11/26/2010

I just raed a very interesting article in regard to China and the supposed misallocation of capital that is ocurring in that country. I know that I would appreciate your thoughts regarding the premise of the article. Perhaps other readers of your blog would also like to view your comments regarding the potential of the Chinese bureacrats getting market manipulation wrong.

Thank you and please keep not only your blog going but your wit as well. It is much appreciate by myself and I believe quite a few others.
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2010/11/23/shadow-over-asia.aspx

I wrote my own piece on this when I was in China. https://adventuresincapitalism.com/post/2010/08/22/Riding-The-Trans-Siberian-Railroad.aspx

Look, there’s massive misallocation of capital going on. Even the Chinese government admits that. They’re trying to slow that misallocation down. They’re a bit late to do much, but they’re trying. The thing to remember is that while government sponsored real estate and overdevelopment of infrastructure is a driver of fake ‘growth’ now, there is a whole lot more about the Chinese economy that is legit and not state controlled. I wouldn’t bet against China. I think that all the guys who expect China to collapse are insane. There will be violent shakeouts along the way, but a bit of misallocation isn’t a shocking development and I think that a lot of people overstate the quantity of misallocation going on. I’d take their bureaucrats over ours. Theirs want growth. I’m not sure what ours want beyond getting re-elected.

Hi Kuppy,
I’ve been following your blog for a while, and finally I found the investor I’ve been searching for. I love the way you explaining, it is very informative and educative, Thanks Kuppy.
Anyway, I’ve been following the company called Platinum Group Metals. Their biggest asset now is in south africa.
I have 2 question:

1)Do you know any political risk or any other risk having mining bussiness in South africa?

2)How long gold bull market would last (I know nobody can answer this), but looking by the government debt trend and etc, what is your prediction?

1 South African assets scare me to death. I have friends who disagree, but I own nothing in South Africa and haven’t for ages.

2 The bull market will last until it doesn’t. We’re a long way away from the top so I am not thinking too hard about it. It will be obvious when governments around the world get serious about serving their constituents better.

If you are buying gold because you think that inflation is very likely, do you think it might be better to buy swaptions on US interest rates? If the dollar stops being an attractive currency, and China and others stop lending to the US govt so cheaply, then the int. rates should rise, right?

I try not to overthink these things. I’m up more than 4-fold on some of my first gold bullion. If I were playing some sort of funky interest rate product I could be down money. Why do I have this sneaky suspicion that inflation will be raging out of control in five years, yet 30 year bond yields will be 50 bips (because the Fed owns them all) and the government will still be worrying about deflation?

Hi Kuppy:
I know this isn’t Ann Landers or a “how to” site, but I was wondering if you could share some light on how you organize all the information you gather when you and your team are doing research. I find that it’s very difficult to avoid overload – too many stacks of paper, too many disparate notes, too many files, etc…especially with the internet providing instant access to just about any tidbit of info one dreams up. Do you reduce it all to a report or some type of dashboard?

Honestly, there’s no way to follow everything. I focus on what I find most interested in at the time. I have a pretty good ability to prioritize and focus on the most time sensitive stuff first. I’m also pretty good at very quickly figuring out if I ‘care’ or not about some idea. When I’m excited about something, it’s just about the only thing I focus on. That means I often miss stuff. I still have a post-it saying to look at INTX. I put it up when the stock was $4 in the summer of 2009. Every time I started work on it, I’d get dragged off into some other project, so I’d circle it and underline it and highlight it again so I knew to focus on it when I had a free minute. Guess I simply missed that one… Honestly, it happens a whole lot more often than I’m happy with. You just need to spend your time on the best opportunities and accept that you will miss a lot too.

Several friends have begun investing in Iraqi Dinars under the idea of government reconstruction and the revaluation of the Dinar; plenty of information I find says this is just a scam but their “advisors” are persuasive and stubborn if nothing else. Personally, the only currencies I want are precious metals, but is there any sort of opportunity here? You are definitely more well traveled than anyone I know and would love your opinion or if you have heard anything from the Middle East. Thank you for everything.

I’ve read of guys who are long Dinar, but don’t know the details. I’ve never been to the Middle East either. So, here’s an open question to readers: Does anyone know the bull thesis?

Thanks for your valuable insights/advice around investing in general. You’ve mentioned the potential for mining services and your focus seems to be on small cap companies. Are there mid or large cap companies you would consider or suggest others consider as a way to diversify exposure, knowing that the returns and risk might be less?

Major Drilling (MDI: Canada) is well run. Unfortunately, it doesn’t have the sort of growth or moat that I want. None of the others are appealing to me in any way. It’s probably worth researching if you want a larger name. I have no position in MDI and this isn’t a stock recommendation or anything.

Happy thanksgiving. I just received a news release from AAG re huguet stepping down. You have talked about how they brought Rae in to get the company known, et al. You spoke highly of Huguet but it seems like maybe his skill set was getting it to this stage. Is this something you expected or does it concern you? The timing, even though in canada it is not thanksgiving was also a red flag. Also, you mentioned on vietnam faber spoke favorable about it—Hickey bought VNM several months ago so i am waiting to hear about what your comments when you do go to vietnam. financial times had an article how undervalued vietnam is compared to other countries. Add it to our watch list. thanks.

I had lunch yesterday with new Chairman Paulo Bilezikjian. I think this is just part of a normal succession process. Huguet still owns millions of shares and will stay on as an adviser to the company which is a good thing. I wouldn’t read anything into the timining of this. It’s not a holiday in Canada where the company is headquartered.

VNM could be an interesting investment. I’m just not up on the details. I’m not the sort of guy to buy an ETF. Either I like a few specific companies, or I just pass. It’s rare that an ETF will give me the sort of upside I need to make an investment.