Investing Newsletter

— Issue #286: December 2023 —
Welcome back, friends!
My good friend and long time client Michael sent this beauty through from Troncones in
Guerrero, Mexico.
Tim in Abu Dhabi sent this one through from home track, Al Forsan International Kart
Circuit.
© 2023 Capex Administrative Ltd. | Unauthorised sharing may result in limb loss 1
Apologies for the delayed timing on this issue. In my defence, it is a beastly issue (again).
IN THIS WEEK’S ISSUE

● Milei wins
● A death to rejoice
● Dutch disease?
● China's plan for the global South
● The cracks in the COVID narrative widen
● More cracks
● Excess deaths
● Presented without comment
● There goes the peg
● Shipping yard capacity
● Energy vs S&P 500
● Chanos closes: a beautiful contrary sign
● Biomass
● The Big Five Six:
1. Gold
2. Northern Dynasty
3. MMA Offshore
4. Scandinavian Tobacco
5. Mermaid Maritime
6. Egypt
MILEI WINS
The honey man did it. Five years ago — or even just three years ago — it didn’t seem
possible, but here we are. Let’s go back and consider why Argentina is even worth
considering.
A reminder that Argentina was once one of the richest nations on Earth and a rival of the
U.S., hence the well-known phrase "as rich as an Argentine."
Here are some incredible facts about the Argentinian economy in the early 20th century:
● As rich as the U.S. per capita at the turn of the century
● GDP grew 6% annually during the 43 years to 1914 (fastest in the world)
● Top 10 wealthiest nations globally per capita by 1914
● Argentinian exports peaked at ~4% of world trade during the 1920s
● Argentina was still as rich as much of Europe as late as 1950
Much has been written about the woes of this country. Most folks have simply given up.
After all, it’s been decades since we could have had anything positive to say about it.
And here we are. With the first-ever self-proclaimed anarcho capitalist president. The
markets love it! So off to the races we go…
Too late, you may be thinking. Well, let’s say you finally decided to get onto the Argentina
trade in July/August. We are only back to those levels now. Stocks are still very cheap, and
if Milei can do half of what he has threatened, they will be even cheaper on a
forward-looking basis. We think fundamentally Argentina is a better trade now than it was
a few months ago when there was all the uncertainty of the election result.
For us it is a keeper, and really the question comes down to position sizing the trade. Don’t
get carried away. It is Argentina, after all.
A DEATH TO REJOICE
As my friend Doug Casey states, there are people that need killing. Clearly, that’s true.
Nobody could argue that we’d all be better off if Hitler, Stalin, Pol Pot, Obama, or many
others had met an early end. Millions of innocents would have not met a fiery and
unjustified end if these sociopaths had been put to the sword.
In the long line up of absolutely horrible monsters who deserved killing, certainly Henry
Kissinger stands tall among them. This was one truly despicable creature.
That is why the volume of vomit-inducing condolences spewing forth from the bought and
paid for media presstitutes serves only to keep an ignorant American public… well,
ignorant. I suppose it is to be expected since every empire champions its murderers
provided they did so in the process and name of expanding the state.
I was heartened to see the Rolling Stone’s coverage being more factual, mincing no words.
Finally. Finally!
The article is a decent rundown of the countless evils this man was party to.
I leave you with the thoughts of Anthony Bourdain, the famous chef. Bourdain, as well as
being able to rustle up some good grub, was a keen thinker and explorer of the human
condition and culture.
DUTCH DISEASE?
From the article:
“Veteran anti-Islam populist leader Geert Wilders has won a dramatic victory in the Dutch
general election, with almost all votes counted.
After 25 years in parliament, his Freedom party (PVV) is set to win 37 seats, well ahead of
his nearest rival, a left-wing alliance.
"The PVV can no longer be ignored," he said. "We will govern."
Let me be clear. Our job here is to identify and navigate the political and market trends and
to profit from them. Wilders (like all others) is simply another wheel in the global cog we
need to factor in.
Here’s what I think is going to happen in Europe. The zeitgeist that exists is decidedly
anti-establishment, and increasing numbers of people are unhappy with the authoritarian
nature of the pointy shoes in Brussels. Consider the election of Meloni in Italy, the election
results in Slovakia we have spoken about, and now of course the Dutch elections all point
towards the same thing.
Right now both the Dutch as well as the Slovaks are celebrating, but the issue here is that
these elections are not enough. The leaders of any EU country are completely and totally
hamstrung by their monetary overlords at the ECB. Consider Meloni, who — despite her
clear desire to effect many changes — may as well pop on some frilly lingerie and handcuff
herself to the bed for some naughty time with her man, because at least that way when
she’s getting screwed she can feel good about it.
Why and how?
Because the moment she (or in fact any leader or leading party in any EU country) tries to
do anything that the pointy shoes in Brussels dislike, they simply remind her that they can
