To understand the commodity moves, you need to understand the macro. Chris Judd joins us to dive deep into the big picture.
Transcript
I am excited. I'm excited for this one. We're talking macro. We've got Chris Jud on the show. It's been a while since we've spoken with Judy. We are going to jump into the wider world of what is happening out there, how he is thinking through capital flows, through liquidity, interest rates, all these sorts of things. I'm excited to share this conversation. Tray's had a flying start um managing uh Ser macro Fund and >> great returns. >> Great great thinker about the world. takes in a lot of information, synthesizes it, and then yeah, has really interesting equity um selections as a result of that. A lot of those equity selections happen to be quite interesting mining adjacent businesses. So, if you one of those people is pretty curious about some of the mining services businesses out there, Johnny's got some um some pretty interesting views on that. >> He does. Before we jump in, we need to talk a bit about commercial property. Now, there's been a lot of ruckus in the budget lately, Australians would note, but commercial property >> strange. I hope >> commercial property has been carved out of this. So, Xed Capital, they're doing an awesome job. They manage over half a billion dollars now. They've got a bunch of properties. They have this flagship fund called the Collective. It's a group of commercial properties out there. They pay a cash return of 7 to 8%. That doesn't even include the capital uplift that you see from holding the asset over time as well. that flagship collective fund. Five commercial properties in there all along the east coast and one to come in Western Australia very shortly. >> Western Australia our home. Go exceed capital. Check them out. There's more info in the show notes or just give them a call. Get in touch. >> What do you reckon, mate? We um West Australia should see if you agenda. >> More on that to come. Here we go to Chris Chad. >> Any other conferences big big on your list? >> Euros one's really good at Roto. Yeah. So, we really like that. We'll go to that every year. And Morgan's one in Nusa. >> Yeah. >> It's not the Morgan's mining one coming up. There's Morgan Small Cap Mining, which same time as Diggers. >> Yeah. >> And then the actual Morgan's one is in October. >> They're probably the two for us. >> And are they good because the concentration of buy side guys versus everything else. >> Just a good mix of companies, good fund managers there. Um >> I mean, good juris like Roto's great and noose is great as well. Um >> totally. Yeah, there's something about roto where everyone's captive. It just works. So even in Nusa, it's good conference, but you'll leave do your own thing at night if you're just over small talk. >> Whereas Roto, you don't really have that option. Like you're captive. >> Two pubs. >> Yeah. It sort of forces you to to just >> hang more than you would, which is good because I I get small talked out usually and I'd eventually just tap the mat, but at Roto >> Yeah. >> you sort of hang around a bit longer. Um >> Well, yeah. I mean, you you've got a a global mandate with the fund as well. So, do you how often do you get overseas? Where do you where do you go to? >> I there's a sort of a macroy type conference in Singapore I might go to. Um, but that's it. That's it. There's there's some other ones that look cool. Um, but I haven't dug in that deep yet. And we're we've got that for flexibility. We've never had more than 10% of our farm overseas. >> Gotcha. So it's usually pretty minimal, but if the world got crazy and we just thought there's the biggest opportunity ever happening in US or Japan or whatever, we could scale it up. But it's it's it's pretty Aussie focused. >> Yeah. Well, you say if the world got crazy, the world is a a pretty crazy place. >> If the world got crazy and it it felt like there was there was an opportunity elsewhere, we could we could exploit it. >> Yeah. Yeah. So, what are you what are you making of everything happening worldwide? Uh what are we making? Interesting as it always is. Um yeah, I mean Iran is dominating talking points currently. Um it's clearly not resolved yet. Um and it only really just made no sense to me what was happening there. And the only time it started to make sense to me was when you know through listening to other people speak and reading coming to the conclusion that closing the straight of mus was the desire from the US not the negative effect of the invasion the war in Iran. Um and why would that be? Uh because it gives them significant control again. So if you you know if the numbers get bandied around that China can produce you know for every one ship US can produce China can produce 350 if there's sort of that differential in uh ship making capacity between China and the US. Um you know the dominance that the US has had in the Navy forever is maybe not as sure going forward as it has been for the last x number of years. And when you look at the leverage China has over things like critical minerals which you guys be really well versed in or uh you know the processing of those minerals um the various belt and road initiatives manufacturing capacity a lot of things in the physical world where they've really focused on and spent huge amounts of money on whilst the US have really focused their spending on tech innovation and financial innovation. um you know it I think it's become obvious that that's created a vulnerability for the US when you look at the Ukraine war which we felt in many ways was a proxy war between the US and China uh and the US wasn't able to win that war because they couldn't match the manufacturing capacity of Russia and China. So, um, what we think by closing the Straits of Hamus and not only that, regaining control of the Panama Canal, which was a really big focus of Trump when he came in early on in his second term. I remember listening to that thinking, gee, he's making a big deal out of this. Um, if you control those naval choke points, then that really did does give you that dominance through the Navy. even if other countries can build ships much more efficiently than you and if China can produce you know minerals in Africa and then they need to ship them to China to process them uh if they don't control uh um you know important naval choke points around that world perhaps that leverage isn't quite as great as we believed if if um the US didn't still have that naval dominance so that sort of makes some sense to us You know, you couple that I'm going to waffle here. Do you want me to keep waffling? >> Keep going. >> I mean, you couple that too, cuz it's just so inflationary and and then you think, what a nightmare. Who would want that? When you look at um the US as the biggest energy producer, they're certainly hurt a lot less by higher oil prices than countries that don't produce their own oil. But then if you also extrapolate what's coming down the pike in terms of the deflationary impacts of AI, you know, let's say that productivity or deflation is is coming in 3, four, 5 years time. It's starting to come through now with government debt north of 120% as a percentage of GDP. Deflation is terrifying in that instance. you know, your options when your debt to GDP is that high to reduce your debt in real terms are to grow your way out of it or to stop spending, which that's not really going to happen in the US because so much of their spending comes from the government. Um, so if you try and cut the deficit, you're going to cut GDP. So that's not an option. You can restructure the debt. The US isn't going to do that. You can default on your debt. The US is also not going to do that. So then the last option is to inflate away your debt. >> It's the only option. >> It's the only option. So we've always known that. And then if you see this this potentially huge deflationary force coming down the pike, maybe this is your last chance to inflate away the debt and get it to a more manageable level sort of 80% of debt to GDP where you can normalize interest rates without crushing uh your deficit and making it even more significant year-over-year. Maybe this is their last chance to inflate away the debt before the deflationary impacts of AI come on. >> Do you and do you do you believe that that is an ambition though? Do you believe there's a desire for genuine fiscal responsibility ultimately? Because it it almost like feels just observing that that there's no regard for fiscal responsibility. In fact, everyone's kind of snatch and grab while while the opportunities there to the detriment of the long term. Well, I think fiscal responsibility, it depends what you mean by that, but I assume that means like reducing the deficit spending, I I think with debt to GDP this high, that would almost be irresponsible because it would crush that GDP component because so much of the economy and the flowing effects is reliant on that fiscal spending. So, if they want to let it rip, now doesn't seem to be the time for sound money. Like, something's got to pay the price here. It's either the currency, the inflation or equity markets. And depending on which ones you choose in that greatly impact what happens to the deficit. You know, if you if you say equity markets are going to cop the whack, what happens to your your capital gains tax revenue and your stockbased compensation revenue and your consumer spending? Um, you know, if bond holders take the whack, well, that that seems pretty attractive given a large chunk of them uh overseas. uh sovereign nations, some of which you're in a great power competition with. Um so I just think you've got to pick who cops the whack. Or you can say, well, they do nothing and it goes to 150% of debt GDP, it goes to 180%, but the deficits are going to get astronomical. Then I think you will eventually um lose the ability of people won't want to buy those bonds um and you get, you know, runaway yields. So, um, yeah, I mean, that's the difference with Japan. They've got a larger debt to GDP burden than that, but they've got a huge net international investment position of of assets that they can sell. So, um, that's a very waffly first answer. I assume we've started recording, have we? >> No, I think it sets an awesome. >> So, I think, sorry, I'm interrupting. I think a lot of people think the reaction function to the inflation that's coming is going to be, well, um, you're going to have to raise rates to get ahead of this thing in the US. uh and we don't think maybe even get positive yields compared to inflation. We don't think that's coming and that that's I think that's the decision investors have to have to make. Um you know, different story potentially in Australia. >> Well, one of the things we we all know about financial markets is things happen slowly than they happen all at once. And to be more specific, your point of the US not been able to roll its debt, how do you think about that? Well, I think they'll be able to. Um, >> it's just >> at the price they want to. >> Yeah. Because if not, they'll put on their balance sheet. Yeah. So, those bonds get bought, how many go on the central bank balance sheet? I don't know. I mean, interesting. Walsh wants to reduce the size of the balance sheet. Uh, >> that's what he says. >> Yeah. So, I think he said for every $500 billion reduction in the balance sheet, that's the equivalent to a 50 basis point hike. So you could see a world where he's saying we've reduced the balance sheet by a trillion. So net net we should drop rates by a percent and they neutralize each other. That's what he's saying. Whether or not people agree with that. Um and then you go who's going to buy those bonds? I think they've got 9 trillion bucks of bonds they've got to refinance in the next year and 12 trillion in the next two years. I actually don't know off the top of my head how many zeros is even in a trillion. Like that's a big number. Um, so who's going to buy this bond? So I I would assume they will be mandated with sort of policy changes or they'll call it deregulation of the banking industry, changes to the what is it the SLR um so that banks can buy those bonds more easily. But I I think it's a time, you know, invest if investors can't get creative on potential whatifs now, like when are they ever going to be able to, you know, we had an era coming out of an era where you had $18 trillion worth of negative yielding interest rates. We coming out of an era where at one stage you had oil that was minus 37 bucks a barrel for a small period of time. We also had an era where we were, you know, locked inside our homes for 3 years. uh and kids weren't allowed to go to school. So if you can't be creative about potential outcomes now, I don't think you'll ever be. And so there's lots of different potential outcomes. Um and they're not our base case, but we sort of think we sort of think a bit about them. Um, you know, if you revalued the gold on the US government's balance sheet, uh, at today's prices, I think it's carried at about 42 bucks an ounce, every $4,000 gold goes up, that's a trillion dollars added to the US balance sheet. And I thought if they revalued gold, then they've got an asset that they could borrow against. But my understanding is that not that's not how it happens. If they revalue it, that money gets just gets dropped in the TGA. M >> so if they revalued it to today's prices what's that's about a trillion bucks that gets dropped in the TGA the the US government's checking account effectively if you had a Dow ratio of 1 one of which it's been twice in history a lot more than that what's the Dow at 30 something 50 >> 50,000 according to Pam Bundy >> yeah so you've got you know 10 trillion you know you got 12 trillion bucks that gets there's creative things that are possible out there. You know, whether it's uh stable coins being used in society for for just everyday payments. Um, you know, there's a lot of different weird options out there. Um, and now's the sort of time when a lot of those weird things happen. So >> I mean you you look at Besson and the commentary he's had pre and post getting in the hot seat and it was very critical of of Yellen and and the people before about you know only doing at the short end not rolling at the long end when rates were next to zero and now he's in the seat and maybe it's a bit harder than it seems from from the outside. >> Yeah. And he did the biggest buyback ever of of longerterm bonds or or 10ear bonds not long ago. So, um, they're financing more and more at the short end. Um, yeah, and I mean, his argument would be, I guess, that the interest rates aren't at zero, um, which which obviously they were for a period of time with Yellen, but again, I don't know that governments are meant to act like a hedge fund where you get your zero rates and you try and jam as many into 30-year bonds as you can. like I longer term I'm not sure if that's an appealing way for investors to fund government deficits if they think their counterparty is a hedge fund looking to get the better end of the deal. Um but yeah I mean both those both and they're super smart. It's it's easy to criticize. I mean, what a challenging gig. Um, they're both walked into, but yeah, it's um yeah, all all those things are easier said than done and Walsh will probably experience the same thing. It'll be nice. I'm sure he'd like to reduce the central bank balance sheet significantly. Whether or not it happens, it's hard to imagine how it could. >> For sure. as a