Discussing deep value commodities with Trader Ferg

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code MOMNM as in non member? And what's happening at GRX? Mate, I tell you what, 150 exhibitors, they're cutting edge of mining innovation, tech from the everything that is revolutionised in the resources sector. How good is get? Along get just save yourself money ticket links are in the show notes. And Speaking of other things that are just awesome, Trader Ferg. Absolutely. What is that? Mate check out his sub stack if you're not there already. He is the counter cyclical king

you'd say. Absolutely. Mate, so if we've had him on before, he's a well known figure in the investment community. And mate, we talked. What have we opted? Would you guys get him to write? Them down because there was so much, so much, so much, buddy. We talked inflation, inflation, China, gold, PGM's loves, loves his rhodium loves. Rhodium. I don't even know what that is, but I'm excited to learn about it. If you if you talk to Ferg you

should love it mate. Bloody cobalt, uranium, offshore oil mate. We covered a he. Covered a lot of ground. And it's I love hearing his his views, the way he thinks and the way he punts his money. Love it. So right, let's get into it.

Let's RIP in. Right on Muddy Mudders. We've got on the man I want to be one day. Trader Ferg mate, I'm still in envy of your life, big fella. Thanks. Yeah, no, great to be back on Boys, Boys. I love the channel, honestly. You, you, you tackle the questions. I'm honestly wondering. Some days I like just yeah, see, see some news and then you the video pops up a a day later. I'm like, that's exactly what I was wondering.

Very good mate. Well, we the the theme of this is always what is the most hated and what's a good entry point that oh, Trader Ferg's looking at. So, boys, take it away. Yeah, I think we can give you a bit of mutual admiration here because we we love your sort of style. You're writing as well, Ferg, and your ultra contrarian kind of nature.

And I thought it'd be cool to, to start this convo reflecting a bit because you wrote this wicked piece called Moats and Cannibals. I'd, I'd encourage anyone who hasn't read that one to, to go and have a, have a look just to get a feel for your writing. So that was about a year ago or so. And there's a lot of topics that you touched on there from inflation to human behavior and how you view markets that I think are quite interesting and worth kind of reflecting on a year or so later.

And I want to sort of frame it with one of these quotes that I just pulled out that you wrote. Embracing the cyclical nature of markets is the only way I know of how to make outsized returns. And I want to kind of hear your thoughts bearing that in mind on where we are in the cycle of the, the commodities or the various markets you're you're most pumped by mate?

Yes, certainly. Yes, I, I like that piece because that was kind of my overall framework for how I'm trying to position for the next decade at least. And like, it's kind of simple when you really break it down that all the markets are a sort of mess human behaviour and we just always spending between like fear and greed in certain sectors and greed. We just are justifying price action and over projecting. And I think you got that with AI. And then there's the other side,

which is the, the fear. And it's just nothing's pissed, like too pessimistic. And this is where I like to hang out, which is like, just how bad can it get that you're like, you just you don't have to be that right to see a great return. And like some of the classic examples are just stuff going bankrupt. I love for like the like you can look out for the phrases like terminal decline, stranded assets, like just multiple bankruptcies. I own a few companies that have gone bankrupt twice.

And yeah, once you kind of understand cyclicality, you can see like, sure, not everything's cyclical. Like you'll have a hard time if you're waiting for like fax machines to come back or something. But if you pegging yourself to a, a trend that you think is going to hold up for long term, like energy demand, then it's all just a, it's all just an opportunity to to have patience and set yourself up for great returns.

If you can stomach some volatility and keep your eyes on like the long term fundamental outlook. And that, that piece was really just observing that I think we're coming out of a, a period of sort of loose money, low inflation and everything that's worked in that period is going to stop working. And what I see coming, which will be tighter money, it'll be higher structural inflation and there'll be a lot of a lot of resource constraints just

because we've underspent. We've put just been pouring money into the likes of take and especially the Mag 7. And if I I point I was trying to make in that piece was if you the markets work on narratives like a big narrative, then was like the power of say, like network effects where everyone just there's no evaluation too much to justify the power of a

network effect. All that piece was really getting at the fact that I think there's going to be a lot of sectors where you have, you've had so much capital put in, so much written down on the assumption it was not going to

be needed. Like the offshore rigs, whether it's even like Fermal coal with both probably the prime examples that they're just going to have a huge Moat moving forward and they're going to have outsized returns that super hard to compete with, like a super dual ship to replace it. You need to start, you need day rates higher and then you need the ship, yeah, capacity. And then you need to put up 40% and then you need to wait five years for it to come on.

And then you've got to compete with with companies that are holding all these assets that with no doubt against them. So and if during this period inflation's a lot higher, it just just makes it even harder to compete with that. And so that's the idea of the Moat, the ideas of the cannibal side of things is these companies are well aware that they have the smoke and they can start buying back their own

stock. And so you can have these companies that could really corner their float during this period with a Moat and they could have substantial outperformance. And just on that back, they don't even need to be have their mould balls re rated by the market. But obviously once the performance comes to market, we'll probably start taking

notice. And that's why I kind of kind of see that being a future kind of narrative that the market really catches on to. But obviously I'm talking like five years from now, which not many people want to position. And if I'm honest, like been in the like the, the whole offshore space has been absolutely brutal lately. So don't have much to show the last six months for this thesis. It's just been waking up every day and seeing them get hammered again. And the demand hasn't gone away.

It's just been pushed forward a year or two.

The the point on inflation, I think is the one I want to draw on because I think that is the one that dictates to a large extent or all the other ones. And I'm keen to sort of get an update on, on your thoughts. Ferg, you wrote back then that we're in for a highly inflationary decade. And you know, there's the sort of connotations on investing in hard assets, real assets and all these sorts of things.

How is your thinking on that big kind of picture cycle of inflation changed over the last year? Hasn't really like I, I still think the end games there, like when you when you break down the situation the US is in, it's it's nice to see what they're doing with those stuff, but the it's too little too late. When you look at this sort of the numbers like they, they already like 87% of it's non discretionary or they're trying to cut.

