How to uncover investment ideas hiding in plain sight

Energy isn’t merely an ingredient in economic growth—it’s the ingredient that makes growth possible.

And at the center of the energy sector, geopolitics is a driving force—determining how and why the industry functions.

Today, I explain why it’s critical for investors in the energy sector to understand the role of geopolitics… and how it can help you uncover investment ideas hiding in plain sight.

Transcript

The Mike Alkin Show | 65

How to uncover investment ideas hiding in plain sight

Announcer: Free and clear of the chatter from Wall Street, you’re listening to Talking Stocks Over a Beer, hosted by hedge fund veteran, and newsletter writer, Mike Alkin, who helps ordinary investors level the playing field against the pros by bringing you market insights, and interviews with corporate executives, and institutional investors. Mike sifts through all the noise of mainstream financial media and Wall Street, to help you focus on what really matters in the markets, and now, here is your host, Mike Alkin.

Mike Alkin: It’s Tuesday, July 9th, 2019. Hope you had a good fourth of July weekend, and enjoyed yourself wherever you were, and for our Canadian friends, hope you had a good Canada Day. I just decided last week I was just going to recharge a little bit, and my family and I we went to the Jersey Shore. Went down to Long Beach Island, in an area called Beach Haven, which is I know for those of you who watch TV, and you think of the Jersey Shore you think of a lot of folks in big hair, and tank top t-shirts, but it’s really, it’s not like that at all. It’s really nice, it’s relaxing.

Although it has the hottest sand I’ve ever seen in my life. I’ve been on a lot of beaches, and this sand is crazy. The walk from when you hit the sand to where the water is, I don’t know, maybe it’s 200, 300 feet, and you should see me doing like a polka dance across the sand, because apparently my wife tells me I’m a baby, and I can’t handle the sand. But it really it is, it’s … I mean, I’ve been in the tropics. I’ve been a lot of beaches, and it’s nothing like this. So, I got to look that up as to what causes the sand to be so damn hot on the Jersey Shore.

I grew up on Long Island, 75 miles away, never had an issue at all. It was cool sand. So, it was hot sand, but anyway it was … The kids had a lot of fun, and they were a few families there, and a lot of kids. It’s just great to watch them when their teenage years to just have their friends around and do all that stuff. But I learned something. It was fortified for me this week that my wife is smarter than Waze. Well, that’s what she tells me. So, I am a firm believer in, in Waze I trust. We have … My son and I, travel a fair amount for his lacrosse in the summer on the travel team in the tournaments, and you go all over the place. So, we’re in the car a fair amount on the weekends, and Waze has gotten me out of some incredible traffic jams, through side streets, and back alleys, and Lord knows where, but sure enough it saves time.

So, I have really followed that motto, in Waze I trust. My wife on the other hand, every time we’re in the car and I have Waze on, because I can’t figure out the whole infotainment stuff, I could barely … On a computer I know how to use the internet, and email, and a spreadsheet. So, I don’t even bother with the other stuff. So, I’m fine with Waze, works well for me. But every time we’re in the car, every time we’re in the car and I have Waze on, she says, “You know, I wouldn’t go that way.” I said, “Well, yeah I know, but …”

She said, “Yeah, but I’m telling, I’d go this way.”, and I say, “No, I appreciate that, but see here it shows that this shows … let’s pull up three alternate routes, and this is not any of the three that you want to go, and this is telling us the time.”, and she says, “Yeah, but it doesn’t know, I’m telling you.” When I do that, and I used to do that early on, when I first started using Waze I would always try and trick … go around it, it never worked. It always took longer.

My wife, every time, tells me, and she’s right every time. So, I decided that when she’s in the car from now on I’m just, in my wife I trust. No longer Waze I trust. So, I don’t know how she does it, but she’s clairvoyant when it comes to traffic. If I could figure out how to patent it I would, but I don’t know that I can. But besides that, anyway, you know you live in the northeast of the U.S. when it takes you four hours, four and a half hours to go 70 miles. It’s just kind of how it works. To where I live in Long Island, to get off of the Island is an hour and a half, and it should take without traffic … 12 minutes, 15 minutes. So, there you have it.

Anyway, last week, two weeks ago I guess, when I started my conversation … I was talking a lot about energy, and I gave out an outline. As my career has morphed over the years, I think I mentioned, or if I didn’t mention I meant to mention it, but I’ve really drilled down, no pun intended, into the energy sector. Early on when you start out as a young analyst, you are … if you’re … depending on the firm you’re at, but I was a generalist investor. Really, my first … I was a short seller. I worked at a short only firm. So, it had two funds, one was a long-short fund, and the other was a short only fund, and I had my focus on the short side. So, I did a lot of deep dive fundamental research across myriad industries.

Where I really spent a lot of my time early on was in the for-profit education space, and it was there that … This is going back into the middle latter part of the ’90s where the for-profit education companies were following really the growth of Title IV, which is the federal funding, and it’s continued to today. You see tuitions increase, because the available monies from the government increase. So, university folks just keep bumping it up. But then you had these, and still do, you have these public companies that became huge growth vehicles because they … The internet was just really starting up, and you were able to do marketing on the internet, and even before the market they did telemarketing, and they would target those first generation to go to college, and lower income students, and they would sell them on the dreams of getting a college degree.

But, this was for for-profit schools that had no brand, that in theory it worked great. You would provide access to an education to those who couldn’t, wouldn’t normally have known about it, and you went out and told them about it. But the problem was, the education sucked, and many of them, not all, but many of them were full of crap on the enrollment process. I learned early on, I went through the enrollment process as a potential student, and from there we started doing our primary research and talking to former students, or students in parking lots, then former students who told us how they weren’t getting … Former students said they withdrew from classes, but the loans weren’t being … They weren’t getting refunds on monies.

It was … One thing led to another, you talked to congressional staffers, you talked to the education department, and it was a great way to learn how to do a mosaic of research, and how not any one thing is what makes an investment work, and you have to put it all together. It’s kind of like a jigsaw puzzle, and just looking for different pieces, and weighing the evidence, if you will. That’s the science of it, and the art of it is trying to figure out how to make money, what do you do with that stuff, and trying to find catalysts, and what causes the stock price to go down? But a great, great experience in doing what’s called primary field research. In newsletter land they call it boots on the ground, it’s primary research.

