December 3, 2017
December 3, 2017


Kuppy, your MERC is up almost 30% in a month. Any idea what’s going on? Is there news?

Dunno. Seems like more buyers than sellers…. It’s still quite cheap if I’m correct.

In your earlier comments you had mentioned that if you are good with accounting, you can probably learn about any industry in a weekend. Can you please elaborate a little more on that. I mean what piece of information / sources do you usually look at when you are learning about a new industry.

There’s no ‘one size fits all’ sort of scenario. I just get on the internet and start reading. If I have friends in that industry (I usually can track someone down) I chat with them. A good analyst research piece is a start, but it only gets you so far in terms of background info. I really want to know what the inside players are thinking/doing. Industry publications are great for that. There are almost always interviews. It’s not easy. Depending on what I want to know, it can take hours or months if I really want to learn the details. When in doubt, just start reading and buying people drinks and see where it leads to.

A lot of NBSK pulp is used for printing and writing paper. I see this sector in free fall as more people move to electronic forms of print. It also looks like extra supply is hitting the market out of Chile and the restarting/revamping of a few pulp mills in North America. There is also the possibility of using bamboo pulp as a substitute for NBSK which is produced in many asian countries. While inventories of NBSK are low compared to historic levels, would you not agree that the increasing demand out of China would more than be offset by the aforementioned points and pulp companies see no need to increase inventories? I don’t envision 4 billion people will be convinced in a few years to start using toilet paper. I also fail to see any other demand or supply shocks appearing on the horizon that could threaten those low inventory levels.

I have to disagree with you here (though you could very well be correct). NBSK content in printing/writing has been declining for years now. There is increased supply from Chile and North America, but there are also even larger increases in demand. Bamboo pulp is good at some things and not so good at others. It isn’t a perfect substitute. I’m not saying that NBSK producers are a great 5 year investment. I think that for the next year (or three), NBSK prices will stay elevated. If that is the case, I think my companies will do well. These really are speculations for me–not investments. I appreciate the comments though. It always helps when you have to question your thinking.

Kuppy, Thanks for your blog – I have found some of your insights very interesting. I’ve been particularly enamoured with pulp idea and have been tracking Mercer whilst reading a few research reports on it over the last month. I may take a position soon. Anyway I wanted to direct you to Third Point’s latest letter www.thirdpointpublic.com where Dan Loeb touches on the theme and seems equally as bullish as yourself. He’s a man it has been profitable to agree with!

Looks like I’m in good company… Dan Loeb is a great investor. Thanks a ton for sending this my way.

Well, in my impressionable youth I owned a lot of Global Crossing stock, recommended by all (Merrill?) as a brilliantly-run provider of the essential infrastructure of undersea fiber optic cable. It did not end well. Who wound up owning all those miles of cable, I wonder?

I don’t remember all the details, but I remember smart investors paying pennies on the dollar for the debt and selling it off to someone else a year or two later for a huge gain.

A lot of people talk about China Vs India. China is way ahead of India at this point of time, but its not a democracy. The govt works in an opaque way. The currency is manipulated to boost exports. While India which is a democracy but lacking in infrastructure development, large scale corruption, slow reforms. It looks good on paper. Both these countries are growing fast but China is developing on the strength of exports while India has a stronger domestic consumption. What do you think about these two emerging economies?

It’s very hard to generalize about such huge places. I think they’re both winners over time if you are an investor. I don’t know enough about either to feel confident about picking individual companies though.

Do you agree with other hedge fund managers that believe china real estate is a bubble? I saw some pics of the so called ghost towns which is mind boggling.



I have answered this question a few times now. I think there has been massive overbuilding and there is bound to be a violent shake-out, but I don’t think that means there is a bubble in real estate. That doesn’t mean that prices cannot drop in half at some point in the next few years. I sure wouldn’t be a buyer at these prices….

If I understand correctly, Sinchao property may not be truly owned by Andean. I’m trying to understand the significance. I would be inclined to think its important but offsetting it is the recent financing by an ‘insider’. I was wondering what you believe the implications are?

Tthere are some title issues that need to be cleaned up. I think they will eventually be resolved in Sinchao’s favor. I had some inklings that there could be issues when I first wrote about Andean last year. It is one of the reasons that I haven’t talked much about Sinchao or ascribed much value to it. It is a very sizable asset, but it is non-core to my Andean thesis. (For disclosure purposes, I own a few SMZ shares).

I believe that the most valuable commodity is not gold. It is water. After a long wait PHO and PIO have broken out. Would you please take a look? I own some but would like to add substantialy.

Water is quite valuable. I just don’t know of an intelligent way to invest in it and am suspicious of any product that people constantly talk about. Good luck.

Have you thought about investing in private printing presses? Currency circulation has go to increase with all the printing going on right?

I’m currently investigating De La Rue; it seems to be undergoing some temporary problems which has knocked the share price down, but it’s got good exposure to the developing world which are currently enduring the brunt of the inflationary pressures.

I looked at De La Rue a few years back and didn’t feel that it had enough growth for me to get excited–though it did seem cheap.. I don’t know enough of the details to have an opinion right now. I’d guess that there are better ways to play inflation–but this sure is a pure play on money printing….

Several questions regarding the Sinchao title issue:
1. Do you have any additional color on the deficiencies and the potential remedies?
2. Any thoughts on timing, cost and long-term impact to value?
3. I know management has been replaced and most are new but this seems like a very major miss on their part. Thoughts?

1. Only what’s public. 2. This clearly impacts Sinchao which I own a few of. It should have no real impact on Andean as I doubt investors are ascribing much value to this. 3. This was an error from the old management and new management discovered it recently as they were investigating documents.