# Katusa Research: full text > Every published article and page on katusaresearch.com as plain text, in > one file. This is the llms-full.txt companion to /llms.txt, which is the > curated map of the same site. Generated: 2026-10-22T10:00:48.610Z Items: 686 Curated map: https://katusaresearch.com/llms.txt URL inventory: https://katusaresearch.com/sitemap_index.xml Article feed: https://katusaresearch.com/feed/ Records are separated by a line holding three hyphens and nothing else, followed by a level-one heading with the title, a blank line, and a line beginning "- URL: ". Body headings are kept at the level they were written at, so a level-two heading inside an article is still "## ". Published content only. Nothing in this file is paywalled subscriber research, and nothing in it is a draft. --- # You’re Stuck at 3% - URL: https://katusaresearch.com/you-re-stuck/ - Type: article - Published: 2026-10-16 - Author: Marin Katusa In this week’s edition of the KII… - **Your neighbor’s 3% mortgage is a trap.** Copper developers are caught in the same one. - **I bought the stock everyone was dumping in 2023****.** It’s paid me twice since. - **One AI stumble could kill your favorite gold mine.** And it won’t be the gold price. You probably own a copper stock that won’t get its next cheque. The deposit isn’t the problem. Everyone said Enbridge would cut its dividend. I bought. They raised it. Your gold mine’s next financing could hinge on an AI company you don’t even own. You probably know a couple who should have downsized and moved by now. The kids are gone and the house is too big for the two of them. But they stay because of the mortgage, not the house. **Expensive money doesn’t punish everyone. It sorts everyone.** They locked in their rate years ago, when money was cheap. If they sell, they need a new loan. On a $400,000 mortgage, their 3% rate costs about $1,690 a month. The same loan at today’s 7.40% costs about $2,770… or $13,000 a year more for the same house. This week the rate on a typical 30-year American mortgage reached 7.40%, the highest in almost three years, and applications fell again. The same sorting is under way in the resource business, and it will decide who ends up owning the next copper mine. ## Who Writes the Next Cheque - The Cost of Capital A copper mine can die long before the first tonne comes out of the ground, with the deposit still in place and the demand still growing. Simply because the money to build it got too expensive. A company with an operating mine and little debt keeps producing through a rate shock. Its competitor, with a richer deposit and no financing, waits. **Both own copper, and** **only one of them can sell it****.** The IEA just said investment in critical minerals fell last year for the first time since the pandemic. Lithium companies cut hardest. Copper companies were the only group that spent more, and the IEA still expects supply to fall a quarter short of demand a decade from now. The copper companies that spent more were the ones already producing. They paid for growth out of mines that are running. The developer with a deposit, a slide deck and no cash flow misses the round. A skipped round today is a mine that opens a decade too late. In September, companies on Canada’s Venture exchange raised about a billion Canadian dollars across 88 financings, against C$630 million across 119 financings a year earlier. - **The average cheque more than doubled, from C$5.3 million to C$11.4 million.** - **But the exchange now has 91 fewer listed companies than a year ago.** ## What’s Your Money Worth? The simple answer, the same as mine. Back in June 2022, I wrote something in the KRO that still governs every cheque I write: *“My role is not to be liquidity for any company.”* If management wants my capital, they need to give me a compelling reason to part with it. In September 2023, Enbridge announced the purchase of three U.S. gas utilities and, the same week, sold C$4.6 billion of new shares to help pay for them. The stock sold off. That month, in my premium newsletter **[Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/)**, I wrote an issue called "*Cost of Capital*" and said I was accumulating ENB in size at US$32.90, with the dividend paying out 8.8% at that price. There were rumors circulating that the company may have to cut their dividend. But we did our homework, believed in our math and I bought in volume… in real time, as did many in the KRO. Enbridge had the scale to swallow three utilities that almost nobody else could, and decades of contracted cash flow to cover the bill. - **By June 2025, the KRO position was up** **over** **5****0****%** **and** **another 21% of our cost base paid out in dividends.** The dividend was the bonus. What we bought was a great business the market had marked down for the size of its cheque. The Cost of Capital for Enbridge during that acquisition was high. I still own every share of Enbridge because it’s a great company, but knowing when to buy is as important as what to buy. Last December, the company raised its dividend for the 31st year in a row. ## What is Your Price? Have you ever asked yourself, what is your own cost of capital? Today, you can earn over 5% on a ten-year Treasury while you wait, with essentially the lowest risk of any alternative on the planet for 5%. That’s your alternative. 5% for a 10 Year. - **A** **high-risk** **venture** **must** **be able to deliver multiples of that return considering the high risk.** Do you understand the risk within your own portfolio? For example, have you properly assessed the time and cost of permitting, exploration, drilling and development? What about metallurgical risk, political risk, cost overruns and commodity prices? And what are the odds the asset is even economic at a commodity price the project can be financed at? **Financial Spectrum** If you have been a long-time reader, you know I have talked about Pareto’s Law in great detail. Some know it as the *80-20 rule*. Here’s a chart that should scare you, regardless of what side of the spectrum you are on. - **10% of** **households** **currently “own****” 88.1% of the** **stock market****, up from 82****.****7****%** **2****1** **years** **ago****.** The wealth chart above is why this is personal. The bottom half of American households own 0.6% of the stock market, and the top tenth own nearly nine-tenths of it. The middle 40% own 11.3% of the stock market. Yes, I am aware that the data is skewed due to founder-held positions such as Elon Musk in both Tesla and SpaceX, and the founder positions in large AI companies are anomalies that add to the data of the top 10%. But the point still holds: Wealth is concentrated. **I’ll give you a real-world current example****..****.** The cost of capital will change depending on what the market offers. Meaning, if one or more of the big AI companies have a hiccup and must hit the markets to meet any cost over runs on a project, the cost of capital will go up (like it did on Enbridge). A black swan in AI can directly impact on the cost of your favorite gold mine being financed. Do not think they are independent of one another. **Understand, evaluate and expose yourself to the best management teams****…** **W****ith the best assets in the best jurisdictions that will be ab****le to maneuver any market setbacks.** You also want exposure to balance sheets that can survive downcycles and not dilute your interest and pay you for owning the company. The couple down the street with the house too big for them with the old mortgage are not rich; their term hasn’t renewed yet with the new cost of capital. In resources, the deposit tells you what could be built. The financing to build the project will tell you who will own it. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # They Raised the Forecast Again - URL: https://katusaresearch.com/they-raised-the-forecast-again/ - Type: article - Published: 2026-10-09 - Author: Marin Katusa You have a number in your head for what AI is going to need from the grid. Somebody asked you about it this summer and you had it ready. A share of the country's electricity by the end of the decade, or a count of gigawatts. You said it as if you measured it. Four years ago, the world had a lithium and EV target number ready too, and so did I. I know how that one aged. - **Goldman Sachs changed its U.S. data center forecast** **again** **on Sunday.** It raised the number for the end of this year by five gigawatts, cut the number for next year by five, and told clients the outlook was "largely unchanged." That’s a forecaster calling its aim steady while the target moves. ## The Table Gets Set Either Way Book a restaurant for Saturday and you have a reservation. If the place is popular, you book a second one down the street. Neither booking costs you a cent, and both kitchens are buying fish for you on Friday. A demand forecast is a stack of reservations added up by someone who never checks who showed up. The 2022 lithium models added up automakers' targets, and a target is just a reservation with a press release attached to it. In 2024, BloombergNEF had plug-ins at 47.5% of American car sales in 2030. A year later, the same forecaster said 27%, and this June it said 17%. - **The 2030 forecast fell by nearly two-thirds before 2030 arrived.** The price fell before the forecast did. Lithium carbonate fell from just under $80,000 a tonne in late 2022 to under $10,000 by early 2025 on S&P Global's assessments, and the mines that expanded for the reservations took the loss. ## A Hundred on Paper for Every One Drawing Power The power models take reservations from the same kind of customer, and this booking is free too. A data center developer files an interconnection request with a utility. Because the request costs nothing, the developer files several, in several states, and waits to see which grid answers first. Texas publishes the most honest count. At the end of 2024, its grid operator had 63 gigawatts of large-load requests in the queue. By June of this year, it had 474, and about nine in ten of those came from data centers. The most power Texas has ever used in a single hour, set on July 22, was 91 gigawatts. Of that 474, the operator had cleared 9.5 gigawatts to connect, and in July it could see 4.4 gigawatts actually drawing power. - **Texas has over a hundred gigawatts on paper for every one that is drawing power. Those are *Paper Gigawatts**.*** On August 3, Governor Abbott told the grid operator to stop connecting new data centers until it had checked who was real. ERCOT is auditing roughly 300 projects and reports back on December 10. A new state law goes further: from next year, only loads with a signed connection agreement count in the Texas forecast. Ohio got there first. AEP Ohio had more than 30 gigawatts of data center requests on its books. When it asked developers to pay for formal studies, 13 GW remained. When AEP put binding contracts and financial commitments in front of them, 5.6 GW signed. More than four out of every five requested gigawatts fell away before the contract stage. ## The Forecast Chases the Last Surprise In June 2025, S&P Global counted 117 gigawatts of American data center demand for 2030. It raised that count in September and again in April, to 183 gigawatts, and 2030 is no closer than it was. The Energy Department's own lab tells the same story from the metered side. In 2023, it had data centers using under 5% of American electricity, with a top case of 12% by 2028. This June it lifted the ceiling past 15% by 2030. - **The lab's 2030 range is 322 terawatt-hours wide, almost twice what every data center in America used in 2023.** Every forecaster corrects toward its last miss. The lithium crowd missed high and cut; the power crowd missed low and is still raising. Utilities build to the raised number. Gas capacity in their plans for 2035 has grown from 275 gigawatts to 350 since the end of 2022, by RMI's tally, and somebody pays for every plant in that plan whether the reservation shows or not. S&P has a word for the stretch of a cycle where spending keeps rising after the earnings stopped supporting it overshoot. A forecast made of reservations is how a build gets there. ## I Count What's Metered On Monday, Google signed a 20-year deal with Constellation for 890 megawatts of new nuclear capacity on the PJM grid. The power comes from upgrades across eleven reactors, the first expected in 2028. - **That’s more than $4 billion, eleven reactors and a 20-year contract. These gigawatts have money behind them.** The paper gigawatts need a 2030 forecast to get paid. The reactors that already exist and the warehouses that are already down to days of stock do not. The kitchens are buying steak on reservations. **[I count the tables that are already full](https://join.katusaresearch.com/subscribe/).** Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # AI and the safest cigarette ever sold - URL: https://katusaresearch.com/ai-and-the-safest-cigarette-ever-sold/ - Type: article - Published: 2026-10-02 - Author: Marin Katusa You probably trust the company that talks the most about safety. Trouble is, so did your parents. In March 1952, Lorillard Tobacco called a press conference at the Waldorf-Astoria to launch a new cigarette called Kent. Doctors just started linking smoking to lung cancer, and smokers were getting nervous. So, Lorillard gave them a filter. It called the Micronite filter *“the greatest health protection in cigarette history”* and ran ads for it in the Journal of the American Medical Association. The filter contained blue asbestos. In 1954, a Lorillard researcher found asbestos in the smoke. It kept selling the filter for two more years and moved 13 billion Kents before it changed the design. Filter tips made up 1.3% of U.S. cigarettes when Kent launched in 1952. - **When the asbestos came out in 1956, they made up 27.6%. By 1960, it was half.** **** A Philip Morris study put it plainly in 1966: “the illusion of filtration” mattered as much as the fact of it. The AI industry is running the same play right now, and this time the filter has a ticker you can buy. ## Superintelligence got its Cancer Scare Between April and July, the models got out. - OpenAI's agents slipped out of a test sandbox and into Hugging Face's servers. - On June 18, another OpenAI agent broke into a Medicare statistics portal run by the Australian government. - Anthropic read OpenAI’s report and went back through 141,006 of its own test runs. Three Claude models had broken into three real companies, and two of the victims had no idea until Anthropic called. The models used weak passwords and unlocked doors, and they kept going after they worked out the door was real. ## Safety Goes on Sale In June, the New York Times reported OpenAI could push its IPO to 2027. The reason was price. Sam Altman wanted US$1 trillion, and the bankers pointed at SpaceX. On September 12, Altman gave Fortune a new reason: Going public now would be “an ill-advised moment” because of safety. That same weekend Anthropic’s CEO published an essay asking the industry to slow down. Six days later the Wall Street Journal reported Anthropic plans to list in November at about US$2 trillion and raise up to US$100 billion. This week Reuters got hold of Anthropic’s prospectus. Of 261 pages, 80 cover the risks and 48 cover the business. - The models may “resist shutdown” and act in ways “resembling blackmail.” The company lost more than US$8 billion running the business in 2025, on US$4.6 billion of revenue. It also has signed US$518 billion of computing and data-center deals, and about 80% of that money can’t be cancelled. **The one thing in that document that cannot be switched off is the power bill.** Then on Monday, Nvidia launched Sentry, a watchdog that runs on a separate Nvidia chip beside the AI model and stops a rogue agent in milliseconds. More than 100 companies are working with it, including Microsoft, JPMorgan and Anthropic. - In August 2025, Nvidia wrote that building kill switches into chips *“would be a gift to hackers and hostile actors.”* Thirteen months later, it sells the chip that runs the agent and the chip that watches it. That is the Micronite filter with a press release. Lorillard would've recognized the day an industry's biggest danger became its best ad. ## The Only Kill Switch That Works Every safety filter is more hardware, and all of it runs on the grid. That grid is already short. In PJM, the market from Chicago to Washington, generators got US$28.92 a megawatt-day to stand by for 2024/25. This summer’s auction cleared at the US$325 cap for 2028/29. Four straight auctions have cleared above US$269, and the last two came up short of the reliability requirement. - **A large power transformer took about 50 weeks to arrive in 2021. By last year, Wood Mackenzie put it at 128.** Since January 1, every new data center over 75 megawatts must install a remote-disconnect switch so ERCOT can cut it off in an emergency. The only kill switch that already works is the one at the substation. ## Own the Fuel The way around a grid kill switch is your own power plant, and the hyperscalers know it. - Microsoft signed for the power from a restarted Three Mile Island - Amazon signed for power from a Pennsylvania reactor. In April, the Department of Energy launched “Nuclear Dominance, 3 by 33” to rebuild the U.S. fuel supply chain. A reactor runs on uranium, and the switchyard between the reactor and the campus runs on copper. Kent's filter sold cigarettes for four years before the asbestos came out, and the smokers paid either way, just as the AI campus pays for its power whether the model behaves or not. **[Inside Katusa's Resource Opportunities, we hold the fuel, not the filter…](https://join.katusaresearch.com/subscribe/)** A debt-free uranium producer that doubled its operating mines this year. And copper explorers sitting on the kind of tonnes the industry needs to replace the Escondida it loses every year. ### **[Get in the room right here.](https://join.katusaresearch.com/subscribe/)** Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # America’s Most Valuable Acre is Empty - URL: https://katusaresearch.com/america-s-most-valuable-acre-is-empty/ - Type: article - Published: 2026-09-25 - Author: Marin Katusa On January 10, 1901, six tons of drilling pipe blew right up into the air from a well outside Beaumont, Texas. Then came mud. Then gas. Then oil. The Lucas gusher ran at a hundred thousand barrels a day for nine days. It started the Texas oil age, and under it was a rock you’ve salted your eggs with all your life and never once thought of owning. **A salt dome.** For a century, oilmen asked what the salt trapped. The people writing cheques now ask *what it can hold*, because the valuable part of this rock is the part you take out. You’d never guess who holds the biggest ones. The good folks at the DOE are who keep every barrel of the country’s emergency oil. ## Where A Salt Dome Comes From A salt dome starts as a dead sea. In the age of the dinosaurs, an ocean over the Gulf Coast dried out and left a salt bed thousands of feet thick, and rivers buried it under miles of mud. Under that weight, salt does something no other rock does: it flows, slowly, like the ice at the base of a glacier. Over millions of years, it pushed up through the heavier rock above it like a giant plug squeezing toward the surface. In November 1980, a crew drilling on a Louisiana lake nicked the roof of the salt mine inside the dome below. The lake went down the hole in hours and took eleven barges and sixty-five acres of an island with it. Nobody died. What swallowed the lake was plain fresh water eating through salt, and that same trick is how you make a vault. ## Salt *Was* About as Boring as a Commodity Gets… Americans dump millions of tons of it onto roads every winter. In 2025, the average value of U.S. rock salt was just $54 per metric ton. Cheap enough to spread on a highway and watch it disappear down a storm drain. Then comes the clever part: Drill into a dome, pump fresh water down, and dissolve the salt. - ***SIDE NOTE for the technocrats among my readers**, you can also use brine, but it just takes a bit longer to dissolve out the cavern.* Next, pump the brine back out and what remains isn’t a mine… It’s a gigantic underground bottle. ## Meet America’s 714-Million-Barrel Underground Vault The United States doesn’t store its emergency oil in giant steel tanks. It stores most of it inside salt. Along the Gulf Coast, the Strategic Petroleum Reserve contains 60 enormous underground salt caverns spread across four sites in Texas and Louisiana. Together, they are authorized to hold **714 million barrels of crude oil**. *Image: Illustration of the Brand Mound DOE Storage Site ([source](https://www.atlasobscura.com/places/bryan-mound-strategic-petroleum-reserve))* The typical cavern is roughly 200 feet across and 2,500 feet tall and holds around 10 million barrels. That is tall enough to swallow Chicago’s Willis Tower with room left over. And salt happens to be unusually good bottle material. At these depths, rock salt has extremely low porosity and permeability. It also deforms slowly under pressure. Most interesting of all, small cracks squeeze themselves shut. Salt heals its own cracks, like a superhero. That combination is why the Department of Energy says salt-cavern storage can cost up to 10 times less than above-ground tanks and 20 times less than caverns mined from hard rock. The U.S. government took one of the cheapest commodities on earth… Removed it… And turned the empty space into infrastructure capable of holding hundreds of millions of barrels of the world’s most important commodity. Dear Canada, please take note of how it’s done… The US DOE did this great and better than anyone else on the planet. ## The Hole Outlasts the Oil The reserve fell below 300 million barrels in August, its lowest since the caverns were filled in the early 1980s, and sits around 285 million today. The argument in Washington moved from how much oil was left to whether the holes would survive. A government audit warned in May that every refill cycle dissolves more walls, and the Energy Department says 70 million barrels can never come out. Picture the oil as the tenant and the hole as the building. Salt caverns hold about a tenth of the country's gas storage but more than a quarter of its daily withdrawal capacity. Because a bottle empties faster than a sponge. Not long ago, that space rented for single-digit cents a month per thousand cubic feet. Contracts now sign in the twenties and auctions clear in the thirties, above the twenty cents it takes to pay for a new cavern. At 25 cents, by our math, one ten-billion-cubic-foot cavern collects about $30 million a year. In 2024, a pipeline company paid $1.95 billion for six Gulf Coast storage sites. Four of them were salt domes that the seller had bought for a little over a billion a few years earlier. Hydrogen is stricter still, as it seeps through welds and turns steel brittle. Only five places on Earth store pure hydrogen at commercial size, and every one is a salt cavern. The biggest of them sits inside Spindletop. The dome that opened the oil age now collects rent from the hydrogen age. ## Resource investors are trained to value what comes out of the ground… How many ounces, how many barrels, what grade, what recovery? Salt domes flip that thinking upside down. Charlie Munger always said, “Inverting the problem is where the real money is made.” And that’s what salt domes provide, the opportunity to make a fortune. Because once the salt comes out, the asset may not be exhausted. It may have just been created. The same underground cavern can store oil, natural gas, compressed air, and, increasingly, hydrogen. The commodity inside can change over time, but the geology can’t. - Compressed air is an incredible opportunity few are paying attention to. When the wind is blowing and power is cheap, you can compress air into the cavern. When power is expensive, you let it back out through a turbine, like a battery but for a fraction of the cost. You can build another steel tank, another battery, another pipeline. You can’t manufacture a salt dome that took millions of years to form in exactly the right place. You mine the commodity once. And then you rent the hole for decades. Food is better with a little salt, and so is your resource portfolio. But as always, do your due diligence. I have and look forward to [sharing with my KRO subscribers](https://join.katusaresearch.com/subscribe/) all the wonders of salt. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Election Market Correction - URL: https://katusaresearch.com/election-market-correction/ - Type: article - Published: 2026-09-18 - Updated: 2026-09-17 - Author: Marin Katusa The mid-terms are coming up, but major markets like the S&P 500 haven’t seen a major market correction in a long time. If you bought anything in the last week of March, you own a reflex now. So far, it has paid. The market fell hard that week, oil was over $100, and every headline said correction. Three weeks later the index was back at a record, and whatever you bought on the way down was green. That was the second time in a year. - **The tariff selloff of April 2025 was deeper and scarier**, and it healed faster than any drop that size in the history of the index. Twice now, buying the drop has paid inside a quarter. And a habit that pays twice stops feeling like a bet. ## Seventeen Months is Average… Since the April 2025 low, the S&P 500 has gone 17 months without a 10% correction. I keep seeing that number used as proof one is overdue, usually by someone who is already fully invested. Since 2010, there have been nine corrections. The wait between them ran from seven months to 44 and averaged 18. - **Seventeen sits on the average (but note that the average has never *predicted* a date).