December 3, 2017
December 3, 2017


I’m in Phnom Penh, Cambodia. I got the tourist bug out of the way. Now I’m getting ready for a pile of meetings. They’re opening a stock exchange next year and I want to learn more about it.

Hi Kuppy,
Apex is listed as pink sheet stock here. Would you ever consider buying Apex in the OTC market here?
I really enjoy your site. Thanks.

If you have done your research and like an investment idea, it shouldn’t matter which exchange the stock is trading on. With all the supercomputers fighting each other for basis points, the world’s stock exchanges are pretty well arbitraged out by now. The key is to do your math and know what the shares should be worth in different currencies. That is the key.

Excellent site, great insights. I’ve read that you’re not a fan of minng for reasons you clearly state. Having said that, what do you find so compelling about AAG? Is it the management or some other aspect that is the key to your interest?

There are something like 5,000 publicly traded junior mining companies. Sometimes something slips through the cracks and is just too cheap to ignore. In this case, the management wasn’t telling the story. Now new management is telling that story. That’s why it was cheap and why the valuation discount is closing (rapidly). I think that there’s a good chance that there’s a lot more metal in the ground than is indicated in the current resource. I also think that the economics of this deposit are very appealing. That said, I really still hate mining.

Hi Kupster:
Wondering if you have an opinion on the attractiveness of US residential real estate over a long-term horizon (10 yrs). I personally don’t think we’re at a bottom, but I think we’re within 10-20%.
In other words, I don’t think this is the “perfect” time to buy, but with such a margin for error – being able to buy cash flow positive assets at below cost – does it matter?

Over the long-term (10 yrs), real estate will do well, if only because the government intends to destroy the currency and it’s a good place to hide from that debacle. You need to remember that all real estate is local. Some markets have already bottomed, some are quite strong and some can still lose half from here and not be cheap. Too many people have forgotten that real estate gets valued on cash flow. Ten times cash flow (10 cap rate) is probably the spot where real estate first starts looking interesting to me. I don’t think we’re there yet, especially because it’s safe to assume that rents continue to drop for quite some time. If you know of places in the US with 10 caps, I certainly want to know about it.

For too long, real estate was about asset appreciation and not cash flow. There are a lot of properties that will still hit the market. It’s hard to get excited yet. I sort of think that even if we are within 10-20% of the bottom nationwide, it may be a long time before prices really increase from here. Then again, no one ever gets the exact bottom. A lot of stuff does trade below replacement cost–though maybe that means that these things shouldn’t have been built in the first place? In summary, it’s very hard for me to get excited about US residentialy real esate as an investment today. There are so many better ways to make money. But that’s just me. Why not do real estate overseas in one of the frontier markets? You’re buying into a bull market and getting a 15 cap rate along the way. I always prefer to buy into a trend that’s underway than try to pick a bottom in a bear market.

From your travels in Mongolia is there anything transportation infrastructure related? for example: trucking, railroad, bus service, or auto repair. As you mention there is great upside (and risk) in the boomtowns but getting to them has to be facilitated, and the transportation system will be lower risk since it will go to the successful places and stop going to the busted places. If the railroad co’s are smart they will run more than 1 line to the mining locations, which will support passenger use (post mining era) This to my mind is the single biggest flaw in the US railroad system.

The only other investment I can think of from this far away would be that of the utilty companies. Thanks for the travelogue and the photo’s

Right now, transportation is a nightmare. Many of the paved roads that do exist aren’t very good. Most of the mines are in the south near the Chinese border. For security reasons, the Mongolians are hesitant to run rail road lines to the border. The Mongolian and Chinese railroads also use different guages. This all makes logistics difficult. Eventually, roads will be built. Right now, you just have dirt ruts connecting most of the cities–though there are 2 lane dirt roads going from the mines to China and there are hundreds of trucks making round trips carrying coal. If you look at transportation businesses in the US, they tend to be pretty lousy investments. Think of planes, trains, automobiles and trucking in the states. It will all get built in Mongolia, but I want to invest in businesses with high returns on capital. Utilities are ok businesses, but too highly regulated for my tastes. The Mongolian power company will be privatized in the next few years. It may be interesting when that comes along. I own a handful of Mongolian shares. For now, that’s the best working idea that I have.