Liquid real assets with Will Thomson of Massif Capital; natural gas, tungsten and tin | S07 E33
Summary
Investment Strategy: Will Thomson of Massif Capital focuses on investing in liquid real assets through publicly traded companies, emphasizing sectors like energy, materials, and infrastructure.
Portfolio Construction: The strategy involves a concentrated portfolio with 15 positions on the long side and a few on the short side, focusing on companies with specific catalysts rather than broad commodity price exposure.
Key Sectors: The discussion highlights investments in European natural gas, emphasizing companies with solid balance sheets and high dividend yields, and the strategic importance of the North Sea region.
Bottlenecks and Opportunities: Thomson identifies bottlenecks in sectors like semiconductors and critical metals such as tungsten and tin, which are crucial for industrial and technological applications.
Risk Management: The approach includes a focus on operational catalysts and political risk, with an understanding that patience and timing are critical due to the inherent volatility in real assets.
Shorting Strategy: Short positions are opportunistic, targeting companies with negative trends and poor management, often in cyclical industries.
Market Outlook: The podcast discusses the long-term outlook for energy, noting a lack of reinvestment in oil and gas, and the potential impact of geopolitical factors on supply chains.
Innovation in Commodities: Thomson argues that investing in commodities is not necessarily being short human ingenuity, as these industries are highly innovative, employing numerous PhDs and driving technological advancements.
Transcript
I think we're live. This is Value After Hours. I'm Tobias Carile, joined as always by my co-host Jake Taylor. Our special guest today is Will Thompson of Massive Capital. Great name. He invests in liquid Real Assets. We're going to find out what that is. How are you, Will? >> I'm good. How are you? >> Very well, thank you. Thanks for joining us. Um, Liquid Real Assets, what is that? >> Yeah. So um we we invest sort of along four industry verticals. So energy uh which is everything from utilities to oil and natural gas to renewables uh it is material chemicals mining uh construction equipment that type or construction materials uh and then sort of select industrials which would be companies that provide services to those industries and then infrastructure. So what private companies or private equity talks about when they talk about real assets, we're investing in the same types of assets uh except we're just doing it through the publicly traded companies that invest in them and and sort of build the out of them. A lot of the companies are project companies. They're building some big asset whether it's a refinery or it's a mine. Um but that's that's sort of what we invest in. So big projects in the I guess old economy. >> It's been a tough decade for that style of investment. So you launched in 2016. >> Yep. >> So almost exact maybe maybe a decade in 2025. How how have you uh survived or found good projects through what's been a pretty tough run for for the old economy? So, so I think that that um I think one of the edges that sort of we bring to the table is uh a very sort of different portfolio construction approach which I think has yielded sort of benefits. So, so we've delivered 14 and a half% annualized net of fees. Uh so pretty good. Um but the key has been having a concentrated portfolio and so rather than being exposed to say commodity price beta in a dramatic way um we have picked individual companies that have very specific catalysts uh that we think will overcome any associated drag associated with commodities. And so what we found is that especially in energy mining um infrastructure is a little different. Infrastructure is just really hard to buy well because it never trades particularly cheaply. Um but for a lot of the uh natural resources businesses, uh what we found is that about 50% of the time the catalyst that's moving the stock is commodity price. the other 50% of the time it's something else. But what's most interesting is very rarely do those two things occur in the same year. Um and so with a few rare exceptions, right? And so what you do is you focus on the company that is turning on an asset, copper mine or something, and if they're turning it on and copper prices are going down, doesn't matter. It's still going to you're still going to get a pop out of it. um because you're going from no revenue to revenue, things of that nature. U is it going to be as good as if copper's running with you at the same time? No, absolutely. Um but by being focused and concentrated in those assets, uh it's a very different portfolio than you see out of um a lot of say more natural resources focused ETFs or funds. It's 15 positions on the long side, a handful of positions on the short side, uh 50% of the portfolio in the top five, 80% in the top 10, you know, so very concentrated or relatively concentrated, I guess. And um you know, it's all about what the management team is doing in the operations and and that's how I think we've produced good returns sort of through cycle. Do you think it's what's uh more important the the asset or the management team? >> Uh I would say consistently I would say consistently um through cycle I'd rather bet on a management team even if it's a mediocre asset but mediocre assets can do really well. So, like right now in gold, I'm okay with a mediocre asset. Um, if I can buy the company cheap enough, uh, because they end up having tons of operational leverage to the gold price. Um, but at the bottom of the cycle, it's got to be, you know, you got to have both a good asset and a good management team. So, it just it sort of depends on where you are in the cycle, I guess, is really the answer to that. You can get away with a lot more obviously when when the commodity is running with you. I like one of these lines that you used in your uh presentations. Uh you focus on bottlenecks arising from mega trends. So can you perhaps help us differentiate that from like traditional commodity type investing. >> Yeah. Um well so before we started we were talking about water, right? And uh I said I hadn't figured out a lot of good ways to make investments in water. Um and I have but I did come up with one interesting way uh earlier this year and I was in then I was out of it. Um but one of the one of the things we tend to focus on is is areas where there's overlap between sort of hard material sciences uh geopolitics uh and well an overlap in those two things we find interesting. Um and so one area in our sort of industrial sleeve that we've looked at is people who are producing uh the the the equipment to manufacture the inputs into the semiconductor processing chain. And so they use a lot of water in semiconductor processing. And so one of the companies uh that soul sourced all their TSMC soul sourced all their water purification equipment from is a company out of Japan called Oranda. Okay. So that's an interesting bottleneck. It there are three companies that manufacture the equipment to make the ultra pure water that is necessary for the world's best semiconductors. There are a couple other companies that have, you know, small lines in it, but really it's three small Japanese companies. They manufacture it all. Um, and one of them specializes exclusively for semiconductors. So that's an interesting bottleneck because as this semiconductor, you know, sort of explosion happens and we're building all these facilities, they have giant order flow for for new equipment to create ultra pure water. So that's an interesting bottleneck. Now everyone's aware of sort of some of the obvious bottlenecks and say critical minerals. Um but what's interesting is that with those types of bottlenecks uh you know something some individual commodity has a really good press agent. So like rare earth metals gosh whoever their press agent is right they're great right because every morning you wake up and you hear about rare earth metals. >> But the reality is uh and and you know the stories being told aren't wrong. They're they're not lies. It's it's just that's the headline. Um but uh you look at say US critical metals list um and you say cross off rare earth metals cross off copper and nickel the big guys and you're left with this this list of other critical metals and some of them like tin and tin timn tungsten these guys you know they have no attention on but if China stopped shipping tungsten it would be a similar situation to if they stop shipping us rare earth metals >> or you look at uh say like titanium um China controls like 60% of the titanium sponge refining and that's like a precursor to the metal um you know you've got a bottleneck there too um and so you know those are some of the types of bottlenecks we look at we also are really interested in I used to underwrite political risk insurance policies for a Lloyds of London insurance syndicate. So, we're really interested in situations where political risk creates a dislocation. Um, I'm probably the only investor you guys know who like hears the sound of guns and I'm like, "Oh, maybe there's a company there. >> Someone's making money." um you know uh so that's that's sort of some of the the the types of bottlenecks we're interested in places where um the supply is both an immediate issue um but there's also a time to build problem >> yeah with that lag um is it uh I feel like is there I I wonder if there the public markets are long-term looking enough sometimes for these projects and do you get a a mismatch there where that can create problems to to get a com uh get a project finished to have the patience to like see it through for if it takes five years to get it up and running. >> Yeah. I I mean that the with with all the companies I look at base case should be there's something that's going to go wrong while I own this. um and and >> twice as long, twice as expensive. >> If if I think it's going to be and and that's why the most important thing is buying well with real assets like there are other places you can afford to not buy well, you know, buy get bailed out by compounding or something over time. You can't do that uh with with uh liquid real assets. Um, but no, there's definitely uh I end up in things oftentimes a little longer than I had initially expected or wanted. And so patience is critical. Um, the willingness to average down is absolutely essential. Uh, if you can't if you can't do that, then you should not be you should not be looking at say mining companies or chemical businesses or anything like that. Um, but then the other thing I think and this can be really hard for some value investors in particular I think is that nothing can be held forever. Maybe Exxon Mobile, right? Maybe Rio Tinto, like maybe there's, you know, a few exceptions. Um, but, uh, I'm dating everything for anywhere from 3 to seven years. Um, sometimes two years, you know, and sometimes I get lucky, right? You know, we all get lucky. Every once in a while, something pops. But, uh, everything's got to be, you know, I got to be ready to cut bait and get out because, uh, despite despite the initial pop that comes from, say, turning on an asset, eventually everything starts to go with the cycle if it's if it's lasts long enough. there's like a small window where things can buck the greater macroeconomic trend in my spaces. Um that's the window we try to focus on. Um but you know you can't buck it forever. >> How are you identifying catalysts um outside of sort of commodity trends? What sort of catalysts are you looking for? Um, I mean it's all operational uh things basically and and you know I I said earlier a lot of the the companies I'm looking at are project companies and and one of the interesting things that happens and it happens in other spaces as well. Uh the most notable being sort of like biotech um when projects get going you actually are progressing a project and in theory you're reducing risk as you go. But in public markets that's the orphan period and nobody wants to own it. And so you get this sort of trend. It's called the land curve. Um where you know you get over here it's it's geology. No one's interested. A discovery it pops. Oh we got to build it. It crashes. Uh and then you get an orphan period where they're actually that's actually a whole management team doing stuff. um lot of things to do diligence, a lot of people to talk about or talk with, a lot of people with experience that can help inform your insights, but nobody wants to own it during that period. And so that that's actually my favorite period to play in. Um so most of the work we do is really about understanding the day-to-day operational tasks that have to get done in order to achieve some sort of greater goal. That greater goal is often well understood by the market. Like we're going to build a mine or we're going to build a refinery. That's understood by the market. Uh but the market doesn't want to deal with the challenges associated with getting to that end goal. Whereas I'm like that seems like there's a lot of stuff to do research on. There's a lot of things to understand. There's a lot of opportunity for us to really have a clear understanding of what our risk is. Um, so that seems like a great time to buy as opposed to say, you know, buying, you know, buying bare gold. Yesterday they came out with some good news about a mine that moved the stock. So, so there are exceptions. Uh, but, you know, bare gold is just going to trade with a gold price. So, what's your risk? Your risk is your