What a treat we got you here today, Matty Myers. Inge this on the weekend, get it in ya. Mate, we've got a super long, riveting conversation with the one and only Le Shrub today. Matty wasn't here because we can't depend on him, but we can depend on Axie's mining technology, mate.
They are so dependable. You know, they're just supporting everything you freaking need in drilling orientation, mate. The Oris, the Champs, the Gyros, it's just...
get it in you, depend on Axies more than you depend on Matty. Drillers, geos, and while you're at it, ADR, they've got a big announcement coming. I'm getting excited for that, mate. But first, we've got a pretty awesome chat to share with the money miners, and I think it's worth a bit of an intro to who Le Shrub is, Trav, because he's not your sort of everyday mining equities fund manager that we kind of speak with. He's a bit different, and he's got a super interesting...
Background, so to start with how we kind of came across him I think is a good one to start the Money Miners with. He writes a fascinating substack, refers to himself as the shrub, calls it a shrub stack. It's really fascinating, it's riddled with memes, you know, he's got a great sense of humour, it's entertaining, it's light to read. He's on Twitter as well, but he's got a real bit of pedigree behind him, so a pretty sort of standout education. Did the sort of banker route and then worked at a hedge fund that became quite famous for its investments throughout the, you know, the quote unquote big short era, the 2007-8 financial crisis.
Shorting subprime. Exactly. And he thinks about things with a macro lens.
He's got experience in merger arb, in, you know, event driven trading, which makes his style quite different to a lot of the other fundies we've spoken. with in the past and makes it particularly fascinating to myself. And some of the topics he's written about in the past couple of months alone are just truly fascinating. He has a real bent for holding real assets, which we dive quite deep into, commodities obviously being first and foremost, the way he writes about election volatility, liquidity.
you know how the Fed is thinking the dodgy data the Fed is operating on and how he kind of jokes about this inflation the famous or infamous yen carry trade that you know was the big talking point of the first or second day of Diggers, that's now a distant memory for a lot of us. So there's a lot of juicy stuff. And for myself, he likes to summarize things with a little snippet at the end of all his posts, in case you've got ADHD, just to make everyone's life easy, summarizes his writing in a few brief dot points, which makes my life very easy.
And I think it makes the way he explains things very digestible. So I'm excited to share our... interview with Leshrub. A super different thinker and we get to the juicy commodity stuff which you guys will love but you know we're gonna talk to him all night I think. Let's get into it.
Leshrub, welcome to Money In Mine. Awesome great to have you guys. We're really excited.
I think this combo could go a lot of different ways. I'm kind of excited to see just where it goes. Where are we? Such an exciting time, no? First of all, it's September 11th, so it's a very sad anniversary to start with.
But with regards to the market, I'm very excited to be doing this for various reasons. First of all, obviously, you know, I... I love mining. I love what you guys do. Love Australia, although I've never visited.
Although I've been trading it for 20 years for some masochistic reason. It's a special market. But more importantly, I kind of feel I'm loving the timing that we're doing this show because people are getting so bearish about commodities and energy.
that it's a fun time to riff around it. I mean, I even found myself bearish about it. So, you know, there's one thing that I call shravana, which is, you know, shravana is basically when you become your own contra.
So it happens when you really, really hate something so much that you should actually just buy it. And I'm not sure we're there yet, but I just wanted to throw it out there just so we frame the discussion in an interesting way. way of where we are.
Absolutely. We love trawling through hated, beaten up sort of stuff as do a lot of our previous guests on the show. And as you sort of mentioned there, it's quite fitting. We're talking on a day like today. We'll probably release this in a couple of days time, but I just saw oil hitting a three-year low.
Let's dive into what you're saying as it relates to the commodities a bit deeper. I think I've got the opposite of Shravana, by the way. When I love something so much, I should just sell it. Oh yeah, but that is Shravana.
That is absolutely Shravana. Because I do the same. When I get really excited about a trade and I'm oversized, I'm like, oh, hold on. This is when I got screwed last time because I tripled up.
uh when i thought it's gonna be like you know it's it's up 50 already everyone's talking about it and then you get carried away by the media and you're like oh my god you know i've been right and this thing is up 50 but it's gonna go up another 50 that's when you should actually just start selling at least same thing with energy by the way like energy when oil was above 100 uh you know same thing with copper when uh you know you remember when everyone was saying copper is a you hot new thing like that was only like six months ago by the way like copper is going to go to the moon and it's going to replace this and this and this and this and then ai and copper like when you when you hear ai classic commodity just get out except one that we can speak about later which is okay spoiler alert tin that's about it I'd kind of bookmarked that one for the end of discussion. That's a sort of a special feature. The Tin Barons just look through the chapter titles.
Tin Twitter is a special place. But getting into your kind of positioning, Shrub, and what you've been writing about lately, it's exactly what we're kind of talking about there. It's a high cash balance. It's hedges on.
So, you know, you've been writing about this and sort of seeing the world from a kind of consistent... theme for the last six months longer, right? Yeah.
Yeah. So basically, the way my positioning changed probably twice or three times throughout the year. To start with in February, I think people were getting a bit too bearish commodities in China. And kind of like missing out on the potential for a rallying commodity.
So my biggest position actually was Anglo-American. I bought it like 17, 18 quid. Also partly because I was getting bullish on copper when it wasn't that loved. And PGMs like platinum, especially when it wasn't that loved. And I wrote quite a few pieces on platinum itself.
So I thought, you know, Anglo-American was the best vehicle to play that. It was at 17, 18 quid. Everyone hated it for all the reasons.
And then, you know, suddenly BHP made a bid. So 25 quid. I said goodbye to Anglo-American.
Elliot bought a stake in it. I think they probably bought my shares when I was selling them my tiny position. And, you know, guess what?
Everyone who bought at 25 is now baggy at 20. and hating the stock for all the reasons that we they hated it like six months ago um but uh but you know since i sold my anglo position my mining position my mining portfolio shrunk a lot um which basically so you know i got out of all the copper plays got out of anglo which was my main play and i just stuck with a few things that i thought were I'm not going to say recession proof, but I'm going to say like they would benefit from both recessionary environment that involves printing and high deficits. And they would also benefit in case there is no recession. So, you know, the two commodities that I stuck with and I still I'm still involved in is platinum and tin. And then.
Putting it all together, you know, where we are today, the reason why I've been advocating a high cash balance, and by that I mean like I'm at 40% cash still for the last month or so, more than a month, a couple of months now, is the environment is so uncertain that, you know, people can't figure out where we are. And especially when it comes to stuff that we... that we love like real assets like commodities and energy and all these things like if you don't know where you're going and the stocks aren't that cheap then there's a high probability of a big flush which i think is what we saw lately like in the last you know in the last uh month or so We've seen a proper flush in commodities related to China fears, but also to positioning.
Like, you know, don't forget that people have been long commodities and energy since the war in Ukraine started. So we're just seeing like growth fears, China fears and positioning just coming together and flushing out things, which, you know, that could send them to interesting levels. You know, oil hit a magic number for me, 66 point. uh six six today um so that's that's an interesting level i mean you know bear in mind it was at 85 like uh two months ago so you know what i like seeing is i like seeing this positioning rinsing and i actually don't really care about these growth fears and nonsense i just think the market is going to be like yeah sure guys i mean china's slowing down yeah no shit man like it's been slowing down for like you for like a few quarters already and uh and it's you know it can it can easily turn the other way around so you know the way i see the way i see it is i cash just allows you the flexibility to try to play for bounces to try to get interesting situations um you know those interesting situations don't have to be mining they could be in like uh uh you know various other areas around like you know my biggest position has been a handbag company for crying out loud for the last month so you know i'm pretty flexible about how i how i see things and you know i don't want to be you know i don't want to be in love with with a sector itself but what i do want to have is i always want to have some exposure to commodities and energy so for example even throughout this mess um you know i kept like a five percent position in you in an energy services stock.
And even throughout this mess, you know, I kept like, you know, a 7% position in platinum futures, and I did keep a, you know, close to 5% position in a tin exposure. So, you know, you know, so just to summarize, I like to have a high cash balance because of the uncertainty. But I also like to not mess around too much and just go like complete bear or complete bull.
