BARGAIN HUNTING AROUND THE WORLD

Here at Capitalist Exploits HQ, we like to steer clear of popular investments. Instead, we gravitate towards what’s out of favor (or even hated).

So when we came across this chart a few days ago, our palms started to itch.

We knew non-US stocks were out of favor, but we had no idea it was this bad. Compared to their American counterparts, “international” stocks are now trading at some of the cheapest levels in well over two decades.

Where to look? Well, we’re truly spoiled for choice.

Just last week, we highlighted a coal company in the Insider Newsletter. It trades in the UK and currently sits on a forward P/E of 4X and is likely to pay a 10% dividend (we believe it could be even higher).

Or if 4X earnings is too much for you, how about a shipbuilding company out of Singapore that goes for 1X earnings. Granted, it’s too small for most big hedgies and mutual funds. But for mere mortal retail investors, it’s the kind of asymmetric setup that gets us salivating.

ALL THINGS TRANSITORY...

Feels like a lifetime ago, when — back in February 2020 — we started warning that lockdowns will bring about inflation and shortages. Fast forward to today, and this pesky stuff is now part of our daily lives. We recently set up a dedicated inflation channel in our Insider private forum, where members can share their own experiences with all things "transitory".

First up, we have this from our buddy Kuppy — strikes us as a reliable indicator of inflation in the (real) economy.

And Insider member Vitalie shared this inflationary skit:

MINING BILLIONAIRE SPEAKS

We shared this with our Insider Newsletter readers the other day, but it’s just too good to keep it away from you.

Billionaire mining financier Robert Friedland recently gave a 40-minute speech on “green” energy, the “net zero” transition (and the gobsmacking amount of resources required for it), and more.

It’s fair to say the hairy armpit crowd isn’t going to be too happy with Bob. Here are some of the juiciest nuggets to chew on, as summarised by Brandon Beylo (@marketplunger1) on Twitter X.

If you’re a long-time reader, you’ll be no stranger to the points Friedland makes.

What does “energy transition” mean?

• “You have a billion people that burn firewood to live. They have no access to electrical energy.”
• “We’re burning more coal and more oil today than in the history of the world.”
• “We spent $4T putting up solar panels for hydrocarbons to still capture 83% of energy source.”
• “You’re not going to stop global warming by buying an electric car.”

On electric cars and EV batteries

• “With current lithium ion technology, the destruction we cause, the global warming gas we cause, we might as well sit on our chairs and do nothing.”
• “You just bought your wife a coal-burning car by buying an EV.”
• “The current generation of EV batteries will be toast in 2-3 years.”
• “I would short every lithium company in the world.”
• “We’re going to kill the lithium hydroxide business over time.”

Common metals vital for transition

• “If we’re going to have a transition, we need common and abundant materials. We can’t rely on things like nickel.”
• “The batteries they’re making now are low-grade lithium metal. You don’t need nickel, cobalt, graphite, They’re out the window.”
• “You want batteries made out of common materials so billions of people can use it.”

Womb to tomb examination of net zero

• “Look at the whole system if you’re trying to eliminate global warming.”
• “The Chinese are saying 2060 and India is now saying 2070. What does that tell you?” “There’s zero chance that the twelve major automakers will find enough nickel to make their batteries.”
• “The amount of metal we need doesn’t exist currently in a way that’s green or sustainable. It’s apparent to any readily intelligible person.”
• “How can we stop burning coal and oil and not have an energy transition?”

Two competing paradigms

• “We have two competing tribes. One tribe says ‘I want to save the world, I’m green, I need cobalt, nickel, platinum, or palladium’. The other tribe says ‘Holy shit, the Army/Navy wants these metals for national defense.'”
• “The intensity of metal demand in conflict is beyond your wildest imagination. In WWI you needed a telescope to see the price of copper.”
• “So we’re heading to a world where both tribes have a strong demand for more metals. We’re balkanizing the world into two camps and it's tearing the global supply chains apart.”

A very difficult time

• “It does appear that the world is warming, and there’s zero chance we’ll reduce that. The question is how bad will it get?”
• “I was in CA recently, it was $6.20 per gallon. The average citizen is pissed off.”
• “I agree with Jamie Dimon that this is the most dangerous time since I’ve been alive.”
• “The Fed are idiots. They told us that inflation was over. And it’s not even close.”

We need to reinvent the mining industry

• “First of all, we have to try to mine in the United States. No intelligent person has tried to do that in the last few generations.”
• “Everything is blown out of proportion because mining is viewed as a bad thing.”
• “We also have to determine what metals we actually need for the future. Which is copper.” “Imagine you’re plugging an EV w/ 1MW charger. Our grid is literally a 110 year old lady waiting to die. The Chinese tell me it will take $21T to rebuild the electrical grid.”
• “Our grid is like balancing a pencil vertically on your palm. There’s no storage there.”
• “The symbol of the US, the bald eagle, is flying into offshore windmills. They’re just chewing them up. Who wants to live near them? They’re very low density.”
• “At least real miners know how hard it is to actually find metals and mine it.”

Energy consumption

• “A Google search requires 1,000 joules of electrical energy. You think it’s free, but it’s paid for by advertising.”
• “You think the internet is green? You know how much energy it requires to use AI/ChatGPT? You think Bitcoin/crypto is green?”

Importance of copper

• “I don’t know if we need gold. But I do know we need copper. And we need it really badly.” “Having said that, I’d rather there be gold in my copper. Because people will always want gold.”
• “People are getting rid of their excess copper because they’re de-stocking to reduce their interest cost. But we’re nearing the end of de-stocking and paper selling.”
• “This huge clash is coming between Army, Navy, Air Force and the Greening of the world economy. And the miners have an unbelievable burden to make that happen.”
• “At the same time we need these metals, it’s harder to get the equipment needed to mine the metal!”
• “The miners have a very important role to play to supply the world with the metals it desperately needs.”

Importance of Saudi Arabia

• “If Saudi Arabia can’t maintain basic energy security, we’ll have $200-$300 oil. We need stability in that pricing. At $100-$300 oil, people in Egypt don’t eat.”
• “Saudi is playing a beneficial role by keeping oil between $70-90 per barrel.”

Audience Q&A

• “The valuation of the mining industry relative to the S&P 500 is the lowest in living memory. The general person thinks that mining is evil and must be eliminated.”
• “50% of what goes into an EV is hydrocarbon. If we stopped producing oil, half of humanity would die from starvation.”
• “I don’t think we understand how formidable the Chinese are.”
• “In a Balkanized economy, we went from a Just-in-Time supply chain to a Just-in-Case supply chain.”
• “How much metal do we need to build nuclear reactors?
• How much steel, concrete, rebar, nuclear engineers do you need to build these things?” “The problem is that the world economy is Balkanized. Where is the steel coming from? Where are the pumps coming from? The French want nuclear power, and the Germans are burning coal. Even within Europe, its Balkanized. That’s all I see.”
• “I think the mining industry needs to defend itself more. Where do you think stuff comes from? There’s the hardware of the mine (tons, grade, engineering). Then there’s all the people around the mine (locals). There’s invariably a clash with the locals around the mine. Unless they’re buying into it, it’s not going to happen. That’s the software around mining.”

On knowing where things come from

• “People don’t realize where things come from. As people live in urban environments, they forget where things come from.”
• “We need to communicate the importance of mining and humanize it as an activity. We need to mine in the United States. We need to figure out what should be mined, where we’re allowed to mine, and how.”

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