So, and then that was that industry, and then I started to look at other industries. If you think of all the industries in the world, there’s a lot, but you don’t know when you first start out what’s natural to you, what’s comfortable to you. I remember reading a book when I first started some years, maybe some years later, but Peter Lynch, One Up On Wall Street, and it’s buy what you know, and it was always like, his thing was a lot of consumer stuff, and … I don’t necessarily agree with that, but I think it helps to understand what you know, but more importantly, what doesn’t make intuitive sense to you when you’re looking at an industry.

Over the years, when you first start out, you spend 100 hours a … we used to work 90, 100 hours a week, it was nonstop, and the travel, and you’re always studying a new industry, and trying to get up to speed. Some made much more sense to me than others, and over the years as you become more senior in the industry, you start to say, “Okay.”, when you start to control what stocks you’re going to pick, and not just analyzing them, well then that’s very easy to cull those industries that don’t make sense. As you look at it, there’s healthcare, there’s energy, there’s materials, there’s consumer cyclicals, autos, retail, cyclical retail businesses. There’s staples, there’s food, drug, beverage, tobacco, there’s the financial stocks, there’s the drug stocks, there’s the biotech stocks. You could go on, and on, and on.

So, for me, it was pretty easy. I mean, it was kind of intuitive. The big financial center banks, the money center banks, they’re so opaque, and there were so many moving parts … checked off that list. Biotech companies, I worked with a couple just incredibly bright doctors, MBAs turned biotech analysts, and looking at Phase I, Phase II, Phase III drug studies, and as brilliant as they were, a lot of times it was a crapshoot. So, the one thing I’ve learned as an … know what you don’t know, and I realized, “Okay, forget biotech.” So, that didn’t … I kind of checked that off the list.

And then, as I went on, and on, and on, what I kind of … The core of my career, the middle part of my career, and the sweet spot, was spent a lot of the time in the more consumer driven names, consumer cyclicals, and consumer products, the defensive type names. Food, drug, beverage, tobacco. That kind of always has made sense for me, which was driven by price, volume, and mix. That’s how the revenue is derived. What’s the price of something, how much are you selling of something, and are you selling higher mix being … you have different tiers. You have a value brand, a mid-tier brand, a high brand, and that when you’re looking at revenue forecasts, because stocks move based on the anticipated directions of their earnings, and what … There’s forecasts. So, there’s consensus.

If company X is supposed to move 5% top line growth, and earnings are going to grow 8%, 9%, 10%, pick a number, I’m making it up. Okay well, let’s understand that. We’ve got to analyze that. So, what does that 5% … How is that derived? How much of that move is going to be driven by a price increase, because the thing you’d love to see as an investor is price increases, because if I can change the price one percentage point, all I have to do is have my sales guys go out, negotiate it, and it moves, it’s a point. If I get a point of sales growth not from price but from volume, I’ve got to make more stuff, I’ve got buy more raw materials, I’ve got to consume more working capital. It’s just a lot more work.

So, my margins are going to be better, my profit margins, on a point of growth from price versus a point of growth from volume, and then the mix, are there new products, is there a new product cycle coming that’s going to lead to higher products, or higher priced products, or lower priced products, is your competition coming in on the low end, does the company need to defend that because they need to own that portion of the market? All of that stuff goes into it, but you go out into the field, and you can find all that stuff. You talk to customers, and suppliers, and distributors, and understand it, because consensus is consensus. I mean, it’s the herd. So, it’s not always right, and markets are not efficient, and sometimes things get mispriced.

So, that’s what you did, but that was intuitive to me, that made sense. Jeez, I could … I eat food, I drink beer … I consume a lot of those products, and the same thing on the cyclical side of those. So, as time went on in my career, I spent a lot of time … and then also, I was at two firms that had a very big energy, and natural gas, and natural resource exposure. So, I got great exposure to that, and it was during that where I started to see, and as my career has morphed, and the hedge fund industry has grown, what I started to see was where can you generate really good amounts of alpha, and that’s performance above the benchmark.

In the hedge fund industry it became more and more difficult, and still is to this day, as the hedge funds have grown in numbers from when I started probably less than … there were several hundred, now there’s over 10,000. The economics of running a hedge fund can be lucrative. When I started they were making 1% of the assets they would charge a management fee, and they would keep 20% of the profits. Back then, in the ’90s, most of the investors in hedge funds were really ultra-high net worth individuals, and there was a lot of volatility in the funds. You saw great performance, and one of the things you saw was not a lot of institutional investors.

So, high net worth individuals, a hedge fund manager would know them, they’d talk to them, and they would say, “Look, here’s what we do.” Once a quarter maybe, once every six months maybe, but definitely once a year you would send out your letter, “Here’s how we’re thinking about the market. Here’s how were thinking about certain sectors. Here’s how a couple of the ideas that we like.” It might have been an idea about an industry, an idea about a company, but you didn’t tell them much secretive, because it was your proprietary research, and what you knew from doing that, I didn’t know it at the time, but then looking back now you realize it, but you didn’t put out monthly performance numbers, you didn’t have to worry how you did month to month.

What you realize is to put up performance well ahead of the consensus, or the benchmark, or to generate alpha, you can’t be doing the same thing as everyone else. Well, by definition, if you’re doing the same thing as consensus, it takes a while for consensus to come around to that, to be surprised that they’re not correct. Consensus isn’t typically done by that field research. The way it typically works is consensus is formed on the sale side of the big investment banks through talking to management teams, and management teams are in the business of telling you how great things are, not how challenging things are, and those analysts back then, and still today, but much less so, the analysts aren’t in the business of coming out and putting negative reports out on companies. Some do, it’s not all, but most don’t.

Why? Because there’s relationships to be had, there’s investment banking fees to be had, and even though today a research analyst can’t get paid based on the investment banking side of the business, there’s that wall that’s there, they’re not stupid, if they’re very negative on an industry, and their bankers can’t go in and get those big juice fees, because the CFO and CEO are pissed off at them. They’re not going to have a job. They may not get compensated for it, but they don’t want to give up that half a million dollar a year job, or more. They’re not giving that up.

So, but you realize that there’s less investment … not oversight, there was less investment eyeballs from the … There were no institutions really, or there were some, but most of your investors were high net worth folks, they put the money with you, and they didn’t mind the volatility. Every months, or six months, you told them what your performance was, and at the end of the year, hopefully, not always, but hopefully you outperformed. But you learn under the microscope.

Fast forward to the internet bubble, and the world fell apart while hedge funds had a lot of short exposure and they outperformed, and then that brought in the institutional crowd who got hammered during the internet bubble, because a lot of the fund managers in their world don’t own that garbage, where remember, back in the day, where companies were valued based on the number of eyeballs that viewed a company … if you were an internet company. But that brought a lot of institutional interest, and a lot of demand for hedge funds, and when the institutions came in … it’s all about box checking, and covering their ass, CYA.

