Thursday, September 21, 2017

Mongolia stock market up on coal exports

A boom in the coal trade in Mongolia has helped elevate the country’s benchmark stock index and pump the tiny exchange’s market capitalisation to five-year highs as optimism about the economy grows following a bailout deal.
Coal miners in the landlocked north Asian country are set to increase production on the back of improved market conditions as demand grows from top trade partner China. Mongolia has helped fill a supply gap following Beijing’s ban on imports from North Korea and some smaller ports, as well as the closure in China of mines from tougher environmental regulations.
I am in the process of getting my brokerage account set back up in Mongolia. The last time we had a boom in Mongolia some of the stocks there were up hundreds of a percent.
I do not see why that cannot happen again. Obviousily the Mongolian stock market is off the beaten path. That and the fact that people have to do a little work to set up a brokerage account in Mongolia means most people reading this will never put any money there.
I know what can happen when things change at the margin in these small frontier markets. Life changing returns are entirely possible. 

Wednesday, September 20, 2017

India economy recovering from GST introduction

World Economy:

Business confidence leaps back to higher ground

Big jump from 55.8 to 65.6 in the Indian Sales Index

Corporate Earnings and Staffing Levels Indexes both climb strongly

Following the recent twin shocks of demonetization in December and the introduction of the Government Sales Tax (GST) in July, the Indian economy is clearly bouncing back to high growth levels. The SMI Business Confidence, Sales Growth and Staffing Levels indexes all plunged below their previously high levels, particularly after the introduction of the GST, as the introduction of the Government policies took effect. However the very latest mid-September data from the Indian Sales Manager Indexes shows that strong recovery is now underway. The Indian economy has demonstrated very considerable resilience, bouncing back sharply from initial impact of the twin shocks of the Government policies. Business Confidence, Sales and Market Growth and Job Market Indexes all rose strongly in September, whilst the Prices Charged Index continued to pull back from the high levels of price inflation induced by the policy changes. All-in-all a very satisfactory month of rapid economic recovery and moderating price inflation. 

I am long term bull on India. The demographics are favorable and all that needs to happen is for the government to build infrastructure and the productivity gains will compound over decades.

Another positive is the introduction of 4G mobile service along with expanded smartphone penetration. 

Fairfax India is the way I am playing this trend. 

Tuesday, September 19, 2017

Mongolia economy continues to show growth

World Economics:

Market and Sales Growth Indexes strengthen in September

Staffing levels continue to grow for second consecutive month

Prices inflation increases to highest level in over 3 years

Interesting to note that the Mongolian stock exchange is one of the best performing markets this year. Stocks usually move in anticipation of events. 


Sunday, September 17, 2017

100% electric vehicles means huge demand for lithium, cobalt, and rare earth metals

Quite a bit of chatter in the media recently about the world going to 100% electric cars. All good and well but not much talk of where all the materials to build these cars will come from. Check out this chart:



The chart shows the increase in materials needed if the world goes 100% electric vehicles. These are huge numbers and that means opportunity.

I don't think we get there anytime soon as there just is not enough mine capacity to supply all these metals.

However, the movement towards a 100% EV future will create enough demand to make astute investors wealthy.

Rare Earth Metals Prices are surging, Time to buy Lynas Corp.

Modern life runs on rare earths. The bright and sharp LED displays on your smartphone and TV, the energy-efficient light bulbs in your kitchen, the disc drive in your laptop, and the power steering in your car all rely on the unique chemical and physical properties of 17 hard-to-pronounce elements on the periodic chart known as rare earth elements, or REEs.
(snip)
China has dominated rare earth mining since the 1990s, extracting 85 to 95 percent of the world’s REEs from large clay deposits in the country’s south. When China cut back sharply on REE exports in 2010, it triggered a global price spike, exposing the superpower’s monopolistic grip on materials that are critical to dozens of high-tech industries.
(snip)
According to the US Geological Survey, America imported around 12,600 metric tons of rare earth compounds and metals in 2016, and nearly all of it originated in China. Although the US buys certain compounds and components from countries like Japan and France, the raw minerals for most of those imports come from China.
Global mining production of rare earths in 2016 was 126,000 metric tons. The USGS reports that China mined at least 105,000 metric tons or 83 percent of the total. But that doesn’t take into account illegal — and environmentally destructive — REE mines operating all over China. Of the official tally, Australia comes in (a distant) second at 14,000 metric tons or 11 percent of total production.
I am adding  Lynas Corporation, an Australian producer of rare earth metals, to the Couch Potato Contrarian Portfolio. 
The company is a current producer of rare earth metals and the only publically traded producer of rare earth metals if I am not mistaken.