gold price forecast. I don't want to have anything to do with that. I don't know where gold is going. I you know generally I think I'm directionally good on commodities but beyond like that vague directionality I'm sort of like I don't know. >> Um >> does that then mean William that your your strategy is not as uh traditionally uh centered around inflation protection which is a lot of times the story behind a real asset uh play. >> Yeah. No, I mean uh we pitch and market our strategy around alpha. Um that's that's our focus is generating uh maintaining a a correlation of nothing to everything and uh producing as much alpha as possible with a very low beta. Um and so that's our strategy. Do we offer inflationary protection just sort of by nature of the assets that we own? Yes. Uh but my sales pitch centers more around um I find that a lot of competitors, if you will, have portfolios that have bold macro bets on timid equity bets and I want to have a bold equity bet on a timid macro forecast. It seems it's a little bit um endemic in commodities that you're a little bit more macro than a lot of equity guys sort of say that they are. You have to have some sort of view, but you you don't feel like you need to have or you don't trust the the view. >> I don't there are definitely certain companies uh that I do at times feel the need to have a view on. um on the commodity let's say uh but oftent times I don't feel the need to have a view on the commodity it sort of depends on the company and that's you know I I think it's really important to be crystal clear about what you're betting at all times right and and as long as you're crystal clear on what you're betting on you know it's okay to have some some macro bets if you will but you got to be really clear that you're making a macro bet via equity it's like a derivative equity actually becomes a derivative. Um, derivatives get complicated. They get complicated for a reason. It's because the causality gets messy. Uh, so I I don't I don't like to to make that bet. So So yeah, at times I I uh don't feel the need to have a an outlook or a view on the commodity whatsoever. >> Um, talk to us a little bit. >> Talk to us a little bit about shorting. How do you think about shorting? What are you looking for? >> Um, shorting's tough. Uh, we are very opportunistic about it. Um, so I do not always have a short book on. So, for instance, had a couple of shorts on this year, but mostly shorts have been off and they were all in the first quarter and they were all closed out by the end of the first quarter. Um, shorting by its nature, uh, in my opinion, you want to get in, you want to get out. Uh, time is not on your side. Um, so I like to short things that are already sort of turned over and and and sort of let's call it negative trend and momentum, if you will. Um, and so that's how I approach it. And that works fairly well, I think, with cyclicals. uh shorting is almost the the way we short things is almost the complete opposite of the way we go long a company. And so on the short side uh say when lithium peaked a couple years ago at 80,000 by the time it got to 60 I was like okay this looks like this is going I'm going to short a bunch of lithium companies that I don't like now mostly companies with management teams who I don't think are going to be able to execute. And so you get sort of like a double whammy. Uh you get the macro and the operational. And so the short >> Yeah. I like that. The macro and the bozo. And so the short book is in many regards just the mirror opposite or the the complete opposite of what we do on the long side. >> Uh you you had at one point uh and I don't know if you still have this but you had a overweight position in European natural gas. Do you want to talk to us a little bit about uh European natural gas. I don't know anything about European natural gas. >> Yeah. So, uh we are our oil natural gas exposure at the moment is um three companies represents guess about 25% 30% of the portfolio. Uh Equinor, Vara and Harbor Energy. Um and the the the thesis I mean the thesis at a very high level each company's a little bit different. Um but at at a very high level the thesis is well these companies all have good solid balance sheets. Uh they all have doubledigit capital return in the form of dividends with a little bit of share buyback as opposed to a lot of share buyback and a little dividend. So something like Vara Energy has a 14% dividend yield uh and they've already penciled it in for next year. So I'm sitting on say like three and a half years in a row of 14% dividend yield. And uh you've got an interesting situation in that sort of the North Sea Norwegian continental shelf area where they are the only domestic source of energy for Europe outside of renewables. uh you've lost Russia which creates a bit of premium value there. Um the marginal uh gas into Europe is LNG. So you've got something that increases the price there. And then in the North Sea and in the the uh the Norwegian continental shelf area, what you've got is an approach to production that is much closer despite it's offshore, but despite the fact it's offshore, it's much closer to say fracking if you will than uh Exxon going to Gion. So what that means is the infrastructure basically around those areas is incredible. You have pipelines running across the ocean floor right and left. If you look at a map of the pipelines on the ocean floor, you you uh >> minds Yeah. It's like a bowl of spaghetti. Um, and so there's there are these great opportunities to be infrastructure-led with your with your uh exploration. Uh, and you have a you have a single uh oil and natural gas platform uh and you can go off, you know, a couple of miles that way, a couple miles that way, and drop some things on the ocean floor, drill some holes, and then pipe it all back to the core infrastructure. And so the lifting cost, the cost of production for a lot of these companies is well, they're all sub $20. Some of them are sub $10. Now there's taxes and other things that that absolutely reduce their uh their take-home. Um but they are you know giant free cash flowing assets um with a faster cycle if you will than than more traditional offshore. Uh and so there's a little bit of geopolitics, there's some operational efficiencies. Um, and you've got sort of multiple return streams in the form of uh the dividend, some share buybacks, and then you have the potential for capital appreciation, which is higher than it would be in the United States because Europe just doesn't like oil and natural gas. Now, whether that ever changes and I benefit from, you know, those companies trading the same way they would in the United States, you know, I don't know. That's an open question. Um, but they don't need to appreciate that much as long as they can sustain a double- digit dividend yield either. So, >> how do you feel about energy and natural gas generally? Do you have a view? Were you agnostic? >> He's pro. >> Um, what' you say? >> He's pro. >> He's pro. Um, well, I'm uh I I there were sort of two different things there. I I don't know if you're like I'm I'm all for all forms of energy. I don't care what it is as long as it is economically sustainable and you do it as cleanly as you can, you know, sort of uh afford to do or or as cleanly as you as you can, right? Like I don't want to pollute any more than I need to. Um but in this day and age, in this world, there's some pollution. We've we that's just the way our economy is set up, right? So is what it is. um in terms of like long-term outlook. >> Yeah. In terms of the process, >> not my not my area of expertise, but what I would say is there have been there's been a continuous fall in reinvestment. And so the the dollars that need to go to uh to actually grow um there haven't been dollars going into the oil and natural gas industry to grow production. There have been dollars to keep us running in place um but not for growth. And the fact of the matter is that renewables haven't made a dent yet. Now maybe that changes uh with EVs and them growing faster, but that too is running slow. Um and why anyone would assume it wouldn't have run slow is beyond me. >> Giant we've mandated it so it it has to happen. Um so uh I generally like that sort of setup for the long term um medium to long term five to 10 years or something. Uh uh within that there can be a lot of volatility. So >> yeah I like energy. I've got my I'm up to my risk limits in energy >> US energy. >> Domestic US. So domestic US is one place where outside of pipelines, I've never done any actual EMP stuff. Um the fracking like you got guys out of Texas who just know that they know the management teams and they know the tech and they know the operations and you know like they've been to every well. >> It's hard not to feel like a tourist in that, right? >> I I'm I'm a tourist in that world. So >> I don't mind being a tourist. Tell us a little bit about that. >> That's it. >> I started out in mining as a tourist. Um and then I was like, this is the coolest thing I've ever seen. This is all I wanted. >> I mean, I grew up in an oil and gas patch, so I feel like that's like just by osmosis. Immos some of it. >> You're ton pickkins. Now, >> uh let's talk a little bit about tungsten. What's attractive about tungsten? >> Well, I mean, tung tungsten is is is the rare earth metal store uh in in more of a microcosm um and with easier processing uh and fewer mines. Um so, tungsten is used uh all over the industrial world for mostly for for for making harder making stuff harder. when you alloy steel with it, the steel gets harder and stuff like that. Um it's used a lot in the defense industry. Uh but uh demand grows kind of slow. Uh let's sort of you know GDP level growth um until you hit a cycle like a defense cycle where they need to sort of ramp production and defense and stuff like that. >> What is tungsten used for just hardening? Yeah. Um, it's got other use cases, but I think the largest use case tends to be as as an alloying substance in creating harder metals, >> more heatresistant metals. Um, so you know, the the fan blades say in a natural gas turbine are going to be made from a tungsten alloy. Um, although they make them from ceramics now also. So, you know, like there are substitutes. Uh but any place you need something really hard that isn't going to change shape um that is heat resistant, tungsten is a viable or a tungsten alloy of some kind is a viable uh use case for tungsten. Um so lots of machine parts uh anything spinning. Um stuff like that. Uh or the defense industry. Um, so if you uh if you want to uh bomb an Iranian nuclear power plant, for example, um your bunker buster is going to have a bunch of tungsten in it. Uh tungsten weighs a lot. Um and it it doesn't uh it doesn't change shape. You you shoot a bullet at it and a bullet fractures into pieces. So um but uh there aren't a lot of tungsten mines because the growth has been slow. um the processing has all shifted to China uh and and so you've got the same rare earth sort of story uh except you do have uh tungsten smelters and refiners in the west um and you just don't have a lot of mines that are producing tungsten and so tungsten there was up until this year there was really for all intents and purposes only one publicly listed tungsten miner uh Alante. Um so much like rare earths up until you know a couple years ago there was really only one rare earth publicly listed company. Uh and we're entering a cycle where it's a critical metal. It's in demand. Um and you've got a couple of companies uh that are looking for and have great discoveries and are building mines in western. That's the other thing. you you you find they they're finding tungsten in places like Portugal, which is historically where tungsten has been mined. Uh South Korea, there's some in Canada and a couple of there's some places in the United States that have it. So, you've got a geopolitical need. Uh you have a bottleneck. Um you have an underinvestment cycle. Um and uh they happen to also be finding worthwhile economic deposits in the Western world. Um that doesn't happen very often. Uh, so that's a nice mix. Um, and they're only a handful of publicly traded companies. So if the press agent for tungsten gets better and, you know, they got to go find whoever it is for rare earth, you know, the flood uh, the flood will be be useful or productive forever. >> Yeah. The tungsten marketing board's got to get busy there. >> Get their stuff together. >> Yes. Yes. >> JT, we're coming up on the top of the hour. That's time for veggies. What have you got for us today? Yeah, you know, with uh Will coming on and talking about things in the real world and supply. Um, and I thought we might bring in a little piece uh from physics and see what we can do with it. Um, so I'm going to start the story off with, you know, prices are are popping and one shutters when they're heading to the grocery store or the gas pump and it leads to shouting matches and political pin the tail on the donkey. uh like is it the fault of these greedy capitalists why prices have been going up or is it money money printer going br is it proflegate consumers or is it something else entirely and we're going to borrow a law from physics to give you a comprehensive and dare I even say maybe definitive uh understanding of the raw ingredients of inflation. So we'll learn one equation with four knobs and hopefully like a minimum of handwaving. Uh so physics and economics can sound like different worlds and one certainly envies the other. Uh but but both are obsessed with these systems and they're big messy networks