as a a macro oriented fund manager, it's it's your job to, I suppose, interpret these like macro dynamics and synthesize them into great equity ideas. Um, has anything changed from from, you know, the themes that you've like built, you know, built built a framework around just in the in the last, you know, year to date with with the dynamics of Rome. Has any of that changed the the macro heristics that you you interpret? >> Depends on your time frame. >> Yeah. So we're generally coming into investment thinking what's going to happen in the next 2 to 3 years for this investment and nothing's really changed there. If anything we feel the environment has strengthened for a lot of those opportunities. Um near-term the energy crisis is really significant. Um but we're not investing for next month or the next 3 months. If we were that might change how we were looking at things. So I think being clear on your time frame is important. Um the other thing that's changed locally is we're in a rate hiking cycle now. We feel or certainly I feel that Australian small caps are reliant on decreasing interest rates or at least flat interest rates to capture the retail investor. You know larger cap stocks get flows from superanuation which just rolls in month after month after month. There's a buyer there but the incremental buyer of small and micro cap stocks retail investors. and when rates are going up and they perceive the value of the house is going down, they're just less likely to to buy small cap Aussie stock. So, you just see liquidity rip right out of that market. So, that's changed. um you know and a large part of that I think we're going to get some rate rises anyway but that's that's more obvious now that you've had a an oil shock which central bankers are sort of meant to look through because it's it's oil shock is temporary but the second and third order effects of that once those costs creep into building products or labor or things like that we're already seeing building products go up um and so their job is to to try and squash that. So, um, yeah, that's something that's changed. And then that's that doesn't feel just a one to three month thing. That that feels, you know, of slightly longer in nature. >> We we hear the word stagflation get thrown around a lot lately. Felt the same 3 four years ago. It started to and then it kind of disappeared. But are you a are you a believer? You think that's inevitable? How do you think about it? >> Yeah, I think we're going to get stagflation in Australia. I I think the US is going to be in a high growth inflationary environment would be my best guess. Um yeah, I think businesses linked to the consumer in Australia are going to do it very hard. Um yeah, property, yeah, a a lot of these companies, businesses that have high amounts of debt. Um but the US, I know the headlines look terrible, but you dig into the data, look, it's pretty strong. Um you I think EPS are forecast to grow by 16% uh in S&P 500 companies. um the data center capex is off the charts and you can argue if that's malinvestment if it's a good idea or not that's fine but it's happening um they produce a bucketload of oil and and um yeah I mean I think real world assets are going to lead in in this next period you know call it the next 10 year period um but I I don't think tech's going to get slaughtered And I think, you know, a lot of the way we're viewing the world is through sort of a national security lens. And you know, the worst case scenario, we're already in World War II. It's just not the same as grandpa's war. Best case scenario, US and China are in a great power competition with one one another. in that in either of those environments and I and I think I think people would think in both the US and China that if if they don't win the AI race that's an existential crisis potentially for their their country. So in that world are you going to starve your tech giants of capital? You going to make it hard for them to to get debt and spend on the capex they need it. It almost feels like that data center capex, that AI race is sort of national security importance for the US and they're already dealing with a country that produces half as much electricity as China, you know, so they're in a way fighting with one hand behind their back as well. Are they going to make life harder by making access to capital tight? I I I'd struggle to see that. So that's the dynamic I see in America and then a different dynamic here in Australia. >> You you said so many things there that I'm keen to jump into. The first one just on the American market and and the big IPOs that we could be seeing quite soon, SpaceX, Open AI, Anthropic, these sorts of companies. The it seems as if the goalposts are shifting with regard to passive flows to allow passive companies to come and buy in. And I'm curious whether you've fallen down this rabbit hole of reading, you know, you no longer have to have five profitable quarters back toback to be able to join the the index straight away because passive is such a massive part of the market now. Is there something been >> digging away at the back of your mind like it has with me? No, like we we read about all that stuff and I know you guys read some of the same stuff that I read like L shrub and and B Macro like we you know we love reading their stuff and they're great and I know either one or both think SpaceX will mark a bit of a top in markets. It will suck so much liquidity out. Um and so you I would never really back against those guys but um we just don't really invest for flows. Like I think you got to work out what your skill set is. Um, I was saying to Trav before on air, there's some funds, um, you know, invest heavily on which companies get might be going into the ASX 300 or the ASX 200 or they're really adept and skilled at working out who's on the register and who might need to buy more or who's lost a mandate and is potentially going to be forced to sell or it's just not how we invest. It's not as we're just not good at investing that way and we don't really find it interesting. So, I can acknowledge all those things. Um, and I I read like the Mike Green stuff on passive investing and the the dangers that's coming, but it I don't know, it always sounds clever and just doesn't seem to make that much money. >> Um, >> and we definitely don't sit around trying to be clever. We just want to make money for our unit holders. Um, I'm often beused at sort of funders arguing with random people on Twitter like obsessively trying to look clever. Um, and and the Mike Green stuff, it sort of makes sense. And when it when it does, if it does turn, yeah, potentially there's a wall of money that's going to be forced selling. I get it. But if you're going to wait 10 years before it happens, we don't have a business, you know? Um, and even as a private investor, I don't want to wait 10 years. I I'd be potentially happier for a big payoff as a private investor, but even as a private investor, there's there's just an opportunity cost of of trying to hold on to an idea that that's problematic. >> Just quickly, Trav, we talk a lot about geopolitics here, China verse the West. Now, this is everpresent in commodity markets. It's not changing anytime soon. We see it in rare earth, we see it in lithium, we see it in all sorts of products. These markets are transparent. But you as a mining company, you need to get a better price for your product. >> You need a better price for your product. You need price discovery as well. If you think if you're a rare earth miner, right? Um like where is where is the exchina rare earth price that is actually, you know, got real price discovery. That's an incredible challenge and especially it's a big challenge when you're trying to finance new exchina supply to come onto the market. Now thankfully we happen to know where exchina price discovery is forming. >> MetalsHub. MetalsHub. Check out the platform MetalsHub. They are running auctions. Effectively, you as a seller of your product, a mining company. Chuck up your specific product up there and you see what the market has. This is reflected in their numbers. They show a 2.3% cost benefit throughout all their clients. They've done this thousands of times over. So, you can get on the platform. You can get your project financed because you can sell it to a competitive market. >> Uh liquidity is building every day. Money miners, check out metalshub.com/money your mind. There's a webinar with line down. You can see how it all works. >> Go MetalsHub. >> Yeah, if I do think of the ways that you express your your views. It is a portfolio with some super interesting stocks in there and a lot of them have an adjacency to the um commodity space that you know we we love and talk about. Um I kind of want to peel into many of them with you and I'll kick off with Vice. Um, I know you've talked about this with with JD in the past and we got a ding ding ding. We own this stock. We love it. We went to the AGM and I was like, ah. Anyway, um, >> well attended AGM I've ever seen. James, >> yeah. >> Uh, yeah. Super backable and yeah, I've never seen an AGM. It had more people at that AGM than Minres's the year before. It was a blockbuster AM. >> It was remark. It was tremendously attended. Um, >> yeah, for a for a for, you know, $400 million market cap company. But but yeah, there's there's uh there's there's something pretty pretty exciting about, you know, this this high growth real assets water business that the themes are are tremendous that yeah, I I um I'm just curious like as as the stocks like performed um and I know you've owned it for quite some time and it's been like the big, you know, biggest biggest stock in your portfolio for quite some time. >> Has has your appetite to continue holding it decreased or changed? >> No, we still really like it. We haven't sold it. Um, you know, we started buying it at 17 cents and we almost like it more today. You know, it's it's better owned today, so it's got more institutions on the register, but we can just get to the current valuation with the different operating business units. Not easily, like it doesn't look cheap, but we think it's a higher quality business than a a traditional mining service business. And those consulting businesses trade on a much higher multiple than a normal mining services business. There's ability to cross crossell with their different divisions, but that optionality advice on asset management just feels like a call option on a business decision which there's a lot of work to do on it and you've got to use your imagination a little bit, but you could see that potentially being worth its current market cap in, you know, four or five years time potentially. So, if it doesn't work out, we're comfortable enough with the valuation of just a diversified water service business. Um but vice asset management where they they've pegged for those that don't know pegged a whole par of land with with water in it and they're potentially looking to to sign off take partners throughout the pillar for that water. Um you know if that ends up being a water corp who are in the market for for water in that area and you've got a essentially a government entity as the offtake partner you know the ability to get debt to fund that would be would be astronomical. So >> it's an infrastructure business. >> Yeah. That's that's right. So, um you know, we really like management. We know James well. We speak to him regularly. Um you know, the chair Hutchie I remember from his was it forge? Um >> you know, as a private investor, I remember meeting him and sat next to him at lunch and and he's super backable as well. So, it's got most of those things, you know, insider ownership, skin in the game, um you know, management teams that underpromise and overd deliver. It's got all the sort of things we look for. and um >> and overlay the tremendous tailwinds of the the the theme of like you know water scarcity >> in the in the in the Pilra um this these big industrial ambitions out towards headland combined with yeah the the miners like mining into the water table. So such such a a glaringly simple opportunity. Um >> and those iron or deposits they're under the water table now. They're going to be for 100 years. You know that's not going to change. like it's a long-term opportunity there for the with not a heap of competition. um >> look at the numbers. as you set them up on the spreadsheet for what this infrastructure part, you know, buy on asset management could look like and oh, what's it going to be marked on? Obviously, you can get very excited looking at that. >> That's right. The multiple people will ascribe to that. >> Yeah. >> Particularly if you end up getting a government as as the offtake partner and you know that's a a lot of water under the bridge to see if that will happen. But um yeah, you can get excited for sure and and it's just got the potential to be a funy favorite type stock where it gets valued highly and you get the benefit of the doubt once you're a stock like that. You know the stocks that were like that previously, you know, Life 360 or Promedicus or Zero, you know, great management teams, great businesses and if they have a bad quarter, it gets overlooked. Whereas you see a stock that doesn't have that funy favorite status bad quarter and they just get crucified. They're in the sin bin for for three months. So you feel like Vice if we are moving into a world where hard assets are more attractive and people a bit nervous about AI's ability to disrupt um you know the previous cycles fundy favorites. You feel like Visan's a chance to to be one of the stocks that are included in that sort of funy favorite type feel. And given, you know, the the popularity of the AGM you mentioned, you know, there's some evidence to say that's a possibility. >> The the volatility after earnings reporting lately has been been pretty pretty staggering. Feel it feels like it's growing. On on a separate note, you mentioned before China's power power surge or however you might frame it. And I think that's a good way to segue into talking about energy power around the world. Santos was a company you'd written about recently. So maybe starting at the the macro, how you see power and derivatives of that around the world and then moving into a chat about Santos would be pretty cool. >> Yeah. So I guess electricity we just think is um I guess the most interesting part of AI for us in an investment lens. And when we say electricity, the electrical grid and the underinvestment that's occurred there in the US, but in in most parts of the western world. Um and again I sort of am a bit repetitive in keeping continually talking about national security but you you've seen uh the US you know recently announced that now that's now a department of defense issue the electrical grid again because if they can't produce enough electricity you can't uh power enough data centers and you can't win the AI race. And so that's that's hugely important economically to the US and other countries around the world but it's also a national security issue. uh and one we think that the US will rectify, but they'll have to throw a lot of money at it to do so. Um and then Santos for us was was sort of a case of just wanting to I guess hedge an outcome that we wasn't a base case, but a possibility where um there's enormous oil disruption, which we're already starting to see really with the the conflict in Iran. and I guess essentially have a short-term position that we could have there as a