I want to have some core exposure because some things you're not going to, you know, you won't be able to time certain things. And I don't want to miss out. on a core theme that I believe in by not having at least like a sensible position size. You've got a background in merger up and you write a lot about event-driven investing. How are you kind of balancing the portfolio between those sort of shorter dated, you know, where you can see a catalyst on the horizon versus the stuff, like you mentioned there, the plats, the tin and the other real.
asset type investments that you might hold for a little longer? Yeah, that's a great question because I think that's where you make, you know, that portfolio construction is where you make the real money without actually suffering big drawdowns. So the way I see it is this.
First of all, when the two come together, so when you have an event-driven situation. and the commodity together that that makes it very exciting so like anglo for example you know anglo was the reason why i was really attracted to anglo was it was beaten up but it had a very big soft parts discount so you know if you if you look where it was trading versus appears you could justify like 50 to 100 upside based on a breakup value so to me that was like it had an event angle but before people were talking about it and then people became activists so that that drove The value crystallization in the trade was driven because there was like a potential catalyst. It was like a soft catalyst, which was a breakup value, but there was like, there was a potential catalyst.
So when something like that happens to me, that's when I size big. So, you know, Anglo was a very meaningful position for me because of the two things getting married together. The thing that you were attracted to with Anglo, you know, being that pretty serious discount to some of the past value is probably the exact same thing that BHP was attracted to. Oh, absolutely.
Yeah, absolutely. Because, you know, Anglo had a very, still has a great portfolio of copper assets. And the market was basically very myopic.
And actually, this is something that's really worth highlighting to your listeners, because I'm guessing there's a lot of retail investors. So Anglo, so let me just pick up where it was because it was a very interesting lesson about how things happen. So the stock started in November, it was a 22 bucks, November 23. And then they had a big profit warning that sent the stock to 16. And I remember buying it three months later, like at 17-ish, around 17, 18. So that profit warning were basically driven by operational issues at their copper assets that would basically lead to delays.
Now. If you're a retail investor and your stock is down from 22 to 16, but the operational issues are resolved, will be resolved, and also just create a delay versus a value destruction, that's when you should be getting greedy and buying the stock. But the hedge funds and the short-term investors, the way they operate nowadays, they're like, ah, crap, you know, they missed a quarter and they're going to miss another three quarters down the line because they're not going to resolve these operational issues for the next 12 months. Well, you know, guess what? I'm not an institutional investor.
I'm just running my own money. And I'm like, you know what? I can just buy this because I know it's trading at 16, but the breakout value is 30. So I'll just buy this and sit on it.
And I don't care if hedge funds are not going to buy it for the next three months. You know, they'll buy it in six months. So.
That's when it's worth getting a little bit smart about these things and just say, was the drop fundamentally justified or was it because of, you know, like a three month, six month delay? And, you know, the market can be very myopic around this, especially when it comes to mining and energy stocks, for example. Let's take it to the other side, to the extreme side of how they trade a darling like NVIDIA.
Like NVIDIA is a three trillion company. they delay their key product blackwell by a few months you know and the stock just doesn't do anything it stays at 3.3 trillion and then you know three months later they sell it because of you know some bad well i mean they had good results but it was like a sell the news results but when they actually delayed the blackwell chip you know the stock wasn't it had a it had a blip but it wasn't that much of a blip in anglo's case you know they they had an operational uh issue and delay and the stock lost like you know it went from 22 to 16. so that's the kind of situations where it's more interesting to be looking at uh for me um you know but but you know going back to the event versus uh the portfolio construction aspect you know when you have the event the nice thing about it is that you kind of have, you reduce your downside because there's something to look forward to, if it makes sense. And that event could be something else as well, like... I mean, I'll give you an example of a stock I own.
Like, I own MetalsX, which is a house favorite, the tin stock. But, you know, I've owned it for a while now. I've owned it for a couple of years, three years.
You know, the event there is very soft. They're buying back stock. So the only reason why the stock isn't going down through all this mess is because, well, they finally started buying stock because a third of their market cap is cash.
So something like that that has an event angle. you know i'm kind of more interested uh to be holding on versus you know a stock that's full of cash that's doing nothing with it and you know management is uh just asleep at the wheel which was the case with metals x for a while By the way. So I don't know if that answers the question. Basically, you know, just the event angle just makes things a little bit better with the whole thing.
There's two parts. Like it kind of ties in with the event stuff. But like with the Anglo trade, like, you know, two parts of it are super impressive.
One is like impeccable timing on the entry, but the other one was just impeccable timing on the exit as well. And given you've got the merger up background, like you weren't at all tempted to... a ride to completion or say what that pathway looked like?
Or were you just too trepidatious because of the complexity of that deal that you just thought the easy money's been made? Yeah, actually, I think it's because of my merger background that I got out. Otherwise, I would have kept it. I've been traumatized too many times by broken deals, especially when it comes out.
I'll give you the reasons which I've laid them out when I sold the position just to make it. clear. Reason number one was there were politics involved.
So when there's politics involved, I actually don't really like betting on the political outcome, especially when it comes to mining. So in the case of Anglo, the South African elections were taking place a few months after the elections. after um yeah a few a few months after the deal was announced so i was actually really perplexed why bhp chose that timing before the election because it was obvious that it was going to be a political uh uh talking point you know before a major election in south africa when you have you know one of the biggest employers in south africa being being taken over by bhp which the south africans hate because you know historically they've been cutting investments in south africa so The politics really scared me. So that was a driving force why I got out.
The second thing was, from the regulatory perspective, this thing would have taken a year plus. So when you're sitting on a deal that's going to take a year plus, and the stock was at 25, and the deal completion was like 28. So I was going to make like 15% after having made 50%. I'm like, you know what, I'll just leave that to the merger arms.
If they want to sit on it to make 15% over one year, you know, be my guest. And the third one were the precedents. And the precedents was unfortunately, you know, something I lived through. And I remember very clearly when these big deals get announced, it usually marks, it's usually near the top, not near the bottom.
And these big deals in mining, not only did they mark turning points, they would also have a high degree of failure. So, for example, BHP Rio 2007. Then I remember Anglo Extrata. You remember Extrata?
So it was Anglo Extrata fail. Then I'm pretty sure it was Anglo Glencore, maybe what approach. something that but that didn't work out and then BHP potash corp yeah yeah so basically when you have these big deals not only is there a regulatory risk but there's also a very high probability of failure that's why you know what I just took the money and run I like taking the money and running away because you know when you make the easy money or just just get out let the other guys fight for it it doesn't doesn't matter and that's where we are you speak a good bit shrub about recency bias and you kind of bring it up there given your experience sort of living and investing through that 708 period and you've made some interesting parallels i'm really keen to to learn from you know your lessons back then what you see sort of similar to that time period and i guess importantly what you see kind of differently right now when you when you make that reflection you Yeah, that's a great question, JD. So basically, the thing is this.
What we lived through, I mean, even with all the algos running the market, I think portfolio managers will always have a recency bias, which is they will think what they went through, and they will always be more inclined towards those scenarios. And I think that's a very, very dangerous situation. to be in.
That's why I just like to bring up, that's why when I write about these things, and by the way, I write a lot to help myself as well. That's how I started writing. I basically write, and when I find myself mentioning 2007, 2008, I'm always aware, and that's why I always mention recency bias, because I want to find another precedent that might contradict the one I lived through.
So for example, I didn't live through 1976. So basically, I always want to compare it with, if I have 1978, I want to compare it to like 1976. And you've done some fascinating stuff, you know, analyzing the 1960s as well with the accommodative policy on a sort of fiscal and monetary. Exactly. So for example, the reason why, so we wrote a great piece with my friend, Alliant, where we basically, you know, we asked the what if situation when Powell, because Powell right now is about to make a, is about to kickstart the Fed cutting cycle, the rate cutting cycle.
So that's when it triggered the what if, because there was a chart that was going around comparing it to 2007. And there were some really scary parallels, to be honest, with 2007, but only from like a very meme aspect. So, for example, you know, the Fed cut rates in September 18, 2007. And the Fed meeting. is on September 18, 2024. So, you know, it's kind of like, it's nonsense.
It shouldn't mean anything, right? But it's very mean. So people are going to be like, oh my God, because the market fell and then it rallied to all-time highs and then it was a big crash. So if you put them all together, there were quite a few similarities between the two periods. But again, just from a technical standpoint and a very mean standpoint.