of interacting parts where tiny individual actions add up to powerful collective results. So in economics those tiny actions are daily choices that millions of people make. One person grabs a latte on the way to work instead of making coffee at home. Uh good luck ever retiring buddy. um that decision alone won't shift the price of coffee beans worldwide. Or maybe one family decides it's time to move into a bigger house on its own. That's just one transaction. But when many families all start looking to buy at the same time, you know, maybe mortgage rates are lower or wages are rising, suddenly sellers can price higher. Uh builders see an opportunity, then contractors get busy, material suppliers raise lumber and concrete prices. And what started as a lot of little small family level decisions become a nationwide housing boom and maybe even eventually overheat into a housing bubble. Uh and on the supply side, you know, maybe a farmer decides to plant plant soybeans instead of corn this year. A shipping company cuts back on orders for new containers. Restaurant decides it can't afford to stay open for lunch anymore. Each action seems totally inconsequential in a $100 trillion economy, but you add them all together across millions of farmers and shipping companies and restaurants and you start to see shortages, bottlenecks, higher costs for consumers. So, no individual consumer or business really decides to create inflation. And neither does any central banker, I think, despite all the the helicopter talk. uh and just the same as in physics, no single gas molecule decides to increase pressure inside of a piston. So a molecule simply is following its energy. It's bouncing, colliding, rebounding, but when billions of them are doing it at the together at the same time, the container walls feel that pressure. So that brings us to this equation that we need to learn, which is the ideal gas law, which is expressed as PV equals NRT. And so P is pressure, V is volume, N is the number of molecules. So also called marity. Uh R is a constant and then T is temperature. And that's it. Just these four variables and one constant. But with these we can explain why a balloon expands, why an engine fires, why a star explodes. And for this particular thought experiment, just imagine a piston filled with gas molecules. Okay, very simple. Billions of them are bouncing around and colliding. And pressure is the force of these collisions. Volume is how much space we have to move around in. Temperature is how fast they're moving, their energy. And then quantity is uh just how many molecules are crammed in there. Right? That's the marity. And if you heat the gas, the molecules zip around faster. And if the piston can't move, the volume and the volume stays the same. The pressure rises. I'm I'm not telling you anything you guys don't already know. But uh add more molecules, same thing. More collisions, more pressure. shrink the volume, the pressure is going to spike. And that's that's the gas law. Now, let's translate this all into economics because inflation is is really all about pressure as well. Not molecules hitting a piston wall, but money colliding with limited goods and services. In fact, as uh economist Wilhelm Rokkey had a nice turn of phrase in the 1950s about inflation, he said it was a riot of claims and an insufficiency of goods produced to meet them, which I thought is quite a nice uh bond mo. So here's here's the mapping of our of our analogy. Pressure becomes the price level. Volume becomes the real output capacity. How much stuff the economy can produce. The number of molecules in is the the money supply. And temperature is the velocity of money. So this is the energy of kind of economic demand. So when you think of inflation through this lens, you see it as a dynamic system. So too much money in too little productive space or too much economic energy without enough output and and prices are bound to rise just like pressure. And in the physics version of the gas law, R is this universal constant. Um and it's a scaling factor that kind of ties together energy and temperature and pressure. So the whole equation makes sense. Crucially, R doesn't change. It's a background feature of the physical universe. And that stability is what allows the law to hold across all these different conditions. Well, when we shift economics, it's it's kind of tempting to dismiss that R as irrelevant, but in fact, I think it's there's a very strong analogy here still, which is R is the institutional constants that make the economic system function. So like rules, norms, customs, trust structures that don't show up directly in inflation statistics, but they're essential for the systems coherence. So think of property rights, contract enforcement, functioning courts, capital at risk being treated fairly, the credibility of central banks, uh you know, think of the cultural trust when you accept the dollar and you or you swipe your credit card and you know that that same dollar will be honored tomorrow. Uh and these these constants don't uh they don't fluctuate like money supply or demand or velocity, but they they're invisibly reliable in the background. But if R gets kind of wobbly, if trust in money erodess, if institutionals institutions lose legitimacy, if contracts stop being enforced, if government starts to take random pieces of ownership of businesses, Intel, uh the economies can then deviate uh as well uh and and it starts behaving not ideally. Um, so this, you know, that's where you start to mess around with things like hyperinflation and currency collapses or failed states as examples of where R effectively disappears. So just for fun, let's run through some kind of additional examples of to see how well our analogy holds. Let's let's do a little bit of um let's look at like a little bit of uh case one. So expanding the money supply, government prints a bunch of money, central banks ease credit. It's like adding more molecules into the piston. And unless that chamber expands, i.e. the productive capacity of the economy grows, pressure is going to rise. So we can see that Milton Friedman's old line that inflation is always and everywhere a monetary phenomenon is only sort of correct. As you can now see, there's a lot more to it. Um, case two is rising demand. So even if the money supply stays the same, if people start spending faster, the temperature goes up and these molecules are then bouncing harder, prices rise. And this is why it inflation can accelerate during specular booms or or when households feel more wealthy. Uh or imagine yourself in a hyperinflation when you need to get rid of your wheelbarrow full of cash before lunchtime. Uh case three is a supply constraint. What happens when the piston shrinks? Say a pandemic, a war, labor shortage. Suddenly there's less space for the same money molecules chasing it. Pressures rises. Of course that's stagflation. Um case four, productivity growth. So this the opposite can also be true here. you know, you expand the chamber and which is really technology doing more with less, more workers, new resources and that pressure can ease. So the same amount of money can circulate without driving prices higher. Um and and technological progress is inherently deflationary like we are trying to do more with less. So that slow glide path of deflation I think is a beautiful thing actually and modern economists treat deflation like this boogeyman. uh and that may be correct for that kind of sudden collapse of a debt deflation like in the 1930s but but otherwise price levels drifting lower really helps the average person so why we fight against that is is kind of beyond me um let's test our analogy against a little bit of history so why Germany in the 1920s classic inflation uh molecules were skyrocketed they were printing money endlessly the chamber was damaged by war uh so volume was constrained pressure of course explodes into hyperinflation uh 1970s oil crisis. The piston shrank due to oil shocks rippling through the economy. Uh end up cutting productive capacity. Pressure rose even though money supply wasn't wildly higher. Post 2008, central banks um they desperately wanted to add molecules to the you know through this quantitative easing that they were doing to fight this scourge of deflation. Uh but the pressure stayed low for years. Why is that? Well, it's because the temperature collapsed. uh banks were hoarding reserves on and the velocity of money cratered. So the molecules were there but they were kind of inert. They weren't moving fast enough to hit the walls to create much impact. Uh only later after COVID when you had demand came back strong and then supply chains were were fooled. Uh and that shrank the piston and then that that's when we started to see inflation spike. So uh one last little thing and we're getting close to the end here so hang in there. Uh the US isn't just any regular piston. Uh because the dollar being the world's reserve currency, the chamber is kind of leaky. So the dollars flow out into foreign reserves, trade settlement, uh global commerce basically and it's if some of the molecules had been dispersed into an adjacent chamber from the existing piston. So that's that relieves this domestic pressure. This is why the US has been able to run deficits for decades without runaway inflation uh slowing us down. So those extra molecules coolers were basically like vented abroad. But what happens when those dollars come home? When foreign central banks sell treasuries or when global investors repatriate cash to purchase assets or goods or services that we're producing? Suddenly that pissing kind of reconnects to that external chamber and maybe molecules flood back in. And of course that seems like pressure would have to rise. So who knows when and how quickly. Uh but I think it should be a little bit of a cause for concern. So let's just wrap this thing up. Uh think of every headline as a as a piston reading. Is demand running hot? Has supply shrunk? Are dollars flooding back? Or maybe most dangerous, has trust in the rules eroded or has started to wobble a little bit? Because that's the last one that really actually breaks this model and the one that you want to avoid. >> Good. Good one, JT. Where do you think we are at present? How do you assess all of the inputs at the moment? >> Um, >> lots of molecules. >> It's hard to imagine less molecules. So I mean trillion dollar deficits uh for as far as the I can see. Um and no real appetite to even talk about like is this the right thing to be doing. Um then you have the productive capacity the output. Um tariffs to me seem like totally the opposite direction if you wanted to control inflation. Like you're adding price you're adding costs to things that you're importing. um chasing off low or cheap labor that does a lot of the creates a lot of the productive capacity for your economy through ICE raids. Uh doesn't seems like kind of an interesting idea if you want to keep inflation under wraps. Uh and then but then on the other side of the whole thing um you know what if AI really does create huge productivity gains where effectively expanding the chamber in ways that we can't even imagine right now and we may get bailed out by a technological hail Mary um or maybe there's some energy breakthrough that we get fusion or something that that uh that unlocks the productive capacity and and we all get saved by it >> and then a miracle occurs. >> Yeah. Well, but we are, it does feel like we're trying to like kind of walk along this very steep ridge where if you fell off on one side, you know, you fall into inflation and getting out of control again. Um, or maybe, you know, if technology is so amazing and like the singularity arrives and um, you know, P doom kind of stuff like you fall off onto the other side of the the cliff. So, I don't know. It's it's not an easy time. I would say >> that's what a lot of people are hoping for with their credit card bills. Got to get that singularity before the end of the month. >> You need to get raptured. >> I I did like that analogy. Well, I I I really like the um I always thought that the idea, you know, inflation is a monetary always and everywhere a monetary phenomen was very limited. Uh and I always responded, well, it's also always and everywhere a behavioral phenomenon. I think you're I would expand R a little bit to include consumer behavior and stuff like that. Uh because that seems stable and that changes and it's stable and changes and you know uh changes in sort of cycles. But uh that's a good analogy for bringing all of it together >> in one one place. I like that. >> So >> I've got I've got a question about tin for you. I I >> is this for your hat that you want to wear, Toby? This is this is No, this is a this is a history question about the Lauron's age collapse when they couldn't find tin set back the empire by 300 years. No, I'm kidding. Uh tell us a little bit about the tin market and um where you see opportunity right now. Yeah. So tin uh is again a a sort of a other than critical metal other than rare earths. Um tin has historically been mined in all sorts of different places. Um it was Bolivia was a huge place to mine tin in the 70s and 80s. Then there was a big collapse. Um there's a lot of tin in uh Myanmar and parts of southern China. Uh and then there's there's tin sprinkled throughout the rest of the world. Um uh Cornwall up in England or over in England. Um tin was one of the earlier metals to be mined uh because it's it's nice and soft. I I I don't actually know if that's the reason why it was one of the earlier metals to mine, but historically