hedge to essentially sell once things settle down to deploy more into stocks that were going to be banged up if that that $200 a barrel oil outcome happens. Um, and we're not out of the woods there yet. Um, you know, Santos is starting to look reasonably undemanding uh in terms of multiple um >> they'll be making a lot of money. Yeah, the free cash flow yield's going to be really juicy and you know, they've had a couple of takeover offers which haven't quite uh well not quite haven't gone through obviously, but um we felt that was a pretty good place to have and nice and liquid for for when we felt the world was going to change, but we're still not calling it into the Iran conflict. I know the news flow the last couple of days has been a bit more positive. Um, but it's a pretty significant oil shock that we're experiencing that hasn't really started yet. It feels like it's almost starting now. Uh, in terms of the physical world and so we're just waiting to see how that pans out. >> What are the other ramifications you're looking at? >> Um, I mentioned the issue is small. So, we still have a number of small cap stocks cuz that's sort of our favored place to invest, but they need to be in sectors with really strong tailwinds. If we don't feel the tailwind is strong enough to to overcome the liquid liquidity challenges some of them are going to have then we prefer to be elsewhere. Um you know I think we are just going to enter a very much an inflationary world and you know it's going to be good for commodities for a number of reasons. I think the the era where countries buy US treasuries. So if the US dollar goes up, they can still afford to buy commodities without getting exposed on currency risk. I think that era is going to be reducing and a lot of countries and companies are just going to buy the commodities themselves directly and just store them directly and um you know this running just in time supply chains. I think that era is coming to an end and we saw the risks during co that that um that creates and that's that's rearing its head again now. So we think greater redundancy for both countries and companies is is occurring and likely to continue. um you know we still think a lot of the you know a lot of the investment themes we like whether it's you know I've spoken a little bit about the electrical grid in the US whether it's ship ship building capacity whether it's data center capex um you know a lot a lot of these things are both national security issues but economic issues as well and you know critical minerals is another one where even though some of those things critical minerals has already had a huge We just don't think it's over yet because you know currently it gets framed like or China dominates say rare earths for instance rare earth both production and processing. US is is working hard to try and um build up their their scale in rare earths. We've seen some you know Save Verde deal recently. >> Yeah. >> Um you know price flaws which we've seen with >> materials >> with MP materials and um >> and another group list in the US. But I I think it's not just going to be the US and China. Like India is not going to want to rely on their rare earths from either of those two countries. I don't think Europe is either. Neither's Japan. Neither South Korea. So I think eventually you'll see more and more groups get into this race to secure uh various critical minerals. And right now I think the lens is really just on the US and China. that you know more and more we think these other countries and Japan's already entered the race but I think that's going to spread and there's just not a lot of these deposits uh to go around >> sounds very inflationary >> does yeah it does sort of inefficient and inflationary but I think that's the world we're going into >> and Veritus specifically did I >> yeah so we own Virus we like Virus so um you know we think Virus has a potential to to get an offtake done and potentially even a price floor. Uh I don't know if they'll get the 110 that some of the other groups have gotten given that those groups that have got those 110 price floors are further along than Virus. Um for those that don't know, Veritus is a've got the Colossus project in Brazil. Uh which they're developing and take through to fund to to final investment decision. Um we really like management. Some of the boards been strengthened recently with a couple of additions, but you know, you could see a couple of things near-term that could lead to a rerate on a stock that's already done really well. >> Was um it was it was a it got to remarkably low levels at one point, Veritus. And it it was like this yeah glaring uh anomaly just from a valuation perspective for a period there. I feel like it was right before Rare Earth took off. And the the EV of Feritus was like 20 million. >> Just never raised enough money. Anytime you'd meet them, they always come raise and they didn't want to raise because the stock was so bashed up >> and it was the chicken and the egg. Once they got uh >> you know well capitalized >> off to the races >> and I mean I think that I mean the ser was 2.8 billion US you know it's ramping up in production. So >> the worst geology by the way. >> That's right. That's right. So comparable even to MEI like >> Yeah. That was always the comp. >> On a on a relative basis, we think it still looks really cheap even though it's had >> a um a significant run. So, we'll wait and see. That's a ding ding ding, by the way. >> It was that didn't work it out. Um >> it was a former ding ding ding for me, but I I thought I was a genius selling at $210 and then it because it dipped to like a dollar jumps and now it's like higher again anyway. Uh >> yeah. And everyone would just point out Mi's right there. You know, we're a fraction of the market cap. >> Yeah. the um I was looking at some of your your your other like mining adjacent holdings uh Chris and and um noticed MLG um how how's your thinking evolved with MLG over over over time and just yeah like thinking about the implications of of diesel dynamics etc etc >> yeah MLG's been hard it's been a hard hole there's not much free float on that stock you know the inside own it's great to have inside ownership but when it gets too big uh there's liquidity challenges And >> it's always been cheap. >> Yeah, that's right. I mean, it's way I think MTA's I think it's about 94 cents trading mid70. So, really cheap. I think it's fine, but the free float's challenging and it really hasn't played its role for us in the sense of like we really we rate management. Um there's no issues there, but probably didn't get the kick with gold we thought it would given how much exposure they've got to gold. That was sort of that thesis that this was a lower risk way to play gold. I think north of 90% of the revenue is coming from gold. Um, and it's, you know, we do like that you do get that flaw when you've got such a big tangible asset backing. Um, so I don't think it's it's vulnerable here, but it's, um, it's been a hard hold for us. Um, and they're probably the things that have held it back. A big shareholding is good if if management want to sell and it's going to elicit a takeover bid. I I don't see that happening near term cuz I think it's worth a lot more than this. Um so yeah, that's been a bit of a hard one. >> Another type of services company which has a very uh similar setup in terms of a large founder 41% AI advanced energy holdings. You I think parttook in the the IPO that right >> still holding or >> still holding. Yeah, >> we like that. Like that's a pretty boring >> company but I think Boring is good at the minute. Boring is good. >> Um there's some selling around which we think uh we think we know why and that's okay. Like sometimes people need to sell. Um we rate management. They've got to take over uh offer underway of matrix um which we think will be good. Um >> can really consolidates the the landscape in this part of the world, doesn't it? >> Yeah. Yeah, and I think you're going to get huge margin improvements for that that matrix business um by joining the two. And I just think it's if you look at all their different divisions, the the so the one that made us really nervous was wind, but even winds looking attractive now. Um you know, winds um undersea cabling, uh you know, oil and gas is is you know, a huge chunk of their revenue where it comes from like there's there's really good tailwinds in all those areas. Uh we think management are good um wellunded the ability to buy you know Bolton acquisitions which still isn't you know even after matrix they've still got the ability to do that uh and we think it's cheap so we think it's fine sometimes when uh management aren't based in Australia it just takes a bit longer for the market to maybe get comfortable with the story but you know when you're based here like they're here regularly and they update shareholders. Well, but when you're based in Australia, you know, you might be doing school pickup and you talk to someone and you're effectively broking your stock, it's just a lot more natural uh ways to sell your stock. So, it's pretty liquid. Um, and we think that probably is part of the challenge, but we think over time it's a high quality business. They'll they'll be able to overcome that. So, yeah, we're very much still there. Do do you have like a stepping back a broader view on on the services both mining and kind of offshore as just cheap parts of the market or because it does seem to be a theme picking up that you've you've gone through a fair few of these names and you hold a fair few of the names in in that sort of space. >> Yeah, I think it maybe stems from we want mining exposure but we're not technical mining guys so we're happy to take that risk on at times. Um, often when we like a commodity, we might buy a basket of it. Um, but yeah, it's sort of been a way to give us that hard asset mining exposure without, you know, getting getting resold by the metallurgy. So, um, you know, I mean, we've still got a heap of stocks that are unrelated to mining, but um, yeah, that hard asset thematic is a is a big part of our portfolio at the minute, for sure. >> Yeah. And and you spoke about hedging before and you know in the context of Santos potentially being a hedge to what we could see. How do you think about the the cash component of your portfolio is just a a hedge and playing it safe for now? >> Yeah, it's a it's the most important way we can hedge. Um our cash is not ridiculously high currently. I mean we're about 6% or so. Um, so we got a chunk higher than that uh in March um when we're just trying to work out what was going on. Um but yeah, I mean I think it's a scary time now. I don't think it's a bad time for asset prices. I think it's a bad time for currencies and currencies is what measures those asset prices. So I don't want to be sitting in a a heap of currency. Um, so yeah, that's that saying, you know, we're so so bearish, we're bullish. There's elements of that. Um, provided we're we're putting in the right spots. >> Yeah, we had this conversation with with somebody who'd looked at the the commodities world very intensely within within BHB for for quite some time. And he created a simple kind of matrix of Aussie dollar, US dollar, commodity prices, low, high. and he he essentially was saying we're at a pretty rare part of the cycle where the Aussie dollar has been relatively low. It's appreciated of late, but commodity prices have been really strong for for Australia in general. So, how do you think about like where we are with the Aussie dollar right now? >> Well, I would if I had to I'm not great at picking currencies. I'd on the Aussie dollar strengthening from here. You know, you're going to get rate f differential in terms of our rates are going up. US rates going to be flat and I suspect they're probably coming down. Um, and iron ore hasn't been wildly strong, which which I would expect to expedite that that that rise in that the Aussie dollar, but most of the commodities are really strong. And um, yeah, I I think if if you think it's going to be a commodity bull market coming and that hard assets are going to lead the market, I would expect countries that are resource dominated like Australia and Canada and Brazil are going to see their their currencies appreciate. So that's that's what we're expecting. >> Tasmir Group, tell me about the thesis there. >> We're out of Tasmia Group. Um, >> a former thesis. >> No, they uh the thesis there is they're just they're a mining service operator. They're a rollup. um they buy lots of different businesses, keep the owners of those businesses incentivized to stay on and um you know they they run those those businesses in different regional areas. I think last I looked at that about 20 28 huge different operating divisions and and >> I get why that makes sense cuz the businesses they buy put in a heap of money into the local community and there's a heap of goodwill in those businesses so they keep those divisions going. I guess sometimes for us we like to extrapolate at the extremities and in terms of whatifs and if there's 2,000 different business decisions that's going to be problematic. So they're nowhere near that yet. But um we found it hard when you when you are rolling up business, it's just harder to work out what the organic number really is. And we ended up getting com more comfortable with MA Group than Tasmia. But we like the Tasmia guys. They were it was a really good stock for us. We made some money on it. Um but yeah, full disclosure, we're no longer no longer there. On the flip side, MA is um it's it's a remarkable business if you own the equity. It's dreadful if you're the miner who has to keep paying for their uh >> Yeah. And look, they've underperformed Tasmia, you know, like their evaluation starting point matters and we we love the M guys. We think that's a great business. Um >> it's a it's a wicked. >> It's a wicked business. Yeah. We really trust management. Um, we like the fact they've got that US optionality, which was probably the the thing that was when we first looked at it about 18 months ago or so, that was the bit that looked problematic, but US is going really well now. Um, and we think that's going to be a really important earnings driver for them. We think they're going to make an acquisition, um, which they haven't done for a while. They've got their new 5year plan coming up, which should be released any day. So, um, we're still there and we think that's a really good compounder. >> Aussie Aussie businesses going to the States is is not a, you know, not no guaranteed success. >> Uh, yeah, many companies, many great Aussie companies have done it and failed dramatically. So, >> there's just a huge shortage for skilled labor. Like we we often ask different businesses, you know, I remember asking the shape guys which do fit outs for office buildings and you know, things like supermarkets and stuff and they're really good business which we don't own. But if you could have any macro sort of headline, you could open up the paper and read it. What would you and it would transform your business, what would it be? And I thought it would be super funds to 3x their investment in office buildings or coals to do this or Woolworths to do that. And it was if there was a cruise ship coming here with 10,000 skilled skilled skilled workers, that's what would transform our business. And you hear that time and time again. Um, you know, so much of the skilled labor we have, not just in Australia, around