and will simply cut off liquidity to the Italian banking system. Meloni’s government
wouldn’t last two weeks, and she knows it.
The same is going to be true of Wilders in Holland and all the others, too. Until any EU
member state actually removes itself from the currency system, they’re screwed. And
removal from the monetary system by default would mean sanctions and removal from the
European Union and the myriad trade agreements linked to it. So you can see that as the
pressure cooker gets ever more pressurised the ultimate answer is going to be a breakup of
the entire union. This is inevitable, if only because of the enormous and completely
unpayable debts now accumulated.
Take for example the German 10-year bund.
Yields are rising rapidly now from the lows of 2020, but as rapidly as they’ve been rising
you can see that they’ve a long way to go simply to get to 1990 levels. Keep in mind that the
debt burden on the German government back in 1990 was nowhere near as severe as it is
today. And back in 1990, Germany had access to cheap reliable Russian gas. Now they
don’t. And also, back in 1990, woke absurd “climate change” policies were not in full force.
Now they are.
Add to this bonfire the rising inflation due to the destruction brought by the CO(N)VID
lockdowns, followed swiftly by the blowing up of Nord Stream, which has cemented
European industry in a spiral of higher costs (inflationary). At the same time the
bureaucrats attempt to kill demand with completely moronic “climate policies.”
This is why we’re seeing the rush to implement a CBDC. It is critical for all these reasons.
To recap. They need to hold this ball of wax together because it’s all about to come
splintering apart and their power base (which is in the EU) is threatening to collapse. The
need to repudiate these unpayable debts before it all blows up is why they are rushing to
bring on a CBDC. They know that the social upheaval of a repudiation of debt and the
consequent outrage needs to be met with brute force. This can be achieved when they
control individuals' access to payment for basics like food and shelter. Basically, they’re
looking at doing to the peasants what they’ve already managed to do to the sovereign
states within the EU via the banking system.
I don’t believe it’s going to work, but oh boy, are we in for some tough times. This is one
reason why I can't be bearish on the dollar. Not because the dollar is fantastic. It’s not. But
it provides liquidity and a faltering euro leaves few places to quickly park scared capital.
Europeans should be terrified of what’s coming. The smart money has already begun
leaving, and this trend doesn’t appear to be one that is likely to change. Sadly, most folks
will be captured because capital controls are at this point a given. When? I don’t know, but
does it really matter?
If I was a European (with my assets, banking, etc. all in Europe), I’d definitely be considering
having some precious metals offshore and some bitcoin. On that last point, please, for
goodness sake, if you’re going to own bitcoin, then self custody it. That is the ENTIRE point
of owning it. Sticking it into your brokerage account via some ETF defeats the purpose.
Don’t do that!
CHINA’S PLAN FOR THE GLOBAL SOUTH
Since the Fed started aggressively hiking rates, China has commenced a program where it
lends US dollars to global South countries (who lack US dollars) but demanding yuan/RMB
as payment for those loans.
The collateral for these loans are mining rights, coastal ports and energy rights in those
Global South Countries.
Here’s what it looks like to me. Loan USD to countries that want dollars. Demand payment
in RMB. The country borrowing has to pay back USD, but you can take tons of loans like
this and at any point create demand for yuan. Effectively you’re moving USD off your
balance sheet onto others while retaining the flexibility to demand payment in either USD
or yuan. Smart!
Imagine you’re the CCP for a second. The war hawks in D.C. keep threatening you, and you
know a war may be coming, so…
How do you de-dollarise without selling dollars? You lend them out and have your
counterparty sell them and at a time of your choosing. Imagine having trillions of dollars of
loans out all convertible into yuan at your own discretion. People think that the Chinese
could dump all their treasuries, killing the dollar. Sharper minds recognise this as a problem,
which means it’ll not happen. It is one of the core pillars to Brent Johnson's milkshake
theory. Well, with this strategy essentially the Chinese export the problem to all their
global South partners while simultaneously indebting them (hey, it works for the West
using the IMF) while allowing them to at a time of their choosing create massive demand
for yuan.
Imagine trillions of dollar loans (think of it as dollar demand) that all at one point in time are
converted into yuan. That dollar demand vanishes overnight with a strong bid for yuan.
And get this, it isn’t like the countries will have a choice. The lender makes the rules, not the
borrower. If they demand yuan… well, you pay in yuan.
Anyway, I thought I’d share this with you because I found it fascinating. Oh, and before I get
any hate mail. I’m no champion for or defender of China. I reserve the same level of love
and admiration for them as I do for folks like Kissinger or snakes (and I hate snakes). This is
simply realpolitik.
THE CRACKS IN THE COVID NARRATIVE