So they can't, they can't touch entitlements, they can't touch really touch defence Medicare, like all of that's already set. And So what they're what they're trying to cut is is not enough to move the needle when they're sort of 120% debt to GDP in the US. And so really you got three ways that you could balance things. Again, you got austerity, which is what they're essentially trying to do.

You've got default, which why default when you print your currency or you've got sort of inflate the debt to get it back under control. And that's that's sort of inflating the debt to get it back under control is pretty much, I think almost a certainty. And that results as well from you just look where they're kind of stuck like they, if they push austerity too hard, as we've already seen, the stock market comes down, Stock market's a big part of receipts and that's government income.

And so once you crash that, then they have to print more to make the balance. And so it's just you end up in the the same place either way that, that they, they essentially have to monetise the debt. And so I just, I see that occurring over longer the longer run and just positioned for that with wanting to be in, in real scarce assets to. And I've also kind of like any the likes of what Europe are doing with the whole net zero policy and targeting when the solar and just debasing energy.

I think that's going to play a big role in it because energy's obviously very tightly correlated to inflation as well. Yeah. So I see that, granted it's no one's really worried about it at the moment seems, but I see that coming back in a big way. Yeah, well, Oh no, No one's really worried about bloody hitting open pit mining targets anymore, considering bloody MMS in the in the industry these days. Buddy, you're you're just pretty much guaranteed to get to the ore early.

What a breath of. Fresh air not a is it, isn't it and JC and JD, it's not coincidence like 'cause you the the fact that they've got this whole tech services arm attached to it. Like I'm talking the the geology, the mining engineering, the like and when like resource work great control for the geology, not just looking at rocks mate, finding and telling you what the rocks are the all the pit designs, the the pit techies.

And that just compliments the whole mining services side to blow the rock up and haul it to the crusher and make shit loads of cash. So. Full service Maddie. Mate, they've gone, mate. Old refractory Rob's running it, mate. He's gone from refractory Rob to extractory Rob because he is extracting bloody open pit dirt like an absolute champion Champion these days. So MMS anyway. De risk your operation. Get MMS on site. I will, JD. Go the tech services team.

We can. We can definitely talk about

Europe a bit later on there. There's one other lens just to play devil's advocate here for that I'm curious to get your thoughts on. And I'm largely in agreeance with how how you think about this. But you hear people, I think predominantly sort of from Silicon Valley that'll push the, the growth narrative. And I think that is the alternative to the the three kind of that you mentioned of how this kind of plays out.

You know, the the counter being they can grow their way out and they do that through doge and deregulation broadly to inspire growth in the USDA. Do you ascribe high odds to that happening and that being a means of actually minimizing what that debt to GDP ratio is? Yes, it's a have high enough productivity that you can grow your way out. Yeah, I've seen those arguments put forward especially on the back of that AI just producing like a boom and productivity.

I think the the cleanest counter argument that is the fact that large parts of the economy are off and not especially in US you're not allowed to compete with. And this is the idea that just being so heavily regulated cartel like sort of duopolies, olipolies, regulatory capture that it's, I don't think that productivity can even show up. Like it's there's this great chart that people can look up from Mark Andreessen. This is showing that they have a

2 tiered economy. And you've got areas that supposedly AI should dominate, like education. And the education inflation is just out of control. Like every year it's higher, higher. Same with with medical like should really be sort of a breakthrough in productivity, but it's also captured that they just keep increasing costs and everything that technology is going to attack, it's already kind of attacked.

It's all the electronics, all the all the areas that we've seen just China essentially dominate. And so, and another great book on this is the myth of Capitalism, which is arguing the same thing essentially, that there's just been such such almost crony capitalism across the whole the United States and the the vast majority of manufacturing has been outsourced that that's not going to that's not going to change anytime soon.

And if you did change that, it'd be so painful way back to the point that you'd cause a hell of a recession and you need to print the difference to to fund the dead again and see you back, you straight back into the whole on sort of inflation spiral. Fergie hunt for these, these charts that just look, look like

they're on a, on a downward trajectory, like like absolutely beaten up and they've just been bottom feeding for ages. You and you, you'd look everywhere for them. If they're a cyclical industry, you put capital there and and then you're patient. Where are those charts at the

moment? Yes, I, I refer to it as now as like when the patient's dead, like it's, you know, you know, you're watching the, the medical movie and they're all the families sitting around and you see the heartbeat beat slowing and it, and then it stops and you hear the, the buzz and it just goes flat. I'm, I'm looking for those charts. And I guess probably taking the analogy too far and like what, what could like be the catalyst

to turn around? Like when are the, the, the resuscitation coming around that could bring it back? And I think last time when I was on with your boys, I was just going through the whole PG Ms. trade. And that's been sort of a one that I, I see that a lot at the moment, particularly like we're just talking about rhodium, which is, that's probably when I'm thinking of like the, the absolute flat line and then the breakout. That's the most clinical one I've ever seen at the moment.

It's a beautiful. Chart that one like the the the run up in that in the was it like, you know, between kind of 2010 and 2015 is is outrageous and then falls off a Cliff and now you've got a bit of a breakout again. What's going on there? I mean, it's a pretty, pretty thinly traded market probably. Yeah. So it's opaque is all. Helps. I'm not. I'm gonna start by saying I've got no idea. I've got no insight at all as what, why, who's jumping in there in volume.

I've got yeah, zero idea. I could just throw out some conspiracy theories and some Chinese EV manufacturer hoarding because they see it as a byproduct and. Maybe someone's listening to you talk about it and thinking I could squeeze this market. How? How much have you got locked away, Ferg?

Yeah, a little bit. Yeah, the the you know, that's also the problem what I'm talking about as well with like I don't want to be seen as like, yeah, because I'm the only person that's actually I've come across that's even talked about rhodium. So it's like, are you are you trying to move? But it's been good because I only mentioned that lately. So it's absolutely zero to do with me. And it does have some striking similarities to like uranium and that believe like 80% of its

long term contracted. And so whenever those contracts obviously fall short is like 20% that trades on spot. And so they've got to go in and purchase it on spot. And then Rhodium, it's a by product. So you can't really move supply based on supply and demand. It's largely, largely just comes out of the Bush field in South Africa and you've got just a reef around the bottom of South Africa where the platinum deposits are quite high rhodium.