So, if they’re going to allocate large sums of capital, instead of a high net worth guy giving you $1 million, $5 million, something like that into a hedge fund, now these big institutions, the pension plans, the fund to funds, who aggregate endowment money, and pension plan money, and go out and invest on behalf of those entities, now they could give you $25 million, $50 million, $100 million, $200 million and more. Well, they’re going to make sure that they do their due diligence on all the fund managers, and that became a cottage industry, and then the big industry.

But when that comes though, and then because it was in demand, because it was in demand the fees went up, so now all of a sudden a hedge fund manager would charge … It would go to one and a quarter, one and a half, then 2% of the assets under management, and then that … So, keep their 20% of the profits. So now, all of a sudden, a fund starts running a few billion dollars, all of a sudden you’re running $3 billion, and your 2% management fee on $3 billion is $60 million. Well, I don’t know, do the math, you have seven, eight, 10, 12 analysts, all of a sudden the hedge fund managers are getting very wealthy.

Then, if they outperform they get 20% of the profits. If you’re up 10% on $3 billion, that’s $300 million, and they keep 20%, that’s $60 million. So, that enterprise between the management fee and the other just made $120 million. That’s a lot of wealth to go around. So, that created … Hedge fund managers are smart guys. Okay well, I’m growing my asset base, I have a very steady income stream, and I keep getting bigger and bigger. By the way, they didn’t get to $1 billion, $2 billion, $3 billion by not being super smart and putting up great returns earlier during the times where there was less of that institutional dollars. So, they earn their stripes, then they get to that point, and they don’t want to give up those management fees, so they’re less willing to take a little bit of risk.

And then you have these box checkers who come in and their financial theory, and their portfolio management theory, and they have due diligence questionnaires that could be 40 pages, and they want to know your performance on a monthly basis, and again, you’re trying to outperform, and it’s hard to outperform on a monthly basis. It just doesn’t work that way. So, it’s your work over time that has a variant view, you have a variant perception, and it plays out over time. Well, that sounds great in theory, but most investors don’t have that patience. The institutions are all competing against each other, and there’s pressure to perform, and the guy who made that decision who’s a 28 year old out of school, he doesn’t want to look like an idiot, and no you’ve got to go to investment committees. It’s bureaucracy like you can’t imagine.

So, the more and more that goes on, the more of the assets, trillions now, flow into the hedge fund business. This started happening early 2000s, and mid-2000s, you saw this massive growth, but you started to see performance start to get watered down. Why? Because they’re not doing that things that they did to get them there, and why? Because they are making so much money they’re not going to. Why did the institutions that invest in the hedge fund stick around? Because you never know when a 2008 is going to come around, and the world’s going to blow up again, and there’s short exposure at the hedge funds.

So, when the market gets pounded down 40%, hedge fund’s down 10%, down 12%, down 15%, up a little bit, whatever it may be, when you’re down 40%, you got to be up a lot more than 40% to make up the difference, that’s just math. So, they put up with that, because a regular long-only manager doesn’t have it, they don’t have that exposure. But during all that, what I started to see, and as you get into 2010, 2011, 2012, and being around natural resources and energy, what I realized was … So, you have this whole pool of people focusing on these sectors, and natural resources, oil and gas, yes, but natural resources tend to … they’re boom and bust.

What I started to realize as my career morphed, and morphed, and morphed was despite all the quantitative models, and all the [inaudible 00:23:13] getting into the business, and despite all of the uber smart people … Not Uber the car company, but uber meaning very smart people that do this for a living, and I will tell you, when you’re sitting around an institution, and you’re talking, I mean, the thing you have is you have people who understand the world. They don’t just understand the town they live in, the city they live in, they don’t just understand the business they’re in, they’re looking at industries all over the world, they’re talking to CEOs all over the world, and you get great exposure. If you’re a curious person, guy or gal, the world’s your oyster to take advantage of the knowledge that you could glean from it.

So, one of the things, with all of that, all that stuff, all that noise, what I realized … it’s human emotion. It’s hard to … You do have those surprises in all these other industries, and the stock misses, or B turnings expectations, and you get into … Stocks go up 10%, 20%, 30%, whatever it is, but one of the things I realize is in the cyclical commodity businesses, they’re long drawn out capital intensive cycles, and there’s this recency bias that occurs, and so whatever recently just happened is how consensus tends to form and extrapolate into the future, and forecasting is hard. Especially depending on whatever it is, like oil and gas there’s so many moving parts.

So, the more transparency there is, you’ve got more people following it, but you tend to see with long life projects, I talked before about what I see happening in the shale right now, shale plays, where … and this is not about shale, but I see all of this capital being … because of ZIRP, zero interest rate policy, and Fed … monetary experiment of the last decade, capital is seeking higher yields, and those higher yields come in the form of junk bonds, and that goes to finance a lot of the shale plays. What we’ve seen over the last decade is more of two thirds [inaudible 00:25:25] don’t lose money. Couple hundred billion dollars in pre-cash flow down the drain.

A lot of debt racked up, debt coming due, but it attracts it … But, in the interim, you’ve had all these … So, a lot of the drilling, and exploration, and spending has taken place in the shale plays, and what’s been left for dead is the offshore stuff, and still a third of the world of oil, maybe a little bit less, comes from the offshore fields, but all these projects have been put on the shelf. Then, all of a sudden, when you start to see the changes, now you’ve seen institutional investors really start to demand capital discipline and shareholder returns, versus production growth in the shale plays, and then all of sudden maybe you start to see production growth slow, and now the world needs to come up with a lot of oil every day.

So, where do they get that? Oh, now they’re going to … Then they turn back to the offshore plays, and all of a sudden you’ve said, “Well, wait a second, nobody cared about offshore, there’s been this lack of spending, there’s not enough supply. They’re going to have to go and spend a lot.” All of sudden you see the money come pouring back in. It’s like a huge seesaw, and then you see that in the natural resource, in the oil and gas markets, and it’s deeply cyclical commodity markets. It’s human nature, boom and bust, and I love that.

So, my focus as I’ve morphed, and as I’ve matured, my wife would probably disagree about my maturity level, but what I would say is, it’s … The consumer stuff is always interesting to me, and I keep my eye on it, because it’s just something I’ve known and done for a long time, but in the deeply cyclical industries you can learn so much, and that’s where my interest the last half a decade has really morphed into the energy space. Energy is not just any other ingredient in economic growth, it’s the irreplaceable ingredient that makes that growth possible.