WIDEN
Remember in a previous issue I highlighted that the Philippine’s House of Representative
initiated a formal investigation into the “staggering number of unexplained excess deaths”?
That was a crack.
Now, recall how recently I highlighted to you under the “Slovakian swing” that the extreme
right wing (of course), misogynistic planet-killing anti-LGBT, Putin-loving, and recently
elected Prime Minister Robert Fico was a crack in the dystopian wall of the central
planners.
Well, Fico just issued a forthright challenge to the influence of pharmaceutical companies
and the proposed pandemic treaty that would expand WHO's powers. Taking office on
October 25, 2023, he wasted no time in addressing the heated issues surrounding the
pandemic response.
It’s only a few minutes long, so I’d recommend watching it all.
I don’t know about you, but this guy sounds like an extremist Nazi right wing science denier.
I mean, what’s next? He’s going to suggest climate change is a hoax? Sheesh!
Certainly, it must be time to wheel out the experts to put him straight.
Speaking of Teddy, the cross-dressing serial killer, he is having a rough time as Estonia just
told his organisation to pound sand.
Poor Teddy! The peasants are fighting back. It’s almost as if despite the barrage of
propaganda and distraction they still aren’t getting it.
Here’s a tip Teddy… and all the globalist sociopaths. Your messaging belies the panic now
evident.
MORE CRACKS
This time on the energy front.
Alberta just invoked the sovereignty act in order to resist the Trudeau Government's
energy policy. As Reuters reports:
"We will not put our operators at risk of going to jail if they do not achieve the targets that
have been set, which we believe are unachievable," Smith said. "We have to have a reliable
grid. We have to have an affordable grid, and we're going to make sure that we defend our
constitutional jurisdiction to do that."
Here’s Alberta's awesome governor.
And the transcript:
“Ottawa persists in trying to regulate and remake Alberta's electrical system from
generation to transmission to distribution which will make life more expensive for families
and put the reliability of our grid at risk and they're pushing ahead with their plan even
though section 92a of the Constitution of Canada is clear that legislating and regulating
the development of electricity Falls within the jurisdiction of the provinces.
Alberta's government is committed to protecting Alberta from federal overreach, that is

why this afternoon I intend to table a resolution in the chamber under the Alberta
sovereignty within a United Canada Act we developed this legislation to Shield The
Province from federal intrusions and we're using it now because the consequences of this
particular overreach would be so severe, Alberta will bear the largest share of the expenses
required to meet these absurd targets and consumers and businesses will see their bills
soar. If the federal government has its way many people will be left without electricity that
they can pay for on a power grid that will fall short or even fail in a typical Alberta winter
or summer. We refuse to go along with this plan. I mean if they come through with the
clean electricity regs they will be mandating that we have to have essentially an emissions
free power grid by 2035. That means no one will build natural gas, we don't have a
regulatory framework to build nuclear. No one will build nuclear. We don't have the
resources to build Hydro. No one will build build Hydro so if we do not act we will end up
with instability in our grid. We will either not be able to grow as a province or we will end
up with with brown outs and blackouts. That's the pathway that the federal government is
giving us and I've just said no we are not doing that we're going to build enough base load
power so that we can continue to keep up with growth which will be doubling the amount
of power that we need and we'll build whatever we need to in our Market. What makes
sense is natural natural gas abated to the best available technology available right now,
which may not be in sync with the federal targets but I want our industry to be able to
make the best effort and we'll see. I mean if they're not prepared to to take the risk that
their executives are not going to be thrown in jail in 2035 then we'll have to be the
generator of Last Resort and we will have to build that ourselves but this is uh this is the
conversation we have to have with the industry about how do we derisk these projects to
make sure that we get, they get, businesses get, and albertans get what they need. These
measures are not something that we want to do. They are a plan to counteract the Absurd
illogical, unscientific and unconstitutional interference in Alberta's electrical grid by a
federal government that simply doesn't care what happens to our Province so long as they
have a good virtue signaling story to tell their leftist friends and special interests. We
would much rather work with Ottawa on meaningful ways to reduce emissions while
continuing to generate reliable affordable electricity that's better for all Albertans and
Canadians, but we refuse to meekly accept actions which are so plainly destructive to
Alberta's economy and to the very Safety and Security of Alberta's citizens. We will do
whatever we must to stand up and protect the people of this province.”
Which brings me panting to…
EXCESS DEATHS
BREAKING: Philippines' House of Representative initiates a formal investigation into excess
deaths!
"The copy of the said resolution, this is about a 260,000 excess deaths that we
experienced in this country. We'll be showing a graph coming from the Philippine
Statistics Authority. In DOH (Department of Health), they also have copies that have been
submitted. We are shocked to find out that there were 262,000 excess deaths in 2021
alone."
This reminds me of a statement attributed to Abe. You can fool all the people some of the
time, or you can fool some people all the time, but you cannot fool all people all the time.
Here’s a question to ponder. Consider the water you drink day in, day out. Reliable and
dependable. Imagine that it is suddenly revealed to be containing traces of cyanide? And
this has been going on for over three years. Now imagine that the water company is on
record stating that the water is safe and good for you, and they’ve trotted out experts (who
they’ve paid) to keep the gig going. How would you treat or feel about the water company?
PRESENTED WITHOUT COMMENT
BBC reports:
“The United Arab Emirates planned to use its role as the host of UN climate talks as an
opportunity to strike oil and gas deals, the BBC has learned.
Leaked briefing documents reveal plans to discuss fossil fuel deals with 15 nations.
The UN body responsible for the COP28 summit told the BBC hosts were expected to act
without bias or self-interest.
The UAE team did not deny using COP28 meetings for business talks, and said "private
meetings are private".
It declined to comment on what was discussed in the meetings and said its work has been
focused on "meaningful climate action".”
Meanwhile…
Chinese firm wins largest construction contract in Dubai since 2017
Weird! It’s almost like the Chinese and the Arabs just wanna make money. Quick, someone
explain to them the deadly consequences of the plant feeding climate murdering CO2
emissions that will be coming from the construction and running of both the Bellagio and
MGM. I do hope they plan to only sell vegan food to stop climate change.
THERE GOES THE PEG

