Category: Conference Notes

China launches fleet of electric buses the size of the entire London bus fleet every month

Resource bull markets cause the bear and vice versa

This bull is different due to social media. Don’t need to wait for investment banks

New investors are more prone to the narrative than to the facts

Every generation has to get their ass kicked

You will have another chance to buy things cheap

Usually in resource bull markets. The best of the best move, then best of the rest, then single asset companies, and then penny dreadfuls. This time we went from best of the best to penny dreadfuls.

Bernard Baruch – The only guy who bought the bottom and sold the top is a liar

When you are old there is no need to do things that you do not understand.

Should always define how to declare victory or defeat in advance of placing the trade.

If the price of something doubles and nothing changes then by definition it is half as attractive.

Ask management how they will they convey value to the market and what it will cost. If they don’t have an answer, then walk away.

When the reason to own a stock goes away, the stock goes away irrespective of the price. Hope is not an investment strategy.

Number of speculations you own should correspond to the number of hours of work you are willing to do in a month.

Rick Rule is confused why someone will spend more time comparing tuna can facts than stock due diligence.

Buy cheap, hated, and already in an uptrend.

Uranium has an institutional memory.

2008/2009 – Financial Crisis causes recession. Leads to expansionary fiscal/monetary policy to boost economy.

2020 – Pandemic brings on government lockdowns which causes recession. Leads to expansionary fiscal/monetary policy to provide liquidity.

Insolvency crisis is next

Asset inflation not consumer inflation because money creation has gone to the banks and not the average person.

To have an alternative to USD you need a large alternative otherwise currencies will appreciate too much.

Must hope American ingenuity/entrepreneurship outweighs the stupidity of Washington.

More fragmentation of political parties to come.

Royalty companies at the end of the cycle to protect cash flows.

Sign of the late innings of the resource cycle is when companies can raise way more than they should be able to

Pandemic M/A slowed down due to inability to travel and get boots on the ground

Commodity prices always oscillate around the cost of production

Last gold peak there were 35 gold stock funds

Energy used to be a third of the S and P 500 now its 2.5%

Mining is a horrible business because the easy deposits have been found

Be right, sit tight

Margin debt all time high

With 50/50 Senate can’t lose your party, so extreme bills won’t pass

Interest, transfer payments, and military are 150% tax revenue

Risk is permanent loss. Volatility is temporary loss.

Easier to take Fed at word when they say rates will stay low than if they were to say rates will rise.

Money is store of value. Currency is not.

This is the first global gold rush. 2/3rds of the world could not buy in the 70s

You have to be careful when people are making money out of proportion to their ability.

Woke Culture – I love it when they arrest my enemies but then they came for me.

Bitcoin is not digital gold. Gold is not physical bitcoin.

People want 140 characters with the answer

Top 7 mining companies have copper and nickel as 2 of top 3 priorities

Governments hate losing monopolies.

Gold becomes unaffordable so inflows spill to silver.

Oil is dead when the US leaves the middle east.

Crypto then commodities then emerging markets

India

Dollar 80% trade and 25% GDP

Treasury Yellen is symbolic of the marriage between fiscal and monetary policy

A bubble is a bull market in which you don’t have a position

When things go wrong with a junior exploration play, sell.

Royalty is % revenue

Stream is % rock

Be ready to pivot this year

Time to take personal control of your money

The greatest way to create wealth is to make a concentrated bet. The greatest way to lose that wealth is to never hedge out.

Any contrarian ultimately wants to be in the consensus.

Don’t invest in what you want to happen.

Agriculture is a commodity less sensitive to recession because people need to eat.

Each asset class has its own DNA of volatility.

Study the 2 sigma vol of what you own

Public invests from the rear view mirror

JPM keeps 90 cents of every dollar they steal.

Holding dollars is like buying a ticket on the titanic after it hit the iceberg.

40% companies pulled guidance

Fade certainty

Disproportionate amount of the stock market rally the past 7 weeks has come on jobless claim days

Real unemployment likely over 20%

Majority of individuals reported to the BIS that they believed that their job loss was temporary

Pundits underestimating permanent damage

Permanent damage to corporate profits

Interest rates are not just a discount factor, but also a price signal of deflation

Many small businesses will run out of money in 2 weeks

Bear markets have 3 stages – sharp down, reflexive rebound, drawn-out fundamental downtrend

Dividend stability over yield

Dust off 1970s playbook

Gold supply grows at ~1% per year and currency is currently growing ~30% per year

40% of job losses were part-time

Private interest rates may not fall with treasuries

Prizes over patents is worth exploring

We are all going to be “preppers” now

20th century elections – who would you most want to grab a beer with

21st century elections – who do you least want to punch in the face

Shift in win probability from candidate with most Washington experience to candidate with the least Washington experience

Democrats will try to blame depression entirely on Trump

Both parties want to spend. Will either dominate house and office?