it's, you know, it's got a long history. Um, >> what do we do with tin these days? >> Well, so everything that is electronic is soldered together with tin. >> Okay. >> Um, it it's very important for solar panels. It's very important for Well, yeah. I mean, it it's electronics. So you flip over your motherboard that is all tin. Um it's also uh when uh ASMC goes to make a a uh semiconductor at the nano scale with uh extreme ultraviolet light. The way that machine actually works is it drops a there's a droplet of tin and it's going to sound crazy but I think it's like a thousand droplets per second. um which sounds more like a stream to me, but apparently it's individual droplets that have to be the right size of liquid liquid tin that then get vaporized with a laser to create the right spectrum of light in order to to make those nano scale uh sub you know five nanometer scale imprints on a silicon wafer. That's all >> that's the lithography >> the lithography. Um so so very heavy use of electronics. Um most tin uh over the last 10 or 20 years has been um mined in Indonesia, uh Myanmar, southern China, processed in China. Um and there haven't been a lot of tin developments outside of that area. One of the sort of more successful developments is a a mine called Bisha in the Democratic Republic of Congo uh right up nice and close to the Rwanda border. Um where they like to have you know they like to get the skirmishes uh and uh there have been some tin mines in in sort of Australia, New Zealand area um company called Metals Ax. Uh but outside of that, there haven't been a lot of developments and and tin prices didn't really move. Tin stocks didn't really grow. Um and nobody really paid attention to it. Um now, of course, uh all of a sudden people are like, "Oh, really only been one new tin mine built in the last 15 years. It's Bisha and the Democratic Republic of Congo." Um, and outside of that, you know, there's nothing that's going to be built, nothing that's going to go into production, at least for the next five years. Um, so and and then the mines in Myanmar, the grades are getting very low. It's also a horrendous sort of operating environment. Um, from a humanitarian and environmental perspective, it's just sort of like anything goes. widescale artisal mining and then China sort of uh collects it all into into a big a big pile that they then bring across the border. Um and in fact the mines in Myanmar have been shut down for two years at this point I believe it is and you're talking about 25% of the market supply or something when those mines went offline just they just turned them off. Um, Indonesia had a a ban on exporting tin last year. Um, looking to continue to try and move up the Indonesia has like a strategy, if you will. Uh, they've executed it with nickel. They're trying it with copper. Uh, I guess they sort of tried it with tin, but I'm not I'm not exactly sure what what that was about where they basically say you can't export it unless it's smelted and refined here. So, we want to move up the value chain. So you got to do an extra step here. You can't just export the concentrate. Um uh and so that's that's you know it's it's a very simple story. Um but one of the one of the challenges I think with a lot of the companies I invest in and and and the perfect example of this is uranium. You get this great macro story, right? It all lines up. Supply, demand, all of that. That is insufficient in my opinion for an investment. And because that story in the case of uranium for example, the story you're hearing now is the same story they told 10 years ago. >> But it took 10 years and your opportunity cost was huge. Um, you have to have a company and a management team doing something uh that you can really bet on because that big macroeconomic story while it is a perfect backdrop and nice to have is insufficient in and of itself unless you have an infinite timeline and can afford the opportunity cost and very few people can and uh it just it it you know it might take forever. Um, so, so that's that's the story with Tin. Um, as I said, nothing coming online for like the next five years. There's some interesting stuff trying to restart some mines in Cromwell and England. Uh, there's some interesting theoretically interesting assets in Portugal and Spain. Um, and then, uh, Bisha, uh, which is publicly owned by a company called Alphamin, um, is, uh, sitting down there in the DRC producing what's probably about 10% of the world's tin supply. uh and paying a very healthy dividend of I don't know where it is now maybe 7% 10 something between seven and 10% peran if you accept the political risk uh you can clip that sort of coupon if you will and um the real question with something like Alphamin would be whether or not everyone gets over the DRC risk so early they had to shut the mine down because of conflict in the area stock took a dive uh fell about 40% over the course of couple weeks. Um and uh my expectation was that it was going to be probably two years before they turned it back on. The Trump administration came in and I guess have negotiated a peace agreement of kinds between the DRC and the government of Rwanda which was backing uh some of the the troops uh with a group called M23 which was c sort of the the impetus for the conflict in the region. Um and uh they turned the mind back on in like six weeks. um whether that peace agreement holds or not, whether there truly is, you know, a change in in in the political environment in that area of the world, that's a story that, you know, is going to take some time to play out. Um but uh the stock's back up to where it was uh before that happened. Sure. >> What would you say for like the if someone made the argument that being long commodities is being short human ingenuity? That's a great question. Um uh and it's a great question because I I suspect I suspect that most people will answer that question by saying, "Well, this is all stuff we still need. Um, and it's all stuff that is the backbone of, you know, you don't have AI without copper, right? You don't have silicon chips without tin. Okay, we've already established that. Um, but I guess what I would also say is that that is a very poor understanding of how innovative these businesses are and how critical the innovations they come up with are. You look at something like you guys had that guy on just recently who talked about PhDs. >> Yeah. >> Who employs the most PhDs? Well, Exxon employs more than Apple does. >> They're all in material sciences. They're all in chemical engineering. They're geologists. Um, but they employ more PhDs than Apple does. Um, Chevron is going to employ roughly the same number. Every junior minor employs a PhD. Why? Because geologists get PhDs. Um, Exxon Mobile files something like thousand 2,000 patents a year globally on the latest greatest way of cracking X Y and Z chemical to produce a new synthetic polymer that can be used to keep your iPhone together. Um so I would say that in fact you're investing in innovation. You're just investing in a different component of the innovation. Um it is not the innovation that will lead to the fourth or fifth uh app to order a taxi. Um, but it is the innovation that'll allow you to keep the iPhone, you know, that'll keep the iPhone running uh at a hotter temperature because it's a new material that is more heat resistant. So, it's um it's chemical sciences, it's material sciences, it's physics, it's geology. Uh I don't know what I missed there. Okay. It's just it's not computer science. But even there, you know, I was talking with a geologist this morning uh about a project he was working on in the United States in an area where he said, "Well, you know, they used to mine here in the 70s and 80s and and uh they they came to the bottom of the obvious deposits and they moved on." and he said, 'But what I'm really excited about is the fact that all of the technology that we now use to prospect, none of it existed in the 70s and 80s. You're talking about new geoysical methods, new geochemical methods, uh new biogeeological methods. Um these innovations all occur to help these businesses do what they do and so they're internal and so they don't get out to the consumer. the consumer doesn't know anything about them. Um, but they are critical to advancing our understanding of the world we live in and how we can better use the world we live in to make our lives better. Um, and none of the other innovations that occur after that can happen without it. So I I would say that uh I'm not even sure if the question is is properly formed. Well, let let me ask you a question at the other end of the scale because I'm glad JT went first with that one because I have a question. You know, the I was I was joking a little bit earlier about the Bronze Age collapse because they couldn't find tin >> and that set them back 300 years. And it seems to me that there's a there are a lot of critical minerals in a lot of in a highly highly complex economy that you know the the situation you're describing with tin. It sounds like all of the tin in the world comes from these fairly unstable places. So what do you think the highest risk minerals are in the world and what what are the consequences for >> sort of losing the supply for political reasons or just running out? >> So the running out one is really tricky. Um >> yeah what >> we don't really know we don't really know what's there. We don't you know so so I don't technology gets better for finding this stuff. >> Yeah, the technology gets better for finding stuff. Um, you know, I'm invested in a company now that's looking at ways of recovering copper that wouldn't be recoverable with uh traditional mining methods, but rather via basically what's called insitu mining. are pumping sulfuric acid into the ground trying to dissolve well it's not sulfuric acid but they're pumping an acid into the ground trying to dissolve the copper in the ground and then suck it back up on the other side. Um so you know there's innov you know there are ways that people come up with and stuff like that. Um, I would say that the loss of of any of these critical metals, but also I think equally importantly uh the loss of understanding of how to process them. uh the loss of understanding uh of of doing research on how to innovate on them, make them into new things. Uh all of that is as damaging as the loss of any, you know, if China figures out how to manufacture semiconductors the same way TSMC does, that'd be a bad situation. Um but if they cut off, you know, the magnet supply, that's a bad situation, too. uh it can be catastrophic. Um and it definitely is getting press now. Uh but it's the kind of press that's going to go away quickly. Um and we're going to lose sight of it. And I certainly worry I certainly worry about uh about our our the loss of them but more importantly sort of that mindset if you will Jake that uh that that you had sort of if you will with your question about you know investing in how'd you put it investing >> speak short ingenuity. Yeah, being short ingenuity. Um, we lose people uh going into these industries and so like I go to a mining conference and it's me and you know three other guys my age, I'm 40 uh and then it's a bunch of guys who are 50 and 60. Um so I think the the the the loss of the minerals uh direct access to them the metals etc. uh that is absolutely damaging. Um, but in the long term, I think the loss of of people coming into these industries is perhaps even worse and and and more problematic. I don't know if that answered your question. I went on a bit of a tie right now. >> We need a comedy. We need a commodity a comedy. We need a commodity super cycle to get us back on >> to get people out of M McKenzie and into >> Yeah. Uh, it it uh we got to make it sexy again or something. Um, but the problem the problem is that people don't, you know, I want to go to the DRC and go look at a comp >> plastics. That's the >> Yeah. Or or I want to go to a Dowo chemical uh facility and and understand how they're making plastics from natural gas. That's not really it's not terribly interesting to a lot of people for some reason. I I I don't understand why, but um >> it'll come back brand instead of Van Go or something. It's one of those types of things. >> Hey, Will, we're coming up on time. If uh folks want to follow along with what you're doing or get in touch with you, what's the best way of doing that? >> Um, so we do run uh a Substack. Uh you can get to it via our website which is massivecap.com massscap.com. Um, we also run a mirror image of the Substack on our own website, so we don't have to pay Substack 10%. But, um, some of the stuff is behind a payw wall, some of it's not. I'm on Twitter at I don't know what my Twitter handle is. Um, it's like WT Thompson 13 or something. Uh, but if you look at Massive Cap on Twitter, you'd find me. I'm the only one who reposts Massive Cow cluts. Uh so that that's how you can get in touch with us. Um we run a fund for uh credit and qualified investors on shore or offshore. Um but we're not really supposed to market. >> Uh JT, any final words? >> No. Big hi to each other. >> Check out Janalytic folks. Um once again, the uh the comment section for some unknown reason was turned off. So I don't we'll have to figure out why that's happening. Uh, with any luck, we'll be back next week with a comment section. Same time, same channel. Uh, I'll have a special announcement next week. I think it'll be no guest. It'll just be JT and I >> uh talking about a new project that I have. >> Oh, tease it, baby. >> All righty. Thanks, folks. We'll see you then. Peace. >> Yeah.