** The more useful number is where the last two dips stopped. The autumn 2023 dip made it to ten percent down, and this March turned at nine, before it got there. Every time the reflex fired, the market paid it. ## The Buffett Indicator: Flashing Red Named after Warren Buffett, this simple ratio compares the total value of the stock market to the size of the U.S. economy (GDP). - **Currently, this indicator stands at 2.06, a LOT higher than its historical average of 1.08.** - **The stock market is still currently valued at more than twice the size of the entire U.S. economy.** Even allowing for how global American companies have become, no reading in the dot-com years came close. ## Shiller CAPE: Lofty Territory The second gauge is Shiller’s CAPE. It asks what you pay for ten years of inflation-adjusted profits, the way a buyer of a business asks for a decade of tax returns instead of last quarter’s brochure. - **The current CAPE ratio stands at 40.58, more than double its historical average of 17.79.** Only 20 months since 1881 have printed higher, every one of them in 1999, 2000 or this year. By either measure, stocks are historically expensive, and every buyer who fired the reflex this year paid these prices to do it. ## Yield to the Boss For fifteen years, expensive stocks had an alibi. Bonds paid almost nothing, so a 40x CAPE could hang around because the alternative was worse. That alibi ran out this week when the 10-year Treasury closed above 5% for the first time since 2007. And on Wednesday, the Fed raised rates for the first time in three years. The S&P 500 trades at 21.1 times next year’s expected earnings. Flip that over, and the index yields 4.7% on profits nobody has earned yet. While a 5% Treasury pays more on a coupon, the government has already promised. From 2009 to 2022, the index out-yielded the bond by three to seven points. That gap was the whole argument for paying up. The spread has dipped below zero three times in this cycle: - **February 2025: -0.8%**. Two months later, tariffs caused a 19% decline. - **February 2026: -0.5%**. A March decline of about 9% followed shortly after. - **This week: -0.2% to -0.3%**, and the bond market is still selling. **That was two warnings, with two corrections… and the third is flashing as I write this.** The 10-year may not hold 5% for long, and it doesn’t need to. A 5% coupon against a stock market earning 4.7% means you’re taking equity risk and getting paid less than the government pays you to do nothing. Before 2023, the last two times that happened were 2000 and 2007. A bond fixes its yield with a rally. A stock market fixes its yield with a lower price. ## Get Your Shopping List Ready… Set the measures side by side. The market is worth twice the economy, the CAPE sits above 40, we’re 17 months past the last 10% correction, and a Treasury pays more than the S&P 500 earns. Nothing in this market is screaming “cheap”. Yes, there’s been a pullback, but it’s more of a sneeze than a flush. This isn’t the time to go all-in, but it is the time to be building your watchlist and [stalking stocks like an alligator](https://katusaresearch.com/the-way-of-the-alligator/?). **Here’s what I’m doing personally:** - **Maintaining cash for potential screaming buying opportunities** - **Being selective about stock purchases: focusing on companies with strong balance sheets and reasonable valuations** - **Preparing for increased volatility as markets eventually readjust to more sustainable valuations** The names on the current list, with prices beside them, are in the September issue of [**Katusa’s Resource Opportunities**](https://join.katusaresearch.com/subscribe/?). This is the issue. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Missing Escondida - URL: https://katusaresearch.com/missing-escondida/ - Type: article - Published: 2026-09-11 - Updated: 2026-09-10 - Author: Marin Katusa Somewhere in your portfolio sits a copper forecast you have never read. Your index fund owns it through the biggest producers, BHP and Freeport. And your pension owns it through the analyst who models them. Every one of them opens with the same instruction: subtract 5%. Copper set an all-time high above US$6.80 a pound on the Comex this week. The largest copper mine on earth is BHP’s Escondida in Chile’s Atacama Desert. It produced 1,261,000 tonnes in the year to June (about 2.8 billion pounds). At this week’s price, that metal is worth about US$19 billion. **The second-largest copper mine on earth produces nothing****.** It lives inside every analyst’s spreadsheet. Wood Mackenzie assumes the world loses about 5% of planned copper output every year before a single truck moves. On roughly 23.4 million tonnes of annual mine supply, that’s about 1.17 million tonnes. - **Every January the copper industry writes off a mine the size of Escondida before the first truck moves.** That line item is the Missing Escondida, the copper the industry plans to lose from a mine nobody built. And at this week’s price it is worth more than US$17 billion. ## Losing a Mine Without Closing One I’ve spent more than twenty years walking pits, and every visit starts with the same question: *what can stop this mine?* In 2026, it arrived from every direction a mine can be hit. **Weather****:** Two winter storms hit northern Chile in July and August. Antofagasta cut Los Pelambres guidance by up to 45,000 tonnes, Lundin cut Caserones by 10,000, and Chile’s July copper output fell 9.4%. **Strikes****:** Workers at Capstone’s Mantoverde cut off its water for weeks in January. Even Escondida went missing for 44 days in 2017. **Accidents****:** Codelco’s El Teniente will run below plan for five years after its 2025 tunnel collapse. **Courts and communities****:** A Brazilian judge suspended every licence at Sigma Lithium’s Grota do Cirilo, about 60% of Brazil’s lithium. Sigma is still mining and in court. Its shares fell about12% anyway. **Governments:** China revoked the permit at CATL’s Jianxiawo, about 4% of world lithium, five weeks after it restarted, and in May stopped exporting the sulphuric acid that leaches about 15% of world copper. Congo capped cobalt and restricted copper-concentrate exports. ## Why the Tonnes Don’t Come Back When a mine stops, the copper it fails to sell is the cheap part. Three bills arrive, and as a shareholder you pay all of them. The first bill lands on mines that stay open. Caserones will produce 7.4% less than planned, and its cash cost guidance rose 4.7% to US$2.25 a pound. The second bill never stops. BHP’s Western Australia Nickel produced 81,600 tonnes in the year to June 2024, nothing two years later, and still lost US$255 million. Keeping the pumps and fans running costs about US$300 million a year. First Quantum has paid about US$15 million a month since November 2023 to keep Cobre Panamá safe. The mine produced 330,863 tonnes in 2023 and will produce 30,000-40,000 this year. - **Add Grasberg’s 408,000-tonne shortfall, and the two mines together eat 60% of this year’s allowance.** The third bill is time… Core Lithium shut Finniss in January 2024. With A$290 million of new money, full output returns in mid-2028. Its tonnes never left the supply forecasts. ## The Allowance Is Growing World mine capacity grew 3.8% in the first half of 2026 while output fell 1.1%, per the International Copper Study Group. About 573,000 tonnes of built capacity produced nothing. Over a full year, that’s a Missing Escondida of its own. Wood Mackenzie says the allowance may need to rise from 5% to 6%, another 250,000-300,000 tonnes a year, more than US$4 billion at this week’s price before anyone has dug anything. - **S&P Global says a new US mine now takes nearly 29 years on average from discovery to production.** Zinc touched a four-year high this week at US$1.83 a pound, while cobalt stands about 80% above January 2025. Copper is most talked about, but this pattern runs across mined metals. ## The Mine That Kept Running When a mine goes missing, its copper doesn’t vanish. The buyer still needs it. And the price goes up, and the order goes to a mine that’s still running. That’s why a boring mine in a boring place makes the best money in a year like this one. Boring, to me, is five things… - The mine has its own power line and a backup. - It controls its own water. - It has more than one pit, so one bad wall does not stop the mill. - Its workers signed a contract that runs past the next election. - And the company owns more than one mine, because one judge shut Sigma’s only mine and took 15% off the stock before the market opened. A shut mine that promises to “come back when prices recover” needs two things before I believe it: new money and about two more years. **Go through the copper stocks you own and ask those questions of each one.** Most will fail at least one. Finding the ones that pass is what [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/) is for. Members see the companies that clear this list and the ones I own myself. The mine nobody built has never flooded or lost a wall, and its workers have never struck, yet it grows every year. Real mines keep going missing, so own the ones that stay open. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Gold’s Marketing Budget - URL: https://katusaresearch.com/golds-marketing-budget/ - Type: article - Published: 2026-09-04 - Updated: 2026-09-03 - Author: Marin Katusa You probably believe gold goes up when the debt goes up. This year should have cured you of it, because Federal debt crossed $40 trillion in August. Gold spent the same eight months falling 28%, from a $5,597 record in January to $3,976 this summer. If the debt story were a formula, that couldn’t have happened. Net interest on the federal debt will cost $1.04 trillion in fiscal 2026. That’s more than national defense, more than Medicaid. - **Five years ago interest was six cents of every federal dollar. Now it’s fifteen.** It used to be a problem for your grandchildren and now it’s a line item in this year’s budget. In May, I told [*Katusa’s Resource Opportunities*](https://join.katusaresearch.com/subscribe/) readers that Washington would step into the bond market to hold the long end down the moment it hurt, and that it wouldn’t need the Fed’s permission to do it. On August 19, the 30-year hit 5.34% (the highest since 2007), and Treasury doubled its buybacks of long bonds the same day. The dollar slipped and gold rose 4% in a session. Gold doesn’t go up because the U.S. interest bill goes up. Gold goes up when the rising interest bill becomes a confidence problem. ## The U.S. Interest Bill Became Gold’s *Marketing Budget*… What moved gold this year was rate expectations. The Iran war pushed oil up, oil pushed inflation up, and by late July the market priced a 72% chance the Fed would hike in September. Gold pays nothing, so every tick higher in hike odds raised the cost of holding it. Gold sold off, exactly as it should have. Then two things broke that trade. - On August 7, the jobs report showed the economy lost 23,000 jobs in July. - Twelve days later, Treasury stepped in. Hike odds were 37% as of August 27, and gold was up 13% on the month. Four days later, the trade ran in reverse. Hike odds jumped back to 65%, and gold fell 3.5% from its August 27 close. That reversal confirms the split: the Fed controls gold’s next move, while Washington’s balance sheet shapes the longer trend. ## Washington Pens the Ads Every year Washington spends more just to service what it owes. And every year that number reminds everyone who holds dollars what the currency is backed by: a balance sheet that gets harder to finance. The average rate on the debt is 3.4%, the highest since 2009, and it’s still climbing as old bonds roll into new ones. The Congressional Budget Office has net interest reaching $2.1 trillion by 2036. - **Interest already takes about 20 cents of every dollar of federal revenue, and the Concord Coalition expects 30 cents within the decade.** Nobody in Washington has put forward a plan to change that, and the S&P piece says so plainly. That’s the marketing budget. It runs every year, it grows every year, and gold doesn’t pay a dime for it. Here’s what sixteen years of that advertising bought… Since 2010 the gross interest bill – the full amount Treasury pays including to its own trust funds – has more than tripled to about $1.4 trillion a year. The value of all the gold ever mined has gone from $7.6 trillion to about $31 trillion. - **Through all of it, gold has been worth somewhere between 15 and 26 years of U.S. interest.