Ever since the 1970’s, the headchoppers Saudis have maintained their currency peg to the
dollar. The deal was simple enough. The US would provide military support to the house of
Saud and allow their dictatorship to flourish. In return, they’d price oil in dollars. With oil
being at the very base of most everything manufactured on this ball of dirt, demand for
dollars would always be underpinned by demand for oil and all its myriad byproducts.
Chinese, Saudi Central Banks Sign Currency Swap Worth $7 Billion
“China and Saudi Arabia signed a local-currency swap agreement worth around $7 billion,
deepening their ties as countries across the Middle East and emerging markets look to
shift more of their non-oil trade away from the dollar.
The nations’ central banks agreed on a three-year deal for a maximum of 50 billion yuan
or 26 billion riyals, according to statements on Monday. China, which has been promoting
the yuan’s use in transactions with major energy and commodity exporters, is Saudi
Arabia’s biggest trade partner.”
Speaking of pegs while staying in the sandpit…
UAE officially stops using dollar for oil trades
Here’s an excerpt:
● “The United Arab Emirates (UAE) has shifted from using the US dollar to local
currencies in its oil trades.
● This move aligns with the broader de-dollarization efforts of the BRICS economic
alliance, which the UAE recently joined.
● The UAE’s decision could significantly impact the dominance of the US dollar in the
global oil market.”
It’s almost like oil is the currency. And while looking to verify the above information, I came
across this…
Following swiftly on the heels of the above, OPEC just released an… ahem… carefully
worded but sufficiently strong rebuttal to the globalist shulbitters. I paste the letter below
for your enjoyment.
SHIPPING YARD CAPACITY
For some time now we have been saying that a lack of shipyard capacity will hinder any
significant increase in the global tanker and offshore drilling fleet. As you can see, shipyard
capacity is down about 50% from 2007 to 2011 levels and back to levels last seen 20 years
ago.
As a reminder here is the low order book for tankers:
While shipbuilder capacity can certainly increase again, it is not typically an overnight
thing. It will take time to do so. In other words, don’t expect to see any increase in the fleet
of tankers, drilling rigs, or OSVs this side of 2030 that would lead to an oversupply and put
a handbrake on day rates.
We have confirmation of this situation in a roundabout way with the following article.
Granted the article is talking about FPSOs (floating oil and gas processing ships), but it is
equally applicable to tankers and rigs since they all come from the same shipyards.
“The urgency for foreign contractors to promptly secure spaces at Chinese shipyards has
reached a critical juncture, as these vital facilities find themselves grappling with a
shortage of capacity.
The competition for these essential spaces has intensified, particularly in projects
involving floating production, storage, and offloading vessels and those centred on
commercial ships.
The situation is not isolated to a single yard; other shipyards in the eastern region of China
are grappling with mounting fabrication demands, leading to a backlog that keeps them
fully occupied until 2026. Many yards are facing limitations on their drydock availability,
which further adds to the mounting challenges in meeting project timelines.
This surge in orders necessitates strategic subcontracting, as evidenced by CIMC Raffles

and Wison Offshore and Marine subcontracting module fabrication work to other
non-offshore yards.
Chinese shipyards have been playing an increasingly prominent role in the global offshore
engineering industry. They are now handling 46% of the world's FPSO hulls and playing a
pivotal role in topside fabrication (35%) and integrated engineering.
The time to lock in spaces at Chinese shipyards is now, as the industry navigates a delicate
balance between surging demand and finite resources.”
Perhaps we should be looking to invest in smaller Asian shipbuilders.
ENERGY VS S&P 500