Liquid real assets with Will Thomson of Massif Capital; natural gas, tungsten and tin | S07 E33
Summary
Transcript
I think we're live. This is Value After Hours. I'm Tobias Carile, joined as always by my co-host Jake Taylor. Our special guest today is Will Thompson of Massive Capital. Great name. He invests in liquid Real Assets. We're going to find out what that is. How are you, Will? >> I'm good. How are you? >> Very well, thank you. Thanks for joining us. Um, Liquid Real Assets, what is that? >> Yeah. So um we we invest sort of along four industry verticals. So energy uh which is everything from utilities to oil and natural gas to renewables uh it is material chemicals mining uh construction equipment that type or construction materials uh and then sort of select industrials which would be companies that provide services to those industries and then infrastructure. So what private companies or private equity talks about when they talk about real assets, we're investing in the same types of assets uh except we're just doing it through the publicly traded companies that invest in them and and sort of build the out of them. A lot of the companies are project companies. They're building some big asset whether it's a refinery or it's a mine. Um but that's that's sort of what we invest in. So big projects in the I guess old economy. >> It's been a tough decade for that style of investment. So you launched in 2016. >> Yep. >> So almost exact maybe maybe a decade in 2025. How how have you uh survived or found good projects through what's been a pretty tough run for for the old economy? So, so I think that that um I think one of the edges that sort of we bring to the table is uh a very sort of different portfolio construction approach which I think has yielded sort of benefits. So, so we've delivered 14 and a half% annualized net of fees. Uh so pretty good. Um but the key has been having a concentrated portfolio and so rather than being exposed to say commodity price beta in a dramatic way um we have picked individual companies that have very specific catalysts uh that we think will overcome any associated drag associated with commodities. And so what we found is that especially in energy mining um infrastructure is a little different. Infrastructure is just really hard to buy well because it never trades particularly cheaply. Um but for a lot of the uh natural resources businesses, uh what we found is that about 50% of the time the catalyst that's moving the stock is commodity price. the other 50% of the time it's something else. But what's most interesting is very rarely do those two things occur in the same year. Um and so with a few rare exceptions, right? And so what you do is you focus on the company that is turning on an asset, copper mine or something, and if they're turning it on and copper prices are going down, doesn't matter. It's still going to you're still going to get a pop out of it. um because you're going from no revenue to revenue, things of that nature. U is it going to be as good as if copper's running with you at the same time? No, absolutely. Um but by being focused and concentrated in those assets, uh it's a very different portfolio than you see out of um a lot of say more natural resources focused ETFs or funds. It's 15 positions on the long side, a handful of positions on the short side, uh 50% of the portfolio in the top five, 80% in the top 10, you know, so very concentrated or relatively concentrated, I guess. And um you know, it's all about what the management team is doing in the operations and and that's how I think we've produced good returns sort of through cycle. Do you think it's what's uh more important the the asset or the management team? >> Uh I would say consistently I would say consistently um through cycle I'd rather bet on a management team even if it's a mediocre asset but mediocre assets can do really well. So, like right now in gold, I'm okay with a mediocre asset. Um, if I can buy the company cheap enough, uh, because they end up having tons of operational leverage to the gold price. Um, but at the bottom of the cycle, it's got to be, you know, you got to have both a good asset and a good management team. So, it just it sort of depends on where you are in the cycle, I guess, is really the answer to that. You can get away with a lot more obviously when when the commodity is running with you. I like one of these lines that you used in your uh presentations. Uh you focus on bottlenecks arising from mega trends. So can you perhaps help us differentiate that from like traditional commodity type investing. >> Yeah. Um well so before we started we were talking about water, right? And uh I said I hadn't figured out a lot of good ways to make investments in water. Um and I have but I did come up with one interesting way uh earlier this year and I was in then I was out of it. Um but one of the one of the things we tend to focus on is is areas where there's overlap between sort of hard material sciences uh geopolitics uh and well an overlap in those two things we find interesting. Um and so one area in our sort of industrial sleeve that we've looked at is people who are producing uh the the the equipment to manufacture the inputs into the semiconductor processing chain. And so they use a lot of water in semiconductor processing. And so one of the companies uh that soul sourced all their TSMC soul sourced all their water purification equipment from is a company out of Japan called Oranda. Okay. So that's an interesting bottleneck. It there are three companies that manufacture the equipment to make the ultra pure water that is necessary for the world's best semiconductors. There are a couple other companies that have, you know, small lines in it, but really it's three small Japanese companies. They manufacture it all. Um, and one of them specializes exclusively for semiconductors. So that's an interesting bottleneck because as this semiconductor, you know, sort of explosion happens and we're building all these facilities, they have giant order flow for for new equipment to create ultra pure water. So that's an interesting bottleneck. Now everyone's aware of sort of some of the obvious bottlenecks and say critical minerals. Um but what's interesting is that with those types of bottlenecks uh you know something some individual commodity has a really good press agent. So like rare earth metals gosh whoever their press agent is right they're great right because every morning you wake up and you hear about rare earth metals. >> But the reality is uh and and you know the stories being told aren't wrong. They're they're not lies. It's it's just that's the headline. Um but uh you look at say US critical metals list um and you say cross off rare earth metals cross off copper and nickel the big guys and you're left with this this list of other critical metals and some of them like tin and tin timn tungsten these guys you know they have no attention on but if China stopped shipping tungsten it would be a similar situation to if they stop shipping us rare earth metals >> or you look at uh say like titanium um China controls like 60% of the titanium sponge refining and that's like a precursor to the metal um you know you've got a bottleneck there too um and so you know those are some of the types of bottlenecks we look at we also are really interested in I used to underwrite political risk insurance policies for a Lloyds of London insurance syndicate. So, we're really interested in situations where political risk creates a dislocation. Um, I'm probably the only investor you guys know who like hears the sound of guns and I'm like, "Oh, maybe there's a company there. >> Someone's making money." um you know uh so that's that's sort of some of the the the types of bottlenecks we're interested in places where um the supply is both an immediate issue um but there's also a time to build problem >> yeah with that lag um is it uh I feel like is there I I wonder if there the public markets are long-term looking enough sometimes for these projects and do you get a a mismatch there where that can create problems to to get a com uh get a project finished to have the patience to like see it through for if it takes five years to get it up and running. >> Yeah. I I mean that the with with all the companies I look at base case should be there's something that's going to go wrong while I own this. um and and >> twice as long, twice as expensive. >> If if I think it's going to be and and that's why the most important thing is buying well with real assets like there are other places you can afford to not buy well, you know, buy get bailed out by compounding or something over time. You can't do that uh with with uh liquid real assets. Um, but no, there's definitely uh I end up in things oftentimes a little longer than I had initially expected or wanted. And so patience is critical. Um, the willingness to average down is absolutely essential. Uh, if you can't if you can't do that, then you should not be you should not be looking at say mining companies or chemical businesses or anything like that. Um, but then the other thing I think and this can be really hard for some value investors in particular I think is that nothing can be held forever. Maybe Exxon Mobile, right? Maybe Rio Tinto, like maybe there's, you know, a few exceptions. Um, but, uh, I'm dating everything for anywhere from 3 to seven years. Um, sometimes two years, you know, and sometimes I get lucky, right? You know, we all get lucky. Every once in a while, something pops. But, uh, everything's got to be, you know, I got to be ready to cut bait and get out because, uh, despite despite the initial pop that comes from, say, turning on an asset, eventually everything starts to go with the cycle if it's if it's lasts long enough. there's like a small window where things can buck the greater macroeconomic trend in my spaces. Um that's the window we try to focus on. Um but you know you can't buck it forever. >> How are you identifying catalysts um outside of sort of commodity trends? What sort of catalysts are you looking for? Um, I mean it's all operational uh things basically and and you know I I said earlier a lot of the the companies I'm looking at are project companies and and one of the interesting things that happens and it happens in other spaces as well. Uh the most notable being sort of like biotech um when projects get going you actually are progressing a project and in theory you're reducing risk as you go. But in public markets that's the orphan period and nobody wants to own it. And so you get this sort of trend. It's called the land curve. Um where you know you get over here it's it's geology. No one's interested. A discovery it pops. Oh we got to build it. It crashes. Uh and then you get an orphan period where they're actually that's actually a whole management team doing stuff. um lot of things to do diligence, a lot of people to talk about or talk with, a lot of people with experience that can help inform your insights, but nobody wants to own it during that period. And so that that's actually my favorite period to play in. Um so most of the work we do is really about understanding the day-to-day operational tasks that have to get done in order to achieve some sort of greater goal. That greater goal is often well understood by the market. Like we're going to build a mine or we're going to build a refinery. That's understood by the market. Uh but the market doesn't want to deal with the challenges associated with getting to that end goal. Whereas I'm like that seems like there's a lot of stuff to do research on. There's a lot of things to understand. There's a lot of opportunity for us to really have a clear understanding of what our risk is. Um, so that seems like a great time to buy as opposed to say, you know, buying, you know, buying bare gold. Yesterday they came out with some good news about a mine that moved the stock. So, so there are exceptions. Uh, but, you know, bare gold is just going to trade with a gold price. So, what's your risk? Your risk is your gold price forecast. I don't want to have anything to do with that. I don't know where gold is going. I you know generally I think I'm directionally good on commodities but beyond like that vague directionality I'm sort of like I don't know. >> Um >> does that then mean William that your your strategy is not as uh traditionally uh centered around inflation protection which is a lot of times the story behind a real asset uh play. >> Yeah. No, I mean uh we pitch and market our strategy around alpha. Um that's that's our focus is generating uh maintaining a a correlation of nothing to everything and uh producing as much alpha as possible with a very low beta. Um and so that's our strategy. Do we offer inflationary protection just sort of by nature of the assets that we own? Yes. Uh but my sales pitch centers more around um I find that a lot of competitors, if you will, have portfolios that have bold macro bets on timid equity bets and I want to have a bold equity bet on a timid macro forecast. It seems it's a little bit um endemic in commodities that you're a little bit more macro than a lot of equity guys sort of say that they are. You have to have some sort of view, but