Think about that. Energy is everything. It powers everything. It makes all this economic growth possible. When you combine that with some of the overshoots on both sides to the upside and downside that you see, it creates investment opportunities that don’t exist in looking at reg companies that have more secular growth, not cyclical growth. This applies to other cyclical industries, be it auto or steel, or anything that, but that’s deeply cyclical, prone to real low lows, and real high highs.

Now, the hard part is getting that timing right. So, you’re looking for inflection points, and inflection points can take a while. It takes a while for the market to get their head around it, it takes a while for … if it’s an over supplied situation, for supply to come out of the market, and for it to be felt on the demand side, and the pricing. So yeah, these low rates create this environment, and you get the boom bust cycle, and all this offshore stuff has been put off, but this isn’t about offshore oil and gas, it’s not about shale, but it’s about examples of how the cycles lend themselves to deep overshoots one way or the other.

I see it throughout the energy complex, and there’s so much I see obviously at Sachem Cove, and running a uranium fund they have to know everything about the global energy space, and that’s been a major area of emphasis for many years now. You’ve heard me talk about … Two weeks ago we’re going to talk about how this all fits together, and I started talking about the geopolitics, and it’s something that I have paid a lot of … for many, many, many years, but really, really pay close attention to it, because it is so intertwined. Given how … You may or may not believe my view, but energy really is the source of everything, and when it comes to growth it’s so important.

I was just reading, in one of the African countries that … In Ethiopia, they have to have energy rations now, because they can’t … rise of rationing energy. Think about what that does if you’re trying to get an economy growing. But, it goes way back, I mean, if you think about how energy and the geopolitics are intertwined, you go back to … I remember I was reading a story, it goes back to talking about in February of ’45, how the USS Murphy traveled from Jidda where it picked up King Abdelaziz, who was the founder of Saudi Arabia, and it went and rendezvous with the USS Quincy in the Great Bitter Lake, which is part of the Suez Canal.

On board, the King met with President Roosevelt for the first, and really only, time. They spent a whole afternoon, they had a bunch of discussion, they were focusing on … Palestine was the key thing that they were talking about, but they forged a relationship during this day, and that relationship evolved into a deal that really sat at the heart of really late 20th century geopolitics. What that deal was, was the exchange of American security assistance for access to Saudi Arabian oil. It pissed off Churchill, by the way, because he came late to the party. But, if you think about oil, it had been World War II’s indispensable commodity, and it was equally as critical as rebuilding the postwar economies. The effort that Roosevelt put into King Abdelaziz, and building that relationship, reflected the growing globalization of its supply.

During the war, I mean, America had provided the vast majority of the oil, that fed the war machine, but then production began to shift to the Middle East, and exploration intensified after all these war year restrictions were lifted. Now, Ghawar, which is Saudi Arabia’s crown jewel, and still produces close to four million barrels a day, which really was a secret, everyone thought it produced five million barrels a day until they issued a bond not too long ago, and they had to come out and say what it was, but that was discovered in ’48, and then production started three later.

Then, the U.S. leadership, which drove the war machine, really started to disintegrate and erode when OPEC was formed, which was back then in the ’60s, 1960 I think it was formed. You had Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, and then you had a peak of oil production in 1970, in the U.S.’s oil production until now, but really OPECs effort to entrench its market dominance led to the oil embargo in 1973. If you’re in the U.S., and you’re old enough to remember, you had high prices, long lines of cars at the U.S. gas pumps. You had this oil price induced recession in the west. Really, it was the end of the era in which the U.S., and the major private oil companies who were called The Seven Sisters could really set the rules for global oil markets. It was over.

So, what Henry Kissinger said, “The energy crisis awakened us to a new challenge that would require both critical creative thinking, and international cooperation in order to preserve, and further our collective well-being.”, former Secretary of State. Kissinger’s the one pushed for the establishment of the IEA, the International Energy Agency in ’74, and that was really as a club for energy importers to balance the negotiating power of the exporters. They put it together really quickly, it had wide ranging powers, it had governing board, they could make decisions that would be binding for its member countries, but so much of what happens is based upon geopolitics.

I remember reading a good interview, I think it was in the Atlanta Council last year, and it was a speech that Ambassador Richard Morningstar, he’s the chairman of the Atlanta Council Global Energy Center, a talk he gave in the lecture series in Woods Hole, Massachusetts, and he says, “I’d like to focus on the intersection of energy and geopolitics. When one looks at energy issues, whether it be the behavior of oil markets, commercial energy projects, or new transformative technologies relating to addressing climate change, geopolitics and national security play a role. There are obviously other issues that intersect such as legal, commercial, economic, and environmental issues, but any energy project has to be commercially viable, but that viability is often affected by geopolitics.”

Then he gave a great example, and he touched on the oil markets, because that’s where the intersection with geopolitics is most obvious, because if you have disruptions of supply from Libya, Nigeria, Venezuela, or the imposition of sanctions on countries like Iran, they’re going to have an obvious effect on global supply, the price, how major producers such as Saudi and Russia, and now the U.S. react to these disruptions. He gave a great example of … and he went back to the mid ’90s where he was a special advisor to the President, and he was responsible for all the programs in the former Soviet Union. He said that at some point it became obvious that the energy resources in the Caspian Sea were becoming an important issue, and for a while there had been bipartisan support for the Caspian Policy from the ’90s, which continues really up ’til today, which focuses now on the Caspian gas going to Europe.

What he said was going back to the ’90s from a policy standpoint, the administration felt that the Caspian oil was important to offering new alternatives and supply, and they felt it was important that not all pipelines from the region go through Russia, and they wanted to support the independence of new countries, and the caucuses in central Asia. So, he got involved. He approached Strobe Talbott who was then Deputy Secretary of State, and told them they needed one person to focus on coordinating all these issues, and Strobe said to him, “Okay well, that’s you.” He said, “Me?” He said, “Yeah.” But, that’s how he got involved in the creation of the major oil pipeline from Baku through Azerbaijan, Georgia, and on to the southwestern coast of Turkey.

They strongly supported that route. He said there were three other alternatives from the Caspian, through Iran, through Russian, and the third to the Georgian coast on to the Black Sea, and through Bosporus. Now, here’s where the geopolitics come in. The U.S. was not going to allow a pipeline through Iran because of sanctions at the time, and then further he said, “Why would you want new oil going through Iran subject to Iranian whims regarding the Straits of Hormuz?”, and regarding Russia, he said even the companies recognized there were already enough pipelines going through Russia, and they … Furthermore, everyone was stressing the independence of these new countries, and then turning to the Bosporus, Turkey wasn’t going to allow anymore large tankers through, and if you’ve ever been to Istanbul and you see how narrow the straits are you can understand why.