So you put the two together. And it's like, oh my God, it looks like 2007 and we're so screwed. So we started with that. And then I was just thinking through what was going on in 2007 that was very different to today. And one thing that was very, very different was that the banks didn't have any capital.
So whatever you compare with 2007 was, guys, in 2007, the banks had like zero capital. I'm talking about one fifth to one tenth of what they have now. So, you know, one percent loss in their loan book blew up the whole system. Right now, you know, we're really, really far away from that.
Like we are. Very far away from a credit crunch because of the capital buffers at the banks, which is one thing we did well after the GFC, we recapitalized the banks. That's the first thing.
The second thing that is very different, I think, and that's why we bring the 1960s and 1970s parallels is, you know. We asked, you know, what if we change regime? You know, our recency bias leads us all to think that, oh, we're, the risk is deflation.
Like it's 2007 and the risk is deflation. But we just came out of a very recessionary, you know, we had a few recessionary events, inflationary events like COVID and there ended up being an inflationary event because we printed like 10 trillion or something. And then the war in Ukraine was an inflationary event. And, you know, these cycles take a long time.
So I can also draw you a parallel with the 60s and the 70s, where in the 60s, you know, we had a, we had again like a very... growth, you know, the focus was on growth. Governments were spending on growth.
The focus was on growth. And it ended up leading into an inflationary environment in the 70s. You know, that's how we got there. So we start, you know, these things take time and it's very difficult to change them. So like if in the 60s we're stimulating for growth, we, it really showed in the 70s when we had like a proper inflationary cycle.
And. The year I like to draw parallels with is actually 74, 75, 76, whereby, you know, those were, you know, one of them was an election year as well, whereby, you know, during the election year, I can't remember if it was 75 or 76, that was when inflation was dropping, actually, and the market had a rally. But the following year, 76, inflation picked up again. and the market collapsed so if you put the parallels uh if you actually plot the inflation trajectory in the 70s to the inflation trajectory now it actually tracks it more closely than in 2000s because inflation likes to have a dip and then a rally and in that dip it's gonna just confuse people and say Oh, you're heading into deflation, mate.
So you better cut rates. And guess what? Once they cut rates 50 bps, maybe inflation keeps going down.
Once they cut inflation another 50 bps, maybe it stabilizes. But, you know, trust me, with all the money in the system, if they cut rates by like 200 bps, would you be surprised if inflation picks up and growth picks up and, you know, the monkeys are out in full force and just go crazy again? Because... Yeah, I think it's a high probability event.
But the problem with this is that you don't know when the turn is going to happen. And that's what's confusing a lot of people. And that's why I love the idea of having, you know, the cash there with some core positions. So when you see it happening, you're there to take advantage of it. You're not down 50% already, let's put it this way.
I think that's the important thing. Because, you know... No, no, no.
If we're having a debate between 2007 and 1976, we're talking about like two complete polar opposites, opposite outcomes. So you really don't want to get caught being wrong on that part. And that's why I keep having this debate.
I keep writing about it because I just think it's really, really important for people to do and for me as well to get this right. This this comfortability that you have with the inability to time. Big macro inflection points is such a common theme in your career.
Like, you know, it was just in the preparation for the episode, it was kind of enlightening to just hear the way you talk about, you know, in the housing crisis, you know, paying 1% insurance per year and then waiting three years and not getting paid, but then finally a giant windfall. And that was the best trade of the people who were, you know, short subprime. Yeah.
Has your relationship kind of evolved over time with just, you know, wanting to time these kind of events, you know, precisely? Or you just kind of get more and more comfortable with the inability to do so? I think one thing I learned from, you know, I mean, my boss at the time was a genius, no question about it.
And I think one thing he did right and kind of instilled to me, I mean, there's two key differences. So the way he did it, you know, the way he structured the trade, the subprime trade was just so smart in the sense, whatever happened, he would be okay. I think that's the key takeaway.
And that's the takeaway I got from it. And that's why when I get these asymmetric calls or when I do like a hedge or take one of these swings, you know, I want to do it in a way. That if I get it wrong, I'm not going to get hurt. So I think the genius of the subprime structure was there were a lot of guys that were short subprime, but in 2004, and they all blew up by 2006. Whereas the way we had structured it in the fund at the time was spend 1% a year.
If it works out, you're going to make like 10x, which ended up being much more. If it doesn't work out, you lose 1%. But in the meantime, the rest of your portfolio will do really well. So lesson number one was sizing it to a point that you don't get hurt and sizing it to a point that it makes a big difference if it works out.
Because the other side of the trade is... There were quite a few other people short subprime at the right time, but they didn't make much money out of it. You know, like some funds were, you know, short subprime in 2008 and they were ended up the year flat. Whereas, you know, the fund I was working at was up more than 100 percent and one of the funds was up 600 percent. So, you know, lesson number one is the sizing in a way that it doesn't kill you, but in a way that you profit well.
if it works out like it makes a difference uh right now when when i'm running my own money and i don't have um i don't have much and i have to be like very very fickle with my with my own timing right now i'm more paranoid about the timing than I was when I was at a fund. And that's why I spend a lot of time about, like, I don't really want to, like, you know, there's funds that do these tail risk hedges, for example. And these tail risk hedge funds, they do it every month. They spend a little bit on puts and they spend a little, like, I think that's nonsense. It's nonsense because every month is different.
And I want to, and I want to, I don't want to spend every month. a certain amount of money because on puts like it doesn't doesn't suit me that's why i you know the high cash balance makes that app for me but what i want to do is you know if the market is at at a very high point i want to that's when i want to just allocate some money in puts for example or when when the market is at a low point that's when i want to allocate some uh some money in calls because you know lesson number three i think is people talk about hedges always about oh it's going to go down a lot it's like but yeah but you also have to be prepared if it's going to go up a lot and so you know sometimes when things are low you want to buy you want to spend some money in calls so for example now oil is at 66 I should be sitting down and looking at $80 calls for December, for example. You want to be positioned both for a very bad event, but also for a very good event. Unfortunately, in the case of oil, a very good event could be a very bad event for the rest of the world.
So there's geopolitics involved. But you know where I'm getting with this. So basically, it's worth being careful. When it's your own money, not to overspend on these tail hedges and to be very careful, one, on the timing and two, on the timing.
on what you're spending it on. So, for example, you want to spend it on S&P puts or you want to spend it on oil calls or you want to spend it on bond puts or bond calls. And, you know, as stupid as it sounds, but the easiest thing, well, one good rule of thumb is to just see which one of the asset classes is at an extreme level.
So if it's really beaten up, think about calls. If it's really high, think about puts. I mean, it sounds really stupid and simple, but to be honest, it kind of is.
Like investing is not rocket science. I find your commentary on timing really interesting there, Shrub, because I think the thinking a lot of people would have is you going from working within a hedge fund and that environment to managing your own money, the sense of timing, the pressure on timing would be relaxed. So is it kind of true in a sense that...
The reverse is also true of what you say that the pressure is put on you by yourself or is that kind of your thinking on timing it's very different because it's a different amount of money and you've got perhaps different risk parameters that you put on yourself? Yeah so look I think it's definitely more flexible so I think the nice thing about the timing is You know, the rules of the game change when it's running your money versus running a fund. So, yeah, I'm more paranoid on timing, but that's because I don't have the capital of a fund. But also the fund might have to be hedged for the whole period. When I was running a fund, for example, I had a very high restriction of almost zero beta exposure.
So I had like a 10%, plus 10, minus 10% beta constraint. So that means for every 100 long, you could only be like 90 short or 110 short. So I didn't have that flexibility to move too much around it.
And that's actually very, very stressful by itself because when the market collapses, there's not much you can do. And when the market rallies a lot, there's not much more you can do. Whereas when you're running your own money, you have a lot of flexibilities.
are in your advantage so sure you have the you have the issue of the you know timing it and capital constraint but on the other hand you can also choose to do nothing right you can just say you know what this month doesn't look good i'm just going to sit back i'm going to be all cash you know screw it i'm just going to be all cash i never do that by the way but i i i do go to 50 cash if i want to so that's that's the one thing you can just choose to do nothing uh number two is you can choose to be 100 long you or 100% short. Now, that's something you cannot do in a fund, in a hedge fund at least. My own personal constraints here, my own personal discipline here tells me that I do go 100% long, but I very rarely go net short. And by net short, I mean, for every 100 long, I have 100 short. Like I usually just try to be like 100 long.