you you don't feel like you need to have or you don't trust the the view. >> I don't there are definitely certain companies uh that I do at times feel the need to have a view on. um on the commodity let's say uh but oftent times I don't feel the need to have a view on the commodity it sort of depends on the company and that's you know I I think it's really important to be crystal clear about what you're betting at all times right and and as long as you're crystal clear on what you're betting on you know it's okay to have some some macro bets if you will but you got to be really clear that you're making a macro bet via equity it's like a derivative equity actually becomes a derivative. Um, derivatives get complicated. They get complicated for a reason. It's because the causality gets messy. Uh, so I I don't I don't like to to make that bet. So So yeah, at times I I uh don't feel the need to have a an outlook or a view on the commodity whatsoever. >> Um, talk to us a little bit. >> Talk to us a little bit about shorting. How do you think about shorting? What are you looking for? >> Um, shorting's tough. Uh, we are very opportunistic about it. Um, so I do not always have a short book on. So, for instance, had a couple of shorts on this year, but mostly shorts have been off and they were all in the first quarter and they were all closed out by the end of the first quarter. Um, shorting by its nature, uh, in my opinion, you want to get in, you want to get out. Uh, time is not on your side. Um, so I like to short things that are already sort of turned over and and and sort of let's call it negative trend and momentum, if you will. Um, and so that's how I approach it. And that works fairly well, I think, with cyclicals. uh shorting is almost the the way we short things is almost the complete opposite of the way we go long a company. And so on the short side uh say when lithium peaked a couple years ago at 80,000 by the time it got to 60 I was like okay this looks like this is going I'm going to short a bunch of lithium companies that I don't like now mostly companies with management teams who I don't think are going to be able to execute. And so you get sort of like a double whammy. Uh you get the macro and the operational. And so the short >> Yeah. I like that. The macro and the bozo. And so the short book is in many regards just the mirror opposite or the the complete opposite of what we do on the long side. >> Uh you you had at one point uh and I don't know if you still have this but you had a overweight position in European natural gas. Do you want to talk to us a little bit about uh European natural gas. I don't know anything about European natural gas. >> Yeah. So, uh we are our oil natural gas exposure at the moment is um three companies represents guess about 25% 30% of the portfolio. Uh Equinor, Vara and Harbor Energy. Um and the the the thesis I mean the thesis at a very high level each company's a little bit different. Um but at at a very high level the thesis is well these companies all have good solid balance sheets. Uh they all have doubledigit capital return in the form of dividends with a little bit of share buyback as opposed to a lot of share buyback and a little dividend. So something like Vara Energy has a 14% dividend yield uh and they've already penciled it in for next year. So I'm sitting on say like three and a half years in a row of 14% dividend yield. And uh you've got an interesting situation in that sort of the North Sea Norwegian continental shelf area where they are the only domestic source of energy for Europe outside of renewables. uh you've lost Russia which creates a bit of premium value there. Um the marginal uh gas into Europe is LNG. So you've got something that increases the price there. And then in the North Sea and in the the uh the Norwegian continental shelf area, what you've got is an approach to production that is much closer despite it's offshore, but despite the fact it's offshore, it's much closer to say fracking if you will than uh Exxon going to Gion. So what that means is the infrastructure basically around those areas is incredible. You have pipelines running across the ocean floor right and left. If you look at a map of the pipelines on the ocean floor, you you uh >> minds Yeah. It's like a bowl of spaghetti. Um, and so there's there are these great opportunities to be infrastructure-led with your with your uh exploration. Uh, and you have a you have a single uh oil and natural gas platform uh and you can go off, you know, a couple of miles that way, a couple miles that way, and drop some things on the ocean floor, drill some holes, and then pipe it all back to the core infrastructure. And so the lifting cost, the cost of production for a lot of these companies is well, they're all sub $20. Some of them are sub $10. Now there's taxes and other things that that absolutely reduce their uh their take-home. Um but they are you know giant free cash flowing assets um with a faster cycle if you will than than more traditional offshore. Uh and so there's a little bit of geopolitics, there's some operational efficiencies. Um, and you've got sort of multiple return streams in the form of uh the dividend, some share buybacks, and then you have the potential for capital appreciation, which is higher than it would be in the United States because Europe just doesn't like oil and natural gas. Now, whether that ever changes and I benefit from, you know, those companies trading the same way they would in the United States, you know, I don't know. That's an open question. Um, but they don't need to appreciate that much as long as they can sustain a double- digit dividend yield either. So, >> how do you feel about energy and natural gas generally? Do you have a view? Were you agnostic? >> He's pro. >> Um, what' you say? >> He's pro. >> He's pro. Um, well, I'm uh I I there were sort of two different things there. I I don't know if you're like I'm I'm all for all forms of energy. I don't care what it is as long as it is economically sustainable and you do it as cleanly as you can, you know, sort of uh afford to do or or as cleanly as you as you can, right? Like I don't want to pollute any more than I need to. Um but in this day and age, in this world, there's some pollution. We've we that's just the way our economy is set up, right? So is what it is. um in terms of like long-term outlook. >> Yeah. In terms of the process, >> not my not my area of expertise, but what I would say is there have been there's been a continuous fall in reinvestment. And so the the dollars that need to go to uh to actually grow um there haven't been dollars going into the oil and natural gas industry to grow production. There have been dollars to keep us running in place um but not for growth. And the fact of the matter is that renewables haven't made a dent yet. Now maybe that changes uh with EVs and them growing faster, but that too is running slow. Um and why anyone would assume it wouldn't have run slow is beyond me. >> Giant we've mandated it so it it has to happen. Um so uh I generally like that sort of setup for the long term um medium to long term five to 10 years or something. Uh uh within that there can be a lot of volatility. So >> yeah I like energy. I've got my I'm up to my risk limits in energy >> US energy. >> Domestic US. So domestic US is one place where outside of pipelines, I've never done any actual EMP stuff. Um the fracking like you got guys out of Texas who just know that they know the management teams and they know the tech and they know the operations and you know like they've been to every well. >> It's hard not to feel like a tourist in that, right? >> I I'm I'm a tourist in that world. So >> I don't mind being a tourist. Tell us a little bit about that. >> That's it. >> I started out in mining as a tourist. Um and then I was like, this is the coolest thing I've ever seen. This is all I wanted. >> I mean, I grew up in an oil and gas patch, so I feel like that's like just by osmosis. Immos some of it. >> You're ton pickkins. Now, >> uh let's talk a little bit about tungsten. What's attractive about tungsten? >> Well, I mean, tung tungsten is is is the rare earth metal store uh in in more of a microcosm um and with easier processing uh and fewer mines. Um so, tungsten is used uh all over the industrial world for mostly for for for making harder making stuff harder. when you alloy steel with it, the steel gets harder and stuff like that. Um it's used a lot in the defense industry. Uh but uh demand grows kind of slow. Uh let's sort of you know GDP level growth um until you hit a cycle like a defense cycle where they need to sort of ramp production and defense and stuff like that. >> What is tungsten used for just hardening? Yeah. Um, it's got other use cases, but I think the largest use case tends to be as as an alloying substance in creating harder metals, >> more heatresistant metals. Um, so you know, the the fan blades say in a natural gas turbine are going to be made from a tungsten alloy. Um, although they make them from ceramics now also. So, you know, like there are substitutes. Uh but any place you need something really hard that isn't going to change shape um that is heat resistant, tungsten is a viable or a tungsten alloy of some kind is a viable uh use case for tungsten. Um so lots of machine parts uh anything spinning. Um stuff like that. Uh or the defense industry. Um, so if you uh if you want to uh bomb an Iranian nuclear power plant, for example, um your bunker buster is going to have a bunch of tungsten in it. Uh tungsten weighs a lot. Um and it it doesn't uh it doesn't change shape. You you shoot a bullet at it and a bullet fractures into pieces. So um but uh there aren't a lot of tungsten mines because the growth has been slow. um the processing has all shifted to China uh and and so you've got the same rare earth sort of story uh except you do have uh tungsten smelters and refiners in the west um and you just don't have a lot of mines that are producing tungsten and so tungsten there was up until this year there was really for all intents and purposes only one publicly listed tungsten miner uh Alante. Um so much like rare earths up until you know a couple years ago there was really only one rare earth publicly listed company. Uh and we're entering a cycle where it's a critical metal. It's in demand. Um and you've got a couple of companies uh that are looking for and have great discoveries and are building mines in western. That's the other thing. you you you find they they're finding tungsten in places like Portugal, which is historically where tungsten has been mined. Uh South Korea, there's some in Canada and a couple of there's some places in the United States that have it. So, you've got a geopolitical need. Uh you have a bottleneck. Um you have an underinvestment cycle. Um and uh they happen to also be finding worthwhile economic deposits in the Western world. Um that doesn't happen very often. Uh, so that's a nice mix. Um, and they're only a handful of publicly traded companies. So if the press agent for tungsten gets better and, you know, they got to go find whoever it is for rare earth, you know, the flood uh, the flood will be be useful or productive forever. >> Yeah. The tungsten marketing board's got to get busy there. >> Get their stuff together. >> Yes. Yes. >> JT, we're coming up on the top of the hour. That's time for veggies. What have you got for us today? Yeah, you know, with uh Will coming on and talking about things in the real world and supply. Um, and I thought we might bring in a little piece uh from physics and see what we can do with it. Um, so I'm going to start the story off with, you know, prices are are popping and one shutters when they're heading to the grocery store or the gas pump and it leads to shouting matches and political pin the tail on the donkey. uh like is it the fault of these greedy capitalists why prices have been going up or is it money money printer going br is it proflegate consumers or is it something else entirely and we're going to borrow a law from physics to give you a comprehensive and dare I even say maybe definitive uh understanding of the raw ingredients of inflation. So we'll learn one equation with four knobs and hopefully like a minimum of handwaving. Uh so physics and economics can sound like different worlds and one certainly envies the other. Uh but but both are obsessed with these systems and they're big messy networks of interacting parts where tiny individual actions add up to powerful collective results. So in economics those tiny actions are daily choices that millions of people make. One person grabs a latte on the way to work instead of making coffee at home. Uh good luck ever retiring buddy. um that decision alone won't shift the price of coffee beans worldwide. Or maybe one family decides it's time to move into a bigger house on its own. That's just one transaction. But when many families all start looking to buy at the same time, you know, maybe mortgage rates are lower or wages are rising, suddenly sellers can price higher. Uh builders see an opportunity, then contractors get busy, material suppliers raise lumber and concrete prices. And what started as a lot of little small family level