Yield curve control

Global supply chain arbitrage is over

US competing on China’s turf. State-based capitalism.

Fiat news – “It’s the presentation of opinion as fact”

The virus and how to think about the virus started in China

Behind a currency you have a nation, behind a nation you have a currency

Money-printing in tandem with de-globalization means portfolios must change

Cashless society

When central banks do their job you buy bonds. When central banks do not do their job you buy gold.

Expect capital controls

Experts are experts in their one field typically

Cost of capital must rise for retirees

Crisis is evident when you look at which states Trump and Clinton took. Coasts vs. midland

Xi is failing based on inability to keep Trump in line, Hong Kong riots, and concentration camps

A 90% recovery will not suffice

Expect “This week better than last week” rhetoric

We have never made a coronavirus vaccine

Cases spike end of week and ease off over weekends typically

Volatility in yields has gone way down

Major city populations may decline

Fiscal, fiscal, fiscal

The only thing that governments do effectively is raise taxes

Coronavirus may accelerate the green energy revolution

China to move towards more consumer-centric economy

Cold War 2.0

10 years ago US decided to dominate social media and China decided to take the AI and 5G route

If a currency is deserted, then the government loses the ability to monetize the debt

Digital currency disrupts EMs

Covid-19 could replace the war piece in a Fourth Turning

Fourth Turning adds all prior problems to a crux

Governments always become larger, more intrusive, and more authoritarian in a crisis

Inflation defunds promises

Covid-19 is jail without a fun story

Financial capital growth affects multiples

Fed may buy directly in auction if it gets “sloppy”

There is left and right tail risk

May be the crisis we needed to cause change

The way a downturn is entered dictates a recession or depression. Meaning pre-crisis balance sheets and cash flows

Social welfare is a growth industry

Additional debt reduces the productivity of new debt

Long term, low rates lead to a planned economy

Cutting hurts much more psychologically than increasing less in wealth distribution

BOE and Brazil CB have announced direct financing of government

Velocity of money necessary for hyperinflation

Pension with mandates of fixed income will likely fail

US pensions 60% funded

Dollar performs best in shrinking growth

Coal is hated

US Shale is product of QE

Can’t kill shale. Can only change owners.

Once radical mainstream is now redundant news

Trust was replaced with price.

Relationships were replaced with algos.

Biggest profits occur when you run the other way first

Some stocks fall through sector cracks

Tesla financiers are die hard too…

Capitalism leads to uneven distribution of prosperity. Socialism leads to equal distribution of misery.

If your company is protected on the downside, then your upside can be regulated.

Machines know everything about price and nothing about value.

A lion only must outrun the slowest gazelle. A gazelle must outrun the fastest lion.

MMT – Magic Money Tree

Growth in undesirable jobs can weigh down wage growth

Valuation is not a timing tool

Tariffs are not inflationary unless they are perpetually raised every year

40% of the debt of Russell 2000 companies is floating rate

War and excess peacetime are theoretically 2 ways to sever the business cycle

Recessions occur during a “window of vulnerability” that takes on a shock

Investors always fight the last war

1 Month Libor forecasts FED funds rate well

Corporate bond market near the most overvalued in history relative to treasuries

Once you do the unconventional, it becomes conventional

Theory of least words is best

Federal debt accelerations counterintuitively lead to less growth and inflation at high debt levels

Monetary decelerations lead to lower interest because of lower growth and inflation

Yield curve flattening causes banks to charge less to riskier clients

World is non-linear

The shale revolution and the Permian basin discovery held inflation down

Oil consumption is constantly growing worldwide due to emerging markets

Keynesians spend during recessions, republicans spend when their guy is in office

Strong dollar is by definition deflationary

Pensions are the most short dollars

Marxist government has a top priority of social stability, hence inflation

Soybean prices are not just down because of the trade war, but also because of the swine flu epidemic in China. Pigs eat soybeans.