An interesting graph from Crude Chronicles showing the long term performance of energy
stocks relative to the S&P 500. Energy stocks remain as out of favour as they did at the
height of the TMT Bubble in early 2000. Prior to that we have to go back to the early 1970s
(I’m guessing that was at the height of the “Nifty Fifty” craze).
I put my own graphs together (going back as far as Bloomberg had data) to confirm Crude
Chronicle’s graph, which all seems legitimate!
Chevron vs S&P 500
S&P 500 Energy Sector vs S&P 500
CHANOS CLOSES: A BEAUTIFUL CONTRARY
SIGN
We salute Jim Chanos!
From the article (read this and don’t skip):
“Wall Street’s best-known bear is going into hibernation.
After nearly four decades, Jim Chanos is shutting down hedge funds he manages that
wager against companies he believes are overpriced or fraudulent. His career as a short
seller spanned a contrarian bet against Enron that paid off when the energy trader
collapsed as well as yearslong, money-losing campaigns against Tesla and AOL.
More recently, Chanos has struggled to turn his pessimistic positions into profits while
markets generally moved higher. His firm, Chanos & Co., manages less than $200 million
today, down from $6 billion in 2008, and its funds are down 4% so far this year, while the
S&P 500 is up 19%, including dividends. Shares of Tesla are up about 90% this year, and
the electric-vehicle maker is one of the world’s most valuable companies.
“The marketplace for what I do has changed,” Chanos, 65, told The Wall Street Journal. He
expects to return most of his investors’ cash by Dec. 31.
He says he’s lately been shorting high-price data-storage companies and real-estate
investment trusts, which he says will be hurt as interest rates stay elevated.
Chanos’s funds were up 7% last year while the S&P 500 dropped 18% as interest rates
climbed. Chanos’s funds rose 16% in 2021. Those returns weren’t impressive enough to
stem the outflow of investor cash.
Today, fewer investors see value in adopting a bearish tack. Overall, hedge funds that focus
on bearish bets manage $5.3 billion, down from $6.2 billion in 2012, according to
data-tracker HFR.
That made it harder for Chanos to operate his firm, which like many hedge funds that do
deep research has high costs.
In a letter to his clients that was seen by the Journal, Chanos said “the long/short equity
business model has come under pressure and interest in fundamental stock pickers has
waned.”
Down just 4% this year and folks are leaving his fund in droves? How fickle!
The first thing that came to mind when seeing the “Jim Chanos closing down” headline is I
have seen this all before. Note the date of the article below.
“The fraying of Tiger may prove to be a signature event in the bull market, now 9 1/2 years
long and dominated by tech stocks that have defied all rules about valuation. Specifically,
Tiger's capitulation underscores the beating that "value" investors, including Tiger's chief,
Julian Robertson Jr., have been taking in today's stock market.
The investing style of seeking out quality stocks at bargain prices, which made Mr.
Robertson an investing legend, is the opposite of what is working in today's
tech-stock-crazed market.
The firm, started in 1980, managed as much as $21 billion just two years ago. For years,
the 67-year-old Mr. Robertson beat the cover off the ball, producing results that easily
topped market averages by focusing on locating undervalued stocks. Until last year, Tiger
returned about 30% a year, on average, after the firm's fees.
That all changed during the past two years. In addition to its 19% decline in 1999,
through the end of February this year Tiger Management is down a further 13.5%. US
Airways, the firm's biggest holding, has been its biggest black eye, falling about 55% since
last May. On one especially bad day in October 1998, a surge in the Japanese yen against
the U.S. dollar cost Tiger about $2 billion, a jarring loss -- even considering that major
hedge funds, by their nature, are designed to absorb huge gains and losses on their bets.
Even before now, Tiger has been forced to liquidate various positions to meet the
withdrawal requests in the past year.
Despite the recent downturn in performance, Tiger's performance, of about 25% annually
for its lifetime, is strong enough to be among the best long-term track records in the
investment world. Indeed, a $100,000 investment in the fund in 1980 would be $8
million today.
Tiger Management has six hedge funds, including its trademark Tiger and Jaguar funds. As
a result of the poor performance, investors have been bailing out of the funds.
At its height in 1998 with $21 billion in assets, Tiger found investors knocking on the
firm's doors to get in. Indeed, a flood of money poured into Tiger's funds in 1997 and early
1998. But Tiger's size dropped to about $15 billion by last year, and $6 billion or even less
today, according to people close to Tiger.”
Where do we start here as there is so much to unpack? Perhaps with this — 30 March 2000
and the Nasdaq 100.
Yes, Julian unwittingly called the top of the TMT bubble (albeit a few days after the top). At
the time I thought this was a massive contrary sign, but I didn’t know what would cause the
TMT bubble to burst, and not in my wildest dreams did I think the Nasdaq would fall some
83% and the S&P 500 45% within the following three years. I was young and naive!
Now — after a few more years under our belt — we consider ourselves somewhat wiser.
One of the big things that experience tells us (nothing like experiencing it yourself) is that
when old and seasoned value investing gladiators are rattled by the market and ultimately
chuck in the towel because they believe that the “market has changed,” soon thereafter
their strategy starts to work and work for an extended period of time.
We aren’t calling for the same to play out over the next three years, but we are very
confident that “growth” will significantly underperform “value” over the next five years —
wherever that may take us.
We highlight the insanity of the current environment which has led to Chanos chucking in
the towel (or perhaps being forced to do so by investors):
“The Mag 7: Apple, Microsoft, Amazon, Nvidia, Meta, Alphabet, and Tesla, account for
nearly ⅓ of the S&P 500, +44% of the Nasdaq 100, and ~20% of the MSCI World.”
Apart from the 2000 TMT bubble, have we been here before? Japan springs to mind.
In early 1989, by market cap, Japan accounted for 44% of the global stock market, followed
by the U.S. at 33% and the U.K. at 9%. But a decade later it was just 10%.
Yet in 1989 Japan’s GDP was about half of the United States. I know, it is a “rough and
ready” valuation metric, but the point is that even a second-year university commerce
student (me at the time) could tell you that the Japanese stock market shouldn’t command
a 40% premium to the US stock market when its GDP was about half that of the United
States.
Circling back to the “Mag 7” — a few fundamental considerations or at least a “hint” at the
optimistic future that has been priced into these stocks.
My goodness, even actively managed funds are overweight five of the Mag 7.
It’s mind boggling that Apple and Microsoft’s weight alone in the S&P 500 is 70x larger
than the entire metals and mining industry.
That’s a reflection of how distressed miners have become… or how clinically insanely
overvalued Apple and Microsoft have become (not to mention their mates). Or really it is a
combination of both.
Let us not forget that during inflationary regimes one must strive to find companies with
purchasing power to navigate these types of environments.
Resource companies, despite facing increased operating costs, have inherent pricing power
in their businesses as underlying commodity prices tend to perform exceptionally well
during such periods.
As Tavi Costa points out on Twitter X:
“In an unprecedented shift, AI and other technological advancements now require more
capital investment than sectors traditionally associated with natural resources.
To be precise:
The S&P 500 tech companies, including Amazon and Alphabet, collectively allocate a
higher annual capital expenditure than the combined spending of the energy and
materials sectors.”
We wonder if five years from now if Jim Chanos will be muttering “if I could have just held
on” as Julian Robertson did in the years following the TMT bust. He never seemed the same
man after March 2000.
BIOMASS
America’s the biggest exporter of wood pellets, primarily to Europe. Boom turns to dust!
So much for the “wonder” of burning trees to produce electricity while calling it “green” and
“renewable.”
Seven years of gains smashed in 18 short months:
Enviva management would have us believe that it was a horrid futures deal/trade that
slammed the company.
However, it would appear that this trade was merely the final nail in the coffin for the
company. Bankruptcy would have been the likely outcome in any event.
Take a look at the cashflow statement. It wasn’t earning much and generating not much
more in cashflow. It was essentially surviving and paying dividends by consistently raising
cash by way of share and debt issuance. The “business” was only sustainable while cash was
cheap.
Moral of the story? The real world will prevail (i.e. capitalism trumps ideology).
By the way, the “weakness” in Enviva isn’t unique to it. Rather, it is across the “renewables”
theme.
Enviva (biomass), the Invesco Solar ETF (solar), and the First Trust Global Wind Energy ETF (wind)
Genuine toxic waste! We wonder how much money has been (and continues to be)
spent/squandered in the “renewable buildout.” Money that could have been invested in
conventional energy sources (exploration, development, production).
It is hard to come up with objective answers, but we suspect it is rather significant. If those
investments fail to live up to expectations (hint: it is happening as we speak) then the world
is going to end up with a shortfall in energy supply relative to demand………that supply
shortfall will take many years to rectify.
We think that energy costs are going to rise and stay elevated for a lot longer than perhaps
even we can comprehend!
THE BIG FIVE SIX