decisions become a nationwide housing boom and maybe even eventually overheat into a housing bubble. Uh and on the supply side, you know, maybe a farmer decides to plant plant soybeans instead of corn this year. A shipping company cuts back on orders for new containers. Restaurant decides it can't afford to stay open for lunch anymore. Each action seems totally inconsequential in a $100 trillion economy, but you add them all together across millions of farmers and shipping companies and restaurants and you start to see shortages, bottlenecks, higher costs for consumers. So, no individual consumer or business really decides to create inflation. And neither does any central banker, I think, despite all the the helicopter talk. uh and just the same as in physics, no single gas molecule decides to increase pressure inside of a piston. So a molecule simply is following its energy. It's bouncing, colliding, rebounding, but when billions of them are doing it at the together at the same time, the container walls feel that pressure. So that brings us to this equation that we need to learn, which is the ideal gas law, which is expressed as PV equals NRT. And so P is pressure, V is volume, N is the number of molecules. So also called marity. Uh R is a constant and then T is temperature. And that's it. Just these four variables and one constant. But with these we can explain why a balloon expands, why an engine fires, why a star explodes. And for this particular thought experiment, just imagine a piston filled with gas molecules. Okay, very simple. Billions of them are bouncing around and colliding. And pressure is the force of these collisions. Volume is how much space we have to move around in. Temperature is how fast they're moving, their energy. And then quantity is uh just how many molecules are crammed in there. Right? That's the marity. And if you heat the gas, the molecules zip around faster. And if the piston can't move, the volume and the volume stays the same. The pressure rises. I'm I'm not telling you anything you guys don't already know. But uh add more molecules, same thing. More collisions, more pressure. shrink the volume, the pressure is going to spike. And that's that's the gas law. Now, let's translate this all into economics because inflation is is really all about pressure as well. Not molecules hitting a piston wall, but money colliding with limited goods and services. In fact, as uh economist Wilhelm Rokkey had a nice turn of phrase in the 1950s about inflation, he said it was a riot of claims and an insufficiency of goods produced to meet them, which I thought is quite a nice uh bond mo. So here's here's the mapping of our of our analogy. Pressure becomes the price level. Volume becomes the real output capacity. How much stuff the economy can produce. The number of molecules in is the the money supply. And temperature is the velocity of money. So this is the energy of kind of economic demand. So when you think of inflation through this lens, you see it as a dynamic system. So too much money in too little productive space or too much economic energy without enough output and and prices are bound to rise just like pressure. And in the physics version of the gas law, R is this universal constant. Um and it's a scaling factor that kind of ties together energy and temperature and pressure. So the whole equation makes sense. Crucially, R doesn't change. It's a background feature of the physical universe. And that stability is what allows the law to hold across all these different conditions. Well, when we shift economics, it's it's kind of tempting to dismiss that R as irrelevant, but in fact, I think it's there's a very strong analogy here still, which is R is the institutional constants that make the economic system function. So like rules, norms, customs, trust structures that don't show up directly in inflation statistics, but they're essential for the systems coherence. So think of property rights, contract enforcement, functioning courts, capital at risk being treated fairly, the credibility of central banks, uh you know, think of the cultural trust when you accept the dollar and you or you swipe your credit card and you know that that same dollar will be honored tomorrow. Uh and these these constants don't uh they don't fluctuate like money supply or demand or velocity, but they they're invisibly reliable in the background. But if R gets kind of wobbly, if trust in money erodess, if institutionals institutions lose legitimacy, if contracts stop being enforced, if government starts to take random pieces of ownership of businesses, Intel, uh the economies can then deviate uh as well uh and and it starts behaving not ideally. Um, so this, you know, that's where you start to mess around with things like hyperinflation and currency collapses or failed states as examples of where R effectively disappears. So just for fun, let's run through some kind of additional examples of to see how well our analogy holds. Let's let's do a little bit of um let's look at like a little bit of uh case one. So expanding the money supply, government prints a bunch of money, central banks ease credit. It's like adding more molecules into the piston. And unless that chamber expands, i.e. the productive capacity of the economy grows, pressure is going to rise. So we can see that Milton Friedman's old line that inflation is always and everywhere a monetary phenomenon is only sort of correct. As you can now see, there's a lot more to it. Um, case two is rising demand. So even if the money supply stays the same, if people start spending faster, the temperature goes up and these molecules are then bouncing harder, prices rise. And this is why it inflation can accelerate during specular booms or or when households feel more wealthy. Uh or imagine yourself in a hyperinflation when you need to get rid of your wheelbarrow full of cash before lunchtime. Uh case three is a supply constraint. What happens when the piston shrinks? Say a pandemic, a war, labor shortage. Suddenly there's less space for the same money molecules chasing it. Pressures rises. Of course that's stagflation. Um case four, productivity growth. So this the opposite can also be true here. you know, you expand the chamber and which is really technology doing more with less, more workers, new resources and that pressure can ease. So the same amount of money can circulate without driving prices higher. Um and and technological progress is inherently deflationary like we are trying to do more with less. So that slow glide path of deflation I think is a beautiful thing actually and modern economists treat deflation like this boogeyman. uh and that may be correct for that kind of sudden collapse of a debt deflation like in the 1930s but but otherwise price levels drifting lower really helps the average person so why we fight against that is is kind of beyond me um let's test our analogy against a little bit of history so why Germany in the 1920s classic inflation uh molecules were skyrocketed they were printing money endlessly the chamber was damaged by war uh so volume was constrained pressure of course explodes into hyperinflation uh 1970s oil crisis. The piston shrank due to oil shocks rippling through the economy. Uh end up cutting productive capacity. Pressure rose even though money supply wasn't wildly higher. Post 2008, central banks um they desperately wanted to add molecules to the you know through this quantitative easing that they were doing to fight this scourge of deflation. Uh but the pressure stayed low for years. Why is that? Well, it's because the temperature collapsed. uh banks were hoarding reserves on and the velocity of money cratered. So the molecules were there but they were kind of inert. They weren't moving fast enough to hit the walls to create much impact. Uh only later after COVID when you had demand came back strong and then supply chains were were fooled. Uh and that shrank the piston and then that that's when we started to see inflation spike. So uh one last little thing and we're getting close to the end here so hang in there. Uh the US isn't just any regular piston. Uh because the dollar being the world's reserve currency, the chamber is kind of leaky. So the dollars flow out into foreign reserves, trade settlement, uh global commerce basically and it's if some of the molecules had been dispersed into an adjacent chamber from the existing piston. So that's that relieves this domestic pressure. This is why the US has been able to run deficits for decades without runaway inflation uh slowing us down. So those extra molecules coolers were basically like vented abroad. But what happens when those dollars come home? When foreign central banks sell treasuries or when global investors repatriate cash to purchase assets or goods or services that we're producing? Suddenly that pissing kind of reconnects to that external chamber and maybe molecules flood back in. And of course that seems like pressure would have to rise. So who knows when and how quickly. Uh but I think it should be a little bit of a cause for concern. So let's just wrap this thing up. Uh think of every headline as a as a piston reading. Is demand running hot? Has supply shrunk? Are dollars flooding back? Or maybe most dangerous, has trust in the rules eroded or has started to wobble a little bit? Because that's the last one that really actually breaks this model and the one that you want to avoid. >> Good. Good one, JT. Where do you think we are at present? How do you assess all of the inputs at the moment? >> Um, >> lots of molecules. >> It's hard to imagine less molecules. So I mean trillion dollar deficits uh for as far as the I can see. Um and no real appetite to even talk about like is this the right thing to be doing. Um then you have the productive capacity the output. Um tariffs to me seem like totally the opposite direction if you wanted to control inflation. Like you're adding price you're adding costs to things that you're importing. um chasing off low or cheap labor that does a lot of the creates a lot of the productive capacity for your economy through ICE raids. Uh doesn't seems like kind of an interesting idea if you want to keep inflation under wraps. Uh and then but then on the other side of the whole thing um you know what if AI really does create huge productivity gains where effectively expanding the chamber in ways that we can't even imagine right now and we may get bailed out by a technological hail Mary um or maybe there's some energy breakthrough that we get fusion or something that that uh that unlocks the productive capacity and and we all get saved by it >> and then a miracle occurs. >> Yeah. Well, but we are, it does feel like we're trying to like kind of walk along this very steep ridge where if you fell off on one side, you know, you fall into inflation and getting out of control again. Um, or maybe, you know, if technology is so amazing and like the singularity arrives and um, you know, P doom kind of stuff like you fall off onto the other side of the the cliff. So, I don't know. It's it's not an easy time. I would say >> that's what a lot of people are hoping for with their credit card bills. Got to get that singularity before the end of the month. >> You need to get raptured. >> I I did like that analogy. Well, I I I really like the um I always thought that the idea, you know, inflation is a monetary always and everywhere a monetary phenomen was very limited. Uh and I always responded, well, it's also always and everywhere a behavioral phenomenon. I think you're I would expand R a little bit to include consumer behavior and stuff like that. Uh because that seems stable and that changes and it's stable and changes and you know uh changes in sort of cycles. But uh that's a good analogy for bringing all of it together >> in one one place. I like that. >> So >> I've got I've got a question about tin for you. I I >> is this for your hat that you want to wear, Toby? This is this is No, this is a this is a history question about the Lauron's age collapse when they couldn't find tin set back the empire by 300 years. No, I'm kidding. Uh tell us a little bit about the tin market and um where you see opportunity right now. Yeah. So tin uh is again a a sort of a other than critical metal other than rare earths. Um tin has historically been mined in all sorts of different places. Um it was Bolivia was a huge place to mine tin in the 70s and 80s. Then there was a big collapse. Um there's a lot of tin in uh Myanmar and parts of southern China. Uh and then there's there's tin sprinkled throughout the rest of the world. Um uh Cornwall up in England or over in England. Um tin was one of the earlier metals to be mined uh because it's it's nice and soft. I I I don't actually know if that's the reason why it was one of the earlier metals to mine, but historically it's, you know, it's got a long history. Um, >> what do we do with tin these days? >> Well, so everything that is electronic is soldered together with tin. >> Okay. >> Um, it it's very important for solar panels. It's very important for Well, yeah. I mean, it it's electronics. So you flip over your motherboard that is all tin. Um it's also uh when uh ASMC goes to make a a uh semiconductor at the