the world, is is aging. And you know 20 or 30 years ago people got told if you want to be a success go to university you know get an arts degree don't don't get don't do an apprentichip don't become an electrician and there's just a huge shortage at a time when the world's electrifying you know there's data center capex is dwarfing any of the capex cycles in history um so yeah ma very much plays into that >> it is interesting we we talk about on you know on the one hand having that AI theme of there not going to be any jobs and on the other hand so many businesses we speak to we hear about struggling to find talented people or labor is so expensive you know which is the same thing so it it is interesting to kind of step through that in in Australia specifically >> when AI meets the robots I think that's when >> labor gets scary >> you know from an employment perspective and you know self-driving cars >> it's sort of here you know you can way more in the US without a driver like that's coming that's a big displacement of jobs >> but there's still a way to go before you you get that real next wave of job displacement. Um, >> yeah, skilled labor doesn't matter when you when you've got the robots that can do it. >> No, that's right. That that's that's interesting. And yeah, I don't know. I had a lunch with uh at breakfast it was with industry like titans of industry. I shouldn't have been there by rights. So impressive top 100 ASX CEOs and and chairman. And one of the things that came up was a view that not was held by one or two people that young people are lazy. And that and it's sort of a lot of people have that view. You wonder if it's laziness or just the incentives are wrong for them to work hard. You know, young people in the 70s could could bust their ass and put a deposit on a house after a few years. You know, good luck. um you know you see people getting rich as activists or jobs which you used to do in a pastime because you're passionate about something that's an entrepreneurial venture where you can make bucket loads of money. Um, you wonder if it is a laziness thing or just what happens when assets and labor get so disproportionately valued and and the assets become unattainable to a lot of people who who seemingly play by the rules and work hard and do what they're told to do and still can't afford to buy a house. You wonder if it's laziness or just perverse incentives. >> Yeah. I mean, $1.9 million for the median house in Sydney is just insane. And and you've got such an interesting lens at looking at this through liquidity, through fiscal policy, monetary policy, these sorts of things. You can see it happening on a on a big scale. You can see the the stock market just growing >> and I think it gets worse. >> I think I think like the you know the the financial market thing big themes of of recent history are all an expression of this too. Like you know why is poly market big? Why is >> Yeah, >> that's right. Um it's >> and and so I'm not I don't spend any time >> going this is what the policy should be because it's who cares it's a waste of time. Yeah. >> My time is spent trying to analyze what I think the policy response will be. Not if it's the right one or the wrong one. >> Um and it's easy like I just said well property costs too much for young people to be incentivized to work hard. But if you crash the property market that's not a good outcome for anyone either. That's it's enormous job displacement. So I sort of think it just keeps rolling on and sort of gets worse and worse. Um you know the systems designed for inflation and currency debasement. It doesn't work without it. Um yeah deflationary bust >> is much scarier than than what we're seeing. And we've we've we've seen that in the in the Great Depression. That was a deflationary bust. And and it's easy to stop that happening. >> Yeah. It's very it's very easy to to sound all or bearish about a lot of things, but there's so many good things about the world today as well, healthcare and all the advancements we're seeing as well. So, >> you wouldn't trade it like when would you prefer to be alive? Like >> 1942 felt >> tricky. Um, >> you know, 1916 felt tricky. Um, >> so yeah, it's it's just finding that balance. Like I don't think you can just say, you know, the world's amazing, everything's perfect and and you certainly can't win your mind when your kids can eat and they can go to school and, you know, most people have access to health care and um yeah, it's finding that balance, but overall, I wouldn't trade living now for for another period, but it's got its challenges, it's got its opportunities, and hopefully we're there to to exploit them. >> Absolutely. Absolutely. When when we think about the asset classes, you you you play in stocks and I think we spoke about this last time, but do you think there comes a time where you're you're more curious about bonds, other other types of asset classes, or do you think you just stick to your knitting? >> We'll just stick to our knitting in the fund. Um yeah, I mean, I couldn't think of a place I'd want to invest less than government bonds. um personally uh but other asset classes are interesting um and we've traded a lot of them as PA so I've traded commodity CFDs PA in my previous experience on you could get up to 400 to1 leverage um I didn't take the full 400 >> that's conserv trading silver on the most astronomical leverage and just like >> just not being able to sleep like every if I put >> every move was just enormous and um you I sort of strung out after sort of three or four days and the kids came up and sort of asked me a question I'm watching CNBC and I just thought this is not for me like I did really well out of silver. >> Was this the recent run? >> No, this was pre the fund. This was sort of co and I was able to buy an apartment at Bullah from the >> silver run but I never wanted to do it again. Yeah, >> I was like that is highly highly stressful. And so I think one of the things investing is it's you're really learning about yourself, what you're good at, what your skill set is, what your style is. Short-term trading, uh, you commodity CFD investing is not for me. Um, but you do learn a lot from trading different asset classes. You know, I mean, the intersection between crypto and the real world is coming whether people like it or not. You know, like I haven't looked recently how many US government bonds stable coin companies are buying, but I mean I'm pretty sure they're a top 15 holder of the US government debt. Like it's unbelievable. So, >> and gold. >> That's right. And Tether owns more gold than Bitcoin now, which who would have thought? So, um you know, there's real world implications for that. And there's a lot of policy you can see um you know moving to make crypto more important in the US. It's not it's not something that hits people's radars here but sort of stable coins and the ability for them to soak up US government debt at a time you know when China doesn't want to Russia's not allowed to. Saudi Arabia doesn't really want to. They want to invest in soccer teams and other things and Japan's been selling a lot of their holdings. like someone's going to have to buy those bonds cuz two trillion two trillion plus deficits every year aren't going to finance themselves. It's being open to to what those options are and and stable coin feels like potential potential assistance there. >> So, if you if you do a bit of PA investing that you you can't do in the fund, what is what's your favorite PA investment right now? >> I don't No, I don't really do it because I I don't want to spend the time on it. Um, and it just ends up feeling like a bit of a distraction. So, >> I don't spend any time looking at stuff that the fund wouldn't invest in potentially. Um, you know, maybe too small for the fund, but we still think it might be interesting in, you know, 12 months time or 18 months time. And a part of me doesn't miss being in really small stuff. Um, I suspect you guys like the smaller end of the market and I loved it for ages, but you can just get stuck. Management teams are less high quality than they are. Not always, but often. Um, and you sort of get sick of being lied to after a while, you know. So, I don't really miss it. I could see a world where I would really enjoy PA investing again, but I think I'd be in sort of, you know, midcap. They're small cap stocks, but 200 million bucks isn't really a minnow. The 200 million to a billion dollar market cap. Even if I was back to PA investing, I think I'd still lean there. Um, yeah, I sort of I think I'm valuing liquidity more and more as I get older because it just gives you the flexibility to change your mind. Even though I had a great run in the really liquid stuff, it was good fun. Um, >> yeah, >> there's there's one commodity based company which I think uh you had as a holding maybe a couple years ago. Don't know if it still is there, but Metals X. >> Yeah, we're not there. That was a cracker. Really liked it. It was kind to us. We we're out now. Um out too early. Uh but that was that was good for us. We thank the market gods for the opportunity. >> Tin's been on a hell of a run. >> Been on a hell of a run. Yeah. Um we met with those guys that show ran a gold thing the other day. >> Oh, Tamar Gold was a great Yeah. Which we didn't we didn't plan but they've done a great job with that Metals X. It was so cheap for so long. >> Yeah. >> People struggled with the ownership structure. >> Yeah. >> Um are you guys still there? Yes, ding ding ding. I I I do own stock. JD does doesn't. >> You're a bit late with the ding ding ding tra have a quick double check. >> Yes, you're right. Like I do. Yeah, I wonder how much upside's still there and like I I I struggle to sell it to be honest because it's I still I just love tin so much and it's Yeah. >> And there's not many ways to play it. Like what are you going to go with alchemy or >> Yeah. And to be honest like that is that that is an option. Um or the other one that we hold together, Stellar, which Metals X has just picked up whatever 17 million. >> Yeah. And there's a little Mentos isn't there, which Metals X have a stake into as well. So yeah, the the tin space is is super interesting. >> Should we wrap up with a underrated, overrated >> type? Let's give it a go. Yeah. >> Yeah. I'm going to throw in some other ones as well. There'll be higher lower type questions. Yeah. >> If if you if you get the kind of drift there. So >> the Aussie cash rate, higher or lower in one year time? one years to higher. >> Uh uh gold north of US 6,000 an ounce any time during 2027. >> Yes. I like that you use US. I always use US. I feel the real mining people use Aussie. I'm happy with US I'm more attuned to personally. Yeah. Um >> the US 10year to breach 5% in the next year. No >> oil the average the average Brent oil price in US dollars in 2027 higher higher or lower than 90 bucks a barrel 2027 first half probably lower we'll go lower yeah I think once things I think the net outcome is oil crunches down eventually, but it's probably got 12 months even if the war dissipates today. But then I think the net outcome is it it comes down pretty sharply eventually. >> The the AI capex field out underrated or overrated? >> Well, I think it's real. Whether or not it's a smart way to invest capital, um I don't know, but I think it's happening. >> Uh >> I know it's happening. I can see it's happening. >> Yeah. Tungsten. Overrated or underrated? >> Oh, >> no. Not here. I think overrated here. I mean, killer run. What was EQR? Five cents in December. >> It's amazing. >> Um, hats off to those that played, but I think once those small medals run like that, I think they're overrated. >> But I'm a generalist investor, too. Sorry, J. >> No, no. All good. All good. Silver, I know you you wrote a bit about it a few months back. We need to we need to draw a line in the sand somewhere. So underrated, overrated at 75 bucks. >> I felt like the Vince McMahon meme because I I tipped silver as my commodity of choice when I came on in December with you guys. >> Got there within one month >> and then it ripped and I had all these people texting me going, "You must be making so much silver." I had no exposure. I felt like just music sort of crying there, shaking his head. Um cuz it's hard to play. Uh and uh >> do I think it's overrated? Yeah, I think silver at 75 is is fine to own and and to buy. Um, yeah, I think it goes higher. >> I kind of go go with uh yeah, mining servicesesque type type of business. Minres at 65 bucks. >> This one hurts me a bit because I think Chris Ellison is such a gun and I made a promise to myself. Remember talking to fund manager TDM in Sydney who I really liked. >> Yeah. and they bought them at 12 bucks and they've just I don't know if they're still there but they just held them and they would be they would have topped up at 17 and um >> and I remember thinking you you get a guy like Chris Ellison to me is a bit like I don't know Bezos our version of Bezos or you know the sort of US entrepreneurs you'd really want to back and I thought if they get crunched like that I'm just gonna back the truck up and then here they were at 17 and I'm telling this story and I just couldn't pull the trigger at the time. Like the debt made me a bit nervous. Um you lithium. So a very long-winded way of saying I didn't buy it and I'm not buy 65 personally, but I wish I'd bought it at 17. Yeah, >> I've got another slightly different one. Given we are filming in the in the great state of Victoria, people are very bearish about the Victorian economy. Is the the consensus mood around Victoria underrated or overrated? I >> think I think Yeah, the state is struggling at the minute. Yeah, I think that's I don't really know whether underrated or overrated is the right way to answer that. >> Are people too bearish, do you think? Or do you think that's pretty justified? >> I think it's justified. Yeah, >> we'll always have you back. >> Yeah. It won't last forever. like these things are uh you know temporary by nature but temporary can be two years or 20 years. There's just not many assets to sell now which makes it different to the last time Victoria was in this place in the early 90s. So it'll come good eventually but I think you know for a lot of small business owners in particular I think things are very tough in Victoria at the minute >> and different to the rest of Australia and you notice it. I I feel you feel it when you go to Adelaide, when you go to Perth, Queensland. I feel the mood is wildly different. Um, >> do you guys feel that? >> Yeah. Energy, what we've spoken about is a big part of that as well. And that's been a a slow burn here, but it's key input cost for so many businesses. You you definitely feel it. Definitely feel it. Perth is up and about. You see it in the house prices >> big time. >> Yeah. >> Yeah. >> Yeah. >> I uh I think it's a great place to leave it. And um yeah, delighted that you could uh share your views with us Chris and congrats on the you know remarkable performance from Ser today since you've started it and yeah look forward to speaking again in the future. >> Thanks J really appreciate it. It's good fun. >> Big thanks to our partners Sanvic Ground support intrlinks focus the platform by market tech Woody the platform by costmine intelligence exceed capital and metalshub. Check them out. >> Now remember I'm an idiot JD is an idiot. If you thought any of this was anything other than entertainment, you're an idiot and you need to read our disclaimer.