Five deep value ideas that you probably wouldn’t have heard of before let alone considered.
These aren’t trade ideas as such, but if you were to take each position short them in equal
weights and hold those short positions for five years, you would most likely be taken to the
cleaners, which answers the question of whether or not they would be a good investment.
Please read our important disclaimer here regarding any recommendations.
1. Gold
2. Northern Dynasty
3. MMA Offshore
4. Scandinavian Tobacco
5. Mermaid Maritime
6. Egypt
GOLD
We think gold could hit $3,000 within 18 months ( we wanted to say 12 months, but we
thought best to be a little conservative).
Do you see what we see?
Gold in USD
After a three-year trading range, gold is now breaking to the upside.
Gold in EUR
A series of higher highs and higher lows.
Gold in AUD
Making new highs in Aussie dollars (near enough).
Gold in RMB
That’s a 10-year high (or near enough).
Gold in SGD
A three-year trading range. No breakout yet, but it is trading on the upper bounds.
To us it looks like gold is set to rocket higher in multi-currency terms.
How about this for an idea — let’s say you already have a 5% weighting in gold. What about
putting 1% into long-term (January 2026 expiry) options. Let’s go for a big swing (position
for a big move over the next two years).
We are going to look at two “ideas.”
First, how about an OTM call and an OTM bull call (all January 2026 expiry).
Here are January 2026 GLD call option chains:
So let’s look at a $250 strike at $9.0. With GLD at $300 come January 2026, that will be
about a 450% return. And with GLD at $349, that would work out to 1,000%. But that is
close to an 83% move in GLD to achieve that, you might say. Yes, all possible.
A $250/$300 bull call spread (buying the $250 at $9 and selling the $300 at $4.20 for a
cost of $4.80. That would give you a 940% return if GLD was to close at or above $300
come January 2026. That is a 57% move in GLD over two years. Not too far off the wall.
Now, let’s assume you have a 5% exposure to GLD and you put 1% into the bull call spread
discussed above and, by some miracle, GLD closed at $300 come January 2026. So $5,000
invested in GLD goes to $7,900 and $1,000 invested in the GLD bull call goes to $9,400. In
total, the investment goes to $17,300 or a 290% return. To achieve this return given GLD
went up 57%, you would have to invest $11,000 in GLD. Therein lies the power of a little bit
of asymmetry in your portfolio.
Of course, you could try your luck with calls on GDX. We aren’t singling out gold over gold
miners in any way.
NORTHERN DYNASTY
The world’s biggest undeveloped copper mine. We see the stock price as a very cheap
long-term call option. We see no harm in a 0.5% exposure to something like Northern
Dynasty. We say 0.5% because you never know, it could go bang!
Of course, this is nothing we didn’t know.
What has caught our eye is the stock price behaviour over the last six months, particularly
against copper miners (the Global X Copper Miners ETF). Is this just random speculation or
does someone know something? Time will tell!
MMA OFFSHORE
We want to remind folks of the asymmetry offered by OSV (offshore service vessel)
operators. Yes, from the start of 2003 to 2013 (10 years), MMA really did go up some
2,500%. We see no reason as to why that performance isn’t in the process of repeating
itself.
But before you get caught up in the romance of 2,500% returns, take a closer look at that
chart on the next page. You had to endure a 66% drop during the GFC. That is about as
romantic as taking a hot date to the movies to watch Saving Private Ryan. OK, I never was
that stupid, but I once did take this hot girl to see Brokeback Mountain.
Seriously, I (Brad) never knew what it was all about. I thought it was a good old fashioned
cowboy movie set in the mountains. Cowboys, horses, dogs, Winchester lever action rifles,
mountains, sheep, adventure. What more could a man ask for?
My date knew what it was all about, but she never let on. She thought it was absolutely
hilarious when I was almost dry retching when the two lads decided to get it on. What an
idiot!
I wonder what John Wayne would have thought of the movie!
Or perhaps even idiots end up getting lucky! I did end up getting married to that girl, and
we are still together.
Ok, back to MMA…
To be “clinical,” MMA did go through a capital restructuring in 2021 where 30% of its
liabilities were wiped out with a debt for equity swap, but we would argue that the
fundamentals that OSV operators face over the next 10 years are significantly improved
compared to 2003 to 2013, and yes, operators like MMA could still be up north of 20x 10
years from now.
SCANDINAVIAN TOBACCO
During the last Insider monthly webinar we did say we were going to include at least one
“divi” stock into the Big Five each week. Let's kick it off with Scandinavian Tobacco.
A cigar maker. In fact, the world’s biggest cigar manufacturer by volume.
Ah, this reminds me of the good old days! I have smoked a few of these over the years, but
little did I know they were owned by Scandinavian Tobacco.
From Reuters:
“Scandinavian Tobacco Group A/S is a Denmark-based company engaged in the