So, that really only left Baku, Tbilisi and Ceyhan. But companies argued that the cheapest route was through Georgia, and then out through the Bosporus. He said he remembered a meeting at the White House where they were explaining the position, and one of the companies argued that they had to let them go through Supsa on the Black Sea and then through the Bosporus, because it was the lowest cost. But what Morningstar argued was that was irrelevant because Turkey wasn’t going to let it happen, and if they wanted to get the oil out of the Caspian it had to go through the BTC. He said everyone was grumbling, but ultimately they came to an agreement. He said, “You have to recognize that the project, as a policy maker, needs to be commercially viable.”, and they worked with Turkey to guarantee the cost of the pipeline wouldn’t exceed a certain amount, and so and so forth.

Then he fast forwards to today, he says, “A more recent example is the intersection of energy and geopolitics is what’s the controversy that’s surrounding the Nord Stream 2 pipeline.”, and that’s the pipeline that would carry gas from Russia on to the Baltic directly into Germany and into Europe. You’ve heard Trump rail about the pipeline, and all the money Germany pays Russia for gas. He used that point to question why the U.S. should support NATO and defend Europe. I mean, Nord Stream 2 is a real issue, and the real reasons for which the Obama Administration, mostly the Trump Administration, are opposing it, is that it just increases European dependence on Russian gas.

You’ve heard me talk about uranium, and dependence on Russia, Kazakhstan, but Russia has used a political tool to deprive Ukraine of transit fees on existing routes, they could shut off natural gas at any time. Morningstar argues it sends a terrible signal given the Russians actions in the Crimea, and in eastern Ukraine, Poland, other central European countries strongly oppose it. But he said many in Europe support the pipeline, saying its commercial project and geopolitics shouldn’t be a consideration, although Merkel has recognized that it does play some role.

So, there you have it. It’s a commercial issue, or a geopolitical issue. What takes precedence? Some in Europe say, “Why is it any of the U.S.’s business?” U.S. argues it is, because energy security relates directly to economic security and political security, which is clearly in our interest anywhere. There are all these things that get involved. It’s all in the papers every day, you just got to pay attention to it, because it ultimately does affect. It ultimately does come down to energy. That’s why I look from an investor’s standpoint why I find the energy sector so interesting, is the boom and bust cycles, and how you really … It can lend itself to these just dramatic, dramatic swings in prices.

So, if you’re going to back to that hedge fund and you’re trying to seek out those regular returns, and you’re … Now you’ve gotten bigger, you’ve got a few billion dollars, and you’re buying it now because you’re so big you have to buy a lot of the mainstream companies, and your performance is somewhat struggling, and during the last 10 years it’s been very difficult, because you have short exposure, you’re not fully exposed to the market, so you’re going to underperform, and you’ve seen this massive increase in passive investing, and you’re fighting it out. That’s why I find the energy markets, and particularly those markets that have been so left for dead so interesting. That has been something that’s been very, very interesting for me to explore over the years, and to find opportunities that really are just hiding in plain sight, you just have to look.

One of the things that I spend time with, and we think about world energy investment, and again, this is all public stuff. The International Energy Association Agency is fantastic, the information you can get from there. How does this stuff … It all comes down to money, how does this stuff get financed? In 2018 the global energy investment stabilized. It was $1.8 trillion. Now, that was after three years of a mild decline. This is going to surprise you, there was more spending on oil and gas than coal supply. Power attracted the most investment, China by far was the largest market for energy investment in 2018, but that’s narrowing. The U.S. and India have increased the most over the past three years.

What you’re seeing in trends in energy spending and supply side spending is it’s shifted a lot towards projects with much shorter lead times, which is really a reflection of investors demanding better capital management … really during periods of a lot of uncertainty about the direction of the energy system. Renewable, obviously, no supply … adjusting for the price declines in renewable is up about 55% since 2010. But, the interesting thing what you see when you look at it is today’s investment trends are misaligned with where the world appears to be heading, sustainable energy. Interestingly, approvals of new conventional oil and gas projects fall way short of what would be needed to meet the continued robust demand growth. There’s hardly any signs in the EIA data of a major reallocation of capital that’s required to bring investment in line with The Paris Agreement, all these other sustainable development goals. Even as you see costs fall in some areas, investment activity in low carbon supply and demand is stalling, and it’s stalling because insufficient policy focus to address all the capital risks.

In the sustainable development scenario that the EIA has, the share of low carbon investment need to rise to 65% by 2030 from today’s share of 35%, and to get there it needs a significant step change in policy focus. It needs new financing lift solutions at the consumer and the bulk power levels. It needs faster technological progress. You need more R&D. You need a huge sustained spend on the energy grid. Think about that. It’s not what you think when you think about it, if you’re paying attention to energy, you’re thinking, “Oh my God, the growth is in renewables.”, and everyone’s racing to do it. But the thing I love about investing, it all comes down to math. It’s the thing I love about uranium, it all comes down to fourth grade math. You just got to put the mosaic together.

In 2018, like I said, the global energy investment remained relatively stable, it was $1.8 trillion. For the third year in a row you saw power exceed oil and gas, you had additions and capacity were flat, [inaudible 00:44:54] costs fell on some technologies, which makes the overall spend less. Energy efficiency spending is stable. Investment and coal supply increased 2%, dirty coal, think about that. You’re thinking coal [inaudible 00:45:07] coal is dead, if you look out over the next 20 years, coal as a percentage of energy production, or power production will be lower, the volumes will be flat. Why? Because of dam growth in the rest of the world, in the developing world.

So, if we think about regional spending, you have the $1.8 trillion, China is the largest market for total energy investments of about $375 billion, the U.S. is second at $350 billion, Europe $200 billion, Middle East a little over $100 billion, Russia $100 billion, India $80 billion, South East Asia $75 billion, but in India is where we’ve seen the most growth over the last three years. Not surprisingly, China, the U.S., and India are driving the investment trends. More than $2 in every $10 in investor energy goes to powering Asian economies. Another $2 divides between oil and gas and power in North America.

The U.S. is responsible for most of the growth in energy supply investment this decade with increases in both oil and gas obviously supported by the shale, and in the power sector, but you’ve seen oil and gas spend slow down a little but in the past three years, even though it grew strongly from 2017 to 2018. But, energy efficiency investment has declined. China’s lead is narrowing, but spending is increasingly driven by low carbon electricity supply and networks, but total investment declined a few percent over the last three years due to lower spend on new coal fired plants, which is down over 60%.