** It’s 22 years today. The next time someone tells you it’s in a bubble, ask what happened to the interest bill. ## Gold Caught Up But the miners still have to earn it. The market doesn’t price a gold miner on the gold price. It prices it on what the board does with the money… and the boards have a record. We know Washington will spend about $1.039 trillion on net interest this fiscal year, about $2.85 billion a day. **Let’s set that against what the gold industry is actually *worth*…** [I screened 25 companies for the September KRO](https://join.katusaresearch.com/subscribe/), every Western producer above 250,000 ounces a year. Together they’re worth $626 billion, which is 220 days of Washington’s interest bill. Newmont, Agnico Eagle and Barrick, the three biggest gold miners in the Western world, account for 106 of those days between them. Cheap, on the numbers. **One year of net interest could buy all of them and have close to $400 billion left over.** Those 25 producers are clearing roughly $2,900 an ounce at $4,600. That’s the problem, because that margin is exactly what makes boards do foolish things. - **The last time it looked like this, in 2011, the industry spent it buying the top and wrote off $9.4 billion inside three years.** The market remembers. Gold benefits from a government that pays a trillion dollars a year in interest. The producers only benefit if their boards don’t spend the windfall the way they did last time. Some of them have learned but most of them haven’t. Sorting the two is the entire job. Every one of these boards is about to be handed more cash than they’ve seen since 2011, and the spending decisions get made this cycle. [The September KRO is out now](https://join.katusaresearch.com/subscribe/). Regards, Marin Katusa **P.S. Barrick is about to IPO the best gold assets in North America**, into the highest prices in history. One question matters: is that a board that learned, or a board cashing out before you figure it out? Our answer is in the issue. **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Tax on Standing Still - URL: https://katusaresearch.com/the-tax-on-standing-still/ - Type: article - Published: 2026-08-28 - Updated: 2026-09-02 - Author: Marin Katusa Somebody you love thinks this is the best economy of their lifetime. Somebody else you love can’t get through August without a credit card. And you’ve sat between them at the same table, nodding at both, wondering which one was lying to you. Neither one was. In 2020, the American economy stopped being one economy. Economists named the break: **the K-shaped economy**. ## One Letter Sorted 132 Million Households Picture the letter **K**: one line drops, then splits into two arms. One arm climbs and the other sinks. In 2020, Washington cut rates to zero and grew the money supply roughly 40% in two years. All that new money landed on things you can own. **If you owned stocks or a house, the flood lifted you.** The S&P 500 sits near record highs, and American home prices are up almost 58% since the start of 2020. If you owned rent and groceries, the flood lifted your bills instead. If you want to know, [the Federal Reserve keeps score](https://fred.stlouisfed.org/release/tables?eid=813804&rid=453). The top 10% of households own 87% of all stocks. The bottom half owns 1% and carries more than half of America’s consumer debt. The upper arm does what the lower arm can’t: turn surplus cash back into assets. The lower arm’s next dollar increasingly goes toward: **food → rent → power → transportation → necessities** The upper arm’s next dollar increasingly goes toward: **assets → property → investments → premium services → scarcity** ## Every K Has a Split Point A K is two arms and one moment. And the moment one line becomes two is what I call the *split point*. The 2020 split point was the money flood. The people who rode the upper arm never saw it coming. They were holding assets on the day the arms separated. You can’t join an arm after it separates, but every new split point re-sorts everyone. The same re-sort ran after 2001, 2008, and 2020. A real world example… - **In 1960, a median American house cost two years of household income. Today it costs more than five.** At these prices, buying the last K’s winners means paying full fare to the people who boarded early. ## The Pentagon Already Picked Its Arm One arm spends more of every new dollar paying for scarce things. The other has enough capital to own them. Measured against the S&P 500, broad commodities spent the early 2020s at their cheapest level in half a century. I’ve published that ratio chart since 2019, and its two previous lows, in the early 1970s and late 1990s, each opened a decade of commodity gains. The turn has started: the broad commodity index hit an 18-year high this spring and sits 47% above a year ago. While the ratio still scrapes along the floor of its range. **Most readers of *Katusa’s Investment Insights* already sit on the upper arm.** The question is which part you own. Nvidia alone carries more weight in the S&P 500 than energy, utilities, and materials combined. Your index owns the customer, but it barely owns the supplier. - **AI companies can design a chip in California, but they can’t code a megawatt into existence.** Data centers burned 415 terawatt-hours in 2024. The IEA sees 945 by 2030 and a 30% copper shortfall by 2035 on today’s pipeline. Washington noticed before your feed on X or Facebook did. The Pentagon bought shares in America’s only operating rare earth mine in July 2025 and became its largest shareholder. - **In August 2026, it signed another $2 billion in critical minerals and battery deals.** Governments don’t spend billions on supply they expect to stay cheap… ## How the Upper Arm Stays There I found my first split point as a schoolteacher grading math quizzes at night. A paycheck stops the minute you put the pen down, but the assets I started buying did not. You don’t even need upper-arm money to start. That’s what a split point means: you’re early, so prices are still normal, and a regular paycheck can still buy a real position. The expensive part is waiting. Run the math on standing still (and doing nothing)… At 4% inflation, prices climb about 50% in a decade, and $100,000 of today’s buying power shrinks to about $67,000. - **In the University of Michigan’s latest survey, only 8% of Americans expect their pay to beat inflation this year.** That’s the tax on standing still. The upper arm owns things that reprice with inflation instead of holding the cash that inflation eats. **A financing, for example, runs the other direction…** The company creates new shares and sells them to you directly. The money goes into the company itself, and these deals usually staple on a sweetener: a warrant, the right to buy more shares later at a locked price. I’ve been in these rooms for over 20 years. The open market is where the upper arm sells, and the financing is where it buys. **I put my own money into these deals, and members see the ones I’m in.** Some doors have rules about who walks through, and plenty of deals behind them go to zero. But you can’t walk through a door you’ve never heard of. - **One of our recent gold deals in Katusa’s Resource Opportunities is up 54% in the last few months.** And it could climb a lot further as the company executives its business plan. (High risk, high reward). **Staying on the top of the K hasn’t changed since 1960…** Own what reprices, buy near the split point, and use the best door your rules allow. But being right about gold, oil or copper won’t save you if you own the wrong company in that sector. That’s why [**Katusa’s Resource Opportunities**](https://join.katusaresearch.com/subscribe/) exists. It’s tailored to people who want the information and the names that the upper arm of the “K” are looking for. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Three days left - URL: https://katusaresearch.com/three-days-left/ - Type: article - Published: 2026-08-21 - Updated: 2026-08-20 - Author: Marin Katusa Open your fridge and count the days of food inside. Most homes hold about a week. Now run the same count on the world’s copper. Outside American warehouses, the answer is three days. Three. The number you’ll see quoted is the global total, and the global total is doing something dishonest. The world’s visible copper sits in three warehouse systems: COMEX in the United States, the LME serving Europe and Asia, and Shanghai inside China. Add them up and the total looks survivable. The total is hiding a migration. ## America Started Hoarding When Washington floated copper tariffs, copper started moving, and it hasn’t stopped. Traders shipped copper into American warehouses to beat the deadline and capture the premium. Since the combined stockpile peaked on March 20, the three systems together have drained about 30%. The drain played favorites. COMEX inventories grew 25% while the LME fell 40%. Shanghai collapsed 85%. The metal is leaving the places that use it and parking in the place that taxed it. America is hoarding, and the global number wears the hoard as camouflage. ## Three Days on the Clock Measure inventory the way a family measures food: in days. The world’s visible copper now covers about 12 days of demand, down from almost 17 in March. - **Strip out the American stockpile, and the rest of the planet holds just over three days, down from nearly ten.** Three days leaves no room for a strike, a smelter outage, or a slow ship. The world outside America is living paycheck to paycheck on the metal that carries its electricity. And buyers can feel it. Requests to pull copper out of LME warehouses in Asia have jumped to 100,675 tonnes, four times the long-term average. Requests don’t always turn into withdrawals, but every one is a buyer trying to lock metal down before someone else does. On Monday, the panic got a price tag. Buyers paid $545 a tonne over the three-month futures contract, the widest gap since the 2021 squeeze. Shorts paid $110 a tonne to survive a single day, because delivery day lands Wednesday and they owed metal that barely exists. Trafigura poured its own copper into LME warehouses to calm the market and the gap still held near $250. ## Smelters Now Pay the Miners The shortage shows up one step earlier too, before copper ever reaches a warehouse. Most mines never sell finished copper. They sell concentrate, a powder about one-quarter copper, and smelters charge a fee to turn it into metal. That fee is a live reading on how much mine supply exists. Plenty of concentrate, high fee. Scarce concentrate, and smelters cut their price to win every tonne. In 2015, the benchmark fee sat at $107 a tonne. By 2024, it had fallen to $80, and last year it hit $21. This year it hit zero, the lowest on record. And in the spot market the fee has gone negative: some smelters now pay miners just to keep their furnaces fed. By June, the spot fee sat at negative $127 a tonne. - **Twenty-five years around this market, and I’ve never watched that benchmark print zero until now.** It means the machines that make copper are fighting over the rock that feeds them. The warehouses show the shortage in finished metal. The smelters show the same shortage at the mine gate. ## The Hole Gets Wider Three days is this year’s problem. The next twenty years make it structural. **In 1882, Thomas Edison wired Pearl Street Station to a handful of buildings in lower Manhattan, and the modern grid started on a red metal wire.** A hundred and forty-four years later, everything new still hangs on that same wire: the grids, the electric cars, the solar farms, the data centers, the defense buildout. Bloomberg’s long-run math says the pull reaches 44.7 million tonnes a year by 2050. **Today’s mines can’t meet it.** **Because today’s mines are shrinking.** - As ore grades thin, output from existing operations falls from 22.7 million tonnes to 15. - Recycling doubles and still leaves the world short 18.7 million tonnes a year. That difference is nearly the size of today’s entire mined supply. And supply can’t sprint to close it. Miners crush more rock every year for the same pound. A new mine takes about 17 years from discovery to first production, and a high copper price cannot speed up geology. The warehouses count this week’s shortage, the smelters count this season’s. The wedge is the shortage that arrives no matter what the economy does next. Meanwhile, the copper price sits near $6.47 a pound, just under the record it set earlier this year. The price is calm but the plumbing isn’t – hence the opportunity. This is the Three-Day World, and it pays for exactly one thing: pounds delivered into a market with almost nothing spare. Stories, forecasts, and old share prices earn nothing here, and the producers who promised pounds they can’t pull out of the ground get punished first. Separating one from the other is exactly what this month’s [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/) does, copper stock by copper stock. The full acid test on nine copper producers… Pounds promised against pounds delivered, and every balance sheet against the wait. **There’s a private financing I spent two months on**, and why the board that killed it twice tells you exactly where this cycle sits. Plus, Doctor Copper’s split personality: How Edison’s 1882 wire became the metal investors now describe like gold. Including the market update and where our attack capital goes next. [Get in the room right here](https://join.katusaresearch.com/subscribe/). Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Pentagon’s Shopping List - URL: https://katusaresearch.com/the-pentagons-shopping-list/ - Type: article - Published: 2026-08-14 - Updated: 2026-08-13 - Author: Marin Katusa - Washington has signed almost $40 billion in minerals deals. **The winners all share one word.** - 96 cents of every Friday project dollar arrived as debt. **One company got the other kind.** Washington wrote $2.1 billion of mining checks on Friday. And I’d bet you did what almost everyone did: saw the number, felt the itch, pulled up a ticker or two. The dollar amount is the only line in a government deal that pays you nothing. The instrument underneath is what moves stocks, and Friday’s instruments were telling you not to chase. In June, [I showed you Uncle Sam’s Cap Table](https://katusaresearch.com/the-companies-uncle-sam-buys-next/?): sixteen companies, $20 billion of direct government ownership, every scored position but one beating the S&P 500. Friday, at the largest White House mining gathering in more than 120 years, the administration bragged about a different number: 160 deals, almost $40 billion. **Both counts are honest, but only one of them is skin in the game.** That difference decides whether the next government headline makes you money or just excites you. ## Washington Bets Two Ways The $40 billion counts everything Washington signs: loans, grants, purchase agreements, equity. Our $20 billion counted ownership and nothing else, because ownership is the only instrument that pays the government when it pays you. **Equity is Washington betting on you.** **A loan is Washington betting you won’t embarrass it.** The lender collects its interest whether your story works out or not. The owner rides your share price the whole way up. And when the owner signs on as your biggest customer (the way the Pentagon did at MP Materials with a ten-year price floor), the bet gets a floor under it. From now on, run a five-second test on every one of these headlines: skip the amount and find the instrument: Loan, or own? Not bad for the institution your golf buddies still call the worst allocator alive. ## Eight Checks from One Owner Now run it forward to last Friday. The biggest check, $1.4 billion, builds Sila’s battery materials for satellites, drones, and munitions. Another $150 million backs Niron’s magnets, built without a single rare earth: a route around China’s chokehold instead of through it. Conditional loans, both, and conditional means the money still has terms to clear. The strangest check is the best one. Four hundred million for Sunrise Energy Metals to build the world’s first primary scandium mine. - **The entire world produces about 80 tonnes of scandium a year. The mine Washington just financed is built to produce 60.** China mines roughly 80% of that tiny market and processes nearly all of it. And in a market this small, whoever writes the first big check gets to set the price. **Add it up: 96 cents of every project dollar on Friday arrived as debt.** The other four cents are interesting… The Pentagon took $85.5 million of equity in Strategic Bauxite USA, alongside $64.5 million of private money, for the heat-resistant alumina that goes into missiles. One company out of eight walked away with Washington on the share register. Reuters reported that five months of war with Iran have burned through missiles and interceptors faster than America can rebuild them, and every one of those weapons starts life as ore. **The same war that sank the yen is now signing mining checks.** But loan money never just sits there… ## Watch Who Graduates The loan book has a habit of turning into a shopping list. MP Materials cashed Pentagon grant checks years before the Pentagon took a stake. Intel’s grant money converted into Washington’s 9.9%. Lithium Americas carried a federal loan before Washington joined the share registry. Westwater’s $25 million capped a courtship that opened with a letter of interest fifteen months ago. **The money runs a ladder: grant, loan, customer, price floor, equity. Only MP Materials has climbed every rung.** And equity rarely arrives alone; it shows up next to a customer. One Friday deal is worth circling: - **Lockheed Martin holds an option on a quarter of Sunrise’s scandium before the mine exists. One of Friday’s loans already carries the second signature. By the third, the easy rerating is gone.** Add February’s strategic mineral reserve and July’s authority to restrict critical-mineral exports and the shape turns familiar: finance the mines, stockpile the metal, control the exits. Beijing’s playbook, run in reverse. You watched what export walls do to a domestic price in last week’s letter: New York copper at nearly $600 a tonne over London, with a tariff decision on the President’s desk. Friday snaps this year’s letters into one line: reactors bought fuel-blind, four of every ten pounds from -SWAP Line Nations, copper with no rescue, a Dependence Chain now running through munitions. The lender behind the biggest checks, the Office of Strategic Capital, barely existed two years ago. $725 million to Energy Fuels in June, roughly $2 billion more on Friday. **Call it a farm system with a printing press**, and somewhere inside it sit the names Washington will eventually own. Which loan recipients graduate to the cap table is the harder question, and it is exactly the June issue’s work. All sixteen government positions, mapped. The loan recipients whose fingerprints match Washington’s past purchases, flagged. The names stay behind the paywall. The test doesn’t. **The names are in my premium research service, *Katusa’s Resource Opportunities*.** **[Become a KRO member here](https://join.katusaresearch.com/subscribe/?).** Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Bessent’s Notepad - URL: https://katusaresearch.com/bessents-notepad/ - Type: article - Published: 2026-08-07 - Updated: 2026-08-06 - Author: Marin Katusa Last Friday, a Reuters photographer zoomed in on a notepad. Treasury Secretary Scott Bessent carried it into a Camp David cabinet meeting with one handwritten line facing the camera: “Buy Japanese Yen (JPY) $5-10 bill.” Within days, Japan’s finance minister confirmed the two governments are stepping into the market together, the first joint yen purchase since June 1998. If you hold a mortgage or a bond fund, that notepad was written for you. The chain behind it starts five months earlier, in the Strait of Hormuz. ## Hormuz Sends Japan the Bill Japan imports over 99 percent of its crude oil. Around 95 percent comes from the Middle East, and roughly 70 percent sails through the Strait of Hormuz. When the United States entered the war with Iran on February 28, every barrel got dearer, and every tanker got riskier. The damage piled up fast: - Japan’s total import bill reached a record 11.3 trillion yen in June, up 25.4 percent from a year earlier - The June trade deficit hit 407 billion yen against forecasts of 120 billion - The IEA approved its largest oil release ever, 400 million barrels, with Japan draining almost 80 million from its own reserves ## Yen Buckles The yen, already weak, slipped past ¥158/US$ in March. And Japan’s Finance Ministry asked traders about buying crude futures to contain the damage. When a finance ministry weighs oil trades to defend its currency, the two markets have fused. Tokyo fought alone at first and Reuters estimated its July 30 operation may have reached $59 billion. The yen still slid to nearly ¥164/US$ in late July, its weakest since 1986. ## Why Couldn’t Tokyo Out-Hike the Pressure? For almost thirty years, Japanese money was close to free. And the world borrowed cheap yen to buy assets that paid more. The Bank of Japan has been raising rates, and its 1 percent today is a thirty-year high. A small hike in the summer of 2024 was enough to break things: the unwind of those yen loans sent the Nikkei down 12.4 percent on August 5, its worst day since 1987, erasing roughly $790 billion. The traders who borrowed yen for free have lost fortunes. Yet dollars still pay far more. The Fed holds its rate at 3.50 to 3.75 percent, and the US 10-year pays close to 4.7 percent. That left Tokyo boxed in. Hike faster and risk breaking markets again, or hold still and watch the oil bill sink the yen. The box is *why* the notepad came out. ## America Buys Yen Without Dollars The New York Fed bought yen through Goldman Sachs and Morgan Stanley, funding the trade by selling euros. The operation never touched America’s own currency. Before last week, Washington intervened in currency markets just three times since the mid-1990s: 1998, 2000, and 2011. When Washington starts buying someone else’s currency, the stress has climbed above the market’s pay grade. The yen snapped back toward ¥157/US$ within days. ## What Was America Protecting? Japan holds about $1.14 trillion of US Treasuries, more than any other country on earth. Repeated yen defense can force Tokyo to sell those dollar assets bonds, and heavy selling pushes US yields and American mortgage rates higher, with your mortgage rate riding on top. In May alone, Japan’s holdings fell $66.8 billion (to $1.143T). The operation used euros, so it placed no direct selling pressure on the dollar. And the protection runs through the bond market: America joining the fight cuts the number of Treasuries Japan must sell. Bessent framed the intervention as support for a trusted ally. Viewed another way, the yen rescue also protects the Treasury market. I call this the Dependence Chain. Japan imports 99 percent of its oil, so a Gulf war sank the yen. America borrows over a trillion dollars from Tokyo, so a sinking yen threatened US yields. The next link sits in metal. ## Copper Has No Rescue America imported 57 percent of the refined copper it used in 2025. The market it buys from is already distorted by tariffs and increasingly tight outside the United States. Washington taxes semi-finished copper products at 50 percent, and a decision on extending tariffs to refined copper itself now sits on the President’s desk. The market is front-running that decision at record scale. **More than 200,000 tonnes arrived at US ports in July****.** That’s the biggest monthly inflow in shipping records going back to 2014. - **And New York’s premium over London has stretched to nearly $600 a tonne.** Supply keeps tightening underneath the stampede. Smelter outages left 16 percent of global refining capacity idle last quarter. Chile’s idle capacity sits at its highest since 2019, and Shanghai’s deliverable stocks have collapsed 82 percent since May. COMEX copper trades at $6.64 a pound, near its all-time high, and London copper sits around $14,000 a tonne. That’s before the tariff decision or the drawdown has finished working. The full copper story is bigger than one letter can hold. A weak yen can be bought, and Treasuries can be borrowed against. No notepad can conjure a refined tonne of copper. The smelters were never built. Idle smelters, global inventory cover you can count in days, and a supply gap that widens past 2029 all sit under this price. I discuss that story in this month’s ***Katusa’s Resource Opportunities***… **And put close to 20 copper stocks through the KR Screener.** **One stands above all.** [Click here to become a member and find out](https://join.katusaresearch.com/subscribe/). Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # America is Building Reactors it Can’t Fuel - URL: https://katusaresearch.com/america-is-building-reactors-it-cant-fuel/ - Type: article - Published: 2026-07-31 - Updated: 2026-07-30 - Author: Marin Katusa - The countries that can fill the 70% fuel gap are a problem. - You checked everything before you bought…. except what the reactor eats. - BEST CASE, America makes 30% of its own reactor fuel by 2030. If you bought a nuclear stock in the past two years, you probably did what almost everyone did. You checked the reactor design, the government backing, and which tech giant was writing the cheques, and then you watched the whole sector double. You never asked what the reactor eats. That blind spot in your homework is now the most important variable in the entire nuclear trade, and it decides who wins the correction. ## What the Reactor Eats Today’s fleet runs on uranium enriched to about 5%. The next generation of small modular reactors runs on HALEU, uranium enriched between 5% and 20%. This is because the higher enrichment gives a smaller reactor longer fuel cycles and more output per square foot. It also means the new fleet needs a fuel America barely produces. A single demonstration cascade of sixteen centrifuges in Ohio is the only licensed HALEU source in the country. It started enriching in October 2023, and by mid-2025 its total lifetime output was 920 kilograms. **Twenty months of production, and the whole pile weighs less than a compact car.** Run the numbers forward, and the gap widens. US HALEU production today is 0.9 metric tonnes per year. If every planned facility gets built on schedule and hits every one of its targets, domestic capacity reaches about 12 tonnes by 2030. The Department of Energy projects demand above 40 tonnes by then. - **Best case, America produces 30% of the fuel its own reactor buildout requires.** The only two countries producing HALEU at scale today are Russia and China. America banned Russian imports in May 2024. There is a partial bridge, though. In September 2025, regulators cleared the country’s one commercial enrichment plant, in New Mexico, to push enrichment up to 10%, which helps some designs. But the reactors the hyperscalers are funding need full HALEU, and 10% material is a feedstock for making HALEU, not a substitute for it. ## Four of Every Ten Pounds The problem runs deeper than the new fuel… - **America’s existing fleet already runs on uranium it doesn’t mine.** In 2024, US utilities bought 55.9 million pounds of uranium, and 92% of it was foreign-origin. American mines produced just 677,000 pounds all year. Call it 1% of what the fleet consumed. Canada and Australia cover about half of the imports. Reliable friends (for the most part, if you ignore Canadian elbows). But Kazakhstan supplied 24% of deliveries, Uzbekistan 9%, and Namibia and Russia 4% each, which means four of every ten pounds feeding American reactors come from -SWAP Line Nations, countries the Fed would never backstop in a crisis. Washington saw this before the market did. Through late 2024 and 2025 came DOE enrichment contracts, DoD equity stakes in fuel cycle companies, and the ADVANCE Act to speed up licensing. That was billions of dollars committed to rebuilding, from scratch, a supply chain America had let rot for thirty years. ## Then the Market Bought Everything The re-rating that followed was one of the most violent I’ve seen in resource investing, and we built two indexes to track it. - One holds the advanced reactor developers. - The other holds the nuclear infrastructure and fuel companies that feed them. The developer index ran as high as 337% by October 2025. The infrastructure index reached 245% over the same stretch. Then gravity. The developer index fell 56% from its peak, and the infrastructure index gave back 37%. The thesis didn’t break. I am a long term uranium and nuclear bull. And we haven’t seen anything yet in the energy bull market. The demand, the government money, and the fuel gap are all real. What broke was the idea that you could buy this sector fuel-blind: owning reactors on paper without ever asking which companies have fuel access, signed contracts, regulatory milestones, and funded balance sheets. And which ones have a story and a rendering. - **For the next several years, fuel is the chokepoint every nuclear business plan must pass through.** Companies on the right side of it will sign contracts on their own terms, while companies on the wrong side burn cash waiting for allocations that may never come. That sorting is what the correction started, and it is not finished. We first published on SMRs to [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/) members in May 2024, in an issue called Powering The Electron Rush. Before the massive run-up and the correction. We just finished that sorting for Katusa’s Resource Opportunities members. We put the whole field through the fuel test: fuel access, regulatory progress, construction timelines, and a balance sheet that can survive the wait. - Fifteen companies made the cut. - The spread inside those fifteen is brutal. One fuel company trades at a 32% discount (and counting) to contracts it has already signed. The market is paying you to wait. One reactor developer collected two NRC approvals in eight months and still trades at seven cents per planned megawatt, while its closest peers trade at seventy cents to nearly a dollar. Another survivor has 419 months of runway at its current burn rate, and one of the most famous names in the sector has 49. And the two strongest reactor programs in the country can’t be bought on any exchange at all, which changes what every public name is actually worth. **The names are in my premium research service – *Katusa’s Resource Opportunities*.** [**Become a KRO member here**](https://join.katusaresearch.com/subscribe/)**.** Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Last Time Gold Looked Dead, It Rose Sevenfold - URL: https://katusaresearch.com/the-last-time-gold-looked-dead-it-rose-sevenfold/ - Type: article - Published: 2026-07-24 - Updated: 2026-07-23 - Author: Marin Katusa In December 1974, gold looked finished. The price had run from $35 an ounce to nearly $195 in four years, and then it came apart. Over the next twenty months, gold lost almost half its value, sliding to about $103 by the summer of 1976. Newspapers ran the obituary, investors who had cheered the climb sold near the lows, and Wall Street called the whole thing a bubble that popped. They were early, and they were wrong, because from that 1976 low gold rose more than sevenfold to reach $850 by January 1980. The people who sold to the headlines missed the greatest run the metal has ever had. I keep that story close right now, because gold has just fallen about 25% from its January high, and the same obituaries are being written again. ## A Rally With Real Fuel Gold nearly tripled from $1,811 in February 2023 to $5,417 this past January, and the buying came in serious volume. Central banks around the globe added a net 1,182 tonnes between January 2023 and May 2026. A new kind of buyer arrived too. Tether, the company behind the largest dollar stablecoin, lifted its gold from 53.58 tonnes in the first quarter of 2023 to 132.18 tonnes by the first quarter of 2026. On top of that steady demand sat a bet about the Fed. Through 2025, investors piled in expecting rate cuts in 2026, a softer dollar, and lower yields. That combination lit the fire, and by January, gold had never been more expensive or more loved. ## Iran Changed the Math The war arrived at the end of February, and it reached gold through a chain that few investors expected. A conflict in the Gulf drives energy and shipping costs higher across the whole economy, and those rising costs push inflation up. The Federal Reserve treats hotter inflation as a reason to keep rates unchanged, and that strips away the rate cuts gold had been counting on. And, gold was up a lot, so selling was expected. At its June meeting, the first led by new chair Kevin Warsh, the Fed left rates where they were. It held its target range at 3.50% to 3.75% and raised its 2026 inflation forecast to 3.6%. Nine of the eighteen officials penciled in a rate hike for this year while only one saw a cut. In early 2026, markets expected two rate cuts. By mid-July, they had flipped, pricing close to a 60% chance the Fed hikes by September. That reversal is what gold. - Gold pays no interest, so it competes with bonds that do. US10Y currently is paying 4.67%, while gold costs you to store. Investors hold gold when they expect rates to fall. Once rates look set to stay unchanged, a bond paying interest becomes the better deal, so money leaves gold to get paid. The war switched that old relationship back on, and the rate-cut premium that had carried gold to $5,417 drained away. The drop picked up speed in March, and one seller made all the headlines. - Turkey’s gold reserves fell by roughly 130 tonnes, most of it temporary gold-for-dollar swaps rather than outright sales, tipping central banks to net sellers for the first time in 33 months. The headline looked alarming, so it handed nervous investors one more reason to sell, and for a while the selling fed on itself. ## Buyers Never Really Left One loud month of selling hid what came right after it. China’s central bank kept buying straight through the fall, adding gold for a twentieth month in a row and posting its heaviest single purchase of the entire streak in June, just as the price sank. Turkey had sold to cover an urgent need for dollars, and the rest of the world treated the lower price as a chance to buy. The investors who own gold through funds behaved the same way. Even after the slide, gold held in ETFs finished the first half of 2026 at 4,047 tonnes, a touch above the 4,029 tonnes held at the start of the year. The gold price fell hard while the tonnes held barely moved. Tether has stayed in the game as well, still adding bullion to back its balance sheet. The new chair, Kevin Warsh, has set up five task forces and brought in fifteen outside experts, including former central bank governors and economists from around the world, to rework how the Fed measures inflation and sets policy. His stated aim is a framework that lets the Fed lower rates without stoking prices, and that is exactly the relief gold has been waiting for. ## The Setup for the Next Leg Add it all together, and this correction looks more like a floor forming than a top breaking. The demand that drove gold is still here; the price is testing long-term support near $4,000, and the main weight on it is a rate fear that eases the moment oil calms down. That’s the same setup that came before every big second leg in gold’s history, the 1976 bottom included. The clearest opportunity may sit in the miners. GDX has fallen about 36%, well past the metal itself, because the market assumes that lower gold means crushed profits, and the numbers tell a very different story. Barrick’s Q1 2026 AISC was around $1,708/oz, Agnico’s 2026 cost guidance is roughly $1,500, and at $4,000 gold the sector is generating very wide margins. Newmont also showed strong leverage to gold in Q1, realizing about $4,900/oz and delivering record free cash flow. So, the miners have fallen 36% straight into what should be the richest margins the industry has ever earned, right as earnings season begins. The people who sold gold in 1976 were reading the headlines, while the people who held were reading the fundamentals, and the fundamentals today look promising. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Debt You Can’t See - URL: https://katusaresearch.com/the-debt-you-cant-see/ - Type: article - Published: 2026-07-17 - Updated: 2026-07-16 - Author: Marin Katusa You probably own a piece of a company you’ve never heard of. It’s called Beignet Investor LLC, and it owes bondholders $27.3 billion. It has no products and no customers you’d recognize. It exists for one job: to hold the debt for Meta’s giant Louisiana data center so Meta does not have to. Meta built the campus, runs it, and will pay the rent. On paper, though, the $27.3 billion belongs to Beignet. And Meta’s balance sheet stays clean, meaning the debt is not on Meta’s balance sheet. That one deal sits inside a much larger floodgate. In eighteen months, tech companies have pushed more than $120 billion of AI spending and debt into vehicles like this, and the lenders funding them are already showing cracks. ## How the ‘Financeamagic’ Works Meta spent a year with Morgan Stanley designing the structure and won a private SEC letter blessing the accounting. The recipe: - Blue Owl Capital owns 80% with $2.5 billion of equity. Meta keeps 20%. - Pimco bought $18 billion of the bonds. BlackRock bought billions more. - Meta rents the campus back through four-year leases across 11 buildings, just short enough to book as an operating expense instead of debt. - Meta can walk away as early as 2033. The bonds run to 2049. The bond market saw through the label on day one. The bonds carry an A+ rating, yet they priced near 6.6%, a point above Meta’s own bonds and in line with the average junk bond. Oracle’s $16.3 billion Michigan campus priced their bonds even worse at about 7.5%, with six years of interest-only payments before the principal shrinks at all. ## The Trick Runs in Reverse Too… CoreWeave rents AI chips to the giants, and all three rating agencies rate the company junk. Its own bonds trade near 10% yields. In March, it borrowed $8.5 billion at investment-grade rates anyway. Moody’s stamped the loan A3 because of what sits behind it: a rental contract from Meta worth at least $19 billion, plus warehouses of chips that lose most of their value within three to five years. In 2006, an AAA label came from a mortgage pool’s structure. Today, an A3 label comes from one customer’s promise to keep paying with chips that depreciate and power costs that may change. ## The Lease Mountain US tech companies now hold more than $850 billion in data center lease commitments, up $570 billion in a single year. That’s a 204% jump year over year. - Oracle: ~$250 billion in commitments against a market cap of just $398 billion. **Oracle’s lease pile equals 62% of its entire stock market value. **Its shares have dropped 29% this year, and S&P cut Oracle to BBB-, one notch above junk. Moody’s has it at Baa2 with a negative outlook. Microsoft and Meta are not too far behind, either… ## Who are The Lenders Behind the Curtain? Private credit. The BIS counts more than $200 billion of private credit loans to AI companies, up from near zero just a few years ago, jumping from under 1% of the market to almost 8%. - **The FSB says AI took more than a third of all private credit deals in 2025, up from 17% over the prior five years.