manufacture of cigars and pipe tobacco. The Company also holds a position in the fine-cut
tobacco category in the Scandinavian, the United States and other markets. The
Company’s portfolio contains more than 200 brands, including the Cigar brands Cafe
Creme, La Paz, Macanudo, CAO, Partagas (the United States) and Cohiba (the United
States); Pipe tobacco brands include Captain Black, Erinmore, Borkum Riff and W.O.
Larsen, and Fine-cut tobacco brands include Bugler, Break, Escort, Bali Shag and
Tiedemanns. The Company’s sales offices are located in North America, Europe, New
Zealand and Australia, and it has sales to more than 100 countries around the world.”
Close to a 10% annualised return over the last 10 years. Nothing to choke over!
It pays a dividend of 7.5%, but as much as it pays out in dividends, it buys back stock, so the
effective yield is about 15%.
MERMAID MARITIME
A subsea service provider operating mainly offshore in the Gulf States. The company
provides a range of subsea engineering services, including subsea installation engineering,
offshore decommissioning, inspection, repair and maintenance, construction and
installation support, commissioning, cable and pipe laying projects. The subsea fleet
consists of 7 subsea support vessels and 15 ROV systems.
What a beautiful long-term trading range, which now is looking like it will break out.
EGYPT
Some two years ago we saw something rather bullish developing in the Argentine stock
market. We didn’t know what was going on for a fact, although we did have some
speculative thoughts, and one of those was a change in “regime” (which has happened).
When we looked closer we discovered that many of the Argentine ADRs were trading at
very cheap valuations, so we figured that even if there was no change on the political front,
we would still get very cheap stocks paying generous dividends. Now we find the same
situation in Egypt, where something bullish is building after a very long bear market. When
you look closely, valuations for most stocks have P/Es under 10x and are paying great
dividends.
In USD terms, Egypt has gone absolutely nowhere in some 15 years and still 70% below its
2008 high. And yes, it really did go up some 12x from 2004 to 2008.
But relative to the S&P 500 it is down some 90% since 2008.
The problem is that there are very limited ways to gain exposure to Egypt. The primary way
would be via the VanEck Egypt Index ETF (EGPT). With a market cap of some US$25m, that
is ok for individuals to invest in, but if you are running a fund management shop with
$250m under management, then a 1% position size works out to about 10% of the ETF. Too
small.
Same for Pakistan and the Global X MSCI Pakistan ETF (PAK).
WEEK’S HUMOUR
Sincerely,
Chris MacIntosh
Founder & Editor In Chief, Capitalist Exploits Independent Investment Research
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— Issue #286: December 2023 —