50 short as a, you know, when I want to be edged or, you know, fearful, let's say. So, you know, the easy, let's put it this way, the easy way to make money as a retail investor, I think is to be only long and buying dips. on big pukes and then just ride them out and take the money again and run and do it again but you know not with all your money you can do it with like half your money or something i think if someone did that it would do really really well i mean no one has the discipline to do it but you know it's in theory it's really cool no Reminds me of one of your tweets. It was something to the effect of, you know, everyone tries to be a genius and do all these macro trades, but in reality, you'll make way more money just earning a couple of equities and riding them to the moon. Dude, 100%.
Like, if I look at, you know, I basically do a review of my year every time and I look at where I've made the returns and It's basically, you know, one or two stocks a year. And, you know, they tend to be diverse as well. Like I was thinking, you know, 2020, I had a 10 bagger in Pluck Tower, which is like a hydrogen Ponzi stock. 2021, it was a recycling stock, 10 bagger.
It was also Ponzi. 2022, it was long energy, short tech. That was my trade. That worked really well because it was the Ukraine world.
that stuff um yeah and 23 24 i did i mean 24 was anglo-american and biotech and 23 was biotech again so you know go figure i mean there's so many opportunities everywhere um and it's you know it's good to have an open mind around it but especially if you know sorry i forgot about lithium as well so 20 Two must have been lithium or 21, I forgot, like a Patriot Metals, one of your Aussie listed stocks. That was a, yeah, it was a 10 bagger. Thanks to a good friend of ours called The Koala on Twitter. I'm sure you know The Koala.
We know The Koala. We are familiar. I know you know The Koala. So yeah, you know, bless him.
You know, he got me in, you know, maybe that was one of the things that inspired me to write that tweet because... You know, he talked me through the thesis. The stock was at like 30 cents.
I was like, oh man, this is like a no-brainer. The stock went to six bucks. I was selling it down at six bucks and I think it went up to 18. I was out at six, but I went to 18. Like, you know, proper retirement rate if you sized it.
You've said some other really interesting stuff about your mindset in the past, Trub, that I want to kind of zoom in on as well. The thing that really stood out to me is talking about putting safeguards around you and I guess kind of playing into what you've just said there with a longer term time horizon on some of your trades, mentioning Buffett and Munger and how they kind of look at situations. But what really stuck out was that you said you don't have an online account per se. You sort of put your emails in and actually speak with a trader or broker to kind of execute, to just have an additional layer of safety and I guess help you.
think through trades? Is that the kind of rationale as to why you do and operate in that way? Yeah, I think it's...
You know, I have weaknesses and I'm learning about these weaknesses as I go. And I found that when I was, when I had an online account, you know, you get to get trigger happy. So, for example, you get more reactive to news, for example. So let me just. A stupid example would be it's the middle of the night and there is a headline about some policy change in the US and the futures are down 50 bps.
And you panic and you're like, oh, my God, let's just use an example. Apple gets fined for 20 billion and the Nasdaq is down 50 bps. And you're like, oh, my God, that's going to collapse the Nasdaq.
So you go short the Nasdaq reacting on the headline. And it's, you know, 10 p.m. at night and you've had a few drinks and you think that it is a big short. And you.
lever your account to short the nasdaq and then the next day the americans come in you know aka the and all the what i what i like to say the you know the monkeys come in basically and they're like oh who cares about a fine by the you on apple you know apple's a great company and they just send the nasdaq futures one percent up and you're like oh my god why did i do that why did i have a drink and trade futures just using it as a simple example whereas i found that if you call someone email someone or write out to someone your trade it introduces a neck another layer between you and hitting the button and actually this is one reason why I was tweeting out my trades and now I write them down on Substack It's actually, it started off as like, it still is. It's another layer of security for me. The fact that I sat down, thought about it, and I always think, what if like a grandma reads one of my tweets and goes crazy on a stock and blows up?
So that's when I like to think about the risk. uh, what I do. I mean, you know, what I do is parody anyway.
So, you know, I always tell people what I do is a complete joke, but, but you know, when, when you write it out and when you tweet it out and you put it out to the public, you always have another layer of thinking around it and just framing your upside and your downside and what can go wrong. And I just find that very helpful. And if I was going to give one advice to people, nothing I give is advice because all I'm doing is I have a parody account on Twitter and a parody publication on Substack.
But if you write down your trades or keep a diary or write down the trade before you do it, you know, why you're doing it, you'll see that you will improve your hit rate. I think just on that. Mate, LeShrub's got some pretty important fair points there when it comes to safeguarding yourself from a bad trade.
It kind of reminds me a little bit of what the internal decision-making must be like if you're trying to safeguard your mine site from a complete power fuck-up. Mmm. How would, like, you know, if you were to try to do that, what would you do? From my vast experience, Trav, in building mines, what I do is I've just got Silverstone. on speed dial.
It just makes your life that much easier. And I mean, it's any sort of power, you know, Jen says diesel, you want to bus people around, EVs, water, they even do water, mate, piping it, moving it around. I think it's just the go-to number everyone should have on speed dial, anything power related and almost anything else. I mean, there's not much surveying, they do pretty much everything, right? Mate, safeguarded, I just feel safe when Kenny Keogh is in my presence.
He just makes me feel at ease. just lives it. He's a man of the people.
He goes there himself. Mate, I am, I'm safe with that. Mate, if you want a vote of confidence, you need any more than that. I mean, just look at the bloody clients they've worked with.
Batch B, Roy Hill, Northern Star, Pilbara, Minres, IGO. I mean, need I go on? I don't feel very safe with min-res but we'll move on.
Hey, they did a good job. Alright, back to the truck. In the world of commodities, why are you kind of drawn to them?
Especially kind of now when you're trying to pick a bottom. What is it about commodities that in the backdrop of the macro environment you kind of describe that you're enticed to? Because I think commodities should be an integral part of the portfolio.
To start with, there is a recency bias because I was doing commodities in 2007, 2008. And in the, let's call it super cycle, when China was was going crazy about it. But even after that, commodities is something that we'll always be using. I don't care about AI, no AI, we will always be using commodities. And there is a constant...
What's the word complacency around supply? So, you know, that's number one, it's something tangible as well. So when it's something tangible, you know, kind of like, like the like hard assets in general, just owning some. thing that is tangible except for the ponzi's you're in there before yeah look i i have no i have no inhibition buying ponzi's if they're gonna go up so i i don't mind that i don't mind that and actually i think like my best portfolio constructions has been actually a barbell approach whereby on the one side of the barbell i have commodities and on the other side i have a biotech which you know i affectionately call them ponzi's but you know some of them could change the world you know some of them could save lives but you know biotech's like the you burn cash so that's why i call them ponzi's so this barbell approach i actually really like constructing my portfolio this way um but you know but the thing about commodities as well is on a on a bigger scale with the amount of deficits that we're running with the amount of printing that went on over the years you really have to be thinking about inflation, structural inflation.
And that goes back to the 2007 versus 1976 scenario. And that's why I get drawn in commodities because, you know, I want to have that hard asset inflation protection in my portfolio. And it's a question whether that should be 5% or, you know, 50%.
Yeah. You know, right now, I'm probably like, I'd say like I'm below 20%. But, you know, I've been at as high as 60. And, you know, below 20% is basically where, you know, just because I have long-term positions that I'm not selling.
But, you know, that's the summary about commodities. I think it should be an integral part of the portfolio. I think they're always underestimated. I think there's complacency around supply. And I think there's also complacency because the narrative shifts.
so much. I think there is complacency about the possibility about structurally high inflation. And also geopolitics does still play a part, right? You know, you look at, and with geopolitics, I also mean, you know, permitting, like, okay, everyone hates copper now.
I actually don't have any copper exploration either, to be honest, at this moment. But you know, there's no permitting. And where's the supply coming from?
And, you know, in Panama, they shut down a mine. So, okay, now we're in a lull, but if demand actually picks up, well, where's the copper going to come from? You know, this could take two years, who knows, but, you know, these things do hit a wall eventually. It's as simple as that. I love how you write about the monkeys that you kind of referenced before.
