December 3, 2017
December 3, 2017


“This time is different” — four dangerous words..
Hi Kuppy, every time I read one of your articles I go to bed a little bit wiser.. thanks for sharing.

I recently red an interview with Prem Watsa where he speaks about a potential chance of a coming second leg in the market, resembling the 1930s.. Also, china is starting to show signs of a serious slowdown, massive property bubble etc..Grantham talking about a real dent i commodity prices due to china slowdown..

Thoughts about this and how it would affect EGD?

A commodity price slowdown will not be good for EGD obviously. That said, there has been 20 years of net depletion in various commodity reserves. Mining companies NEED to find more reserves. This is a long term bull market that EGD will ride. In the short term, who knows? Precious metals make up a sizable portion of the demand for EGD services and that should do well no matter what happens.

I read with great interest your article on retail clothing. Years ago (I won’t say how many!), I was put off with the power/price of “designer” items. I decided to clip the designer tags off different articles as they wore out. Sometimes even underware tags (when they had them) were put to good use by sewing them on to any old name garments. Accolades litteraly poured in on my choice of wardrobe selections! “What a beautiful Ralph Lauren blazer!” says one friend who didn’t realize it was purchased for $5 in the local Good Will store. You get the point I’m sure. Almost no one can tell the difference in quality/price, because the only thing most people really notice is the one-inch tag on the back pocket. Good luck in Ulan Bater and skip the mystery meat street stands

No mystery meat for me…. Yes, most designer things are just marked-up regular stuff. I’ve never understood the price premium.

My mom started a gift shop in ’62 with $197 in the bank. It lasted 40 years. It was based on her eye-she would go to gift shows and find the next thing. In those days you got territories for your early investment,so you had something everyone else did not-sometimes for years.

The mark up was big,but we gave huge service-always getting collectors what they wanted. She was the first in town to bring the artists into the store to talk and show how they worked.

What killed the business model? The loss of the territory retail concept,the entrance of the big dicounters(“can I still have the extra service,but with 30% off?”),the people making collectible items getting greedy and overdoing it-these all hurt.

But you combine the internet(with no sales tax)with the corporate store business model spreading like a virus,and every town is the same. Real small business,the idea of opening a small specilty shop is just over.

And in that corporate world,the margins are so thin,and the ability to protect and play out an idea when the whole planet feels like it is moving faster than real time-I can find no way to value,or to creat a retail business in this new age. You’re just a warehouse moving stuff through.

It’s tough to be a small player in retail any longer. That’s for sure.

Curious if you’ve ever looked at LODE and if so any thoughts?

I’ve seen this name popping up all over the place. I know nothing about it however. No more jr Miners for me….

Dear Kuppy,

Since due diligence in Mongolia (and other frontier markets) is pretty difficult, I like to hold a broad basket of shares. In case of Mongolia I have shares in nearly all standard companies and some non-standard ones. This should somewhat reflect the market and allow me to make a mongolia bet. This seems a sensible strategy to me. Nevertheless, you have expressed several times your opinion that one should really be there (live there or be very present) to make appropriate investments. I can understand that your approach is sensible for a large investor like you (and that is why people let you invest their money). But for a small investor like me this seems not profitable and pretty dificult. My questions are: 1) Are country bets ok ? Holding the Mongolian market? I’d like to do something similar for peru too in the future. 2) At which point do you deem it worthwhile to move to the frontier market (Mongolia). this depends on current wage etc. but I still am interest in a rough guess.
I love the blog, keep up the good work! It is rare to read sensible advice on investing.

1–Country bets are fine. My fund owns shares in many of the top 20 companies as a broad bet on Mongolia.

2–I moved to Mongolia because I wanted to focus my attention on it as it is such a fascinating and rapidly growing place. Everyone has to make his own decisions on where to live and why. For me, Mongolia works.

Kuppy–Have you taken a look at American Manganese? They apparently have a process where they can produce electrolytic manganese from low-grade ore for 44 cents when the world price is $1.80. 98% of manganese in the US comes from China and they have a cost structure in the area of $1.20. Seems like a good investment both from the point of view of economics and national security.

Sorry, I know nothing about it. Jr Mining companies are scary. Though I seem to think that Manganese could be an interesting speculation in its own right as the Chinese will increasingly be limiting exports.

BKE seems to be an exception re. the generic quality of jeans. Look at the long term chart. Don’t know how or why.

Some retailers consistently outperform–until they don’t. It’s one very tough business. But there will always be winners.