07/25/2011
December 3, 2017
06/24/2011
December 3, 2017

07/05/2011

I hope no one lost any fingers in the festivities yesterday…


Foraco Intl., Kuppy, presumably you spent time on it in order to understand EGD better, if so, how does it score on your key tenets?

Foraco seems well run, but there is too much exposure to water drilling and I prefer a more pure play on hard rock drilling. I certainly cannot fault you for owning it however.


Have you looked at Baja Mining? Seems they have proven copper reserves and is trading at a significant discount. Curious for your thoughts.

I looked a long time ago and there are some serious techincal issues to overcome. Thankfully, I no longer have to think about such things because I pretty much refuse to even consider looking at mining companies without production.


Kuppy, Unless I’ve missed something, it appears the fuel embargo from Russia appears to be unresolved. While Russia states it’s because of a shortage, I can’t help but think they’re using fuel as a bargaining chip for all the infastructure projects being planned. Am I wrong & can you shed some light on this issue from Mongolia? & on that note, how vast is the potential for domestic oil supplies coming online in the coming years?

Depending on who you talk to, Mongolia may have the potential to produce up to 2 million barrels of oil a day. However, I think that figure is likely overstated by a good deal. In any case, it will be years before there is significant domestic production.

Russia is clearly flexing its muscles as they want access to distribution networks in Mongolia. I have no idea how this plays out and oil remains tight in UB, but much better than a week ago.


Here’s a recent article on the case for Mercer:
http://seekingalpha.com/article/276567-mercer-international-deleveraging-strong-market-create-a-potentially-winning-strategy

A few percent lower and I will have to add to my position. It’s just too cheap.


In your latest post you touch upon the future opportunity you see in commodities, and I’m guessing more specifically the commodity itself vs. companies. If so, is there any way besides futures for small individual investors to invest (besides gold and silver which have ETFs)? Thanks.

Most commodity products now have mini-contracts that have negligable margin requirements. Even small investors have access to any product possible. I tend to buy both futures and the producers when I’m playing a move as the producer tends to have more upside volatility over short periods of time, though over longer periods, the commodity always seems to outperform.


I think the Chinese are going to bail out Europe in return for military technology and influence over strategic areas down the road. I think they view “investing” in Europe as part of their military budget and are making these investments knowing they are going to lose money the same way they have been buying and holding U.S. debt. Do you agree, and are there actionable investment implications of this view?

You could be right. They are certainly trying to buy influence. In the end though, the ECB will bail out Europe through massive money printing. I don’t think they will let China get too much of the bailout action. Though it sure would be funny to see Greece cozy up to China and threaten to use a Chinese bailout, sort of like Iceland get real friendly with Russia for about a week when they blew up.


Your recent comments on Steady….Hold…….Hold were a good reminder to be patient. You indicate that you are holding a fair bit of cash and waiting patiently for commodity buying opportunities. Does this mean that you feel there is as much, or more, upside in commodities versus Mongolia? Or is it a matter of diversification for your fund? Thanks for your great forum.

Over time, I think that the right assets in Mongolia will very signficantly outperform most commodities. However, Mongolian assets are quite illiquid so I have to have a balanced approach. I ALWAYS hold extra cash for opportunities. Currently, it’s a bit more than I want, but I don’t find much that is cheap. I really hope there’s a good selloff, but as soon as they hint at QE3, I have no choice but to go and buy everything in sight. In the end, every asset class but cash is going to go up quite significantly in value. The Federal Reserve is determined to create another asset bubble to bail out the last two.