...troubled, you know, the kind of commonplace derision that you've got to Wall Street and, you know, everyone and in and around it. And I think it kind of extends to policymakers as well. How do you think about, you know, a lot of the key bits of data that you talk about, you write about with the...
you know pretty pretty consistent revisions that we that we see obviously the um the non-farm payroll jobs is the the go-to example but how do you think about sort of navigating markets with you know such flawed data in a sense oh yeah basically i think people are always I used to take the data at face value as well. So, you know, and I think most people do. So they see a number hit the screen and they're like, oh my God, no, non-farm payrolls are up 200,000 this month. Great. The economy is doing great.
Labor is doing great. And I used to take things at face value too. And then I ended up going down the detail and I wrote a detailed piece about it where I was looking at all the revisions that were taking place.
And by the end of it, I was like, oh, my God, this is just completely made up. Because they were, you know, when it comes to inflation data, I mean, let's start with inflation data, which is a bit of an easier one. So inflation data, when as a seasonally adjusted factor to it.
So I remember clearly a few months ago, inflation came hot. but cpi came hot but ppi came cold and i figured when i went to the detail i found that uh gasoline was up in one of them but down in the other one because of a seasonally adjusted factor so if you looked at the picture in the gasoline price like if you checked on bloomberg or wherever gasoline was up like seven percent on the on the month but in the ppi data it was down because of seasonally adjusted uh factors so I was joking that, you know, when you go to the pump station, you should be asking for a seasonally adjusted gasoline price. So that's one easy way that they were fudging inflation data. Now, on the job data, it's way messier because they have these things called the birth death adjustments, which is a fudge factor based on when companies are born and companies are dying and they just want to. smooth out the job number, basically based on the data.
And these adjustments, they create very big swings. So like if the last number was, I don't know, 140,000, the adjustment factor was like, I'd like to say 80,000. I can't remember off the top of my head, but it was like 80,000 over two months. So it's like it's a real number. I think it was like 25% downward revisions for all the jobs created or something.
So you're talking about like a pretty big swing. And the problem with these big swings is that we are starting a rate cutting cycle where we're not sure if they should do 25 or 50. And, you know, my point of what I'm saying is, you know, ignore whether the data is fake or real. What you should be getting your mind to is that the data is inaccurate. So when the data is inaccurate, What you should be focusing on is how will the market trade them in the short, like if you're a short term trader, you should be thinking, how will the market trade them? That's the one thing, what's going to be the narrative.
But in the longer term, you should be thinking, you know, if I strip out all these things, how does it, how does it, the economy actually look under the hood? And you know, my simple answer is that the economy is slowing faster than the headline would suggest. It's not collapsing because I don't want to be an alarmist.
It's not collapsing, but the job creation was slower than what the headline would suggest. And if you think about what that means, that means that the Fed was handicapped. by basically this inaccurate data.
Like, you know, maybe they should be cutting 50 bits at the next meeting, if you ask me. Or maybe they should have cut in July already. And also there's this interesting aspect about the data that I put in the last report, that the adjustments tend to be...
The adjustments were upwards... during COVID, during 2021. So the revisions were upwards. And now the revisions are downwards. Why is this important? In 2021, if you remember, inflation was transitory.
Remember that? Inflation was transitory, right? So the job data, let's say, was coming at 100, but it should have been 200. So the revisions afterwards were higher. So the Fed at that point was looking at the job creation and it was lower than what?
You know, lower than... what you would expect. So like, oh, that's great. Inflation is transitory.
You know, there's a lot of slack in the labor market. Yeah, we got, we got. And then they come out with revisions like months later.
It's like, ah, shit, you know, there was a, actually the job creation was much higher. Now we're in the opposite stage. We're at the stage where the job number, the job numbers are good, but actually the revisions are coming lower.
So what I'm just saying is. That's why I, you know, especially because it's, you know, we're in money of mine where we're talking about cyclical. So it's important to get this right.
Now, with the revisions lower, it means that the economy is slowing faster than what they're telling us. Whereas before when inflation was transitory, the labor market was. better than what they were telling us.
Now the labor market is worse than what they're telling us. So, you know, at some point, they're going to come out and, you know, act on it. And by the way, that's not necessarily... But they have to wake up to it. And when they wake up to it, that's when you need to make a decision.
Are we 2007 or are we 1976? Who does this serve, right? Because it's like, it's almost the consensus view now that... the numbers are all fake and the Fed's kind of captured by the stock market and market participants are allergic to, you know, volatility downwards and then, you know, Fed changes tune again. But like, how does that actually happen?
Like, who does it serve? Whose incentives are kind of like influencing these like pretty serious, important decisions? And like, how do you unpack that?
Yeah, unfortunately, I'm a conspiracy theorist. We mention that sometimes. yeah so so i you know i i can't help it it is what it is but i don't mind that because you know as a parody publication it's you know it's it's kind of fun you know i i can afford to to write my conspiracies and you know uh uh get on with it you know like i i read a joke yesterday someone sent it to me so i identify as a conspiracy theorist my pronouns are hold you so So basically, who does it serve? You can make a lot of arguments because with the jobs data, I was semi-joking that...
the perfect jobs report would be one where it's cold enough, it's bad enough that the Fed can go and cut rates, but it's good enough that Biden can stand on a podium and say that the labor market is still very strong. So because the jobs data is so complicated in the sense like there's total payrolls, for example, but under the detail is also private payrolls. So it's actually what the corporates excluding the government have created. So the total payrolls could be strong because there's more people employed in the government. But the private payrolls could be weak because, you know, manufacturing went down or construction activity went down.
So you can. find like a bear case and a bull case by looking at the same set of data so to your point who does it serve I think it can serve both of them because on one side, you know, Biden comes out and now Kamala says, oh, the job market is very strong. We create 140,000 jobs. And then on the other side, you have the Fed coming out, you know, the formation and the private payrolls has been quite weak. So we have to be vigilant or, you know, the job openings have been weak.
Or, you know, if you look at this. Oh, you know, you look at part-time workers have risen by full-time have fallen down. So it's all these details I can just fudge around, to be honest. So who does it serve? It serves everyone.
It serves the Fed. It serves the politicians. It's an election year.
So in an election year, you know, this has been the stance of mine and of what I'm writing on Trust Act. But in an election year, you get... You can see a lot of weird stuff happening, and we have seen a lot of weird stuff happening, and a lot of games being played, still being played. So, you know, it's just a question of what happens after the election is also, it's like a really good point at this point. We have fake numbers, fake fed numbers, fake inflation numbers.
It's all fucking true, we know it. But you know where there is a complete intolerance for fake numbers? And it matters so much when you're doing drilling and exploration work, JD.
It's like you can't stuff up the... The assaying just has to be like perfect. You can't stuff up any of that. You've got to have just great assay hygiene. I don't know if that's a word.
Is that a word? Assay hygiene? Anyway, you know who has great assay hygiene? Fucking K-Drill, mate. K-Drill.
K-Drill. You know why? You want to be in safe hands.
Oh, safe hands. I mean, safe hands. You look at the size of Ryan's hands and you know they're safe because he could just fit a giant watermelon in one of them.
No, you're dead right. I was getting a bit, you know, worried talking about all this questionable sort of stuff that we see in the broader world. Over in America, you know, we don't have to worry about it here. And it's good just to highlight what K-Drill does just to feel safe.
You know, you want RC drilling. You want some diamond drilling. They have.
They have. both of those both of those and a whole lot more and they can do it without faking the data the day is real it's gonna be quality there'll be that's it there will be mines where they drill uh man i feel so safe with k drill oh we're we're bloody patagonia you best with k drill look at that bad boy nice thanks k drill you got a drill program get in touch call k drill call ryan o'sullivan get the job done Back to La Trobe. You have to kind of hope that the Fed and everyone involved can remember all the fudgings of the numbers and the tweaks of the numbers. Otherwise, they're really driving with their eyes closed. It's kind of concerning to think about.
Yeah, I think that's the main concern. I have because, you know, going back to the 2021, I mean, 2021 was a policy mistake. You know, they let things run too hot.
We were at 0% rate with everything booming around us, except like the Fed was saying that it's not transitory and there's slack in the labor market, which there wasn't. And now we're in the opposite. We're like 5% rates. Things are slowing down and we're still debating. So.