nano scale with uh extreme ultraviolet light. The way that machine actually works is it drops a there's a droplet of tin and it's going to sound crazy but I think it's like a thousand droplets per second. um which sounds more like a stream to me, but apparently it's individual droplets that have to be the right size of liquid liquid tin that then get vaporized with a laser to create the right spectrum of light in order to to make those nano scale uh sub you know five nanometer scale imprints on a silicon wafer. That's all >> that's the lithography >> the lithography. Um so so very heavy use of electronics. Um most tin uh over the last 10 or 20 years has been um mined in Indonesia, uh Myanmar, southern China, processed in China. Um and there haven't been a lot of tin developments outside of that area. One of the sort of more successful developments is a a mine called Bisha in the Democratic Republic of Congo uh right up nice and close to the Rwanda border. Um where they like to have you know they like to get the skirmishes uh and uh there have been some tin mines in in sort of Australia, New Zealand area um company called Metals Ax. Uh but outside of that, there haven't been a lot of developments and and tin prices didn't really move. Tin stocks didn't really grow. Um and nobody really paid attention to it. Um now, of course, uh all of a sudden people are like, "Oh, really only been one new tin mine built in the last 15 years. It's Bisha and the Democratic Republic of Congo." Um, and outside of that, you know, there's nothing that's going to be built, nothing that's going to go into production, at least for the next five years. Um, so and and then the mines in Myanmar, the grades are getting very low. It's also a horrendous sort of operating environment. Um, from a humanitarian and environmental perspective, it's just sort of like anything goes. widescale artisal mining and then China sort of uh collects it all into into a big a big pile that they then bring across the border. Um and in fact the mines in Myanmar have been shut down for two years at this point I believe it is and you're talking about 25% of the market supply or something when those mines went offline just they just turned them off. Um, Indonesia had a a ban on exporting tin last year. Um, looking to continue to try and move up the Indonesia has like a strategy, if you will. Uh, they've executed it with nickel. They're trying it with copper. Uh, I guess they sort of tried it with tin, but I'm not I'm not exactly sure what what that was about where they basically say you can't export it unless it's smelted and refined here. So, we want to move up the value chain. So you got to do an extra step here. You can't just export the concentrate. Um uh and so that's that's you know it's it's a very simple story. Um but one of the one of the challenges I think with a lot of the companies I invest in and and and the perfect example of this is uranium. You get this great macro story, right? It all lines up. Supply, demand, all of that. That is insufficient in my opinion for an investment. And because that story in the case of uranium for example, the story you're hearing now is the same story they told 10 years ago. >> But it took 10 years and your opportunity cost was huge. Um, you have to have a company and a management team doing something uh that you can really bet on because that big macroeconomic story while it is a perfect backdrop and nice to have is insufficient in and of itself unless you have an infinite timeline and can afford the opportunity cost and very few people can and uh it just it it you know it might take forever. Um, so, so that's that's the story with Tin. Um, as I said, nothing coming online for like the next five years. There's some interesting stuff trying to restart some mines in Cromwell and England. Uh, there's some interesting theoretically interesting assets in Portugal and Spain. Um, and then, uh, Bisha, uh, which is publicly owned by a company called Alphamin, um, is, uh, sitting down there in the DRC producing what's probably about 10% of the world's tin supply. uh and paying a very healthy dividend of I don't know where it is now maybe 7% 10 something between seven and 10% peran if you accept the political risk uh you can clip that sort of coupon if you will and um the real question with something like Alphamin would be whether or not everyone gets over the DRC risk so early they had to shut the mine down because of conflict in the area stock took a dive uh fell about 40% over the course of couple weeks. Um and uh my expectation was that it was going to be probably two years before they turned it back on. The Trump administration came in and I guess have negotiated a peace agreement of kinds between the DRC and the government of Rwanda which was backing uh some of the the troops uh with a group called M23 which was c sort of the the impetus for the conflict in the region. Um and uh they turned the mind back on in like six weeks. um whether that peace agreement holds or not, whether there truly is, you know, a change in in in the political environment in that area of the world, that's a story that, you know, is going to take some time to play out. Um but uh the stock's back up to where it was uh before that happened. Sure. >> What would you say for like the if someone made the argument that being long commodities is being short human ingenuity? That's a great question. Um uh and it's a great question because I I suspect I suspect that most people will answer that question by saying, "Well, this is all stuff we still need. Um, and it's all stuff that is the backbone of, you know, you don't have AI without copper, right? You don't have silicon chips without tin. Okay, we've already established that. Um, but I guess what I would also say is that that is a very poor understanding of how innovative these businesses are and how critical the innovations they come up with are. You look at something like you guys had that guy on just recently who talked about PhDs. >> Yeah. >> Who employs the most PhDs? Well, Exxon employs more than Apple does. >> They're all in material sciences. They're all in chemical engineering. They're geologists. Um, but they employ more PhDs than Apple does. Um, Chevron is going to employ roughly the same number. Every junior minor employs a PhD. Why? Because geologists get PhDs. Um, Exxon Mobile files something like thousand 2,000 patents a year globally on the latest greatest way of cracking X Y and Z chemical to produce a new synthetic polymer that can be used to keep your iPhone together. Um so I would say that in fact you're investing in innovation. You're just investing in a different component of the innovation. Um it is not the innovation that will lead to the fourth or fifth uh app to order a taxi. Um, but it is the innovation that'll allow you to keep the iPhone, you know, that'll keep the iPhone running uh at a hotter temperature because it's a new material that is more heat resistant. So, it's um it's chemical sciences, it's material sciences, it's physics, it's geology. Uh I don't know what I missed there. Okay. It's just it's not computer science. But even there, you know, I was talking with a geologist this morning uh about a project he was working on in the United States in an area where he said, "Well, you know, they used to mine here in the 70s and 80s and and uh they they came to the bottom of the obvious deposits and they moved on." and he said, 'But what I'm really excited about is the fact that all of the technology that we now use to prospect, none of it existed in the 70s and 80s. You're talking about new geoysical methods, new geochemical methods, uh new biogeeological methods. Um these innovations all occur to help these businesses do what they do and so they're internal and so they don't get out to the consumer. the consumer doesn't know anything about them. Um, but they are critical to advancing our understanding of the world we live in and how we can better use the world we live in to make our lives better. Um, and none of the other innovations that occur after that can happen without it. So I I would say that uh I'm not even sure if the question is is properly formed. Well, let let me ask you a question at the other end of the scale because I'm glad JT went first with that one because I have a question. You know, the I was I was joking a little bit earlier about the Bronze Age collapse because they couldn't find tin >> and that set them back 300 years. And it seems to me that there's a there are a lot of critical minerals in a lot of in a highly highly complex economy that you know the the situation you're describing with tin. It sounds like all of the tin in the world comes from these fairly unstable places. So what do you think the highest risk minerals are in the world and what what are the consequences for >> sort of losing the supply for political reasons or just running out? >> So the running out one is really tricky. Um >> yeah what >> we don't really know we don't really know what's there. We don't you know so so I don't technology gets better for finding this stuff. >> Yeah, the technology gets better for finding stuff. Um, you know, I'm invested in a company now that's looking at ways of recovering copper that wouldn't be recoverable with uh traditional mining methods, but rather via basically what's called insitu mining. are pumping sulfuric acid into the ground trying to dissolve well it's not sulfuric acid but they're pumping an acid into the ground trying to dissolve the copper in the ground and then suck it back up on the other side. Um so you know there's innov you know there are ways that people come up with and stuff like that. Um, I would say that the loss of of any of these critical metals, but also I think equally importantly uh the loss of understanding of how to process them. uh the loss of understanding uh of of doing research on how to innovate on them, make them into new things. Uh all of that is as damaging as the loss of any, you know, if China figures out how to manufacture semiconductors the same way TSMC does, that'd be a bad situation. Um but if they cut off, you know, the magnet supply, that's a bad situation, too. uh it can be catastrophic. Um and it definitely is getting press now. Uh but it's the kind of press that's going to go away quickly. Um and we're going to lose sight of it. And I certainly worry I certainly worry about uh about our our the loss of them but more importantly sort of that mindset if you will Jake that uh that that you had sort of if you will with your question about you know investing in how'd you put it investing >> speak short ingenuity. Yeah, being short ingenuity. Um, we lose people uh going into these industries and so like I go to a mining conference and it's me and you know three other guys my age, I'm 40 uh and then it's a bunch of guys who are 50 and 60. Um so I think the the the the loss of the minerals uh direct access to them the metals etc. uh that is absolutely damaging. Um, but in the long term, I think the loss of of people coming into these industries is perhaps even worse and and and more problematic. I don't know if that answered your question. I went on a bit of a tie right now. >> We need a comedy. We need a commodity a comedy. We need a commodity super cycle to get us back on >> to get people out of M McKenzie and into >> Yeah. Uh, it it uh we got to make it sexy again or something. Um, but the problem the problem is that people don't, you know, I want to go to the DRC and go look at a comp >> plastics. That's the >> Yeah. Or or I want to go to a Dowo chemical uh facility and and understand how they're making plastics from natural gas. That's not really it's not terribly interesting to a lot of people for some reason. I I I don't understand why, but um >> it'll come back brand instead of Van Go or something. It's one of those types of things. >> Hey, Will, we're coming up on time. If uh folks want to follow along with what you're doing or get in touch with you, what's the best way of doing that? >> Um, so we do run uh a Substack. Uh you can get to it via our website which is massivecap.com massscap.com. Um, we also run a mirror image of the Substack on our own website, so we don't have to pay Substack 10%. But, um, some of the stuff is behind a payw wall, some of it's not. I'm on Twitter at I don't know what my Twitter handle is. Um, it's like WT Thompson 13 or something. Uh, but if you look at Massive Cap on Twitter, you'd find me. I'm the only one who reposts Massive Cow cluts. Uh so that that's how you can get in touch with us. Um we run a fund for uh credit and qualified investors on shore or offshore. Um but we're not really supposed to market. >> Uh JT, any final words? >> No. Big hi to each other. >> Check out Janalytic folks. Um once again, the uh the comment section for some unknown reason was turned off. So I don't we'll have to figure out why that's happening. Uh, with any luck, we'll be back next week with a comment section. Same time, same channel. Uh, I'll have a special announcement next week. I think it'll be no guest. It'll just be JT and I >> uh talking about a new project that I have. >> Oh, tease it, baby. >> All righty. Thanks, folks. We'll see you then. Peace. >> Yeah.