December 3, 2017
December 3, 2017


I appologize for the sparse postings lately. I have been busy in Mongolia and Canada for the past few weeks.

Kuppy, huge call on Mongolia. You really got that right, the index is up over 100% since you wrote about it.. Top performing market this year! Do you think the move is over? Are you selling?

Well you heard it here first…. VBG That’s what happens when very cheap companies meet massive growth. This bull market is just starting.

To use a baseball analogy, we are in the first inning of this move. I’m doing nothing except praying for a pullback to buy more. I was trying to buy shares in about a half dozen companies but they were too illiquid for me to buy even a fraction of what I wanted. Many of them have doubled or trippled, but it doesn’t matter. I want to buy the pullbacks. Most Mongolian companies still trade for low single digit earnings multiples….. I want to buy whenever there are blocks for sale. It is the curse of illiquidity…..

Kuppy, with whats happening in the middle-east are the rising food prices a concern for your growth prospects in mongolia? I imagine a large part of the income is spent on food. Are you seeing any of this in your travel’s?

Rising food prices are a concern for all countries. I haven’t noticed any unrest in Mongolia. I think that people here realize that economic growth is a positive and most people have a very optimistic view of the next few years. I would be more concerned about places with stagnant growth.

I recently discovered your blog and I’m thoroughly enjoying it. I’ve started to research some Mongolian companies, and my question is about Winsway (1733HK). They’re involved in the procurement, transportation, and processing of coking coal in Mongolia. I read in a previous Ask Kuppy post that you’re not a big fan of transportation stocks (you mentioned planes, trains, automobiles, and trucking), but it seems like things are setting up pretty well for Winsway. I read that the chairman of the Coal Industry Association of Mongolia was suggesting that coal exports could grow as much as sixfold in the next 5 years as some of the large coal mines become operational. That sounds like a very nice tailwind for companies involved. Is there an element to the story I’m not seeing or a risk that would make you stay away from this area?

I really don’t know enough about the company to have an opinion. From the little that I know, I think that they make a good portion of their money as middle-men in the coal business and some of that money is through arbitrage and trading. If coal production grows as some people expect, I would think that Winsway could be an interesting business.

The last time you mentioned silver, you were somewhat ambivalent. You were correct that we had not seen the top, but worried about a supply response. How much of the recent move do you think is a result of societal unrest, and do you think there is a serious issue of the CME or some other exchange not being able to make delivery? If you think there will be delivery issues (or if you think that the exchanges will be pressured to increase margin levels further as the powers that be realize the damage Bernanke is causing throughout the world), what do you think about shorting the major exchanges?

I certainly wouldn’t short the CME because I thought there was a delivery issue. I think a lot of this delivery stuff is tin-foil-hatter nonsense. Could there be a failure at some point? I’m sure there could be, but it doesn’t go into my thought process. In the short run, there is a ton of investment demand in silver and that is driving up the price. Looking out a few years, I see a crushing quantity of supply pending. If the price spikes between now and then, I will likely sell some or all of mine.

I’ve read that (KS) may be in the market to make an aquisition.

1. Do either/both Fibrek or MERC seem like logical brides to you?
2. After such a large run up (MERC), what are the chances of a nice premium being paid on top?
3. Last one: Let’s say that Fibrek was to get bought out. Generally it seems that this drives up comparable companies stocks, would you think that would happen in this particular scenario?
Sorry for asking so many question

1. I don’t know much about KS, but if you have the balance sheet to support it, FBK and MERC seem like smart acquisitions as you can buy them at a tiny fraction of the cost needed to build new mills. 2. If it gets acquired, it will probably be at a premium. 3. Could be. These are very cheap businesses. Anything that drives attention to the sector would be bullish.