Inflation Is the Only Escape (Chris Judd)
Summary
To understand the commodity moves, you need to understand the macro. Chris Judd joins us to dive deep into the big picture.Transcript
I am excited. I'm excited for this one. We're talking macro. We've got Chris Jud on the show. It's been a while since we've spoken with Judy. We are going to jump into the wider world of what is happening out there, how he is thinking through capital flows, through liquidity, interest rates, all these sorts of things. I'm excited to share this conversation. Tray's had a flying start um managing uh Ser macro Fund and >> great returns. >> Great great thinker about the world. takes in a lot of information, synthesizes it, and then yeah, has really interesting equity um selections as a result of that. A lot of those equity selections happen to be quite interesting mining adjacent businesses. So, if you one of those people is pretty curious about some of the mining services businesses out there, Johnny's got some um some pretty interesting views on that. >> He does. Before we jump in, we need to talk a bit about commercial property. Now, there's been a lot of ruckus in the budget lately, Australians would note, but commercial property >> strange. I hope >> commercial property has been carved out of this. So, Xed Capital, they're doing an awesome job. They manage over half a billion dollars now. They've got a bunch of properties. They have this flagship fund called the Collective. It's a group of commercial properties out there. They pay a cash return of 7 to 8%. That doesn't even include the capital uplift that you see from holding the asset over time as well. that flagship collective fund. Five commercial properties in there all along the east coast and one to come in Western Australia very shortly. >> Western Australia our home. Go exceed capital. Check them out. There's more info in the show notes or just give them a call. Get in touch. >> What do you reckon, mate? We um West Australia should see if you agenda. >> More on that to come. Here we go to Chris Chad. >> Any other conferences big big on your list? >> Euros one's really good at Roto. Yeah. So, we really like that. We'll go to that every year. And Morgan's one in Nusa. >> Yeah. >> It's not the Morgan's mining one coming up. There's Morgan Small Cap Mining, which same time as Diggers. >> Yeah. >> And then the actual Morgan's one is in October. >> They're probably the two for us. >> And are they good because the concentration of buy side guys versus everything else. >> Just a good mix of companies, good fund managers there. Um >> I mean, good juris like Roto's great and noose is great as well. Um >> totally. Yeah, there's something about roto where everyone's captive. It just works. So even in Nusa, it's good conference, but you'll leave do your own thing at night if you're just over small talk. >> Whereas Roto, you don't really have that option. Like you're captive. >> Two pubs. >> Yeah. It sort of forces you to to just >> hang more than you would, which is good because I I get small talked out usually and I'd eventually just tap the mat, but at Roto >> Yeah. >> you sort of hang around a bit longer. Um >> Well, yeah. I mean, you you've got a a global mandate with the fund as well. So, do you how often do you get overseas? Where do you where do you go to? >> I there's a sort of a macroy type conference in Singapore I might go to. Um, but that's it. That's it. There's there's some other ones that look cool. Um, but I haven't dug in that deep yet. And we're we've got that for flexibility. We've never had more than 10% of our farm overseas. >> Gotcha. So it's usually pretty minimal, but if the world got crazy and we just thought there's the biggest opportunity ever happening in US or Japan or whatever, we could scale it up. But it's it's it's pretty Aussie focused. >> Yeah. Well, you say if the world got crazy, the world is a a pretty crazy place. >> If the world got crazy and it it felt like there was there was an opportunity elsewhere, we could we could exploit it. >> Yeah. Yeah. So, what are you what are you making of everything happening worldwide? Uh what are we making? Interesting as it always is. Um yeah, I mean Iran is dominating talking points currently. Um it's clearly not resolved yet. Um and it only really just made no sense to me what was happening there. And the only time it started to make sense to me was when you know through listening to other people speak and reading coming to the conclusion that closing the straight of mus was the desire from the US not the negative effect of the invasion the war in Iran. Um and why would that be? Uh because it gives them significant control again. So if you you know if the numbers get bandied around that China can produce you know for every one ship US can produce China can produce 350 if there's sort of that differential in uh ship making capacity between China and the US. Um you know the dominance that the US has had in the Navy forever is maybe not as sure going forward as it has been for the last x number of years. And when you look at the leverage China has over things like critical minerals which you guys be really well versed in or uh you know the processing of those minerals um the various belt and road initiatives manufacturing capacity a lot of things in the physical world where they've really focused on and spent huge amounts of money on whilst the US have really focused their spending on tech innovation and financial innovation. um you know it I think it's become obvious that that's created a vulnerability for the US when you look at the Ukraine war which we felt in many ways was a proxy war between the US and China uh and the US wasn't able to win that war because they couldn't match the manufacturing capacity of Russia and China. So, um, what we think by closing the Straits of Hamus and not only that, regaining control of the Panama Canal, which was a really big focus of Trump when he came in early on in his second term. I remember listening to that thinking, gee, he's making a big deal out of this. Um, if you control those naval choke points, then that really did does give you that dominance through the Navy. even if other countries can build ships much more efficiently than you and if China can produce you know minerals in Africa and then they need to ship them to China to process them uh if they don't control uh um you know important naval choke points around that world perhaps that leverage isn't quite as great as we believed if if um the US didn't still have that naval dominance so that sort of makes some sense to us You know, you couple that I'm going to waffle here. Do you want me to keep waffling? >> Keep going. >> I mean, you couple that too, cuz it's just so inflationary and and then you think, what a nightmare. Who would want that? When you look at um the US as the biggest energy producer, they're certainly hurt a lot less by higher oil prices than countries that don't produce their own oil. But then if you also extrapolate what's coming down the pike in terms of the deflationary impacts of AI, you know, let's say that productivity or deflation is is coming in 3, four, 5 years time. It's starting to come through now with government debt north of 120% as a percentage of GDP. Deflation is terrifying in that instance. you know, your options when your debt to GDP is that high to reduce your debt in real terms are to grow your way out of it or to stop spending, which that's not really going to happen in the US because so much of their spending comes from the government. Um, so if you try and cut the deficit, you're going to cut GDP. So that's not an option. You can restructure the debt. The US isn't going to do that. You can default on your debt. The US is also not going to do that. So then the last option is to inflate away your debt. >> It's the only option. >> It's the only option. So we've always known that. And then if you see this this potentially huge deflationary force coming down the pike, maybe this is your last chance to inflate away the debt and get it to a more manageable level sort of 80% of debt to GDP where you can normalize interest rates without crushing uh your deficit and making it even more significant year-over-year. Maybe this is their last chance to inflate away the debt before the deflationary impacts of AI come on. >> Do you and do you do you believe that that is an ambition though? Do you believe there's a desire for genuine fiscal responsibility ultimately? Because it it almost like feels just observing that that there's no regard for fiscal responsibility. In fact, everyone's kind of snatch and grab while while the opportunities there to the detriment of the long term. Well, I think fiscal responsibility, it depends what you mean by that, but I assume that means like reducing the deficit spending, I I think with debt to GDP this high, that would almost be irresponsible because it would crush that GDP component because so much of the economy and the flowing effects is reliant on that fiscal spending. So, if they want to let it rip, now doesn't seem to be the time for sound money. Like, something's got to pay the price here. It's either the currency, the inflation or equity markets. And depending on which ones you choose in that greatly impact what happens to the deficit. You know, if you if you say equity markets are going to cop the whack, what happens to your your capital gains tax revenue and your stockbased compensation revenue and your consumer spending? Um, you know, if bond holders take the whack, well, that that seems pretty attractive given a large chunk of them uh overseas. uh sovereign nations, some of which you're in a great power competition with. Um so I just think you've got to pick who cops the whack. Or you can say, well, they do nothing and it goes to 150% of debt GDP, it goes to 180%, but the deficits are going to get astronomical. Then I think you will eventually um lose the ability of people won't want to buy those bonds um and you get, you know, runaway yields. So, um, yeah, I mean, that's the difference with Japan. They've got a larger debt to GDP burden than that, but they've got a huge net international investment position of of assets that they can sell. So, um, that's a very waffly first answer. I assume we've started recording, have we? >> No, I think it sets an awesome. >> So, I think, sorry, I'm interrupting. I think a lot of people think the reaction function to the inflation that's coming is going to be, well, um, you're going to have to raise rates to get ahead of this thing in the US. uh and we don't think maybe even get positive yields compared to inflation. We don't think that's coming and that that's I think that's the decision investors have to have to make. Um you know, different story potentially in Australia. >> Well, one of the things we we all know about financial markets is things happen slowly than they happen all at once. And to be more specific, your point of the US not been able to roll its debt, how do you think about that? Well, I think they'll be able to. Um, >> it's just >> at the price they want to. >> Yeah. Because if not, they'll put on their balance sheet. Yeah. So, those bonds get bought, how many go on the central bank balance sheet? I don't know. I mean, interesting. Walsh wants to reduce the size of the balance sheet. Uh, >> that's what he says. >> Yeah. So, I think he said for every $500 billion reduction in the balance sheet, that's the equivalent to a 50 basis point hike. So you could see a world where he's saying we've reduced the balance sheet by a trillion. So net net we should drop rates by a percent and they neutralize each other. That's what he's saying. Whether or not people agree with that. Um and then you go who's going to buy those bonds? I think they've got 9 trillion bucks of bonds they've got to refinance in the next year and 12 trillion in the next two years. I actually don't know off the top of my head how many zeros is even in a trillion. Like that's a big number. Um, so who's going to buy this bond? So I I would assume they will be mandated with sort of policy changes or they'll call it deregulation of the banking industry, changes to the what is it the SLR um so that banks can buy those bonds more easily. But I I think it's a time, you know, invest if investors can't get creative on potential whatifs now, like when are they ever going to be able to, you know, we had an era coming out of an era where you had $18 trillion worth of negative yielding interest rates. We coming out of an era where at one stage you had oil that was minus 37 bucks a barrel for a small period of time. We also had an era where we were, you know, locked inside our homes for 3 years. uh and kids weren't allowed to go to school. So if you can't be creative about potential outcomes now, I don't think you'll ever be. And so there's lots of different potential outcomes. Um and they're not our base case, but we sort of think we sort of think a bit about them. Um, you know, if you revalued the gold on the US government's balance sheet, uh, at today's prices, I think it's carried at about 42 bucks an ounce, every $4,000 gold goes up, that's a trillion dollars added to the US balance sheet. And I thought if they revalued gold, then they've got an asset that they could borrow against. But my understanding is that not that's not how it happens. If they revalue it, that money gets just gets dropped in the TGA. M >> so if they revalued it to today's prices what's that's about a trillion bucks that gets dropped in the TGA the the US government's checking account effectively if you had a Dow ratio of 1 one of which it's been twice in history a lot more than that what's the Dow at 30 something 50 >> 50,000 according to Pam Bundy >> yeah so you've got you know 10 trillion you know you got 12 trillion bucks that gets there's creative things that are possible out there. You know, whether it's uh stable coins being used in society for for just everyday payments. Um, you know, there's a lot of different weird options out there. Um, and now's the sort of time when a lot of those weird things happen. So >> I mean you you look at Besson and the commentary he's had pre and post getting in the hot seat and it was very critical of of Yellen and and the people before about you know only doing at the short end not rolling at the long end when rates were next to zero and now he's in the seat and maybe it's a bit harder than it seems from from the outside. >> Yeah. And he did the biggest buyback ever of of longerterm bonds or or 10ear bonds not long ago. So, um, they're financing more and more at the short end. Um, yeah, and I mean, his argument would be, I guess, that the interest rates aren't at zero, um, which which obviously they were for a period of time with Yellen, but again, I don't know that governments are meant to act like a hedge fund where you get your zero rates and you try and jam as many into 30-year bonds as you can. like I longer term I'm not sure if that's an appealing way for investors to fund government deficits if they think their counterparty is a hedge fund looking to get the better end of the deal. Um but yeah I mean both those both and they're super smart. It's it's easy to criticize. I mean, what a challenging gig. Um, they're both walked into, but yeah, it's um yeah, all all those things are easier said than done and Walsh will probably experience the same thing. It'll be nice. I'm sure he'd like to reduce the central bank balance sheet significantly. Whether or not it