Energy investment in the European Union is down 7% over the past three years, but the share of spending going towards low carbon energy has risen to nearly 60% of the share, and energy efficiency has been the lone growth area for spending. Renewables powers spending has slowed, mainly, I mean, you’ve got falling costs … but it accounts for over 80% of generation spending. In the Middle East investment is down by a fifth the past three years, one of the largest declines globally, and is huge retrenchment in oil and gas spending.

If you look to see the landscape, and you look at it you say, “Wow, okay, where is this money being spent in terms of share of the population versus current income levels?” In the high income level, 42% of 2018’s investment was in the high income level. That’s 16% of the population. In the upper middle income, 44% of 2018 investment spending of the $1.8 trillion was in the upper middle income, which is 41%. In the lower middle to low income, 14%, which is 42% of the population. But as the EIA points out, a shift towards lower income segments is needed, because there’s this strong link between income levels and energy investment. The 90% of energy investment, as I just said, in 2018 was concentrated in high and upper middle income countries and regions. I mean, because they tend to benefit from relatively well developed financial systems.

So, what are the implications of today’s energy trends? You talk about the sustainable scenario, I told you right now you need to see a big improvement in spending on renewables to get to their sustainable plan. So really, what you’re seeing is, energy investment is misaligned with where the world needs to be heading, and it’s way out of step with where it needs to go. If you look at the IAE scenarios compared with the average annual investment required for 2025 to 2030, total energy supply needs to step up significantly, even with changing costs, declining costs. For fossil fuel supply, the lower levels of oil spending seen since 2014 need to come down further to be consistent with the sustainable development scenario, i.e. The Paris Agreement. But even falls well short of what’s needed in the world of continued strong oil demand, which it is in the new policy scenario.

For gas supply, today’s investments fall way short of the levels projected in both the sustainable development and the new policy scenario. For coal, the opposite is true. The current spending exceeds the levels required by the late 2020s in both scenarios, and the shift in spending’s required on the supply side, but it also needs to rise for demand. Energy efficiency and end use play increasingly … play increasingly important roles in transport and heat. Those sectors are responsible for 70% of final energy consumption, over half the global CO2 emissions. There’s a lack of policy attention given to these areas, pointing to a broad need for more focus in activity.

So, you need to see a step change in policy focus, you need new financing solutions, you need technology progress just to get remotely close to this sustainable pathway. But all you hear in the press is talking about climate change, and the Paris accord, and how everyone’s doing what they need to, but there are investment implications, there are companies that can benefit companies that will get hurt by that. That’s why over the next several weeks we’re going to start going sector by sector, and that’s how we’re going to start to look through the energy landscape.

I have a little special guest for you today though, and it’s somebody who on Twitter has gained a nice voice, and he’s come out of the shadows, and he has emerged as a nice voice in nuclear power space, he happens to work for me at Sachem Cove, and his name is Tim Chilleri, and I thought we’d have some fun. Tim’s in the office today from another east coast city that he lives and works, but he’s in here visiting ground zero of the office. Not ground zero, but he’s visiting the office of where our nuclear brain trust occurs. So, I thought we’d bring in Tim. We were joking around before I started the podcast, and we were talking about … I said, “Hey, what are the things that make you go, ‘Ugh.’?”, that get him frustrated when he’s on Twitter. So, Tim, just say, “Hi.”

Tim Chilleri: Good to be here, Mike.

Mike Alkin: I will have you know, I had Tim bring his hockey equipment and skates, because there is … For the next two weeks every day we’ll be playing hockey. So, I said, “If you don’t bring your equipment and your sticks and your skates just don’t bother coming.”

Tim Chilleri: Actually said that I was going to be fired. So, I figured I might as well round up the gear and bring that up.

Mike Alkin: Pre-requisite hockey. So anyway, look there’s a lot going on right now in the uranium space, and Tim brought his presence to Twitter, and we once in a while I see … I’m on Twitter, I’m @FootnotesFirst on Twitter, and I tend to … I’ve gotten more silent over the last several months, because I just can’t get engaged in … I don’t have the time, or the inclination sometimes to go back to ground zero. I’ve put a ton of information out there, and I’m happy to engage with anyone on many things, but there’s a lot of information. If people take the time to do a little bit of due diligence rather than just wanting to shortcut everything, I’m happy to engage.

But sometimes I just … the day gets busy, and I don’t … and Tim has really, the last few months, come out. I watch as I see him go back and forth with people, and I know Tim very well, I can see when he’s getting a little hot under the collar. So, I said, “You know, let’s do … Hey, Tim, what are the things that could make you go, ‘Ugh.’?” So anyway, there’s a lot of stuff going on in nuclear power, I mean, overall I would say we’re very pleased with the demand trends that we see. We think there is a material shortfall right now in the market, the market would think there’s a … a few people would say that there’s a short fall also, but I think consensus would be based off of looking at WNA and UXE numbers that there’s still a surplus in the market, which we think could not be more wrong. We think it’s dramatically wrong, and we think the market will come around to that in a period of time.

I mean, our modeling that goes out through 2030, has … It’s easy to see 20 million plus to 40 million pounds of deficits. We’re not rocket scientists, we just do fourth grade math and apply, country by country level analysis, we apply a commerciality thinking to it though. We apply a commercial … We look at these things through a commercial lens, and what is in supply now, and what is going to come out of supply, because who finances these things? One of the things people who finances these projects, one of the things I think gets lost on people who are looking at this industry, and again it is a very small portion of the energy industry, it’s opaque, it’s very complicated, it’s got so many layers in the fuel cycle that are all interconnected. So, it’s a mosaic of information that has to be put together.

So, when you think about these various layers, you can’t just say, “Okay, what is on the drawing board, and what’s going to go into production, and what’s going to stay into production?” You have to look about who finances these things. If we look around the world, and we look at what comes out of Kazakhstan at 41% of global production, and the Kazakhs are half of that, and then you have the joint ventures that are there, and then you have … you look around the world at the state owned entities that people think could produce at lower costs, we would … and on paper they can. We think there’s some spending that needs to be caught up to be done to get to those levels, but you’ve got to put a mosaic of information together.