The proposition is simple; rare earth metals are seeing a surge in demand and price due to electric vehicles, renewable energy, and other specialty applications.
China controls most of this production and has been cracking down on polluting miners thereby helping to limit supply. 
Prices are way up for these metals and there has been no new capacity put online for years due to low prices. The only rare earth mine in the US, owned by Molycorp, went bust and the Chinese are actually trying to buy it.
Demand is way up and supply is constrained so the price for rare earth metals is going higher. The last time rare earths ran in price some of the stocks were up hundreds of percent. 
I am buying Lynas Corp. (buying the Australian listed shares for better liquidity)

Thursday, September 14, 2017

Federal Budget and Entitlement Spending are a Lit Fuse


Trying to describe to people why the US is not going to be a super power much longer due to its profligate ways just creates animosity and a canceling of golf and dinner invitations.

Maybe this visual will help the delusional or those suffering cognitive dissonance.

See that white line that is rising at 60 degree angle? That is mandatory spending; Social Security, Medicare, Military Pensions, etc...Those are things that have to be paid.

See how the orange line has plateaued and is heading down? That is spending on everything else; welfare, infrastructure, the military, national parks etc... These are things are going to be shrinking.
See the blue line? That is interest on the debt. That has to be paid or the US cannot issue anymore debt.

Tell me again how the FED is going to normalize rates? Explain how my scenario of Social Security and Medicare destroying the dollar are wrong? The only solution I see is debt monetization, which by the way is what every broke government eventually does.

As long as it is done slowly most people will never even understand it is happening.

Many people are making the mistake of confusing that which is inevitable as also being imminent. The US is going broke slowly and one day it will go broke all at once.

Tuesday, September 12, 2017

US cracked the $20 trillion dollar debt level

Hurray, another milestone for the US! And by the way the Dow made an all time high today.

US debt level

I point out this milestone for a couple of reasons. First of all no one really talks about it. It gets a mention on the evening news in passing if it all. Most people could care less or can’t even conceptualize what $20 trillion dollars actually represents.

I am not going to make a big deal about it either except to mention that the debt does not matter, at least for today.

However the debt will continue to grow just like a tumor. And eventually, if it is not dealt with, it will matter one day.

They say countries go broke slowly and then all at once. There is a lot of built up wealth and inertia in the US. So this can probably go on for many years.

Nevertheless, the debt will grow and the $100-$200 trillion in unfunded liabilities will grow. At some point the monetization of debt will matter and the dollar will devalue.

That will make your standard of living go down and cause even more income inequality.

Do not expect politicians to solve this problem as what needs to be done to solve this is not politically possible and what is politically possible will insufficient to cure the problem.

History and human nature are not on the side of the US. Better make your preparations while you can.

Sunday, September 10, 2017

There will be debt monetization


If you think this is sustainable you do not understand math or history. The only way this gets dealt with is through the FED monetizing this debt.

That means a lower dollar, lower standards of living, and alot of poor people.

It will be good for gold long term.

Saturday, September 9, 2017

Mongolian Miners plan to increase coal output due to Chinese demand

Reuters:

Mongolia’s coal miners are looking to ramp up production to meet growing demand from top buyer China, but longstanding transportation issues continue to hold back sales, industry executives said at a conference.

(snip)

Mongolian producers have been taking advantage of stricter environmental regulations that have closed hundreds of small-scale mines in China, their biggest market.

“As domestic production (in China) goes down, China buys from Australia and Mongolia to close the gap,” said Gotov Battsengel, chief executive of Energy Resources, a subsidiary of the Mongolian Mining Corporation (MMC).

The miners have also sought to fill a supply shortage opened up by sanctions and China’s ban on imports from North Korea.

If the Mongolians would build a railroad to the Chinese border the economy go nuts. Transporting by trucks is eating up alot of margin and is limiting exports.

I am not holding my breath on the railroad as successive governments in Mongolia have not demonstrted they are interested in taking advantage of their compartive advantage.

Nevertheless I am still bullish on MMC and Mongolia Growth Group.

Friday, September 8, 2017

Gold: Mother of all bullish patterns forming

Interesting technical take on gold price from Kimble Charting Solutions.

A reverse head and shoulders pattern seems to be forming in gold. If the gold price is able to close above the "neckline" than it could be off the races:


President Trump will be appointing a new majority of Fed governors including a new chairman and vice chairman. President Trump likes to use debt as has been his history in the private sector.

That propensity for debt and the fact that the US is entering its terminal phase as applies to forced entitlement spending means a whole lot of debt that will need to be monetized.

I do not anticipate he will be appointing ‘hawks” to the FED. That will be great for gold and after six down years it looks like a new gold bull market could be kicking off.
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