So rhodium is produced in a few other places like Russia with non nickel, Zambia, but in US, but it's all very, very low splits. So you're talking think Russia's like 2% split with the Palladium dominant deposit. Zambia, it's about the same. US it's even lower like 1%. And then there's one little spot in South Africa, you're up around 8-9 percent and that's, so that's where sort of 85% of global rhodium production is. And again, this is all based on

them essentially extracting PGM. So rhodium is just one part of that equation. And so it's hard to move the supply on that. And so when you're a pure byproduct, it really trades on like illiquidity doesn't really trade on fundamentals, I guess like when you need it, you just got to pay up for it. And This is why I loved it is you get to sit there in a physical metal that's got, it's like an out of the money call option type volatility.

And so by the time this airs, it's probably collapsed back down to where it was. But I just know that, yeah, when someone needs it, they're going to have to pay up. And it's done this five times. Like if you're talking cyclicality, this is probably the most cyclical little commodity I've come across that five times already has been a

multi bagger. And then obviously supplier gets gets incentivized generally because it goes hand in hand with PG Ms., which is another point why this is quite interesting is both platinum and Palladium are both down. So it doesn't actually make sense why it's rocketing.

It's not logical either. But yeah, I if you zoom out, the biggest story kind of like I went through when I was last on, is that the entire space is rolling over and no one's worried about it because they think EVs are going to rocket and there's no need for catalytic converters.

Whereas I hold a different, different opinion that the likes of BYD with its massive ramp and plug in hybrids and their additional need for catalytic converters is it can actually drive demand up. And at the same time all the plans to expand production either being cancelled or being pushed out like nor Nickel which was supposed to add 8% to global PGM production that was supposed to come online by 2027 that was supposed to be commissioned in 2023.

So that due to sanctions they couldn't get equipment. So they'll push the project out and that's yet to start. They haven't given a new timeline, but granted that timeline was four years. Even if they start start now, still four years down. And then again, this is Palladium rich. So two, 2/3 of their production is Palladium, like 2% is rhodium and the rest is platinum. And interestingly, their economics are driven by nickel because they're prominently nickel focused and obviously

nickels in the shutter as well. So they're probably pushing out CapEx on the back of that as well. So it's a, it's a similar story across so many commodities. Is this just all the investment looks horrible when you get out to 2030 like all the resources rolling over and I think demand is going to be surprisingly strong. And yet anyone trying to invest on this generally had a quite a rough time. If you I've got a small position in Subarnier, they're just being beaten up in there.

So that's why I kind of find the rhodium even more fascinating and like pretty Chuck such a big slab in it. We were we were we were in the Bush Feld and we'd we'd visited a pic the PGM operation. I sent you a message pitching you a stock and you're like no I'm happy. Holding physical rhodium and out of the money call options is Subarnier is my barbell strategy.

Yeah, exactly. Well, I just I've been beaten up so much reminders that when I find something clean like this, because it's it's the other thing that's so exciting when you get to own physical is you and sit and inherently have a call option on South Africa going to shit, which has been a high, high probability sort of outcome recently. And whether it's load shedding. We're at some of the bills that passed recently that are pretty on like pretty concerning I

guess. And yeah, with physical and 85% of rhodium coming out of South Africa, if things do take a real turn for the worst there, you've got a call option on that because yeah, you can expect them the supply to get a lot tighter. And so I love it from that angle as well. With it was Subarnier an increasingly Anglo American platinum with it just being sold down by its parent. It's just that's kind of a, a hedge that maybe Palladium and platinum also run hard.

And yeah, maybe if there is potential that rhodium gets substituted in some way, it's always going to be like, what can go wrong? And the thing with rhodium is you've got 85% of its demand is just purely catalytic converters. And there is a, there is a, a possibility that it could be kind of engineered out of a catalytic converter or severely reduced. Maybe some new AI can work out how to substitute plating or platinum or some other element to really reduce it.

And so it's not as kind of ear tighters say uranium where you just, you know, this was a 440 reactors operate in the 65 under construction and they're all going to require uranium. They're not going to all suddenly switch to forum or something else. It was the, the comment we heard when we were in South Africa was the the loading of yeah, like platinum and Palladium in some of these plug in hybrids is, is decreasing pretty substantially over time as well.

Which again, I mean that's kind of like the whole lithium intensity thing in the, in the AV batteries that we saw play out too in some respects. But the end of the day, at the moment you still need it. You need it in in substantial quantities even if there is a a reducing load. Yeah, what they So they can only reduce it so much.

So they've got the, a lot of what I see extrapolated with China sort of going into like near 0, like Western media loves to pick certain headlines like this is their solar build out, this is their, and this leaves out that they're sort of building a coal plant next to the the solar grid. And one thing that most developing countries are pushing very hard is matching emission standards because they don't want the smog. They've seen what sort of China

and India have gone through. So the emission standards are quite high and that requires sort of a minimum PGM loading. And then on the demand side, I think demand is just going to continue to surprise to the upside for these new energy vehicles because a lot of the buyers are going to be first buyers. So they're just going to keep the demand will just keep showing up because now I know I'm seeing it here in in Indonesia and Bali.

I drove down to Eluado on Valentine's Day with my wife and we just got stuck in traffic and I just ended up counting Byds and I'd never seen them before maybe six months. And I counted like 2530 on just the way down to Alawatu all brand, brand spanking you. And you can pick these up for sort of 15/14/15 thousand US and they're just crazy, like build quality, crazy mileage, beautiful, beautiful cars.

And at that sort of price point, there's a lot of people that are, is going to be sort of an upgrade from a scooter to to that sort of vehicle. And I think think demands going to really surprise to the upside across the whole developing world. Whereas it's going to disappoint across the Western world, which is where everyone's sort of pointing and saying, look at the tariffs. They're going to defend their their domestic industries and stunt Chinese growth. But I don't think that's where

China's looking to grow. Can you get any exposure to who builds the catalytic converters outside of the materials itself? You can with Johnson, Matthew, I think Matthew, maybe it's a PGM sort of processor. Few people I respect have pitched that as a sort of an investment angle. I kind of went through it and I couldn't get nearly as excited about it as just going straight rhodium.