So it is concerning because there is a cost to fake data, inaccurate data, or however you want to describe it. There is a cost to it, and it's going to show. You speak, you know, often with a kind of shorter term bias in a sense, and a lot of the opportunities are kind of shorter data that you write about. But how do you think, you know, zooming all the way out about fiscal recklessness, about currency debasement, about all these issues and a kind of, you know, endgame if you want to put it in kind of dramatic terms? Is that something that, you know, occupies much space in your mind?
Are you much more focused on the here and now? No, big time. It occupies me a lot. actually and that's why I write a lot about short-term trades but I also I find that the short-term trades get my mindset right and get me to look at a lot of things and what I try to get out of it is I also have like my portfolio actually doesn't change that much so the short-term trade is like swing trades that just you know pay the bills but if I'm gonna say like you My portfolio doesn't really change that much. And I want to have that exposure that protects me from the debasement side.
That's why I, you know, what we said earlier, that basically commodities are an integral part of the portfolio. Like, you know, I have a 7% position in platinum, for example. I'm not going to change that. I have my tin exposure.
I'm not going to change that. And the reason is, you know, what you said. I do actually think that the world works around currency debasement. And the best way to do currency debasement, by the way, is to do it in a covert way.
Like you don't want to be Venezuela or Argentina. You want to do it gently. You don't want people, you know, like I affectionately call all of us the plebs.
You know, you don't want the plebs to figure out that there's currency debasement. And that was, you know, one danger with Bitcoin that it made people aware there is currency debasement. coming on. So, you know, that's why I think people should have real assets in their portfolio and in their life, like a house is a real asset, like, you know, someone should have a house, I believe, you know, a lot of people think that you shouldn't even own a house, I think they should own a house, I think, okay, in Australia, it's a bit different, because you guys got really, really screwed with the property market, I guess, which is a result of various policies, and I guess, cultural. But you know, A real asset like a house or real assets like commodities, I think they do play a part because the endgame, what's the endgame?
The endgame is that, well, there's one endgame that's a very, very bad one. And let's not get there because that one is like a Soviet style endgame. or World War II endgame, but you know, let's not talk about that.
So we, we are finishing on a happier note. You know, the end game is basically, these guys are just going to keep printing. They're going to keep spending.
So, so, so what's going to happen? Well, at some point they're going to have to monetize the debt, but slowly. So the end game is probably going to be yield control because imagine having like, you have Trump versus Kamala. What's the one common thing that they both have? They both want to spend.
They're both promising things. They both have to do that. So imagine at some point the bond vigilantes come up because we haven't had bond vigilantes.
We had them actually in October 23, 2023. had them for like a few weeks when the yields blew up at 5%. And then Yellen came in and just capped the yields in a very nice covert way by, you know, just changing the issuance schedule and the maturity schedule of the new issuance. So they don't want to have yields blowing up. So the end game is basically some form of yield control like Japan. And when that happens, that is like a covert way of currency debasement.
Like someone has to pay for it, right? So it's either going to be the currency or it's going to be in the bonds. And I'm guessing it's going to be like, you know, the currency is going to pay for it eventually. And we're going to keep doing this covert currency debasement thing that we're doing, which we have been doing since like 1970s, to be honest. We'll just keep doing it.
It's simple when you spell it out in a lot of ways. Yeah, I mean, look, because the other way to think about it is this. My ex-boss, you know, who I'll say again, I mean, he was a genius.
He said something very simple. Every crisis is different. So people think about 2007 and we're going to have another 2007. But what happened after 2007 is like the policymakers know how to deal with 2007. And that's why we're here. We're here because they realized that they could just print a lot of money to get us out of 2007. So that's what they're thinking. That's their own recency bias.
Their own recency bias is that they're going to keep printing to get us out of a crisis. What did they do in COVID? They printed to get us out of a crisis.
What are they going to do in the next crisis? They're going to print to get us out of crisis. But now they don't even let it go to like, can you imagine the S&P down 50%?
Like here we have it. Guys, here we have like not even a 10% correction, 9% correction. That lasted two days in August.
And we had Jeremy Siegel coming on CNBC crying and begging for an emergency rate cut. And also putting Jeremy Siegel aside because who cares about Jeremy Siegel? No offense to him.
But not only was he crying about an emergency rate cut, the market was also pricing in an emergency rate cut. So this is the important part. The important part was we had a 9% correction. market jumped from pricing a 25 BIP rate cut in September to pricing in a 50 BIPs rate cut, plus an emergency rate cut to stem a 9% decline in the S&P, which by the way, the S&P was already still up more than 10% for the year in a very good year at a very high valuation, right? But that was enough to get everyone panicking that we need to act now.
This is an emergency. NVIDIA is at 100, guys. We cannot have NVIDIA go below 100. It's a matter of national security. There's one more kind of broader question I want to ask Shrub and it's just because you say sort of Nvidia there and it comes to mind and that's regarding passive investing and the influence you think that that passive has that that's been a big change you know it was around in that area you speak of, 07, 08, but it's bigger than ever.
What kind of influence do you think passive investing has on the market and how that makes the next crisis its own unique kind of crisis? if and when that day kind of comes? Yeah, big time.
So I wrote a piece called the NVIDIA Liquidity Vortex, which I was actually going through this, that basically was going through the passive flows. There's a lot of detail, but I'll just tell you about the passive flow side of these things. Because basically we have created a casino in this one stock called NVIDIA. And it's also a function of passive.
But to give you an example of how concentrated this thing is right now. So the top seven stocks in the S&P account for 32% of the index. But in the NASDAQ, the top seven stocks are 45% of the NASDAQ. So the way you should think about it is for every $100 of passive, $32 goes to these seven stocks. and in the nasdaq's case for every 100 that goes to the nasdaq 45 goes to the same seven stocks now if you look at nvidia's case for every hundred that goes in the s p about seven bucks ends up in nvidia that's crazy so it's insane if you think about it that's why you know i wrote this whole piece go detailing the flows uh you know expanding levered etfs as well as as well as passive but basically You know, imagine being like a 80-year-old man or investing in passive.
And you're like, oh, I'm going to have none of this nonsense and all these bubbly stocks. And I'm going to have my money in the S&P, which is safe. And you're like, well, actually, any money you put now, 7% goes to NVIDIA.
So that's the problem with how they've constructed the index now is it's so skewed to these names that, you know, God forbid what we said earlier, like we have a proper correction. You know, everyone is going to have going to have a rough time. Like you can't have a perfect correction.
You know, you can't have a perfect correction. You know, you can't have a of an index in a you know great company and all that but it's a you know it's a three trillion company that is cyclical so you're you've introduced a lot of risk um into the into pension funds by having this high level of concentration because you know the s p is supposed to be a uh a very uh um i'm not going to say safe diverse it should be a diverse uh index and in the case in the case of uh say microsoft actually works out because if you look at the the earnings of microsoft they've been very very stable maximum just you know it's uh it's a secular stock let's put it this way but when you introduce something like nvidia which Again, great company, but their earnings have been very cyclical in the past. So you basically just skewed passive towards a cyclical industry that at some point is going to go down.
I mean, it's already down, like from 140, it went down to like 100. So that's a pretty big loss already. So, yeah, passive has screwed up the game. And it's very difficult.
to see how they're going to unscrew it to be honest at this point um and my view is that for the rest of the market to do well you probably need to see nvidia get killed because you want to see that casino shift to be more a more diverse casino instead of just a single stock casino It's phenomenal, right? The bigger stocks get bigger and yeah, at the margin, a huge amount of the money gets kind of allocated to these, to put, to basically pushing the price up of these existing large stocks on crazy high multiples. But the exact same mechanic works in reverse.
And maybe that's why the global financial world is so averse to a little bit of downside volatility because of the fear that unwinding can kind of create, which, you know, to the metals exposures. I'd love to touch on shrub. Why platinum? So platinum for me is, uh, Actually, a very easy trade, which sounds scary when I phrase it that way already. Contra indicator.
Yeah, it's a bad start. But I actually do think, you know, I do believe in currency debasement. I think the deficits have gone out of control.
And, you know, when I look at... and you know you look at gold is at the highs you know for a good reason and then i look at platinum and platinum is actually more rare as a metal than gold and it's a precious metal and you know when i started in the industry again recently buyers platinum was trading at 100 premium to gold and right now platinum is trading at a 60 discount to gold And I just find that fascinating because it's the lowest discount. It's the highest discount it's ever traded versus gold.