If a government statistic is “manipulated” you should still have the benefit of the trend

Technological progress of a nation correlates with military budget size

All nations are moving towards planned economies

Social credit systems disincentivize risk taking

Nevada is the Saudi Arabia of Vanadium

Just because something has not happened yet does not mean it won’t

If you are an empire country, then going to war is not decided by you, but by your enemy

Low rates to VC firms is disinflationary in some instances. For example, Uber gets cheap credit to subsidize customer transportation via rent seeking behavior

Private equity has advantages with lock up periods

4 Horseman – declining 10 year yields, declining copper prices, declining South Korean equities, declining oil prices

Humans do 2 things well. Buy what they wish they had bought. Sell what they are about to need.

1 in 3 Russell 2000 companies do not make money

What or when, but never together

People do stupid things around full moons

Scarcest assets win when currency is devalued

Dollar peaks when FED starts raising rates

If 2 people always have the same opinion, then one is unneccessary

Never ask an incumbent what they think of innovation

123… what comes next? Maybe 3 because today is the best predictor of tomorrow. Maybe 2 because things tend to mean revert. But perhaps 1 because what goes around comes around.

Nobody that starts a sentence with “I could be wrong but…” can get in trouble

QE forced everyone out the risk curve

Current returns decrease prospective returns

Bailouts induce rational risky behavior

Things that are different this time are usually viewed optimistically

There are probabilities and there are outcomes

How do you know people are risk adverse? Because everyone has a favorite stock, but no one has a 1 stock portfolio.

Investment management requires uncomfortable idiosyncratic decisions

Short of losing your job or clients, you can take as many pitches as you like in investing

Cash should be viewed with option value, but that value is derived from 2 things. What is the probability that the world goes to hell? What is the probability that you will have the guts to put money to work if it does?

When social security was created, the average life was only 1 year past retirement.

Problems arise when FOMO>FOML (Fear of losing money)

I had an amazing time at the conferences, and I am incredibly appreciative of the work that was put in by the hosts and administrators. Looking forward to whats next!

Must Read – Reminiscences of a Stock Operator

When a yield curve is flattening, a “bull steepener” is when the 2 year strengthens, and a “bear steepener” is when the 10 year weakens.

The idea of “voting with money”

The stock market is a “behavioral exercise.”

Liquidity drives markets in the short to intermediate term.

The market is an aggregation of agreements and disagreements

Holding losers is not just negative due to opportunity costs, but emotional capital as well.

Rolling protective options is good risk management.

It is likely a good idea to always hedge yourself using options. Keep in mind this may burn around of 30-40% of your profits.

Lose small win big

Volume profiling allows one to see where price interest is greatest in a market.

Vega risk is when you buy an option during a high volatility time, and volatility returns to normal.

Abusing the wealth effect lever has caused the FED to become subservient to risk assets.

Demand changes slower than supply in the oil market.

The dynamite fishing analogy. When liquidity tightens, many small fish die and start to present themselves. The whale is dead. In time, the whale will reach the surface as well.

There are more fools than money.

With the yuan oil contract, to an extent, one could say that oil can be traded for gold for the first time since World War 2.

The renminbi is like the Bundesbank of Asia. US central banks have the equity market at heart, and the Germans have the bond market at heart.

Debt default probabilities should be deemed higher when debt is held by foreigners.

Do not forget that China and India make up approximately 40% of the world’s population.

Gold price per ounce correlates with total debt.

Fun chart in below link showing periodic table of commodity returns.

http://www.usfunds.com/interactive/the-periodic-table-of-commodity-returns-2018/?utm_source=home&utm_medium=insights

China makes up about 50% of commodity demand.

GDP is like looking out the back window of your car, and PMI is like looking out the front window.

About 70% of day trading is made up of high frequency research.

The US imports about 98% of its uranium.

Saudis have been known to drive out high cost US shale producers and OPEC competition by increasing supply.

A good option strategy may be to buy up in the money calls up an IPO.

There is no cap on gold because there is no floor on the dollar.

Do private placements when management needs you, not the other way around.

You want management with skin in the game.

An easy gold strategy to follow would be to decide x% that you want gold in your portfolio and rebalance accordingly.

The fact that many bonds pay a negative real yield may make up for gold storage costs.

Stop losses do not guarantee your risk management.

Term structure is like the yield curve for commodities.

The immediate contango in the WTI futures is to incentivize the storage farmers to store/deliver. There is plenty of oil in the future, which means you need storage, so you need contango.

The shape of the curve is by no means a price prediction.

Producing your own commodities is key to domestic geopolitical risk.

2 pounds of vanadium added to 1 tonne of steel will make the steel twice as strong.