I'll tell you what I could get bloody excited about, Ferg is SWIG approaching 18,000,000 drill meters Wow, there we know there are 17,000,000 JD 1818 millions around the corner and. It's a hard number to wrap your head around. I. Still haven't. I still haven't heard the the absolute staple for underground exploration drilling. And mate, they are going down there breaking a bloody record every day.

Because I want to know what the record is for the deepest underground diamond drill hole ever drill. Because if Deep X haven't drilled it yet, they're probably about to drill it. So yeah, wow, if someone knows that. Any day now, any day. Any day, right? Or just the fact that they drill the longest diamond holes in the world is just nothing to be ashamed of or unbelievable. Go sweet, go deep, X. Your point on on BYD is, is fascinating and we're seeing it

here in Australia as well. I think you can now get one for under 30 grand Aussie. That's the the 1st AV to get below that price. And I also saw that in the top ten, I think it was 6th place best selling car in Australia is the byd Ute. It's it's mind blowing. And I think about stuff you've you've written of going long BYD essentially and kind of short Tesla and you haven't not necessarily done this, but that's kind of broad strokes.

How do you think about this and how do you think about the the Super excessive valuations on some of these very popular names in on global markets? You know, I think Tesla's like the prime example of it, honestly. Like it's people just have PTSD from shorting that thing. You see the shorts have gone from 25% of float for years to they're like 1.9% as of now and the company's screwed.

I like what unless they're sort of going to create robots and I think I, I read an article a few days ago that Kathy Woods season producing robo taxis that bring home like 90% margins within like a few years. And it's just all these like sort of hail, hail Marys to justify the stock price. But to me it's getting eaten alive. You can see this in China. They have like 20% of their revenue in China and they're just getting eaten alive by the

Chinese manufacturers. The you just don't you just can't compete in any arena that China's decided wants to dominate. They really have just their industrial policy is second to none. So they just open their cheque book and they'll just absolutely start a crazy sort of competition war and fund them, give them subsidies, give them big orders from the state owned companies. So that they got up to like 400 odd EV companies. And now it's whittled down to I

think there's like 70 remaining. But really it's 8. And really it's really it's like two or three when you consider BYDS now got 37% domestic market share in China and just dominating and no one can compete with that. And the problem with Tesla's valuation there was price like it was going to take over an increasing share of global market share when it's just getting eaten alive. Like you just put BYD next to a Tesla. And I couldn't agree with you more.

Like how every release by BYD is almost like when the iPhones used to come out. It's just exciting. Like what are they going to release now? Like a seal that can do 2100 KS on a single charger and tank gas their 4 wheel drive which can float and drive across lakes and it could sideways park or do a 360 on the spot. The wheels that can fully spin around. Yeah, crazy. I, I, I haven't even. I haven't Even so quote me on this because I looked it up.

I had a friend told me that they're doing some sort of a flying a flying vehicle and I haven't I haven't even looked

into that. I was like just what is this company and how how is this trading 25 times Ford PE and or I don't even think it's 25. I think it's like 21 and Tesla grand has probably come down since I looked at it, but it was like over 100 Ford PE yeah, it's long long short was yeah, I've I've happily had that long short on, but I'll probably more happily have probably a bit late now, but would have been like long rhodium short lithium for a while then.

Well, they've got baywides, haven't got home batteries now to compete against the Tesla Powerwalls. Yeah, they'll get big tickets from WA given that. Yeah, a lot because we just roasted a lot. WI's just announced 20,000 batteries get a $5000 rebate in from July 1st. So what's if that sort of takes off? Imagine if households start taking up home batteries to connect to solar and that becomes the addition to EVs. Like how much?

Why do you putting towards the intensity for all the materials to go into them? Yes I I haven't played the battery side at all because I just find it way too hard. Like, I think BYD is the perfect example of that is you'd, if anyone had, if you just had a flat spreadsheet of how many cars they're pumping out and you rewinded five years, you would have thought the whole EV thesis was actually like on fire.

It had been really correct. But what if you're looking at the details, what they labeled new energy vehicles, you'd realise that new energy vehicles are up by 80% year on year, whereas the EV's, I think they're 8%. So they're completely, I think nearly 60% of the productions now these plug in hybrids. So they're, they're almost, they're really reducing the EV, the straight battery electric vehicle out of their production line to an extent.

And when you get into the batteries, they, so the assumption was it would be like a whole lithium battery for a car. Now it's now it's only 1/3 of that with what you need in a plug in hybrid. And then they switch to lithium ion phosphate and see you've only got a third and you've got lithium ion phosphate. And then they build a factory last year that's switching to sodium ion and that that's nameplate capacity and sodium ion can pretty much do their current production and their

plug in hybrids. And then their Chief technology officer came out a month or two ago and said, yeah, we'll have solid-state batteries. We'll have demonstration by 2027 and we'll have it commercial by 2030. And it doesn't seem like a company I want to take the under on like a Elon said that I'd kind of have a giggle, but Byd's chief technology officer, I probably wouldn't bet against

that. So yeah, to your question about sort of the to them doing sort of the Tesla power wall, like what what battery chemistry will that even be? Will that be a solid-state? Will that be a sodium ion? Will that be I? Because I always saw there was a lot of talk of just how big the lithium ion industry would be. And I just, yeah, I was always like, that's a massive assumption that it's the ultimate winner. A battery material that you have spoken about sort of brought

away on electronics is tin. What's your, what's your latest thinking on, on tin? There's been some very interesting geopolitics that we've touched on in the past in the in the world of tin, specifically in the DRC and you know, the the one real Aussie name has has moved quite well in the past month. What's your latest think in there? Yes I love it. I wish there was more ways to play it because I don't want to size a just a single minor up too much.

