When Woke Trumps Economics – OWTW

As the old adage goes, the cure for high prices is high prices. In other words, big increases in the price of a commodity are typically greeted with fresh capital pouring into that sector, increasing supply.

And yet, this time it is indeed different (for the time being, anyway). Case in point:

Q4 2022 hedge fund letters, conferences and more

Major institutional investors including Europe’s Legal and General Investment Management (LGIM) said in a joint statement they have cofiled a shareholder resolution that asks Glencore to reveal how its production and capital expenditure plans align with the Paris goals and the International Energy Agency Net Zero Emissions pathway.

“Having both invested in and engaged with Glencore over many years, a higher degree of transparency is necessary in order to clarify how the company’s exposure to thermal coal is aligned with the 1.5C pathway and corresponds to its net zero commitment,” said Dror Elkayam, an analyst in investment stewardship at LGIM.

Other investors include the Swiss based Ethos Foundation, Australian pension fund Vision Super and HSBC Asset Management.

The resolution is to be presented for a vote at Glencore’s annual shareholder meeting in 2023.

Now, here’s a crazy idea…

If you don’t like what a company is doing, why not sell out your holdings and buy something else? But it appears that maximising returns took a back seat to social justice agendas at many of these big investment houses.

We aren’t complaining, though. It gives us a clear advantage over these muppets (as far as investment returns go).

Here’s the World Coal Index (in orange) compared to the S&P 500 (in purple):

As you can see, it’s been a nice run (up 131% over the last two years). But importantly there seems to be no clear incentive to bring additional supply to market. So higher we go…

   PULSE CHECK ON URANIUM

It’s been a while since we last checked in on another commodity near and dear to our hearts — uranium.

Don’t get us wrong. We’re still bullish uranium. Very bullish. Uranium has been a core holding for us in the Insider portfolio. We had the first little run and it was lovely, but we think there is much more to come.

For an overview of where things stand with yellow cake, our buddy Kuppy just wrote an entire post dedicated to just that (and his preferred way of playing it). Here’s a sneak peek:

…it’s a new year and everything is lining up for uranium. Macro funds need a trend to latch onto in 2023 and I don’t think there’s a better one out there—especially when funds need a trend that is both idiosyncratic and immune to all the headwinds that are impacting most other risk assets. Uranium doesn’t care about recessions or interest rates or whatever it is that JPOW is doing. Uranium only cares about supply and demand, and those two are increasingly diverging further apart.

Read Kuppy’s entire article here.

   ALL THINGS TRANSITORY…

Feels like a lifetime ago, when — back in February 2020 — we started warning that lockdowns will bring about inflation and shortages. Fast forward to today, and this pesky stuff is now part of our daily lives. We recently set up a dedicated inflation channel in our Insider private forum, where members can share their own experiences with all things “transitory”.

You think prices are out of control in your country? Well, check out what Insider member Vitalie sent through from Moldova:

Annual inflation in Moldova in December was 30.2%, monthly – 0.8%.

And these are the official numbers, mind you. We shudder to think what inflation must actually be like in reality.

   ONE MAN’S TOXIC WASTE, ANOTHER MAN’S…?

They say a picture is worth a thousand words. And that certainly appears to be the case with Argentina.

Take a look at the charts of some of the local stocks…

This is a classic bullish setup.

We cannot find any bullish commentary on Argentina. For most investors, the country is on the “toxic waste” pile (if it’s at all on their radars). And yet the charts above tell us something hugely bullish is building there.

What is the narrative here? We don’t know. Well, we could spin you some made-up story to match what we are seeing in the charts, but it would be simply that.

For the most part, Argentinian stocks are crazy cheap. For instance, one company we singled out in a recent Insider Newsletter issue sits on a P/E of about 2x, which is just nuts.

But even more remarkable is the strength of Argentinian stocks in light of a very weak stock market. Over the past 12 months, most are still up respectfully (anywhere from 20% to 180%) — which can’t be said for the S&P 500.