happens, it's hard to imagine how it could. >> For sure. as a as a a macro oriented fund manager, it's it's your job to, I suppose, interpret these like macro dynamics and synthesize them into great equity ideas. Um, has anything changed from from, you know, the themes that you've like built, you know, built built a framework around just in the in the last, you know, year to date with with the dynamics of Rome. Has any of that changed the the macro heristics that you you interpret? >> Depends on your time frame. >> Yeah. So we're generally coming into investment thinking what's going to happen in the next 2 to 3 years for this investment and nothing's really changed there. If anything we feel the environment has strengthened for a lot of those opportunities. Um near-term the energy crisis is really significant. Um but we're not investing for next month or the next 3 months. If we were that might change how we were looking at things. So I think being clear on your time frame is important. Um the other thing that's changed locally is we're in a rate hiking cycle now. We feel or certainly I feel that Australian small caps are reliant on decreasing interest rates or at least flat interest rates to capture the retail investor. You know larger cap stocks get flows from superanuation which just rolls in month after month after month. There's a buyer there but the incremental buyer of small and micro cap stocks retail investors. and when rates are going up and they perceive the value of the house is going down, they're just less likely to to buy small cap Aussie stock. So, you just see liquidity rip right out of that market. So, that's changed. um you know and a large part of that I think we're going to get some rate rises anyway but that's that's more obvious now that you've had a an oil shock which central bankers are sort of meant to look through because it's it's oil shock is temporary but the second and third order effects of that once those costs creep into building products or labor or things like that we're already seeing building products go up um and so their job is to to try and squash that. So, um, yeah, that's something that's changed. And then that's that doesn't feel just a one to three month thing. That that feels, you know, of slightly longer in nature. >> We we hear the word stagflation get thrown around a lot lately. Felt the same 3 four years ago. It started to and then it kind of disappeared. But are you a are you a believer? You think that's inevitable? How do you think about it? >> Yeah, I think we're going to get stagflation in Australia. I I think the US is going to be in a high growth inflationary environment would be my best guess. Um yeah, I think businesses linked to the consumer in Australia are going to do it very hard. Um yeah, property, yeah, a a lot of these companies, businesses that have high amounts of debt. Um but the US, I know the headlines look terrible, but you dig into the data, look, it's pretty strong. Um you I think EPS are forecast to grow by 16% uh in S&P 500 companies. um the data center capex is off the charts and you can argue if that's malinvestment if it's a good idea or not that's fine but it's happening um they produce a bucketload of oil and and um yeah I mean I think real world assets are going to lead in in this next period you know call it the next 10 year period um but I I don't think tech's going to get slaughtered And I think, you know, a lot of the way we're viewing the world is through sort of a national security lens. And you know, the worst case scenario, we're already in World War II. It's just not the same as grandpa's war. Best case scenario, US and China are in a great power competition with one one another. in that in either of those environments and I and I think I think people would think in both the US and China that if if they don't win the AI race that's an existential crisis potentially for their their country. So in that world are you going to starve your tech giants of capital? You going to make it hard for them to to get debt and spend on the capex they need it. It almost feels like that data center capex, that AI race is sort of national security importance for the US and they're already dealing with a country that produces half as much electricity as China, you know, so they're in a way fighting with one hand behind their back as well. Are they going to make life harder by making access to capital tight? I I I'd struggle to see that. So that's the dynamic I see in America and then a different dynamic here in Australia. >> You you said so many things there that I'm keen to jump into. The first one just on the American market and and the big IPOs that we could be seeing quite soon, SpaceX, Open AI, Anthropic, these sorts of companies. The it seems as if the goalposts are shifting with regard to passive flows to allow passive companies to come and buy in. And I'm curious whether you've fallen down this rabbit hole of reading, you know, you no longer have to have five profitable quarters back toback to be able to join the the index straight away because passive is such a massive part of the market now. Is there something been >> digging away at the back of your mind like it has with me? No, like we we read about all that stuff and I know you guys read some of the same stuff that I read like L shrub and and B Macro like we you know we love reading their stuff and they're great and I know either one or both think SpaceX will mark a bit of a top in markets. It will suck so much liquidity out. Um and so you I would never really back against those guys but um we just don't really invest for flows. Like I think you got to work out what your skill set is. Um, I was saying to Trav before on air, there's some funds, um, you know, invest heavily on which companies get might be going into the ASX 300 or the ASX 200 or they're really adept and skilled at working out who's on the register and who might need to buy more or who's lost a mandate and is potentially going to be forced to sell or it's just not how we invest. It's not as we're just not good at investing that way and we don't really find it interesting. So, I can acknowledge all those things. Um, and I I read like the Mike Green stuff on passive investing and the the dangers that's coming, but it I don't know, it always sounds clever and just doesn't seem to make that much money. >> Um, >> and we definitely don't sit around trying to be clever. We just want to make money for our unit holders. Um, I'm often beused at sort of funders arguing with random people on Twitter like obsessively trying to look clever. Um, and and the Mike Green stuff, it sort of makes sense. And when it when it does, if it does turn, yeah, potentially there's a wall of money that's going to be forced selling. I get it. But if you're going to wait 10 years before it happens, we don't have a business, you know? Um, and even as a private investor, I don't want to wait 10 years. I I'd be potentially happier for a big payoff as a private investor, but even as a private investor, there's there's just an opportunity cost of of trying to hold on to an idea that that's problematic. >> Just quickly, Trav, we talk a lot about geopolitics here, China verse the West. Now, this is everpresent in commodity markets. It's not changing anytime soon. We see it in rare earth, we see it in lithium, we see it in all sorts of products. These markets are transparent. But you as a mining company, you need to get a better price for your product. >> You need a better price for your product. You need price discovery as well. If you think if you're a rare earth miner, right? Um like where is where is the exchina rare earth price that is actually, you know, got real price discovery. That's an incredible challenge and especially it's a big challenge when you're trying to finance new exchina supply to come onto the market. Now thankfully we happen to know where exchina price discovery is forming. >> MetalsHub. MetalsHub. Check out the platform MetalsHub. They are running auctions. Effectively, you as a seller of your product, a mining company. Chuck up your specific product up there and you see what the market has. This is reflected in their numbers. They show a 2.3% cost benefit throughout all their clients. They've done this thousands of times over. So, you can get on the platform. You can get your project financed because you can sell it to a competitive market. >> Uh liquidity is building every day. Money miners, check out metalshub.com/money your mind. There's a webinar with line down. You can see how it all works. >> Go MetalsHub. >> Yeah, if I do think of the ways that you express your your views. It is a portfolio with some super interesting stocks in there and a lot of them have an adjacency to the um commodity space that you know we we love and talk about. Um I kind of want to peel into many of them with you and I'll kick off with Vice. Um, I know you've talked about this with with JD in the past and we got a ding ding ding. We own this stock. We love it. We went to the AGM and I was like, ah. Anyway, um, >> well attended AGM I've ever seen. James, >> yeah. >> Uh, yeah. Super backable and yeah, I've never seen an AGM. It had more people at that AGM than Minres's the year before. It was a blockbuster AM. >> It was remark. It was tremendously attended. Um, >> yeah, for a for a for, you know, $400 million market cap company. But but yeah, there's there's uh there's there's something pretty pretty exciting about, you know, this this high growth real assets water business that the themes are are tremendous that yeah, I I um I'm just curious like as as the stocks like performed um and I know you've owned it for quite some time and it's been like the big, you know, biggest biggest stock in your portfolio for quite some time. >> Has has your appetite to continue holding it decreased or changed? >> No, we still really like it. We haven't sold it. Um, you know, we started buying it at 17 cents and we almost like it more today. You know, it's it's better owned today, so it's got more institutions on the register, but we can just get to the current valuation with the different operating business units. Not easily, like it doesn't look cheap, but we think it's a higher quality business than a a traditional mining service business. And those consulting businesses trade on a much higher multiple than a normal mining services business. There's ability to cross crossell with their different divisions, but that optionality advice on asset management just feels like a call option on a business decision which there's a lot of work to do on it and you've got to use your imagination a little bit, but you could see that potentially being worth its current market cap in, you know, four or five years time potentially. So, if it doesn't work out, we're comfortable enough with the valuation of just a diversified water service business. Um but vice asset management where they they've pegged for those that don't know pegged a whole par of land with with water in it and they're potentially looking to to sign off take partners throughout the pillar for that water. Um you know if that ends up being a water corp who are in the market for for water in that area and you've got a essentially a government entity as the offtake partner you know the ability to get debt to fund that would be would be astronomical. So >> it's an infrastructure business. >> Yeah. That's that's right. So, um you know, we really like management. We know James well. We speak to him regularly. Um you know, the chair Hutchie I remember from his was it forge? Um >> you know, as a private investor, I remember meeting him and sat next to him at lunch and and he's super backable as well. So, it's got most of those things, you know, insider ownership, skin in the game, um you know, management teams that underpromise and overd deliver. It's got all the sort of things we look for. and um >> and overlay the tremendous tailwinds of the the the theme of like you know water scarcity >> in the in the in the Pilra um this these big industrial ambitions out towards headland combined with yeah the the miners like mining into the water table. So such such a a glaringly simple opportunity. Um >> and those iron or deposits they're under the water table now. They're going to be for 100 years. You know that's not going to change. like it's a long-term opportunity there for the with not a heap of competition. um >> look at the numbers. as you set them up on the spreadsheet for what this infrastructure part, you know, buy on asset management could look like and oh, what's it going to be marked on? Obviously, you can get very excited looking at that. >> That's right. The multiple people will ascribe to that. >> Yeah. >> Particularly if you end up getting a government as as the offtake partner and you know that's a a lot of water under the bridge to see if that will happen. But um yeah, you can get excited for sure and and it's just got the potential to be a funy favorite type stock where it gets valued highly and you get the benefit of the doubt once you're a stock like that. You know the stocks that were like that previously, you know, Life 360 or Promedicus or Zero, you know, great management teams, great businesses and if they have a bad quarter, it gets overlooked. Whereas you see a stock that doesn't have that funy favorite status bad quarter and they just get crucified. They're in the sin bin for for three months. So you feel like Vice if we are moving into a world where hard assets are more attractive and people a bit nervous about AI's ability to disrupt um you know the previous cycles fundy favorites. You feel like Visan's a chance to to be one of the stocks that are included in that sort of funy favorite type feel. And given, you know, the the popularity of the AGM you mentioned, you know, there's some evidence to say that's a possibility. >> The the volatility after earnings reporting lately has been been pretty pretty staggering. Feel it feels like it's growing. On on a separate note, you mentioned before China's power power surge or however you might frame it. And I think that's a good way to segue into talking about energy power around the world. Santos was a company you'd written about recently. So maybe starting at the the macro, how you see power and derivatives of that around the world and then moving into a chat about Santos would be pretty cool. >> Yeah. So I guess electricity we just think is um I guess the most interesting part of AI for us in an investment lens. And when we say electricity, the electrical grid and the underinvestment that's occurred there in the US, but in in most parts of the western world. Um and again I sort of am a bit repetitive in keeping continually talking about national security but you you've seen uh the US you know recently announced that now that's now a department of defense issue the electrical grid again because if they can't produce enough electricity you can't uh power enough data centers and you can't win the AI race. And so that's that's hugely important economically to the US and other countries around the world but it's also a national security issue. uh and one we think that the US will rectify, but they'll have to throw a lot of money at it to do so. Um and then Santos for us was was sort of a case of just wanting to I guess hedge an outcome that we wasn't a base case, but a possibility where um there's enormous oil disruption, which we're already starting to see really with the the conflict in Iran. and I guess essentially