December 3, 2017
December 3, 2017



One public company, a bank

A friend sent this to me and I post is as I found it interesting. Caveat Emptor….


Just read your article about you and your dad saying you were glad you owned gold. What do you think is a good allocation of physical gold? I know everyone’s situation is different, and I’ve read all over the internet where different people say 10%, 20%or even 50%. I understand you are not my financial adviser and this is not financial advice but im curious what your thoughts are.

Put it this way, gold is low risk storage of wealth. If you are a conservative guy, you should have more. I tend to be a more aggressive investor, so I have a bit less and have more capital invested in shares of companies. I don’t want to tell you what % of my money is in gold as everyone’s situation is different, but it’s a double digit percentage of my money.

Thought of you Harris when I saw this.Hope you’re well.
How The World’s Youngest Gold Mining Titan Got To Be Such A Massive Success
http://www.businessinsider.com/the-youngest-gold-miner-in-the-world-is-also-one-of-the-most-successful-2012-9This interview is a bit long, but very fascinating. Nolan Watson is a VERY smart guy

I did my very quick look at TITN to see if I want to go further and I like it. Based on my calcs, the thing is priced to grow rev at about 0% to, basically, infinity. Nice, since it looks like rev growth over about the last 2 yrs. has been organic. There has been a really big increase in inventories, though. Is that something you worry about at all? Probably not, is my guess, since you are likely looking at the next 5 yrs as a hold, but just curious.
Thanks for posting the idea.

Inventories are growing rapidly to support increased sales. As a percentage of revenues, it isn’t all that much higher than normal, though it seems a slight bit elevated. Management previously mentioned that they were looking to reduce inventories in the back half of this year—lets see how they do. Overall, it’s not really a concern of mine (especially in this world of very cheap credit).


I read your article against QE and though I don’t know how to make any real investable decisions out of the macro picture I thought your plan laid out was familiar.  How is the plan of -raise interest rates; -fire govt employees, etc. different than what has happened so far in Greece?  It would seem that they are following the plan you laid out and it does not appear to be going well.

Curious on your thoughts.  My macro thinking is most heavily influenced by Richard Koo (“The holy grail of macroeconomics” book) for context.

The investment decision is to own assets that do well with inflation.

Greece is starting to do the right things, unfortunately, they were in such a mess that it will take years and years to fix it. Even then, they’re only taking baby steps. They’re complaining about austerity when they’ve barely even cut at government spending. They should put the petal to the metal there and actually force people with debt into bankruptcy and fire a whole lot more government workers. Remember, there is huge pain associated with doing the right things—which is why politicians cannot do the right things until they have no choice.

Isn’t all the QE stuff really about managing interest rates so that the government’s immense debt burden doesn’t get more expensive?

On the topic of Titan, are you concerned about inventory volumes? The company doesn’t seem to generate any FCF. Does growth mode have to stop so that they can stop chewing up cash with inventory purchases?

Clearly, one aspect of QE is to keep interest rates low so that the US government doesn’t go bankrupt. That is all part of having it all be poorly managed for years.

I think that when the growth rate at TITN slows down in a few years, you will see huge cash flow generation. Remember that rapidly growing businesses usually have very low stated earnings and even lower cash flow as they have to continue to finance growing working capital.

RE: $40 Billion A Month Won’t Fix The Economy….Kuppy for President!!!!!

Hehe… Trust me, you wouldn’t want to be part of any country that I were in charge of…

Hi Kuppy,
I thought you and your readers might enjoy this presentation by Pierre Lassonde :

What particularly struck me is the slide that shows gold discoveries in the past few decades. Definitely seems bullish for drillers.

I am posting this as I found it to be very well done. It is VERY bullish for drilling activity in the next decade or two. These miners have no choice but to find more gold.

I’ve seen you write on real estate in the past and I’m trying to intelligently move out of paper cash and possibly into income property. I expect the medium term future to bring serious inflation. I would acquire this property with a current low rate mortgage. If inflation were to occur how does it effect the value property and do rental cash flows tend to keep up with inflation. How do you estimate this?

I also am looking to acquire some income producing property. Remember that high inflation isn’t good for businesses. You need to worry about vacancy risk, rising taxes and operating costs and finally most leases have very small annual rent increases built into them, so you don’t get the income aspects of increased inflation for many years. Keep this all in mind as you structure your leases.


TITN looks interesting but significant short interest, ~20% for TITN, always makes me pause as shorts, in general, are harder working than longs when it comes to due diligence.

As a significantly undervalued company would it be a buyout candidate?

I am sort of at a loss to explain the high short interest, except to note that there is a convert, but that still shouldn’t account for a 20% short interest.

I don’t think TITN is a buyout candidate as I have no idea who would buy them except a financial player.

Is there some accounting convention that allows TITN to grow so quickly while showing relatively modest ROE and return on PPE plus inventories?  Thanks.

There is no accounting convention. Rather, they’re buying up dealerships at a much lower PE/revenue ratio than their own valuation—which is VERY accretive to existing investors.

Chinese Steel held as “collateral” for loans vanishes


Why anyone would ever trust anything in China is totally baffling to me. I still stand by my thesis “you will know more about anything in China by reading a fortune cookie, than actually reading any financial data”

The Government of Mongolia announces they will be coming to market for $5B USD over the next 2 years, to support infrastructure spending. Is this bullish for the country?


I’m one of those guys who hates debt, but have always felt that you can never have enough infrastructure. It sure isn’t bearish. $5B USD of infrastructure in an $8B USD economy is a huge number. As a guy living in Mongolia, let me tell you that they need all the infrastructure that they can get.

So far, being long USDJPY has been painful & I’m losing a bit of faith in the short term. Do you think this idea should be paired with long an equal amount of Gold futures? In essence, creating a GLDJPY long!
Its not that I’m worried about being short the yen, its that I don’t like being long the dollar.

I have a small Yen short on. It hasn’t been fun. I like to keep trades simple. GLDJPY sounds a bit too complicated for me, but it probably works. Any trade that is long gold vs paper should be a winning trade over time…

Want get your opinion on brokerage firms. I know you have commented on Interactive Brokers in the past, and was hoping you could provide insight on a few (or your favorite) brokers, and specifically in relation to getting international shares. Obviously areas like Mongolia may be out of the ordinary, but from the perspective of most international markets, what broker/s do you suggest.

I only use interactive brokers, so cannot comment beyond that. For Mongolian shares, I’d recommend BDSec as I’m a shareholder and friend of the founders. I am also impressed by the guys at Frontier Securities. For other markets, you might want to look at Auerbach Grayson, which seems to cover many different markets.

A very close friend in Miami has a very successful business which is growing very rapidly. He got his products into a major national home supply retail chain in early 2010 and that chain is ordering much more of his product every year. In 2010 the chain accounted for half his $8M in sales and now accounts for 70% of his $19M in sales.

Since he needs to pay a Chinese factory prior to manufacturing and shipping an order, he has borrowed from a private investor at about a 50% interest rate in the past. Now he has commitments from the chain to order far more than they have in the past so he needs to borrow more money but he wants to get other investors to lend him money at closer to 10%. How would you recommend one go about finding investors willing to get a 10 to 15 percent return on their money?

I really don’t know how he would do that… sorry. It’s out of my circle of experience