09/24/2010
December 3, 2017
09/09/2010
December 3, 2017

09/15/2010

Enjoyed your Mongolian articles-interesting how really emerging (frontier) markets come down to assets rather than income.
You were asking how to play Mongolia. Two indirect plays would be Ivanhoe Mines (IVN-T, IVN-N) with its 66% stake in the Oyu Tolgoi gold/copper mine and RTZ now owning 34.5% after the recent conversion of $400m of convertible debt. Mr Friedland also owns 57% of SouthGobi Resources (SGQ-T, which is a Mongolian coal mine.
One of the stocks we used to own a decade ago when running a Greater China Fund was Erdos Cashmere, listed on the Shanghai exchange as a B share (900936-SH)(available to foreigners). As its name suggestes it was a cashmere producer, although based in Chinese Inner Mongolia rather than Mongolia itself.
Hope this is useful

I have mostly ignored the mining assets in Mongolia. I know there’s big money to be made in these, but my focus really is the broader Mongolian economy. If these mines come online and produce a lot of high paying jobs and tax revenue, it should all trickle down to the economy. It’s a small economy, so a few big mines could have a big impact. Besides, mining is a very difficult business to invest in.

The cashmere producers certainly are interesting, but they are at the mercy of foreign consumers who purchase the garments. You aren’t really getting exposure to the Mongolian economy–you’re getting exposure to style trends and disposable income in the 1st world.


Hello Harris,
not a question per se but more of a comment regarding GE. One reason they were able to make it through
relatively stress free as you say is that Immelt sits on the board of the New York Fed and obtained some sweetheart financing. they were also beneficiaries of the TALF which further allowed them to borrow cheaply while the credit markets were “not functioning”.
this all gets to your point that if GE was not a leveraged financial in drag to begin with then it would have had the “balance sheet” to withstand the past 2 years without the need for a desperate lending kick save.
thanks for sharing your thoughtful posts. cheers

I agree completely. They certainly got some ‘help.’ However, GE survived better than many companies with similar balance sheets did. It wasn’t effortless, but they made it. A slighly worse crisis and they would have had to do a very dilutive financing of some sort.


Kuppy, this question may have been asked before so i apologize in advance, have you been tempted to kick the tires on the rare earth trade, miners in ? Its been getting alot of attention lately since china has started to hoard its supply. Do you know if its even more difficult to mine than silver and gold? Traveling to western austrailia and mongolia did you see any opportunities?
Thanks again for your time.

I spent quite a bit of time on the rare earth metals a few years ago and decided that it was more of a stock promotion game than an actual business. If any of these mines are actually built, they will flood the world with rare earths and destroy whatever pricing exists. That doesn’t mean that the stocks cannot continue to go higher. Look at WAR.v they wanted to build the world’s biggest germanium mine. It sounded good, the economics were attractive at current prices and the price of germanium was screaming higher–until the banks realized that building this thing would drive the price of germanium to zero. A lot of these ideas work really well in newsletters trying to promote stocks, but then they do not work in actuality when you try to run a business. The world certainly needs rare earths, but they are VERY small markets.

Keep in mind that some rare earths have higher demand than others. Most rare earth mines produce multiple rare earths. It’s very hard to segregate out the ones that you want as an investment play. If you are particularly interested in one rare earth, I’d just buy physical and play it that way. Stock promotion is quite different from running an actual business. A few years back, I’d probably play along until the charts stopped looking pretty–now I just enjoy making low risk investments where it’s hard to lose money and if I’m right, i’ll make quite a bit.

As for Australia and Mongolia, they are both economies that are booming. There are lots of opportunities.


Kuppy, when you go into book value, are you measuring book value vs. capitalization ? AND do you consider this the best international measure ? Thanks for your travel/ education

When looking at book value, I just take tangible assets and subtract liabilities. I try to keep things very simple. Book value is a VERY useful metric for thinking of a company. There is never a ‘best’ measure. I also look at earnings and return on capital. Return on capital is probably my favorite metric for evaluating how good of a business something is.