Welcome back, friends!

IN THIS WEEK’S ISSUE

From the article:

"The PVV can no longer be ignored," he said. "We will govern."

Why and how?

Take for example the German 10-year bund.

CHINA’S PLAN FOR THE GLOBAL SOUTH

THE CRACKS IN THE COVID NARRATIVE

That was a crack.

It’s only a few minutes long, so I’d recommend watching it all.

Here’s Alberta's awesome governor.

And the transcript:

Alberta's government is committed to protecting Alberta from federal overreach, that is

Which brings me panting to…

Chinese firm wins largest construction contract in Dubai since 2017

THERE GOES THE PEG

Chinese, Saudi Central Banks Sign Currency Swap Worth $7 Billion

Speaking of pegs while staying in the sandpit…

UAE officially stops using dollar for oil trades

This surge in orders necessitates strategic subcontracting, as evidenced by CIMC Raffles

Perhaps we should be looking to invest in smaller Asian shipbuilders.

ENERGY VS S&P 500

Chevron vs S&P 500

From the article (read this and don’t skip):

“Wall Street’s best-known bear is going into hibernation.

As Tavi Costa points out on Twitter X:

Seven years of gains smashed in 18 short months:

THE BIG FIVE SIX

Do you see what we see?

After a three-year trading range, gold is now breaking to the upside.

A series of higher highs and higher lows.

Making new highs in Aussie dollars (near enough).

That’s a 10-year high (or near enough).

To us it looks like gold is set to rocket higher in multi-currency terms.

We are going to look at two “ideas.”

Here are January 2026 GLD call option chains:

I wonder what John Wayne would have thought of the movie!

Ok, back to MMA…

A cigar maker. In fact, the world’s biggest cigar manufacturer by volume.

“Scandinavian Tobacco Group A/S is a Denmark-based company engaged in the

© Copyright 2023 by Capitalist Exploits

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