** Morgan Stanley projects private credit will supply $800 billion more in data center financing between 2025 to 2028. ## Where it Starts to Break… First, nobody can see the prices. A bond on Meta’s balance sheet gets a market price every day. A loan inside a private credit fund gets whatever price the fund’s own model assigns. MSCI studied $73 billion of these loans and found software debt marked down more than 20% hit a five-year high last September. It also warned private marks trail public prices by about two quarters, so today’s stated values still hide losses that already happened. **Second, the regulators are worried:** The Financial Stability Board warned in May that a sharp AI correction *“could lead to sizeable credit losses to private credit investors.”* It pointed to Tricolor, a subprime auto lender and First Brands, an auto-parts supplier that had borrowed from private credit that collapsed last year amid fraud claims. JPMorgan and Barclays took losses on the fallout, showing how fast this risk finds its way back to the banks. **Third, the lenders are facing a run:** Blue Owl, the firm that owns 80% of Meta’s debt vehicle, saw requests to pull 40.7% of its technology credit fund in the first quarter. The normal limit is 5%. The pressure eased, but didn’t end in the second quarter. Requests ran four times the cap, and the gates stayed up. Blue Owl froze a third fund for good and sold $1.4 billion of assets for cash. Blackstone’s biggest credit fund took $3.8 billion of withdrawal requests, and Moody’s cut its outlook on the whole business-development-company sector to negative. The firms holding the AI debt are the firms facing withdrawals. If they sell loans to pay exiting investors, forced sales reveal true prices. Then, lower prices trigger more exits and the loop feeds on itself. ## The “Toothpaste Principle” A Columbia accounting professor put it best: risk is a tube of toothpaste. Squeeze it out of Meta’s balance sheet and it pops up somewhere else, in a bond fund, a chip loan, or a pension. Pimco anchored both the Meta and Oracle deals, and its $225 billion Income Fund sits on 401(k) menus across the country. The Beignet bonds are now one of that fund’s largest holdings outside Treasuries. Because the debt trades under a private 144A format that still slips into the indexes target-date funds copy, even the “safe” bond option can hold it without ever showing you. Safe. Ya, not the word I would use to explain that structure. Pick that option and you own a slice of a data center Meta can walk away from in 2033. You hold the bonds until 2049. Meta gets an exit, but you don’t. Unlike the banks of 2007, the hyperscalers still turn a profit. The plumbing beneath them looks familiar all the same: $850 billion of lease promises resting on a fraction of that in AI revenue, funded by lenders fighting off a run, priced by models instead of markets. Subprime left us one lesson that still holds… **When the label says investment grade and the yield says junk, believe the yield. Always believe the real rate of the yield.** Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # US Private Placement Monitor - URL: https://katusaresearch.com/us-private-placement-monitor/ - Type: page - Published: 2026-07-16 - Updated: 2026-08-04 - Author: Marin Katusa SEC Exempt Offerings Feed # US Private Placement Monitor Every US private placement, the moment it files. US[Canada](/private-placement-monitor) 3,162Placements $53.64BTotal Raised 274New · Last 7 Days > 7 days30 days90 days6 months12 monthsAll time All sectorsAgricultureBusiness ServicesConsumerEnergy & ResourcesFinancialHealth CareManufacturingOtherReal EstateTechnologyTravelInvestment funds All issuersPublicPrivate Include funds & real estate ## Recent US private placements 20 recent SEC Form D offerings tracked by Katusa Research. Updated 2026-07-16. - ### Farsight AI, Inc. SectorTechnologyOffering$10.0MRaised$10.0MInvestors1StateMAFiled2026-07-16 - ### CapoScore Inc. SectorTechnologyOffering$100KRaised$100KInvestors12StateDEFiled2026-07-16 - ### CellTrack Corp SectorHealth CareOffering$600KRaised$30KInvestors1StateWIFiled2026-07-16 - ### Independence Storage Investors LLC SectorReal EstateOffering$1.4MRaised$1.4MInvestors3StateMOFiled2026-07-16 - ### Northfield Drive West Building One, LLC SectorReal EstateOffering$9.4MRaised$9.4MInvestors107StateINFiled2026-07-16 - ### Cow Gas LLC SectorEnergy & ResourcesOffering$50.0MRaised$6.5MInvestors0StateCAFiled2026-07-16 - ### Admissions Film LLC SectorOtherOffering$300KRaised$150KInvestors5StateILFiled2026-07-16 - ### Creative Planning Employee Investment, LLC SectorFinancialOffering$52.6MRaised$52.6MInvestors138StateKSFiled2026-07-16 - ### GRIZZLY DISCOVERIES INC. SectorOtherOffering$233KRaised$82KInvestors6StateABFiled2026-07-16 - ### REACT MOBILE, INC SectorTechnologyOffering$4.0MRaised$3.5MInvestors26StateWAFiled2026-07-16 - ### Mycelia Movement, LLC SectorHealth CareOffering$13.0MRaised$300KInvestors1StateCOFiled2026-07-16 - ### QuantumSafe Data Systems Inc. SectorTechnologyOffering$12.6MRaised$263KInvestors3StateMAFiled2026-07-16 - ### Nuro Pouches, Inc. SectorOtherOffering$18.0MRaised$9.5MInvestors6StateNYFiled2026-07-16 - ### altRoot Inc. SectorTechnologyOffering$250KRaised$50KInvestors1StateNYFiled2026-07-16 - ### Infinite Cooling Inc. SectorTechnologyOffering$5.5MRaised$5.3MInvestors10StateMAFiled2026-07-16 - ### Sunset Canyon Corporate Center, LLC SectorReal EstateOffering$3.6MRaised$3.6MInvestors21StateNVFiled2026-07-16 - ### FIN PODS AI INC SectorTechnologyOffering$1.0MRaised$100KInvestors1StateNVFiled2026-07-16 - ### Brit Industrial Properties, LLC SectorReal EstateOffering$500KRaised$0Investors0StateILFiled2026-07-16 - ### Prairie Stone Capital LLC SectorOtherOffering$5.0MRaised$0Investors0StateILFiled2026-07-16 - ### J.P. Morgan Real Estate Income Trust, Inc. SectorReal EstateOffering$200.0MRaised$78.5MInvestors154StateNYPlacement agentN/AFiled2026-07-16 This is a preview of the Katusa Research US Placement Monitor. Data is for information only and is not investment advice. | Filed ▾ | Issuer | Sector | Offering | Raised | Security | Investors | Jurisdiction | Listing | ▸ | 2026-09-02 | American Fertilizer, LLC | Manufacturing | $4.8M | $3.8M | Equity | 4 | CO | Private | ▸ | 2026-09-02 | AlgoChains Inc Computers | Technology | $1.5M | $100K | Equity | 2 | CA | Private | ▸ | 2026-09-02 | Telemachus Therapeutics, Inc. Pharmaceuticals | Health Care | $1.5M | $125K | Option/Warrant | 1 | PA | Private | ▸ | 2026-09-02 | Gasentec Holdings, Inc. Other Energy | Energy & Resources | $50.0M | $15.5M | Equity | 5 | CA | Private | ▸ | 2026-09-02 | MyWayv Holding, Inc.AMD | Other | $2.0M | $50K | Other | 1 | FL | Private | ▸ | 2026-09-02 | Sensible Biotechnologies, Inc. Biotechnology | Health Care | $15.0M | $13.5M | Equity | 15 | UK | Private | ▸ | 2026-09-02 | Zing Health Consolidator, Inc. Insurance | Financial | $30.0M | $22.5M | Debt, Option/Warrant | 2 | IL | Private | ▸ | 2026-09-02 | Aclarity Genomics, Inc. Biotechnology | Health Care | $4.6M | $4.6M | Equity, Option/Warrant | 8 | NC | Private | ▸ | 2026-09-02 | D5Cash Inc.AMD Other Technology | Technology | $7.0M | $7.0M | Debt, Option/Warrant | 5 | DE | Private | ▸ | 2026-09-02 | Quantizr, Inc. Other Technology | Technology | $7.6M | $7.6M | Equity | 65 | UT | Private | ▸ | 2026-09-02 | Cheddr Picks Inc. Other Technology | Technology | $5.0M | $1.7M | Equity | 2 | MA | Private | ▸ | 2026-09-02 | OnPeak Weather Group, Inc. Other Technology | Technology | $3.0M | $3.0M | Debt, Option/Warrant | 2 | CO | Private | ▸ | 2026-09-02 | Steribite, LLC Other Health Care | Health Care | $750K | $712K | Equity | 5 | OH | Private | ▸ | 2026-09-02 | Bluefields, Inc. Insurance | Financial | $3.0M | $2.0M | Equity | 3 | NC | Private | ▸ | 2026-09-02 | Disclosure Media Inc Computers | Technology | No cap | $50K | Option/Warrant | 2 | CO | Private | ▸ | 2026-09-02 | Overwatch AI Corp | Other | $1.7M | $1.7M | Equity | 12 | DE | Private | ▸ | 2026-09-02 | Sofi Gunsmoke Gully Joint Venture Oil and Gas | Energy & Resources | $850K | $0 | Equity | 0 | TX | Private | ▸ | 2026-09-02 | ZeroStack Corp.ZSTK Other Technology | Technology | $1.00B | $1.00B | Equity, Option/Warrant | 2 | TX | ZSTK · Nasdaq | ▸ | 2026-09-02 | Be Belong Group Corp.AMD Other Technology | Technology | $10.0M | $0 | Equity, Option/Warrant | 0 | FL | Private | ▸ | 2026-09-02 | Sylvan Labs, Inc. Other Technology | Technology | $10.9M | $10.9M | Equity | 34 | CA | Private | ▸ | 2026-09-02 | Gettysburg Cookie Company, LLC | Other | No cap | $80K | Equity | 5 | PA | Private | ▸ | 2026-09-02 | Radian Forge Inc. | Manufacturing | $3.0M | $2.3M | Equity | 4 | VA | Private | ▸ | 2026-09-02 | Worthy Industrial Holdings, Inc. | Manufacturing | $3.6M | $1.3M | Equity | 6 | NC | Private | ▸ | 2026-09-02 | Krina AI, Inc. Other Technology | Technology | $200K | $100K | Option/Warrant | 2 | CA | Private | ▸ | 2026-09-02 | Appalachia Infra LLC Other Energy | Energy & Resources | $2.0M | $300K | Option/Warrant | 3 | DE | Private | ▸ | 2026-09-02 | Idealab AZ, Inc. Other Technology | Technology | $20.0M | $1.3M | Equity | 3 | AZ | Private | ▸ | 2026-09-01 | Stele Inc. Other Technology | Technology | $50K | $50K | Other | 1 | CA | Private | Free access See all US private placements — free You’re seeing the 15 most recent. Enter your details to unlock the full, filterable monitor and every new filing as it hits the SEC. CountrySelect your country…CanadaUnited StatesOtherEmailWhich best describes you?Select one…Self-identified for content purposes only. Full verification happens before any investment. Unlock the full feedBy submitting, you agree to receive emails from Katusa Research. You can unsubscribe at any time. **No matching filings**Clear a filter or widen the date range to see more of the feed. ## Understanding US Private Placements: Form D, Reg D and the Rule 144 Hold ### The filing behind every row Almost every US private placement leaves one public footprint — a **Form D** filed with the SEC, due within 15 days of the first sale, whenever a company raises under a Regulation D exemption. It is a notice, not a prospectus: it will not show price or warrant terms (those are not part of the form), but it does show who is raising, how much, from how many investors, and through whom. This US Private Placement Monitor reads Form D straight from the SEC, so every figure traces to the filing. ### Who is allowed to buy in Reg D placements are sold mainly to **accredited investors** — broadly, an individual with income over $200,000 ($300,000 with a spouse) or net worth over $1 million excluding a primary residence, plus institutions and certain licensed professionals. How the deal reaches them depends on the exemption: under **Rule 506(b)** the company cannot advertise the raise and may include up to 35 sophisticated non-accredited investors; under **Rule 506(c)** it can market publicly, but every buyer must be a verified accredited investor. ### Offering size vs. amount raised The **Offering** is the total the company is trying to raise — the cap. When it names no maximum, the filing reads “Indefinite,” shown here as **No cap**. **Raised** is the amount sold to date; it is often **$0** on a brand-new filing and rises as the company files amendments. A wide gap between the two means the round is still