And at that price. The producers are all losing money. So I'm very, very excited by being long.
You know, one, a precious metal that will give me protection in the event of debasement. Two, generally a commodity where all the producers are losing money at the current price. I mean, that excites me by itself. Three, most of the producers are actually pretty crappy companies based in South Africa. So there is no growth.
You see their pipeline. They haven't grown production for like a decade. And if you look at new projects, the one I think you had one in Australia that was doing a palladium uh chalice i mean you know something like chalice is never going to get built right so from last time i checked i haven't checked it for like a couple years yeah but is it i don't know i don't know actually i wouldn't mind asking you guys what's going on with that because i haven't followed it for like a year or something you can't put it in your supply demand yeah yeah okay so there you go i mean if it happens it's going to happen in 10 years right yeah i mean so so basically the supply is in there and on the demand side is quite interesting the demand side is actually pretty pretty okay uh because um The reason why they took platinum for dead is because everyone, you know, the narrative was that everyone's going to drive an electric vehicle in the future. And ICE vehicles are going to get killed or, you know, become obsolete.
And platinum is not only a precious metal, it also doubles up as an industrial metal whose main use is in the catalytic converters for ICE vehicles. So the industrial side has been seen as a, you know, that it's going to be weak because ice is going to go down. But actually, it's been okay. And hybrid vehicles actually use a bigger platinum loading than ice vehicles. And hybrids have actually seen growth versus EVs seeing a decline.
So, so not only do you have the upside from the precious side, the debasement side, but you also could have an upside from the industrial side. With, you know, hybrids picking up, EVs, you know, not taking over the world. You know, put all these things together and it gives you like a pretty nice trade.
Like I own platinum and I'm just sitting on it. Like I have 7%. you know at the highs i had like uh you know much more exposure when i had anglo uh in the portfolio uh as a play but you know i'm happy to just sit on that position and you know go bigger as things uh as things turn and uh um that's that's a kind of like a symmetry i like where you have a low downside And, you know, potentially this thing can rip on for various reasons.
Like I gave you like a few reasons why it can work. It can't be just one. It could be like a few different factors. Is the exposure to the physical a pretty intentional decision because the miners are unpalatable? Yeah, so when I first set up the trade, I thought the best producer was actually Angloplat.
But then I was thinking, well, I might as well just buy Anglo-American because they have everything. They also have a great copper asset. And, you know, for the sound parts, this kind of put it all together like Anglo was the easy vehicle.
Let's put it this way. If you wanted like platinum exposure, Anglo-American. easy way out, be done with it.
And then, uh, and then I bought the physical as well because it's liquid and it's easy. Um, I also had calls on it because, you know, you can buy calls. The calls were quite cheap at the time. Now I haven't checked where they are. Um, and then at some point I bought a little piece of the, of the producers as well, of the other players.
uh and i still have one of them but you know they're pretty crappy companies unfortunately which is actually the bull case for and i still hold one of them by the way um but you know that's actually the bull case for the metal is that the miners are so bad and that's why you know if let's put it this way instead of having like sitting on cash or you know too heavy on cash i'd rather own some platinum uh and just have it there as a way to protect against the currency debasement um because some You know, sometimes it happened to me many times when you know, you're bullish on the commodity. And instead of buying the commodity, you buy like some junior minor that's related to the commodity and the junior minor just loses his permit or has a delay and it collapses, the commodity goes to the moon, and you ended up losing money. So you know, sometimes when you bullish a commodity, just just buy the commodity.
And you can, you can sprinkle a little bit around it with some producers. That's kind of how I do it. Like I buy the commodity and I just sprinkle around it some producers in case it works. Because if Platinum goes to $2,000, these miners will go like 5x or something stupid. It was gnarly to watch what happened to some of them around the Russia-Ukraine invasion when a lot of this supply was kind of just in doubt.
They literally did just that. Yeah. I think the talk in the miners is real, but like you say, some of them have pretty busted up balance sheets or just a terrible history of allocating capital. Sabanio is fascinating, right?
I think you had some call-ups. options on them, which came in. Yeah, disaster. Yeah, I wrote them.
I mean, I have like a cemetery of options. I have an option cemetery and they, you know, they just, they went to option cemetery along with the rest. To relate that to Tin quickly, it's kind of interesting.
Obviously, you've mentioned MetalsX there. I can't think of the top of my head. You might know a bit better, Shrub.
a way to sort of play the physical. I haven't looked deeply at an ETF or anything that would kind of cover that, but is MetalsX the only way you play tin or is that more spread on that front? No, I basically, I used to have, so I used to have Alphamin. I never found a way to do the physical in a nice way.
So there is a small ETF in London, but it's really not liquid. So I used to own Alphamin and MetalsX. And I actually have like, I do this thing where I do like a back of the envelope analysis, which I call the corner of the FT.
And basically the corner of the FT is it has, it's a stock pitch that has to be so, so clear and obvious and simple that you can fit it by writing it in the corner of the financial time. So, so I did that for alpha minute, was it 50 cents? Then it went to a buck and I sold it because. It's in the DRC and they were like rebels 200 miles away. I just didn't want to think about it.
You bought the FUD. Thank you very much. Yeah, exactly. I mean, like, you know what?
Great company, amazing asset. But I just didn't want to think about it. So I sold out on that one.
And I did the same analysis with MetalsX, like back of the envelope. And I've held it since. I mean, it's, and I just find that it's the, because there's only two listed stocks in the Western world, Alpha Min and MetalsX and no. easy way to own physical. Yeah.
I just find that Mel's X is the easiest way for me to, to play a 10. Um, I mean, what I like about it is that, you know, when I bought it, it was almost, uh, half the market cap wasn't cash. So I felt, so it was a break-even player. It's a high-cost producer. So they were breaking even, but half the market cap was in cash. And, you know, right now it has a, it had a nice run already.
But a third of its market cap is still in cash. And they've started, and there was a big holder that was selling down. And that was capping the stock for a while. And now it seems like they've reduced their stake. They started at 10%.
Now they're, I think they're almost out. They probably have a little bit left. I haven't even checked. But what I liked about it is that they started a buyback. So in the past, they were just sitting on the cash doing nothing.
The management wasn't speaking to anyone. And now they're just starting a buyback. And every day they do like a little buyback.
And that's the kind of stuff I like. You know, it's like three times EBDA. maybe four, I don't know, three or four, who cares.
But the point is that if tin goes up to where I think it could be, that three becomes one. So that's the kind of trade that gets more excited. I mean, metals by itself has a very checkered history with Australian investors. So when I speak about it with Australians, especially old-timers, they all hate it. It's like, oh my God, it's that shitty mine and, you know, the Renison mine, blah, blah, blah.
And whatever it is, like everyone hates this company. Everyone goes bird on it at some point. But you know what?
I don't mind. I don't mind. I think that's the easy way for me to do this.
And, you know, Tin, you know, just a quick word on Tin. I mean, I know you guys are talking about. before extensively but you know it's the glue that keeps the semiconductors together and again it's a small market the demand is growing and the supply is just not there like there is no supply anywhere um i looked at every single new possible project the uk one and you know cornish and there's one in germany and there's another couple of like fields in Australia that are never going to get built.
So basically no supply demand going up important metal for energy transition, as well as AI, as well as robotics. And the fact that I've used AI with a commodity means that it's going to go down, but. But you know what I'm getting at.
And also, I just like the fact that there's only one or two ways to play it. So imagine we get back to a tin bull market. This thing can easily go up a lot if things play out the way it should. That's why this is one of those stocks that I just own it. I don't even look at it.
I get happy when it goes up, I don't care when it goes down, and I've just had it for like three years and we're gonna keep it for another as long as it remains listed. I just I just don't at MetalsX so I can enjoy tin investors memes better. Yeah. Part of the community.
Yeah, exactly. Yeah. Yeah, it's like, exactly. This is when you create a nice community where it's like, guys, we don't care if we lose money. It's about the memes and it's about the community.
I mean, while we're on the sort of topic of a Twitter community centered around a community, I've got to ask you about coal. You've written about it a while back. Now Peabody was the name that comes to mind.
Is it one you're holding? I mean, it's hated. There's a handful of players out there.
I actually sold it at 23.80. What is it? 20.5 now. Wow. I sold it at 23.80 like a couple of weeks ago.