I always avoided Alfman purely because I've just got too much PTSD in Africa. I just, I don't care how good the miners, I just, I just don't want to be in the DRC and prefer to have a safe jurisdiction in Australia. And there's a kind of a great risk reward at the moment because people were so of middle's X, they were just annoyed with how poorly they've allocated capital for years.

And they were like, oh, they're going to do something dumb like building up the cash buffer now so they can get the other half of ransom from the this JV. That's pretty bloody accretive. That's a great use of the the cash, especially with I think the market supply came down, but demand also came down. So the market hasn't done a lot, but it's been sort of slow sort of disappointing growth out of China and some other developing countries that have brought sort of electronic demand down.

But I don't see that as like kind of a long term trend.

I see that kind of surprising to the upside and I don't think supply is going to follow it. So all things equal, I think 10 is going to keep surprising to the upside and there's very few ways to play it. And yeah, so I'm, I'm a messable on Middlesex. Ding, Ding, Ding on on Middlesex Fig. I saw a headline last week out of Reuters that Myanmar's major mine there, which is being kind of shut down for the best part of last two years has been

signaled to to return the the man more mine in the WA state there. Have you, have you, have you, have you thought about that any kind of you know, short, medium term kind of headwinds on the on the tin price? No, no, I've got to have a dig. I haven't actually read that article yet. Yeah, I need to put more work in my My understanding was it was quite high graded so they weren't going to see a big production jump, but probably need to go through it again. What about Cobalt mate?

The lads did a good episode on Cobalt the other day regarding the, the new trust that is coming up the, I don't know, we made-up our own name cut Cobalt Unit Trust. Speaking of things that are hided and nearly not breathing.

It just seemed the journey this was about to take on with the ex yellow cake folk involved and you know, they got the deal with Glencore to buy Cobalt for it. It looked like very early stage sort of spot yellow cake arrangements when I guess they accumulated a lot of pounds at lower prices. And then obviously spa is retracted a lot now. But how do you view Cobalt? I assume that has to be right in

your wheelhouse of hatred. Yeah, it's certainly hated, but I I don't see where the sort of big demand boost is going to come from. So I can't get that excited about it here honestly. And I kind of got, if I were to, it's similar to nickel. Like I agree it's it's hated, but I just I don't know where the sort of the demand upside is. And I don't have a sort of a clearview on it, unlike, yeah, like kind of like PGMS, how I've got a Clearview. Why the demands going to show

up? I can't, I really have that clean, cleaner view. And so probably for now, it's staying the sort of too hard basket, I guess. Granted, I'll just happily be long almost any commodities I think people will do well and the vast majority of commodities just as a .2 of higher structural inflation. I just want to be in the ones where I can see like a a strong bid for demand that I don't think anyone's thinking about. I think that's a true measure of height.

If it's hided and you hide it, that is the that is the ultimate height that any commodity can have. Well, I just haven't done the work.

Ferg, I'm really interested to to dive into the various sort of cycles at play. We, we started by talking about this broader kind of cycle with the big names getting a lot of attention in, in markets like the apples and stuff of the world. And then all the other places you play in have their own kind of cycles.

And when I think of the likes of uranium, coal comes to mind, offshore oil services, a lot of these from say roughly 2020 to 23, four were in an up cycle and they were and they were doing well. And then those 3, not all of them, but those three come to mind as having peeled back a little bit in, in certain regards, you know, spot pricing on on uranium coal prices have sort of peeled back. That was the sort of hell of a cycle they they had. But. Some of those names are just

hugely shorted now. So the the offshore oil services names, you know, you know. Like. Noble comes to mind And some of the the other US ones 15% plus, you know, 10% plus shorted can say the same for uranium names. I think of that and you've you've made me think of this very well. When you piece together the fact that the likes of Tesla, nobody wants to short them anymore despite their insane valuations. What do you think's kind of happening there at A at a larger kind of market sense?

It's more of a thought. I haven't put the question together well, but they're the, they're the thoughts. I know you, yeah, yeah, I think there's different reasons some sectors being shorted. I kind of kind of be joking and, and just looking across My Portfolio and I have pretty heavy shorts in almost all areas and even even weird places like kind of Chinese tech, which I'm a I'm a big bull on. And some of the ETFs are up around 10:15.

There's even one ETF that's 40% has 40% shorter interest. And you go across to offshore, which I think what's going on there is like pawn shops that generate great alpha. They just short on sort of EPS revisions next quarter. So they don't give a shit what's where, how cheap stock is or where it's going to trade out like sort of a year from now. They're just looking like, will it likely be revised down and

they just shorted into that. That's what I'm pretty sure was going on with with offshore was the only real reason that kind of makes sense to me. Whereas yeah, uranium I I I thought it was kind of crazy until this whole if they're bidding that obviously sports going to have to sell pounds. That kind of makes it more sense than if they were just bidding

on mine is disappointing. It was interesting that when some of them did announce and they weren't actually that bad releases like the likes of boss, there was no covering at all. If anything, they keep pushing up the short interest. So it means they're playing for something bigger. And that actually makes sense that they're playing for sort of a, a sort of a, a liquidity event, which is it's kind of crazy. Like the whole uranium set up is just so ridiculous when you think about it.

You've got this sort of monster demands that's required. That is 100% certain that it's coming like in the favor out the more certain you get it because only by the time you get out to 2040, there's like £3.5 billion required and only 40% of that's contracted. So if you kind of back that back today, you're going to contract into that is like 200, two £100

million a year. And everyone's getting their knickers in A twist that the likes of Brought Uranium Trust whether they've got 606465, they might have to sell sort of a few £100,000 until the utilities are inevitably forced to come to the table because there's just not enough around that you can't operate with a sector where it's 60% uncovered and the miners are producing 25% under what's what the yearly what the yearly

burners. And this is all like none of this is like kind of forecasting, like, you know, how many operating reactors are these are multi multi billion dollar pieces of equipment that have your animal, the lights go out and they've been they've been flexing contracts, they've been working through their inventory and it's all kind of

reached crazy low levels. And so it's, it's the most absurd thing because it's you've got this almost like a pool of petrol waiting for a spark for spot to move and and the utilities to start a contract in size. And yet you've got no, you've got no futures market or anything to keep sort of spot market honest. And yes, but does need to we'll need to raise some money by sort of halfway through the year. So you could have a sort of a real sort of a liquidity event there.

