Milei and Nuclear

Failure Is An Opportunity

The status quo is sticky. Incumbent politicians have reelection advantages, for example. The same is often true for the policies people vote into place. The reason is simple: change is hard. It takes effort and it introduces uncertainty. Big changes typically only occur in the face of a crisis. In Argentina’s case, its own repeated failures have become its opportunity.

The Argentina ETF ARGT (not a promotion, no position) is up 60% over the past 12 months as the best-performing country-specific ETF. A statement like that needs context, but a deeper analysis is not relevant to the scope of this article as this isn’t a pitch or a thesis. That performance is mainly tied back to President Javier Milei’s early signs of success in his “economic shock therapy.”
Milei recently removed rent controls in Buenos Aires.

It’s easy to agree with rent control at the social level. No one likes a rent increase. However, rent control takes away from the overall free market supply as people grandfathered in over time will never leave. Reduced supply means inflated prices for remaining free-market renters. The only way to reduce prices sustainably is to increase supply, full stop. This is true of every market. Rent controls were recently put up for vote in Boston this Summer and, thankfully, they did not pass.

Detroit’s long-standing financial issues have also become their opportunity to lead with policy. I’ve written about this a few times. In 2013, Detroit announced plans to convert its property tax to a land value tax. If you’re not familiar with this, it was an extremely popular concept promoted by Henry George in the 1880s. It was so popular at the time that Henry George used it to run for Mayor of NYC and for President. He lost both but still maintained a huge following. 100,000 people attended his funeral. He’s relatively unknown today, but the concepts live on and are gaining more followers year by year. Detroit has not voted on implementing a land value tax yet, but the plan is still on the table.

This is something that would be nearly impossible to implement in Boston due to entrenched special interests and the strength of the local real estate crowd. In other words, Boston is too successful to test radical change, even if it would be a net benefit. Same with NYC. Yet, today you can still find abandoned buildings and lots in both Boston and NYC that sit unused year after year. An interim step would be to initiate an extremely high abandoned lot or abandoned building tax so that people can’t continue to waste scarce city resources at the expense of the residents. If Detroit or Argentina’s policy changes are successful, their failure-turnaround stories will have a massive positive impact on policy for many decades, if not centuries.

3 Mile Island

Necessity is the mother of invention. Nuclear energy is undergoing a massive rebranding thanks to AI. AI’s energy requirements extend far beyond what the current grid can offer. As a result, Microsoft has signed a 20 year PPA, power purchase agreement, with Constellation Energy to buy the entirety of their available nuclear power capacity to run AI datacenters.

3 Mile Island experienced a partial meltdown in 1979 which released radioactive gases locally. No deaths were recorded during, after or even 20 years later. It’s assumed at this point that there was no impact. Experience and instinct say not to trust studies like this fully. Still, it wasn’t nearly as catastrophic as other meltdown events like Chernobyl or Fukushima, which had indirect deaths tallied in the low thousands. As scary as nuclear issues seem from a basic level, they also appear to be dramatically overstated in ways that end up doing far more harm than good.

Energy policy can be a tricky subject to navigate. Knowledgeable friends have repeatedly told me that energy policy will always eventually flow towards higher-density sources. Nuclear fuel produces orders of magnitude more energy per unit of weight than oil and gas. It’s not even close. Even though it has been unpopular for simple safety reasons, AI seems to have kicked off the rebranding of the Nuclear energy campaign as the best energy source.

I haven’t fully researched the numbers in greater detail just yet, but the financing of a new power plant is typically priced over a few decades, or say 30 years. The usual life of a new reactor may extend beyond 100 years. This means after year 30, a new nuclear project could potentially run debt-free at operational cost for the following 70 years. This would make the plants dramatically more valuable than their upfront cost would initially suggest. Overall, this is a positive trend.