So I was bullish coal. I was long arch. I was long war.
Warrior. I got out of all of them like a year ago. The only one I kept was BTU because it had an angle with Elliot was going out. And I thought it was like, it was a couple of turns of BBDA cheaper than the rest. and it had a lot of cash on the balance sheet that could, and they hadn't started buyback.
So that was a theme around it. But to be honest, I mean, they were right to be getting out of this one slowly because they made a lot of money. So it was, for them, it was becoming a small position and more like a hassle because it probably brought down their ESG ratings by having like a 1% position in their fund in a cold stock, which is never a good look if you have ESG focused investors in. As stupid as it sounds, but it makes a difference nowadays. So BTU, I actually sold it a few weeks, like a couple weeks ago, because there was an activist that got involved.
And the stock jumped like 8% or something. It was, hold on, it was at 22 and it jumped to 24.50. I'm pretty sure I was out by like, you know, 23, I was out. And the reason why I sold it is because I actually had no idea who this activist investor was. It's like, hold on, it's up 10% on an activist, but I have no idea who the activist is.
And Elliot was there as an activist and they didn't manage anything. So I'm out and I'm going to buy it lower. And I just kept seeing it going lower. Now it's at 20. So I should probably just check on it again.
You mentioned before we hit the record button, Shrub, was you think... of buying a mining stock at the moment you didn't tell us what it was but i've got to ask you the question what's what's on your radar oh yeah so no so basically that was we started this conversation by i came in this morning and i just saw so much hatred on oil and copper and commodities in general like it was a really uh really negative sentiment around all these spaces. So we started this conversation before we hit the record saying, I'm happy we're doing this timing wise, because I want to sit down and think about which stocks I should be buying in mining. So I haven't decided what to buy.
But I just want to sit down and just see if I should be buying energy here, or, or some mining names. And you know, like, if I do, I'm probably gonna go with like something. simple like you know the big liquid ones and be done with it until I figure out where everything is uh but you know I mean just a simple you know simple example about how one should be uh thinking about this like if I sold Keybody at 24 and it's a 20 Well, that was in my portfolio two weeks ago. I should be going back to look at Peabody and see, you know, if I should be buying back Peabody as an example. Or, you know, like, energy.
Like, let's just do energy. It's like, oxy. Buffett was buying it in the 60s, 70s, and Occidental is now at 50. You know, should you be buying Occidental as an energy play?
You know, just simple examples. This is kind of what I'm going to do now. and just go through a few charts and favorite indicators. It is pretty remarkable to see the last month or so, and we feel it quite sort of viscerally here in being in West Perth here with such a resource focus, but like we've sort of spoken about...
copper, lithium, every sort of metal under the sun, and in particular the bulks. You know, iron ore is the main one that drives our state here and the country to an extent, and the headlines are sort of popping up. Every day with it sort of breaching below briefly US 90 bucks a ton for the 62% grade product.
There's a, you know, it's either one or the other, you know, everyone's either gangbusters and happy or everyone's terrified and it's the end and China's no longer going to buy stuff and it's kind of all over. So that fear and greed dynamic is very sort of prevalent and interesting to sort of feel and see. Yeah, I mean, that's kind of where I see my job. My job is basically to, I mean, it's so cliche, you know, being greedy when others are fearful and fearful when others are greedy kind of thing.
But to be honest, this market has been giving you the chances to trade around it. And, you know, I have this, one of my silly little sayings. bears get slaughtered, bulls get slaughtered, shrubs photosynthesize.
Like, you know, I mean, everyone is getting bulled up at the highs and everyone's getting bearish at the lows. You know, why don't you just play the range and be done with it? Like, yeah, like I have the, If oil was at 80 and now it's at 66, you shouldn't be getting bearish oil now.
You should be looking at stuff like Occidental and see if it's a good buy or not. We haven't said the words, but mean revision seems very much to be front and center, a backbone to your style. Yeah, big time, big time.
I just like to, I like to fade the monkeys. That's what I call it. And you know, the nice thing about mean reversion is you can also set a stop if you're wrong. So if you're wrong, like, you know, so be it, you get stopped 10% lower, you get a chance to play again.
But if you're bullish and you keep buying and gets, you know, the dip gets bigger, it gets bigger and bigger, and you're down 50% on a trade and you didn't realize it. Or if you're, you know, super bearish and everything just keeps ripping against you. I just feel it's a much healthier, basically because the market is in such an indecisive mode and because there is a lot of money in the system still, that's why we still get these mean reversions in a wild way.
I mean, just look at an example in August, how quickly the market bounced. So we had a minus 9% and a plus 9%. in one month but you know at the minus nine percent kramer came out and said that the market isn't oversold still yet right so like minus nine percent everyone on cnbc was saying this is a big crash and it's going to get so much worse and then we had a 10 rally that no one called for so what i'm saying is um unfortunately in the case of commodities and oil we don't have the same cheerleading as we do with nvidia so it's a bit more difficult to to have these sharp bounces but you know let me let me let me put something that no one is talking about now what if china does a stimulus i know we've gone through this a hundred times but you know one day they might so so be a lot of happy people it's when Yeah, there'll be a lot of happy people where you are. So what I'm saying is, you know, sentiment can change very quickly and it can get killed very quickly. Unfortunately for mining stuff, you know, the sentiment does tend to get worse and worse and worse.
and it doesn't bounce as easily as in tech. Like in tech, they had one week of red and it just bounced back straight out. But, you know, that's what gives opportunities, right? Can you sort of see a world, I know this was a thing that came up a lot maybe two years ago, but can you see a world where energy and sort of mining Whatever they kind of make up, say, I don't know, 5% of the S&P, would they actually make up a much more substantial portion of the market? Yeah, I think that's why NVIDIA has to die.
The NVIDIA casino has to end for that to happen. Because you need to see that shift. take place.
You know, you can't have like, because, you know, I mean, Travis, you asked that question earlier, who benefits from fake data? Well, I can tell you who benefits from passive. It's all the, you know, the big institutional funds, like, you know, the black rooks of the world, they absolutely love passive, right? Or big market makers love passive and big market makers love NVIDIA because, you know.
It trades, I'm going to say like 10, tens of times more than the whole of the mining space a day. Like imagine you're a broker that just trades NVIDIA. Would you choose to trade NVIDIA or all the mining and energy in the world? You're going to trade NVIDIA because that's where all the monkeys are gambling on. It trades 40 billion a day.
I mean, let's just see how much BHP trades a day. Hold on, let's do this. So in Australia.
is your most liquid stock i would guess so today traded 300 million million dollars right and nvidia yesterday traded 30 billion dollars so there you go that's that's your answer even currency just that's your answer yeah 40 billion us wow yeah so that's your answer so basically to get that 5% in energy to be 5% in of the S&P and energy mining to become 10% Well, you need to see the rest compressed, which to be honest, is what happened in 2000. No 2000 to 2006. That's what happened. We were in the same position. I mean, if you ask me, I think there's probably more parallels with 2000 than with 2007. Yeah, that's no extreme concentration.
Yeah, extreme concentration tech bubble. If you want to call it a bubble or not, whatever, but you know, tech excitement, internet versus AI, beaten up cyclicals, which is where we are today. Potential for like a mild recession, which I think there is a potential for a mild recession, and coming out of it, cyclicals just screamed to the moon, whereas tech was doing nothing.
Yeah, well, it's an exciting time to be looking at cyclical companies then. Mate, NVIDIA is a cyclical company though. What are you talking about, Shrub?
Exactly. There you go. A different cycle.
We could talk to you. We could talk to you all night, our time, Shrub, but, you know, I think we'll save the rest for another day. And, yeah, look forward to speaking with you again.
It's been a real privilege to... to unpack the way you think and and sort of dive into yeah the way you look at markets at the moment thanks for making the time really really enjoyed it thanks jd thanks travis had a lot of fun let's do this again cheers rob thank you all right mate that was that was awesome and i think we've uh taken plenty of the money miners time on this friday saturday or sunday on whatever day you are listening on so wrap it up quickly with a thanks to the good people at axis mining technology Mineral Mining Services, Verify, Adia, DSI Underground, Silverstone, who we had in the show, CRE Insurance, Greenlands Equipment, K-Drill, also in the show. And use the Spark Chart while you're at it. Trev, have a good weekend, mate.
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