And that's obviously what the shortest are pushing for that. That does make a lot of sense to me. Yeah, it's, and it's the, the overhang of this, this vehicle that we thought the pounds were locked up for Infinity forever.

Well, the kind of probably the, the narrative sentiment shift that can happen when, when you, when, you know, everyone starts thinking that this vehicle should trade at a, at a structural discount and have as opposed to ever kind of getting to the place where it can trade a premium, which allows it to buy more pounds. Those pounds kind of seem like they inevitably come to the market in some way, shape or form once the the narrative shifts that way.

Yeah, yeah, great, innit. But at the same time it's kind of dangerous game as well because there's as I think boss on just volume that's like nearly three weeks to cover that position if they get trapped. And it does any sort of there's a shift in sentiment people see. It's just everyone's absolute laser focused on on spot because the market's so opaque. It's like coming back to Rhodium like it's, it's since there's no futures, there's no really there's nothing for retail

investors to sort of grasp. There's no information flow really. It's just a handful of of buyers. So yeah, it's, it's going to be fascinating to see how it all plays out longer term for for me, it reminds me, I often throw this the study round that was even God would get fired as a active investor.

Then it's this idea that like even if you could see what the top performing stocks would be five years out, if like the saying, they're using God just as like you, you knew with certainty what they would be and you set up a, an active fund, like God would always get fired because he'd run too much volatility to get to the outperformance. And so he'd always get dumped by his investors. And so many opportunities feel like that at the moment.

Like I can see this dirty pig supply demand gap, but it looks like it's going to be a really volatile Rd. to get there. And I don't know how many retailers actually have the stomach to, to work through it. And whether like when you point this sort of a set up out is I've, I've got some friends that have said I'll just go to 50% cash and wait for the the event to happen, then pile in there kind of like waiting for a, a COVID type, like kind of just an absolute liquidity squeeze down.

And yeah, I don't know if that's smart either. Do you think the if the spot copes going down or even stays where it is at 6350, do you think developers and producers are going to start looking at securing strategic inventory again out of the spot market possibly? Possibly, yeah, I'd be a lot smarter than what they did. Like securing a sort of in the hunger recent highs. Yeah, hundreds of people. Just tried after a couple of rides. Exactly. Yeah, No, it would make more sense.

It's just, Yeah, even even saying that it's such a funny game of, like, musical cheers where everyone knows there's not enough cheers in the middle and the music's just going to stop eventually. It's when you look at the bigger figures. It's just, yeah, I don't know. I don't have any smart insights on what's going to play out in the next few months. I'm just always like my mentor whenever I say anything like this is like, sounds like you've

been too smart. Where's it going to be in five years and almost just ride it through to that and you just cause yourself so much heartache. If you're trying to trade the market a few months ahead, it's just no one could do it and you lose your sanity trying to do it. I don't think I've ever it's actually been the worst thing that's happened to me. Sometimes I've like I one that was pure luck.

Like I put out a whole thesis around Peabody about how coal, how big the supply demand get was, how cheap it was, how it's going to be a fantastic investment. Put it out on Crux as years ago. And then Russia invaded and obviously coal prices went through the roof and everyone was like that was that was you were spot on. And I was like, no, it wasn't spot on at all. It was just I just got lucky like that.

And yeah, I feel like a a lot of that is just understanding that the long term fundamental thesis is there, but you kind of have an understanding that deeply and you can have a rough ride some of this. And that's why I kind of really am attractive at the moment to stuff that's not correlated. Like probably most painful lesson is how correlated uranium and offshore oil have been like just having the correlation all

just seem to go to one. But they will just trade next to each other and a big chunk of the portfolio. So that was just pure pain. And whereas like if I map out some of the my more recent investments, like I've got some tiny little like OSV shipbuilders that went bankrupt twice, Rhodium, Middle 6, they're all doing Chinese tech. They're all absolutely ripping this year and well, and they're kind of helping offset some of the pain and offshore. So yeah, just focusing more on that.

There's some non correlated bits which is a lot harder than it sounds. Do you think just to close the Uranium One off, like do you think it's just going to be rough ride until we see a lot of, because these reactor builds obviously take a while. Like China's probably the quickest atom. But getting to the point where so many are starting to come online, they need the initial one and a half million pounds to charge the reactor. And once that starts building up, do you think it's just going

to be a rocky ride until then? Because a lot of it's all under construction on the way. But there's not, to my knowledge, not shit loads of charging yet. But it will come when China are building 10 a year. Yes, Mike Alcon's always been vocal on this is that you don't, you don't need a additional like just just the operating fleet.

There's a is we don't have sufficient pounds on that and and under construction, but as you say, everyone that comes on and you need what is it 2 to three times the initial core loading verse maintenance. So that is like a sort of a just bumps demand would be a very additional wrecked around the construction that comes on. Granted they've already purchased it when you're starting construction. So, yeah, so you're going to be complete.

And then yeah, yeah, they've got nothing to put in it. Yeah, they're I, yeah. I just think everyone's tearing their hair out because of the, you know, pakeness of it. And, and yeah, as you say now with what everyone's latching onto is any name you look at, you've got a whole lot of short interest that is being the smarter money. And yeah, a sort of an event now by sort of June, it's supposedly spots going to have to liquidate some pounds.