So, we look at that, we look at all the regions of the world where uranium’s produced, we look at all the reactors, we take Draconian assumptions, and we still feel there’s a meaningful deficit, which is in disagreement with what consensus is, and time will tell whether we’re right or wrong, but we believe strongly that there is. But, one of the things that I was talking earlier in the podcast about, the mosaic of information, when I was doing for-profit education, but that translates into anything. One of the things where I tend to not engage with folks is somebody comes at you with one piece of information about something, whether it be U.S. reactors, or whether it be what’s going on in Japan, or whether it be what’s going on with some snippet of information they heard, and then drawing conclusions from that when nothing can be further from having an impact in terms of one specific thing.

It’s a mosaic of things, and you have to plug those into your models, and understand when you plug and play where do those come out? What does that mean to supply? What does that mean to demand? You can’t take one data point and run with it, and then you go down a rabbit hole, and that rabbit hole doesn’t help you solve the problem, which is, is there a surplus or a deficit, and when? So, anyway, Tim, welcome.

Tim Chilleri: Good to be here.

Mike Alkin: So now, I mean, as you think about … Why don’t you give a little bit about your background first?

Tim Chilleri: Yeah sure, actually when I was in high school I was already into financial markets and following them. One of my peers, his father was … He traded his own accounts, coincidentally from Long Island as well, and he was giving me advice, and talking about things, because I would go to him and ask him questions, and this, that, and the other thing. He said early on that if I ever wanted to go into the industry, you really needed to pick whether you wanted to go into commodities, or if you wanted to be on the equity side of things. For whatever reason, I always had an interest in commodities, which is a little bit un-American.

Typically, you find a lot of the commodity centric areas in the world, London, East Asia, Singapore, Hong Kong, obviously, and Perth Australia is another big one, where Americans tend to focus a lot more on equity. So, even way back when, I decided after I got out of college, graduating in 2008, which was … Well, of course, a very interesting time with the great financial crisis coming, but it got me an opportunity to go into the commodity market.

So, I started my career in Chicago as a futures and options broker, which was a wonderful experience, because I got to spend so much time day in and day out across so many different markets, from the indices bonds, agriculture, metals, energy, all the way across. So, I became very familiar at least with a top level view of what was happening in those markets. So, that’s really where I started my career, and then I moved into the physical commodity trading business, where I went to go work for a large physical global commodity trade firm called Olam International.

Olam has always tended to focus on niche commodities. So, whereas some of the houses that you may hear, like the Glencore of the world, focusing on whether it be metals, or oil, they focus on things like peanuts, almonds, cashews, timber, sugar, things like that, where they could feel that they could get boots on the ground, as Mike mentioned, really understand that the supply chain, and develop that, and have people within all stops of the supply chain, and develop views, and be able to stay ahead of the curve, and ahead of the market, and that was really their edge.

So, I went to go work in the marketing department in North America as a sales and trader for cashew kernels. Olam was very, very smart in what they did, and having boots on the ground upstream, which is just a fancy commodity way of saying, origin, where they come from, throughout the processing cycle in various places around the world, and we would all communicate with each other. We would have once a week meetings with people from origin levels, to the factory processing levels, to the sales and traders, and the end markets across Asia, Australia, Europe, Africa and North America.

So, part of my job was to really understand my end destination market, the North American market, extremely well, and feed information back to the team elsewhere. I did this for a number of years, and that’s really where I think the knowledge base of commodities, and understanding the role of supply chains, and pulling back the mosaic, and understanding who’s incentivized to do what? What’s supply? What’s demand? What are traders doing? What’s the role of brokers in that market? Who are all these people, and where do you fit into that cog in the wheel?

So coincidentally, the training that I gained there and operating in physical markets, was a fantastic training ground for uranium, because if you go and Google cashew kernels, you’re not going to find very much information. You really need to integrate yourself in the market, develop a Rolodex of contacts, to speak to people, to understand what’s happening at the various levels of the supply chain. So, when I stumbled into uranium way back in Q1 of 2016 that gave me a framework to operate form of, “Okay, let’s start looking at the supply side, let’s start looking at the demand side.”, and fortunately, or unfortunately, every question that I answered opened about 10 more doors and 10 more questions, so the list of questions grew very quickly.

But with that said, you hear Mike say it a lot, I’ve said it a couple times so far is, really understanding the dynamics in the market, and getting a sense of where all the pieces fit. Something that I jokingly say all the time is I’m just trying to learn something new, one new thing every day, whether it’s a small thing, or a big thing, that you could plug into that mosaic and it sheds a little bit more light. That’s one of my first mentors in the physical markets always said, it’s kind of like entering a market, when you enter a new market it’s like a dark room, and you need to be able to flick on some sorts of candles, whether they’re large or small, and the room will begin to get illuminated from that.

So, it’s about picking all these points of interest, developing them, understanding them, and as you do this, day in and day out, week in and week out moving forward, you’ll look back in time and say, “Wow, I’ve learned a lot about this market, and I have a much better understanding.” But with that said, you’re always charging forward, because markets are, as we all know, extremely humbling, and any piece of information could be the difference maker between continuing on with your thesis, or recognizing that changes are happening. So, that’s a pretty top down level of my background, Mike.

Mike Alkin: Great. So, Tim, as we have spent the last few years modeling out … at least what we could find, every source of supply, secondary supply, demand, country by country we go into … mine by mine, new project by new project, and we analyze those, and look at the reactors. As you look, and I mentioned earlier, we think there’s significant deficits for quite some time, as you look and put your analyst hat on, what do you see when you’re interacting with folks, and you’re hearing the other side of this story, what is it that if you could jump up and down and say, “No, this is what you’re missing.”, I mean, what do you feel when you’re looking at the market, that the market is not yet appreciating?

Tim Chilleri: I think one of the main points is that very few people have been able to dedicate enough time to putting the pieces of the puzzle together. Mike has talked about it in the past, and I was in a similar situation, because when I was beginning to look at the uranium market I was doing something else. I wasn’t working at a fund where uranium was such a small potential position in a fund that you couldn’t dedicate time to it. So, Mike had the opportunity to spend time looking at it, I had the opportunity to spend time looking at it, and kind of hacking around the jungle, if you will, because of that, it’s given us kind of being able to drilled down deep into the silo and look at things on a deep level.

I think generally speaking, one of the first mistakes people make in this market is maybe they spend a few hours on it, maybe it’s a day or two, and they think that they pretty much have a good handle on what’s going on, when in reality it takes hundreds … realistically, to become an expert in this market, you’re really going on into the four figure level of hours to understand all the pieces-

Mike Alkin: And I don’t know that there’re any experts, I’m certainly not.