have a short-term position that we could have there as a hedge to essentially sell once things settle down to deploy more into stocks that were going to be banged up if that that $200 a barrel oil outcome happens. Um, and we're not out of the woods there yet. Um, you know, Santos is starting to look reasonably undemanding uh in terms of multiple um >> they'll be making a lot of money. Yeah, the free cash flow yield's going to be really juicy and you know, they've had a couple of takeover offers which haven't quite uh well not quite haven't gone through obviously, but um we felt that was a pretty good place to have and nice and liquid for for when we felt the world was going to change, but we're still not calling it into the Iran conflict. I know the news flow the last couple of days has been a bit more positive. Um, but it's a pretty significant oil shock that we're experiencing that hasn't really started yet. It feels like it's almost starting now. Uh, in terms of the physical world and so we're just waiting to see how that pans out. >> What are the other ramifications you're looking at? >> Um, I mentioned the issue is small. So, we still have a number of small cap stocks cuz that's sort of our favored place to invest, but they need to be in sectors with really strong tailwinds. If we don't feel the tailwind is strong enough to to overcome the liquid liquidity challenges some of them are going to have then we prefer to be elsewhere. Um you know I think we are just going to enter a very much an inflationary world and you know it's going to be good for commodities for a number of reasons. I think the the era where countries buy US treasuries. So if the US dollar goes up, they can still afford to buy commodities without getting exposed on currency risk. I think that era is going to be reducing and a lot of countries and companies are just going to buy the commodities themselves directly and just store them directly and um you know this running just in time supply chains. I think that era is coming to an end and we saw the risks during co that that um that creates and that's that's rearing its head again now. So we think greater redundancy for both countries and companies is is occurring and likely to continue. um you know we still think a lot of the you know a lot of the investment themes we like whether it's you know I've spoken a little bit about the electrical grid in the US whether it's ship ship building capacity whether it's data center capex um you know a lot a lot of these things are both national security issues but economic issues as well and you know critical minerals is another one where even though some of those things critical minerals has already had a huge We just don't think it's over yet because you know currently it gets framed like or China dominates say rare earths for instance rare earth both production and processing. US is is working hard to try and um build up their their scale in rare earths. We've seen some you know Save Verde deal recently. >> Yeah. >> Um you know price flaws which we've seen with >> materials >> with MP materials and um >> and another group list in the US. But I I think it's not just going to be the US and China. Like India is not going to want to rely on their rare earths from either of those two countries. I don't think Europe is either. Neither's Japan. Neither South Korea. So I think eventually you'll see more and more groups get into this race to secure uh various critical minerals. And right now I think the lens is really just on the US and China. that you know more and more we think these other countries and Japan's already entered the race but I think that's going to spread and there's just not a lot of these deposits uh to go around >> sounds very inflationary >> does yeah it does sort of inefficient and inflationary but I think that's the world we're going into >> and Veritus specifically did I >> yeah so we own Virus we like Virus so um you know we think Virus has a potential to to get an offtake done and potentially even a price floor. Uh I don't know if they'll get the 110 that some of the other groups have gotten given that those groups that have got those 110 price floors are further along than Virus. Um for those that don't know, Veritus is a've got the Colossus project in Brazil. Uh which they're developing and take through to fund to to final investment decision. Um we really like management. Some of the boards been strengthened recently with a couple of additions, but you know, you could see a couple of things near-term that could lead to a rerate on a stock that's already done really well. >> Was um it was it was a it got to remarkably low levels at one point, Veritus. And it it was like this yeah glaring uh anomaly just from a valuation perspective for a period there. I feel like it was right before Rare Earth took off. And the the EV of Feritus was like 20 million. >> Just never raised enough money. Anytime you'd meet them, they always come raise and they didn't want to raise because the stock was so bashed up >> and it was the chicken and the egg. Once they got uh >> you know well capitalized >> off to the races >> and I mean I think that I mean the ser was 2.8 billion US you know it's ramping up in production. So >> the worst geology by the way. >> That's right. That's right. So comparable even to MEI like >> Yeah. That was always the comp. >> On a on a relative basis, we think it still looks really cheap even though it's had >> a um a significant run. So, we'll wait and see. That's a ding ding ding, by the way. >> It was that didn't work it out. Um >> it was a former ding ding ding for me, but I I thought I was a genius selling at $210 and then it because it dipped to like a dollar jumps and now it's like higher again anyway. Uh >> yeah. And everyone would just point out Mi's right there. You know, we're a fraction of the market cap. >> Yeah. the um I was looking at some of your your your other like mining adjacent holdings uh Chris and and um noticed MLG um how how's your thinking evolved with MLG over over over time and just yeah like thinking about the implications of of diesel dynamics etc etc >> yeah MLG's been hard it's been a hard hole there's not much free float on that stock you know the inside own it's great to have inside ownership but when it gets too big uh there's liquidity challenges And >> it's always been cheap. >> Yeah, that's right. I mean, it's way I think MTA's I think it's about 94 cents trading mid70. So, really cheap. I think it's fine, but the free float's challenging and it really hasn't played its role for us in the sense of like we really we rate management. Um there's no issues there, but probably didn't get the kick with gold we thought it would given how much exposure they've got to gold. That was sort of that thesis that this was a lower risk way to play gold. I think north of 90% of the revenue is coming from gold. Um, and it's, you know, we do like that you do get that flaw when you've got such a big tangible asset backing. Um, so I don't think it's it's vulnerable here, but it's, um, it's been a hard hold for us. Um, and they're probably the things that have held it back. A big shareholding is good if if management want to sell and it's going to elicit a takeover bid. I I don't see that happening near term cuz I think it's worth a lot more than this. Um so yeah, that's been a bit of a hard one. >> Another type of services company which has a very uh similar setup in terms of a large founder 41% AI advanced energy holdings. You I think parttook in the the IPO that right >> still holding or >> still holding. Yeah, >> we like that. Like that's a pretty boring >> company but I think Boring is good at the minute. Boring is good. >> Um there's some selling around which we think uh we think we know why and that's okay. Like sometimes people need to sell. Um we rate management. They've got to take over uh offer underway of matrix um which we think will be good. Um >> can really consolidates the the landscape in this part of the world, doesn't it? >> Yeah. Yeah, and I think you're going to get huge margin improvements for that that matrix business um by joining the two. And I just think it's if you look at all their different divisions, the the so the one that made us really nervous was wind, but even winds looking attractive now. Um you know, winds um undersea cabling, uh you know, oil and gas is is you know, a huge chunk of their revenue where it comes from like there's there's really good tailwinds in all those areas. Uh we think management are good um wellunded the ability to buy you know Bolton acquisitions which still isn't you know even after matrix they've still got the ability to do that uh and we think it's cheap so we think it's fine sometimes when uh management aren't based in Australia it just takes a bit longer for the market to maybe get comfortable with the story but you know when you're based here like they're here regularly and they update shareholders. Well, but when you're based in Australia, you know, you might be doing school pickup and you talk to someone and you're effectively broking your stock, it's just a lot more natural uh ways to sell your stock. So, it's pretty liquid. Um, and we think that probably is part of the challenge, but we think over time it's a high quality business. They'll they'll be able to overcome that. So, yeah, we're very much still there. Do do you have like a stepping back a broader view on on the services both mining and kind of offshore as just cheap parts of the market or because it does seem to be a theme picking up that you've you've gone through a fair few of these names and you hold a fair few of the names in in that sort of space. >> Yeah, I think it maybe stems from we want mining exposure but we're not technical mining guys so we're happy to take that risk on at times. Um, often when we like a commodity, we might buy a basket of it. Um, but yeah, it's sort of been a way to give us that hard asset mining exposure without, you know, getting getting resold by the metallurgy. So, um, you know, I mean, we've still got a heap of stocks that are unrelated to mining, but um, yeah, that hard asset thematic is a is a big part of our portfolio at the minute, for sure. >> Yeah. And and you spoke about hedging before and you know in the context of Santos potentially being a hedge to what we could see. How do you think about the the cash component of your portfolio is just a a hedge and playing it safe for now? >> Yeah, it's a it's the most important way we can hedge. Um our cash is not ridiculously high currently. I mean we're about 6% or so. Um, so we got a chunk higher than that uh in March um when we're just trying to work out what was going on. Um but yeah, I mean I think it's a scary time now. I don't think it's a bad time for asset prices. I think it's a bad time for currencies and currencies is what measures those asset prices. So I don't want to be sitting in a a heap of currency. Um, so yeah, that's that saying, you know, we're so so bearish, we're bullish. There's elements of that. Um, provided we're we're putting in the right spots. >> Yeah, we had this conversation with with somebody who'd looked at the the commodities world very intensely within within BHB for for quite some time. And he created a simple kind of matrix of Aussie dollar, US dollar, commodity prices, low, high. and he he essentially was saying we're at a pretty rare part of the cycle where the Aussie dollar has been relatively low. It's appreciated of late, but commodity prices have been really strong for for Australia in general. So, how do you think about like where we are with the Aussie dollar right now? >> Well, I would if I had to I'm not great at picking currencies. I'd on the Aussie dollar strengthening from here. You know, you're going to get rate f differential in terms of our rates are going up. US rates going to be flat and I suspect they're probably coming down. Um, and iron ore hasn't been wildly strong, which which I would expect to expedite that that that rise in that the Aussie dollar, but most of the commodities are really strong. And um, yeah, I I think if if you think it's going to be a commodity bull market coming and that hard assets are going to lead the market, I would expect countries that are resource dominated like Australia and Canada and Brazil are going to see their their currencies appreciate. So that's that's what we're expecting. >> Tasmir Group, tell me about the thesis there. >> We're out of Tasmia Group. Um, >> a former thesis. >> No, they uh the thesis there is they're just they're a mining service operator. They're a rollup. um they buy lots of different businesses, keep the owners of those businesses incentivized to stay on and um you know they they run those those businesses in different regional areas. I think last I looked at that about 20 28 huge different operating divisions and and >> I get why that makes sense cuz the businesses they buy put in a heap of money into the local community and there's a heap of goodwill in those businesses so they keep those divisions going. I guess sometimes for us we like to extrapolate at the extremities and in terms of whatifs and if there's 2,000 different business decisions that's going to be problematic. So they're nowhere near that yet. But um we found it hard when you when you are rolling up business, it's just harder to work out what the organic number really is. And we ended up getting com more comfortable with MA Group than Tasmia. But we like the Tasmia guys. They were it was a really good stock for us. We made some money on it. Um but yeah, full disclosure, we're no longer no longer there. On the flip side, MA is um it's it's a remarkable business if you own the equity. It's dreadful if you're the miner who has to keep paying for their uh >> Yeah. And look, they've underperformed Tasmia, you know, like their evaluation starting point matters and we we love the M guys. We think that's a great business. Um >> it's a it's a wicked. >> It's a wicked business. Yeah. We really trust management. Um, we like the fact they've got that US optionality, which was probably the the thing that was when we first looked at it about 18 months ago or so, that was the bit that looked problematic, but US is going really well now. Um, and we think that's going to be a really important earnings driver for them. We think they're going to make an acquisition, um, which they haven't done for a while. They've got their new 5year plan coming up, which should be released any day. So, um, we're still there and we think that's a really good compounder. >> Aussie Aussie businesses going to the States is is not a, you know, not no guaranteed success. >> Uh, yeah, many companies, many great Aussie companies have done it and failed dramatically. So, >> there's just a huge shortage for skilled labor. Like we we often ask different businesses, you know, I remember asking the shape guys which do fit outs for office buildings and you know, things like supermarkets and stuff and they're really good business which we don't own. But if you could have any macro sort of headline, you could open up the paper and read it. What would you and it would transform your business, what would it be? And I thought it would be super funds to 3x their investment in office buildings or coals to do this or Woolworths to do that. And it was if there was a cruise ship coming here with 10,000 skilled skilled skilled workers, that's what would transform our business. And you hear that time and time again. Um, you know, so