But yeah, as a sort of ran for the numbers that doesn't change the overall outlook whatsoever and that demands going to to me they're very pulled pretty much every lever they can. There's inventories are all record low. They've got to get the uranium through the fuel cycle, which takes, it takes a few years. It's not just sort of take it from the mind to the reactors. There's a whole fuel fuel cycle

there. There's been, if you look at all the stages of the fuel cycle, that's all been rocketing higher. So yeah, I feel like this is kind of like a mass extinction event for all the retail investors in it. You've got to get them out before it can then run. And when that run happens I've got no idea, but I I want to be there for the start of it. Chinese tech Ferg very yeah hated sector even like 12 months

ago. Things changed briefly when David Tepper came out and was banging the table last year. And then like after after really soaring off its base, like peeled back a lot of the gains. And then December, like the stocks were trading kind of like similar to where they were before that. And then they then they rocketed again. Like, well, markets, sometimes they take the path of like Max Payne always. You still still think still think Chinese tech is is pretty

undervalued here? Yeah, this is my biggest position, position of taking in one in whack, 1 whack really. And so is it has even been reinforced. Anyone that hasn't had a chance to go and read American America First investment policy that was released by the White House a week or two ago and this is section in it and where and they are reviewing removing the it's the can't remember what it's called. Anyway, it's a treaty with China that they can essentially invest in US assets with 0 tax.

And if they remove the treaty, they go from zero to 30% withholding. And it's pretty damn significant when you consider China holds 2 trillion of US assets and about 760 billion of that is in US equities, which is kind of fascinating when US equities before this announcement were already particularly MAG 7 and NASDAQ were kind of struggling to find their marginal buyer. And the US has just told them to. I've got I've got a piece in the

works at the moment. It's just telling the Chinese to get the fuck out. Like just out you go. Your capital is no longer sort of welcome. And as part of them having to, they can't fix the trade balance without fixing capital flows. Like you can't just have money keep flowing in if you're trying to fix your trade balance

because it doesn't work. And that's the question there is if they're going to tell that capital that 2 trillion sort of pretty much 760 of equities and seven, I think it's roughly the same in Treasuries to, to get out of the US, where where's that capital going to flow? And China's doing massive trade surpluses. So if they can no longer pour money into US equities, where's it going to go? And I kind of reach 2 conclusions as two kind of obvious spots for it to start flowing.

It's either they're gold, which is got a whole piece on that going through this just massive gap between gold and the gold miners, which is just getting absolutely ridiculous and and sort of their own equities essentially. And that's you, you, it's always been sort of a, a good rule of farmers. You want to be in front of, you want, you want what the Chinese want, you want to be sort of

front running Chinese money. And that's when I go through My Portfolio. I wrote a piece recently that was like, I just want to make sure every area I'm in, there's some strong Chinese demand. I don't want to be fighting the Chinese in any area. That's why I wrote one piece on sort of shipbuilding because I've got a few shipbuilding investments and I'm like, am I competing with the Chinese here? Because I'll probably get my ass handed to me if that's the case.

And yeah, I just love it. Love the Chinese tech angle. I wanted sort of a broad basket to catch all their national champions, like going to the the back to the EV space when they went from sort of 400 to 70 players. And now the the champion out of that, just no one's going to be able to compete with them globally. So they're going to dominate global market share. And I think we're going to see this across multiple sectors.

And it's kind of absurd that they're all priced so stupidly cheap by some of these companies. We've got like 1/4 of their market cap and cash. They're trading it like before the run up, they're trading at like coal market valuations. So I love the trade and I'll probably be on the trade for a decade I'm assuming. China maybe three years ago cracked down pretty hard as, as I'm sure you're aware, on on lots of different industries.

And you know, almost overnight they obliterated like parts of the education education take part. And around the time that like Jack Ma went, went missing for a little while, But he's he's back in vogue and he's good friends with XI again. And the whole attitude in China towards their national champions has really changed. How do you just think, I guess, broadly about your your property rights? Do you just balance that with being being so supportive in valuation with the cash balances

that you speak about? Does that give you real support And now with the CCP on on side with a lot of these companies? You often that that later party, like we said, CP being on side is the key factor. So they they have to like one of my favourite charts is from Louis Vincent Garth where he's just showing that everyone is still so focused on the property bust and they haven't realized that the loans in total to manufacturing are almost equivalent.

I think yeah, they're just below sort of peak property loans. And so they've just, they've poured absolute trillions into building up their manufacturing champions. And so it doesn't make any sense why they would sort of harm them. They're actually just pushing sort of they want free trade globally because they know they're the most competitive. Like, why would they put, why would they try and damage that? And this is largely because China's kind of changed its game.

When you, when you think about the China for the last few decades, it was creating enough growth to provide employment for enough people per year. So they, they, it was kind of a seem to be a rule of thumb that if they could create sort of 8% growth, they could employ 678 million people per year and left amount of poverty. Well, they, they know not longer

need to do that. Their demographics have rolled over and so now the game is they need to keep providing higher paying jobs for their workforce and kind of fight this sort of

declining workforce. Like it's then interestingly enough, they're one of the biggest investors in in robotics where everyone sort of if if you don't show someone that chart, they always assume it's like Japan or somewhere else, but it's actually China. And so I think they're going to do everything to nurture this this of industries. They Chinese have a lot of cash and than notorious momentum

investors. And so I think now that the property bubble's done that those flows are going to divert into their own certain national champions and that could give it a very long runway. It's going to be incentivized by the CCP and they're also talking of sort of stimulus to help get it help keep momentum. And once they announce stimulus, they don't want you to sort of. Lose face.

And so I think I think it's a very robust trend and everyone's just kind of suffering from what we talked about with them. A lot of the Chinese tech been made to do national service and almost been sort of rug pulled by international interests over sort of their overall sort of profit motivated the actual for the shareholders. But I think I think that's changed. Last one from me, Ferg, the the

valuations in gold you just touched on before, the massive diversions between the underlying and the, the some of the gold stocks is super, super interesting. So obviously a commodity that's not hated where you tend to kind of play, but we just haven't seen the equities follow the underlying to the same extent. How do you think about that? How do you kind of position yourself for that today?