Tim Chilleri: Right, certainly. It’s funny, learn something new every day. You talk to someone new, and you get their experience of maybe running a mine somewhere in the world, or a consultant who had worked on different properties in the past, and you just pick up tidbits of information. The number one thing, without question, is that they’ve read an article, or they’ve read of you, and maybe it’s a newsletter, or maybe it’s elsewhere, or if they’ve put together a couple of sources themselves, and they say, “Look, you’re wrong because the WNA is saying this, or a consultant group is saying Y.”, when in reality they haven’t understood the incentives of maybe some of those groups, or something along those lines.

But either way you dice it, the number one thing that I see is just a surface level understanding of the market without doing the deep dive primary research themselves. Just an easy example of this is, when someone is mentioning where data is coming from, it’s typically being amalgamated from some source as opposed to saying, “Hey, I read this in this company’s 10Q, or 10K.”, or, “I was listening to a conference call of a CEO.” That’s really getting down to the primary research of some of these public companies where you can go through their 10Qs and 10Ks and read them from front to back, and you’d be amazed at how much information is actually in there.

Mike Alkin: And then use that as your starting point for when you go and contact people in the industry, and understand, and stress test them, and apply a skeptic side to it to see what seems to be valid and what doesn’t valid.

Tim Chilleri: Yeah, no question about it. So yeah, I think for the most part, that’s the main number one thing. I think kind of a corollary to that, in a sense, is just recognizing what your horizon is. Just because Sachem Cove happens to be doing this doesn’t mean that your time horizon is the same. Your time horizon could be different from other investors in the market. So, if you’re looking to be a part of this market for say, six to 12 months, versus 48 to 60 months, different things will impact the market differently. Or say longer, let’s say your view of the market is 10 years that we could be in a potential positive bull market. Well, different items are going to influence your view based on technology. Can be changes in enrichment technology.

Sometimes we hear, “Well, here’s a bear case on the market.”, but the technology that they’re referencing, or the … anything that they’re coming to us with, might not be relevant on the horizon that we’re looking at it. If a technological future of the market that could be changing affects it in say, seven to 10 years, or 15 years, that’s just not going to have any impact, or mean to us, if we understand what it is, and we’re confident that something cannot be impactful in the market within the horizon that we’re looking at it, or is it going to affect supply, is it going to affect demand in some way, shape, or form.

So, it just goes back to circling back again saying, “Hey, how does this affect our horizon. Does this affect demand? Does this affect supply? Does this affect, or change the way how utilities approach the market, or how they procure in the market?”, and just going over those questions a few times, and thinking about it from that framework, I think, will answer a lot of your questions that you may have about something, and seeing whether it’s relevant to the market, and how you view it. So, those are the two main ones, I think, Mike.

Mike Alkin: The thing that everyone’s focused on right now is Section 232, and it’s been … We’ve long held the view that 232 is noise more than anything, and it really has prevented a major contracting cycle from starting. But, it really just seems to be … I get calls from brokers in Australia saying, “What are you hearing on 232?” It’s the rumor mill of 232. I thought Brandon Munro put out a good piece from Bannerman a couple of days ago talking about it, but we write about it in our letter to our investors. To us, it’s not that important, but why don’t you share your views on 232? It’s only important from a … It’s not important to global supply demand, but it’s important from a contracting cycle standpoint.

Tim Chilleri: Yeah, sure. So, without question it’s going to affect a potential contracting cycle, and one of the items we see sometimes is, well, it only affects the United States. The reality is there’s 58, 59 nuclear power companies out there in the world that are going to be buying uranium. So, it’s a very small pool. There’s a decent chunk in the United States, of course, with the U.S. being approximately, want to call it 25% of world demand, or thereabouts. Any time there’s a trade action, or something in a market that affects the end user of 25% of global demand, it’s going to affect 100% of the market.

Now, certainly there are other countries out there, take the Chinese for example, there are other ones who are going to continue to buy no matter what. They need to continue to build their stockpiles, particularly when you look at what their demand will be in the ensuing five, 10, 15, 25 years, because they take a very, very long approach to this market. But 232, it’s really just for the last 17 or 18 months been something that has really slowed down the markets price discovery. Utilities, whether in the U.S. and globally, really need to understand how this is going to impact their procurement strategy. They really need to understand, is it going to change things in a meaningful way where it changes our business practices? Is it going to change where we have to source from? Are we going to have to go develop new resources, or a new Rolodex of suppliers in the U.S. potentially, to meet any potential trade outcome?

So, there’s a lot of question marks and variables. At the same time, I know there’s been some other people in the industry that have hit on it as well, and that is the U.S. utilities have been extraordinarily busy for the last six to 12 months given the information that the Department of Commerce has requested. So, more than anything, it’s been something that has kind of just thrown a wet blanket on the market from a pricing standpoint. I think, again going back to the horizon discussion, if you do have a horizon long enough this has been kind of a blessing in disguise, because we’re seeing the supply curtailments across the world. With the market sitting below $30 a pound, even call it $35, $40, there’s just no real way some of these curtailed mines can even consider coming back.

So, if you are of the view that you think there are deficits out there, and they’re meaningful, and that they’re going to continue, this really just prolongs that cycle of that structural deficit in the market. Further, it pushes back any real greenfield development that could come to the market particularly in the western world, or in a place that fully needs market prices to exist. These are extremely long lead times from mines to come on, even much simpler mines, call them the ISR mines, the in-situ and recovery, or sometimes referred to as the ISL mines, in-situ leach recovery, while they have smaller upfront capex costs to get going, these are still projects that need to be permitted, that need to be advanced, that need to be financed.

So, what this does is just pushes back any of that supply that could come online, whether it be a curtailment, or a greenfield, which is ultimately positive for the price if you’ve done the work, and put together the mosaic where you believe that we are in these structural deficits, which we obviously do think that, Mike.

Mike Alkin: All right, well, you’ve got work, get back to work. Back to the dungeon, and back to cranking out some stuff. Anyway, hope you enjoyed it. We’re going to continue the energy, I just wanted to touch on the geopolitics of energy this podcast, now we’re going to start breaking it down into different segments as we go. So, have a good week, and we’ll talk with you next week. Thanks.

Announcer: The information presented on Talking Stocks Over a Beer is the opinion of its host and guest. You should not base your investment decision solely on this broadcast. Remember, it’s your money, and your responsibility.


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fossil fuel

The moral case for fossil fuels

There’s a lot of debate surrounding the use of fossil fuels, with many calling it immoral. But the Center for Industrial Progress has a different point of view… Listen as Don Watkins, the center’s director of education, makes the moral case for fossil fuels.
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