much of the skilled labor we have, not just in Australia, around the world, is is aging. And you know 20 or 30 years ago people got told if you want to be a success go to university you know get an arts degree don't don't get don't do an apprentichip don't become an electrician and there's just a huge shortage at a time when the world's electrifying you know there's data center capex is dwarfing any of the capex cycles in history um so yeah ma very much plays into that >> it is interesting we we talk about on you know on the one hand having that AI theme of there not going to be any jobs and on the other hand so many businesses we speak to we hear about struggling to find talented people or labor is so expensive you know which is the same thing so it it is interesting to kind of step through that in in Australia specifically >> when AI meets the robots I think that's when >> labor gets scary >> you know from an employment perspective and you know self-driving cars >> it's sort of here you know you can way more in the US without a driver like that's coming that's a big displacement of jobs >> but there's still a way to go before you you get that real next wave of job displacement. Um, >> yeah, skilled labor doesn't matter when you when you've got the robots that can do it. >> No, that's right. That that's that's interesting. And yeah, I don't know. I had a lunch with uh at breakfast it was with industry like titans of industry. I shouldn't have been there by rights. So impressive top 100 ASX CEOs and and chairman. And one of the things that came up was a view that not was held by one or two people that young people are lazy. And that and it's sort of a lot of people have that view. You wonder if it's laziness or just the incentives are wrong for them to work hard. You know, young people in the 70s could could bust their ass and put a deposit on a house after a few years. You know, good luck. um you know you see people getting rich as activists or jobs which you used to do in a pastime because you're passionate about something that's an entrepreneurial venture where you can make bucket loads of money. Um, you wonder if it is a laziness thing or just what happens when assets and labor get so disproportionately valued and and the assets become unattainable to a lot of people who who seemingly play by the rules and work hard and do what they're told to do and still can't afford to buy a house. You wonder if it's laziness or just perverse incentives. >> Yeah. I mean, $1.9 million for the median house in Sydney is just insane. And and you've got such an interesting lens at looking at this through liquidity, through fiscal policy, monetary policy, these sorts of things. You can see it happening on a on a big scale. You can see the the stock market just growing >> and I think it gets worse. >> I think I think like the you know the the financial market thing big themes of of recent history are all an expression of this too. Like you know why is poly market big? Why is >> Yeah, >> that's right. Um it's >> and and so I'm not I don't spend any time >> going this is what the policy should be because it's who cares it's a waste of time. Yeah. >> My time is spent trying to analyze what I think the policy response will be. Not if it's the right one or the wrong one. >> Um and it's easy like I just said well property costs too much for young people to be incentivized to work hard. But if you crash the property market that's not a good outcome for anyone either. That's it's enormous job displacement. So I sort of think it just keeps rolling on and sort of gets worse and worse. Um you know the systems designed for inflation and currency debasement. It doesn't work without it. Um yeah deflationary bust >> is much scarier than than what we're seeing. And we've we've we've seen that in the in the Great Depression. That was a deflationary bust. And and it's easy to stop that happening. >> Yeah. It's very it's very easy to to sound all or bearish about a lot of things, but there's so many good things about the world today as well, healthcare and all the advancements we're seeing as well. So, >> you wouldn't trade it like when would you prefer to be alive? Like >> 1942 felt >> tricky. Um, >> you know, 1916 felt tricky. Um, >> so yeah, it's it's just finding that balance. Like I don't think you can just say, you know, the world's amazing, everything's perfect and and you certainly can't win your mind when your kids can eat and they can go to school and, you know, most people have access to health care and um yeah, it's finding that balance, but overall, I wouldn't trade living now for for another period, but it's got its challenges, it's got its opportunities, and hopefully we're there to to exploit them. >> Absolutely. Absolutely. When when we think about the asset classes, you you you play in stocks and I think we spoke about this last time, but do you think there comes a time where you're you're more curious about bonds, other other types of asset classes, or do you think you just stick to your knitting? >> We'll just stick to our knitting in the fund. Um yeah, I mean, I couldn't think of a place I'd want to invest less than government bonds. um personally uh but other asset classes are interesting um and we've traded a lot of them as PA so I've traded commodity CFDs PA in my previous experience on you could get up to 400 to1 leverage um I didn't take the full 400 >> that's conserv trading silver on the most astronomical leverage and just like >> just not being able to sleep like every if I put >> every move was just enormous and um you I sort of strung out after sort of three or four days and the kids came up and sort of asked me a question I'm watching CNBC and I just thought this is not for me like I did really well out of silver. >> Was this the recent run? >> No, this was pre the fund. This was sort of co and I was able to buy an apartment at Bullah from the >> silver run but I never wanted to do it again. Yeah, >> I was like that is highly highly stressful. And so I think one of the things investing is it's you're really learning about yourself, what you're good at, what your skill set is, what your style is. Short-term trading, uh, you commodity CFD investing is not for me. Um, but you do learn a lot from trading different asset classes. You know, I mean, the intersection between crypto and the real world is coming whether people like it or not. You know, like I haven't looked recently how many US government bonds stable coin companies are buying, but I mean I'm pretty sure they're a top 15 holder of the US government debt. Like it's unbelievable. So, >> and gold. >> That's right. And Tether owns more gold than Bitcoin now, which who would have thought? So, um you know, there's real world implications for that. And there's a lot of policy you can see um you know moving to make crypto more important in the US. It's not it's not something that hits people's radars here but sort of stable coins and the ability for them to soak up US government debt at a time you know when China doesn't want to Russia's not allowed to. Saudi Arabia doesn't really want to. They want to invest in soccer teams and other things and Japan's been selling a lot of their holdings. like someone's going to have to buy those bonds cuz two trillion two trillion plus deficits every year aren't going to finance themselves. It's being open to to what those options are and and stable coin feels like potential potential assistance there. >> So, if you if you do a bit of PA investing that you you can't do in the fund, what is what's your favorite PA investment right now? >> I don't No, I don't really do it because I I don't want to spend the time on it. Um, and it just ends up feeling like a bit of a distraction. So, >> I don't spend any time looking at stuff that the fund wouldn't invest in potentially. Um, you know, maybe too small for the fund, but we still think it might be interesting in, you know, 12 months time or 18 months time. And a part of me doesn't miss being in really small stuff. Um, I suspect you guys like the smaller end of the market and I loved it for ages, but you can just get stuck. Management teams are less high quality than they are. Not always, but often. Um, and you sort of get sick of being lied to after a while, you know. So, I don't really miss it. I could see a world where I would really enjoy PA investing again, but I think I'd be in sort of, you know, midcap. They're small cap stocks, but 200 million bucks isn't really a minnow. The 200 million to a billion dollar market cap. Even if I was back to PA investing, I think I'd still lean there. Um, yeah, I sort of I think I'm valuing liquidity more and more as I get older because it just gives you the flexibility to change your mind. Even though I had a great run in the really liquid stuff, it was good fun. Um, >> yeah, >> there's there's one commodity based company which I think uh you had as a holding maybe a couple years ago. Don't know if it still is there, but Metals X. >> Yeah, we're not there. That was a cracker. Really liked it. It was kind to us. We we're out now. Um out too early. Uh but that was that was good for us. We thank the market gods for the opportunity. >> Tin's been on a hell of a run. >> Been on a hell of a run. Yeah. Um we met with those guys that show ran a gold thing the other day. >> Oh, Tamar Gold was a great Yeah. Which we didn't we didn't plan but they've done a great job with that Metals X. It was so cheap for so long. >> Yeah. >> People struggled with the ownership structure. >> Yeah. >> Um are you guys still there? Yes, ding ding ding. I I I do own stock. JD does doesn't. >> You're a bit late with the ding ding ding tra have a quick double check. >> Yes, you're right. Like I do. Yeah, I wonder how much upside's still there and like I I I struggle to sell it to be honest because it's I still I just love tin so much and it's Yeah. >> And there's not many ways to play it. Like what are you going to go with alchemy or >> Yeah. And to be honest like that is that that is an option. Um or the other one that we hold together, Stellar, which Metals X has just picked up whatever 17 million. >> Yeah. And there's a little Mentos isn't there, which Metals X have a stake into as well. So yeah, the the tin space is is super interesting. >> Should we wrap up with a underrated, overrated >> type? Let's give it a go. Yeah. >> Yeah. I'm going to throw in some other ones as well. There'll be higher lower type questions. Yeah. >> If if you if you get the kind of drift there. So >> the Aussie cash rate, higher or lower in one year time? one years to higher. >> Uh uh gold north of US 6,000 an ounce any time during 2027. >> Yes. I like that you use US. I always use US. I feel the real mining people use Aussie. I'm happy with US I'm more attuned to personally. Yeah. Um >> the US 10year to breach 5% in the next year. No >> oil the average the average Brent oil price in US dollars in 2027 higher higher or lower than 90 bucks a barrel 2027 first half probably lower we'll go lower yeah I think once things I think the net outcome is oil crunches down eventually, but it's probably got 12 months even if the war dissipates today. But then I think the net outcome is it it comes down pretty sharply eventually. >> The the AI capex field out underrated or overrated? >> Well, I think it's real. Whether or not it's a smart way to invest capital, um I don't know, but I think it's happening. >> Uh >> I know it's happening. I can see it's happening. >> Yeah. Tungsten. Overrated or underrated? >> Oh, >> no. Not here. I think overrated here. I mean, killer run. What was EQR? Five cents in December. >> It's amazing. >> Um, hats off to those that played, but I think once those small medals run like that, I think they're overrated. >> But I'm a generalist investor, too. Sorry, J. >> No, no. All good. All good. Silver, I know you you wrote a bit about it a few months back. We need to we need to draw a line in the sand somewhere. So underrated, overrated at 75 bucks. >> I felt like the Vince McMahon meme because I I tipped silver as my commodity of choice when I came on in December with you guys. >> Got there within one month >> and then it ripped and I had all these people texting me going, "You must be making so much silver." I had no exposure. I felt like just music sort of crying there, shaking his head. Um cuz it's hard to play. Uh and uh >> do I think it's overrated? Yeah, I think silver at 75 is is fine to own and and to buy. Um, yeah, I think it goes higher. >> I kind of go go with uh yeah, mining servicesesque type type of business. Minres at 65 bucks. >> This one hurts me a bit because I think Chris Ellison is such a gun and I made a promise to myself. Remember talking to fund manager TDM in Sydney who I really liked. >> Yeah. and they bought them at 12 bucks and they've just I don't know if they're still there but they just held them and they would be they would have topped up at 17 and um >> and I remember thinking you you get a guy like Chris Ellison to me is a bit like I don't know Bezos our version of Bezos or you know the sort of US entrepreneurs you'd really want to back and I thought if they get crunched like that I'm just gonna back the truck up and then here they were at 17 and I'm telling this story and I just couldn't pull the trigger at the time. Like the debt made me a bit nervous. Um you lithium. So a very long-winded way of saying I didn't buy it and I'm not buy 65 personally, but I wish I'd bought it at 17. Yeah, >> I've got another slightly different one. Given we are filming in the in the great state of Victoria, people are very bearish about the Victorian economy. Is the the consensus mood around Victoria underrated or overrated? I >> think I think Yeah, the state is struggling at the minute. Yeah, I think that's I don't really know whether underrated or overrated is the right way to answer that. >> Are people too bearish, do you think? Or do you think that's pretty justified? >> I think it's justified. Yeah, >> we'll always have you back. >> Yeah. It won't last forever. like these things are uh you know temporary by nature but temporary can be two years or 20 years. There's just not many assets to sell now which makes it different to the last time Victoria was in this place in the early 90s. So it'll come good eventually but I think you know for a lot of small business owners in particular I think things are very tough in Victoria at the minute >> and different to the rest of Australia and you notice it. I I feel you feel it when you go to Adelaide, when you go to Perth, Queensland. I feel the mood is wildly different. Um, >> do you guys feel that? >> Yeah. Energy, what we've spoken about is a big part of that as well. And that's been a a slow burn here, but it's key input cost for so many businesses. You you definitely feel it. Definitely feel it. Perth is up and about. You see it in the house prices >> big time. >> Yeah. >> Yeah. >> Yeah. >> I uh I think it's a great place to leave it. And um yeah, delighted that you could uh share your views with us Chris and congrats on the you know remarkable performance from Ser today since you've started it and yeah look forward to speaking again in the future. >> Thanks J really appreciate it. It's good fun. >> Big thanks to our partners Sanvic Ground support intrlinks focus the platform by market tech Woody the platform by costmine intelligence exceed capital and metalshub. Check them out. >> Now remember I'm an idiot JD is an idiot. 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