Yeah, So that's, that's probably the most interesting divergent at the moment because it just keeps getting wider. And what's fascinating is there is literally 0 investor interest. So you can, you can track this yourself if you just, you just jump on Google and type like inflows into the likes of GDXGDXJ or even G GLD, like just a straight gold ETF. It's it's not actually getting any inflows. If you take it back for years,

it's still negative. A few billion GDX is obviously more negative and GDXJ just a bloodbath. And what's fascinating is even with gold's recent performance, if you bring up, I know GDXJ hasn't even had a single single day of inflows for six months, which is kind of absurd when you consider what gold's the price performance of told itself. And so what's going on here is it's obviously central bank

buying. It's not actually any interest from investors today or investors that are trying to probably pick up physical and not playing it through through sort of ETFs. Will this change will say come ahead? So I'm kind of in a few mines with it. And the fact that like what's going to actually turn, like the charts are beautiful. If you do the ratios, you can look at sort of earnings per share for the gold miners. It keeps climbing higher.

But at the same time, miners being miners, they're all their mud, They're all the sustaining cost margins are just blowing

out as well. Got a chart in 2024 where it's just like a massive spike and there's just like taking away all the profits you'd think you'd get from being and best in gold miners and it's I think what's probably the probability in my mind is that goal is probably going to be revalued significantly and that will bring investor attention back to it because the gap will just get silly.

And also once we experience some inflation, a lot of the crypto crypto projects will trade towards their intrinsic value and people have to start it's a. Polite way of saying 0. Yeah. And yeah, people have to actually start concentrating on something with some, some economic use case because I think crypto didn't really replace a lot of like what was speculation in junior miners. Like the I've got 1 chart that's like all junior mining.

The whole junior mining space, if you can peer it back to the 1990s was like 50% of the entire mining market. Now it's like sub 20. So it's just been absolutely decimated. And yet there's chart after chart where you you pull out the supply demand picture and it just falls off a Cliff out in the 2000 and 30s. And there's kind of like uranium. There's there's actually a need for Greenfield and but yeah, coming back to gold, it's it's just tough to play.

But I think it is, yeah. A very just how hated the the junior gold miners are is kind of a fascinating set up here. And it's quite uncorrelated to a lot of other stuff as well, which I like. On the for the producers like the things with you compare gold on or for instance, like golds, the costs rise because they always got to be doing more capital to get deeper or do a cutback or or whatever.

Like you think of the some of the best producing gold mines in Australia in history, like you Telfer in the heyday, Katie Boddington, like those long life set up specifically Telfer and Cadia or Cadia as a block cave. But you just don't see as much of it now because they're obviously wanting the gold now. So they'll go for the the quickest way to get there. But these big doesn't feel like these big massive long life operations are being set up to be low cost producers during

those environments. Like which ones do you do you pick for that? Because technically shouldn't. You might be just making shit loads of cash on these long life assets but that's been hammered. Yeah, yeah, you'd think it's honestly like I go through it and subscribe to some people that gold pickers and it's literally one of the hardest

markets. Like I just, I increasingly coming towards it as like you just got to have like a kind of similar to like a VC portfolio where you just have a basket and you assume there'll be some real out performers and then you don't try and pick winners because it's it's just too hard. And my, my record of picking like winners within mining has been pretty unblemished by success overall. So I don't want to play that game. I like what I try to find smarter, smarter angles.

Or if I am going to go in a minor, I want a real, a real unique setup that I think I can like something being kind of spun out of a major or some someone off event that really

sets you up nicely. But yeah, like what what you're just talking about, there's this great chart that because gold's not under invested in, I think gold's one of the largest, if you go through sort of CapEx by mining majors, it's one of the largest sort of outlays and yet they've got absolutely nothing to show for it. You see kind of the the chart is just higher and higher investment in sort of exploration CapEx. And the chart of fines is going

the opposite way. It's just getting lower and lower every year. So it's kind of a, it's a interest set up and coming back to China where I think with the US telling them to get out of all US assets, that's like the end of parking capital and treasuries and the obvious recipient moving forward is gold. And it makes sense that it's kind of in everyone's interest that gold gets revalued at some point. This is the only asset that doesn't really break, break

anything. If you if you do, you have like a 10X outcome on most commodities, yet you, you screw some people up somewhere in the world, like if oil goes up 10X and there's going to be a pretty deep recession and a whole lot of bad outcomes. But gold is the one that doesn't really matter if it's got no use case. And so I think on a long enough time frame, gold is going to get

revalued very significantly. And it means the miners, yeah, all things they call the miners should be great performers. And like to your point of it being revalued at some point because the shit like gold gets produced, that's a lot of wealth to store. Yeah, well, a lot of it's stored like the US stores it all at a a fraction of it. I think they all have it on the books that I forget what it is sort of 30 or 40 bucks a an ounce.

And so they have a big injection if they just revalue it to today's pricing, they get nearly a trillion and more if it's it's higher at that point of time. But yeah, I, I think, I think also I because I didn't touch gold for years, because I always saw it as a political metal. Like why would you invest in a commodity where supply and demand don't seem to matter for the pricing of the commodity? And so every time demand would be too high to just issue more paper gold.

And what I see going on in China now is is going to eventually cause the elimination of that paper market because people are going to want, if you're going to settle trade in gold, you're going to need, you know, one physical gold. You're not going to accept some paper. And so, yeah, yeah, I think everything longer term is, is

quite bullish gold. I think that's a welcome spot for a lot of people in Washington to leave the conversation on. Thanks so much for your time and sharing your insights again with us Ferg. Thanks Ferg Legend. Love it. Always have a voice. Yeah. Love the show? Well there we bloody guy. Love a good chat with Ferg. As I've said in private combo punt when you're punting your money like he does.

Full time trader but then has such a long term outlook on everything and can be settled in things for years like until it actually comes to fruition. That's a bit different to my techniques of what Trying to flip it for 20% in a week. But he's got some patience and that's how he buddy, if it comes off, it comes off big, so. Absolutely no big insights from that chat, so thank you Trader Ferg. Ohh mate, Ferg is possibly coming to the GRX conference he

reckons in Brisbane May 20th to 22nd. 190 or 160 bucks off your tickets if you use the exclusive link in the show notes. GRX conference hosted by Ausman and Ausim and bloody. There's also the Ausim Underground operators conference in Adelaide before that April 7th to 9th. Then we've got 100 bucks off there. We're just giving shit away here.

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