open. ### Brokered vs. direct In a brokered deal, a registered broker-dealer markets the placement for a commission or finder’s fee; in a direct deal, the company raises straight from investors it already knows. Form D discloses whether any commission or finder’s fee was paid and names the broker-dealer acting as placement agent. Brokered raises tend to run larger and often point to institutional demand. ### Operating companies vs. funds Form D is filed by two very different issuers: real operating companies raising growth capital, and **pooled investment funds** (hedge, private-equity and venture) raising from limited partners. They behave nothing alike, so the monitor keeps them apart — funds appear only when you choose **Investment funds** in the sector filter, rather than mixing into the operating-company view. ### The PIPE signal — when a public company files Most Form D filers are private. But when a **listed** company files one, it is usually a **PIPE** (private investment in public equity) or a registered direct — a public company selling stock privately, often below market. For public-market investors that is a dilution-and-demand signal worth watching, which is why you can filter the monitor by **Public** or **Private** issuer. ### Restricted stock and the Rule 144 hold Stock bought in a private placement is **restricted** — you cannot resell it freely right away. Under SEC **Rule 144**, the holding period is **six months** if the issuer is an SEC-reporting company current in its filings, and **one year** if it is not. When a large block finally comes free to trade, the price can take pressure — which is why the closing date matters. New to private placements? Read the [Ultimate Guide to Private Placements in Canada and the USA →](https://katusaresearch.com/guide-to-private-placements/) Information only, not investment advice. **Click any row** for the full detail. **Offering** is the amount the issuer is raising (“No cap” when they state no maximum); **Raised** is the amount sold to date — often $0 on a freshly-filed offering. By default this shows **operating businesses raising for themselves** — pooled investment funds, LLC syndications and real-estate vehicles are filtered out; tick **Include funds & real estate** to see every filer. Warrant terms, valuation, round name, and investor identities are not part of a Form D and are therefore not shown. The Private Placement Monitor is for information only. It is not investment advice, an offer, or a solicitation to buy any security. Data comes from public filings and can contain errors or delays. Verify terms against the issuer’s own disclosure before you invest. --- # Gold’s Obituary Just Got Published - URL: https://katusaresearch.com/golds-obituary-just-got-published/ - Type: article - Published: 2026-07-09 - Author: Marin Katusa On Tuesday morning, Bloomberg ran the headline: “Gold’s Bull Market Has Ended.” They’re not wrong about the tape. Gold broke below $4,000 last month — the worst monthly drop since 2008. Nearly $18 billion has left the gold ETFs since January. Now read the other headline that ran the same morning, on the same wire: **“China’s PBOC Buys Most Gold Since 2023.”** While ETF investors dumped four million ounces, the People’s Bank of China bought 480,000 ounces in June. That’s its 20th consecutive month of buying and its largest purchase since October 2023. [Central banks as a group bought more than 240 tonnes in the first quarter.](https://subscribers.katusaresearch.com/checkout/kro-10th-year-anniv-promo/) **They accelerated as the price fell.** And the World Gold Council’s June survey found more central banks than ever plan to add gold in the coming year. So who sold? Funds and traders are graded on 90-day performance. Who bought? Institutions that think in decades and never post a margin call. ## The futures data says the same thing… TD Securities’ desk notes the decline came from bulls cashing out — short positions remain near historic lows. A washout, not a verdict. In twenty years of financing resource deals, I’ve never watched a bull market die while the largest, [slowest money on earth was speeding up its buying](https://subscribers.katusaresearch.com/checkout/kro-10th-year-anniv-promo/). Front-page obituaries don’t run at bottoms because the news is bad. They run at bottoms because everyone who wanted out is already gone. [The 2016 charter price is open until Sunday, July 12th, at Midnight.](https://subscribers.katusaresearch.com/checkout/kro-10th-year-anniv-promo/) ***The 3 Best Gold Stocks to Buy Now*** was written for a tape exactly like this one. [**[ CLAIM THE 2016 KRO PRICE → ]**](https://subscribers.katusaresearch.com/checkout/kro-10th-year-anniv-promo/) Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Bank Lending Standards: The Fed SLOOS Chart Since 1990 - URL: https://katusaresearch.com/bank-lending-standards/ - Type: page - Published: 2026-07-09 - Updated: 2026-07-27 - Author: Marin Katusa Katusa Research · Market Sentiment # Bank Lending Standards: The Fed SLOOS Chart Since 1990 Net percent of banks tightening standards on commercial and industrial loans, from the Fed’s Senior Loan Officer Opinion Survey. Quarterly. **A net 8.1% of US banks are tightening C&I lending standards as of Q2 2026,** up from 5.3% the quarter before. The 2008 crisis peaked at 83.6%. The easiest conditions on record came in mid-2021 at -32.4%. Reading | Value | When | Current | +8.1% | Q2 2026 | Prior quarter | +5.3% | Q1 2026 | Record tightening | +83.6% | Q4 2008 | Record easing | -32.4% | Q3 2021 | The Gauge ## How to Read the SLOOS Every quarter the Fed asks senior loan officers a plain question: are you making it harder or easier for businesses to borrow? The answer, netted out, is this line. Above zero, credit is tightening. Below zero, banks are competing to lend. Credit is the economy’s oxygen. Sustained spikes in this survey showed up before or during the recessions of 1990, 2001, 2008 and 2020. Banks see stress in their loan books before it reaches earnings reports. Context ## What +8% Means Now Mild tightening, and creeping in the wrong direction. Readings under 20% have usually coexisted with growth. The danger zone starts when the number spikes toward 40% and up, which is where every modern recession has taken it. Watch the trend more than the level. Reading the Gauge ## What Tightening or Easing Means A negative reading means banks are competing to lend: credit is cheap, easy and plentiful, which fuels growth and risk-taking. A positive reading means banks are pulling back. Companies that depend on borrowed money feel it first, then hiring, then the broad economy. The level matters less than the direction and speed. Range | What it means | Below 0% | Easing. Banks are chasing borrowers. The 2021 record was -32.4%. | 0% to 20% ← TODAY | Mild tightening. Usually coexists with growth. Today: +8.1%. | 20% to 40% | Meaningful squeeze. Credit-sensitive sectors start to crack. | Over 40% | Recession zone. 1990, 2001, 2008 (peak 83.6%) and 2020 all spiked here. | FAQ ## Frequently Asked Questions What is the SLOOS? The Senior Loan Officer Opinion Survey, run quarterly by the Federal Reserve. It asks banks whether they’re tightening or loosening lending standards across loan types. This chart shows the net percent tightening on commercial and industrial loans to large and mid-size firms. Why are bank lending standards worth watching? Credit contraction leads economic contraction. Banks tighten when their loan books sour, and that shows up in this survey quarters before it shows up in GDP or unemployment. What is the current reading? A net 8.1% of banks tightening as of Q2 2026. For scale, the 2008 peak was 83.6%. More Live Data ## Other Katusa Research Dashboards [Buffett Indicator](https://katusaresearch.com/the-buffett-indicator/)[Shiller PE Ratio](https://katusaresearch.com/shiller-pe-ratio/)[High-Yield Spreads](https://katusaresearch.com/high-yield-spread/)[Household Equity Allocation](https://katusaresearch.com/household-equity-allocation/)[Private Placement Monitor](https://katusaresearch.com/private-placement-monitor/) Related Reading ## More Analysis from Katusa Research - [Sanctions Gone Wrong: How Punishing Russia Put China in Power](https://katusaresearch.com/sanctions-gone-wrong-how-punishing-russia-put-china-in-power/) - [Nuclear Nightmare: America’s Achilles Heel](https://katusaresearch.com/nuclear-nightmare-americas-achilles-heel/) - [The Debt Time Bomb: Amend, Extend and Pretend](https://katusaresearch.com/the-debt-time-bomb-amend-extend-and-pretend/) This page is for information only. It is not investment advice, an offer, or a solicitation to buy any security. Data comes from public sources and can contain errors or delays. Do your own research before you invest. --- # US Household Equity Allocation: 80 Years of Fed Data - URL: https://katusaresearch.com/household-equity-allocation/ - Type: page - Published: 2026-07-09 - Updated: 2026-07-27 - Author: Marin Katusa Katusa Research · Market Sentiment # US Household Equity Allocation: 80 Years of Fed Data The share of household financial assets sitting in stocks. Quiet, quarterly, and one of the strongest long-run return predictors on record. **US households hold 45.8% of their financial assets in equities as of Q1 2026.** The all-time record is 46.7%, set one quarter earlier. At the 1982 generational bottom, the number was 9.5%. Reading | Value | When | Current | 45.8% | Q1 2026 | Record high | 46.7% | Q4 2025 | Record low | 9.5% | Q2 1982 | Average since 1945 | 24.5% | 80 years | The Gauge ## Why Allocation Predicts Returns The logic is supply and demand, not valuation. When households already have a record share of their wealth in stocks, the marginal buyer is scarce. Future demand has been pulled forward. When allocations are low, as in 1982, there’s a generation of buying still to come. An anonymous blogger at Philosophical Economics made this famous in 2013, showing the metric out-predicted CAPE, the Buffett Indicator and every popular valuation tool for ten-year returns. The nickname stuck: the single greatest predictor of future stock market returns. Context ## Extremes Mark the Turns Allocation bottomed at 9.5% in 1982. An 18-year bull market followed. It peaked near 38% in early 2000, ahead of a lost decade. Today’s 45.8% is above the 2000 peak by a wide margin, and the record was set last quarter. Reading the Gauge ## What High or Low Allocation Means This gauge works on supply and demand rather than valuation. A low allocation means households are out of the market, so there’s a reservoir of future buying that can push prices up for years. A high allocation means the buying already happened. When nearly half of household wealth is in stocks, the marginal buyer is scarce, and history says the following decade disappoints. Range | What it means | Under 20% | Washed out. The 1982 low of 9.5% kicked off an 18-year bull market. | 20% to 30% | Below average. Long-run mean is 24.5%. | 30% to 38% | Elevated. The 2000 peak sat near the top of this band. | Over 38% ← TODAY | Record territory. Every reading here is above the dot-com peak. Today: 45.8%. | FAQ ## Frequently Asked Questions What is the household equity allocation right now? 45.8% of household financial assets as of Q1 2026, just off the record 46.7%. Why is this called the greatest predictor of future returns? In backtests since 1945, the starting allocation explains future ten-year S&P 500 returns better than CAPE, the Buffett Indicator or interest-rate models. High starting allocations have consistently led to weak decades. Where does the data come from? The Federal Reserve’s Z.1 Financial Accounts (FRED series BOGZ1FL153064486Q), quarterly since 1945. More Live Data ## Other Katusa Research Dashboards [Buffett Indicator](https://katusaresearch.com/the-buffett-indicator/)[Shiller PE Ratio](https://katusaresearch.com/shiller-pe-ratio/)[High-Yield Spreads](https://katusaresearch.com/high-yield-spread/)[Bank Lending Standards](https://katusaresearch.com/bank-lending-standards/)[Private Placement Monitor](https://katusaresearch.com/private-placement-monitor/) Related Reading ## More Analysis from Katusa Research - [Why the “Home Run” Mindset Is Essential for Winning](https://katusaresearch.com/home-run-mindset-essential-winning-resource-market/) - [The Most Important Quality for Investment Success](https://katusaresearch.com/important-quality-must-achieve-investment-success/) - [Banking on Boring: 8 Lessons from the Legends](https://katusaresearch.com/banking-on-boring-8-lessons-from-the-legends/) This page is for information only. It is not investment advice, an offer, or a solicitation to buy any security. Data comes from public sources and can contain errors or delays. Do your own research before you invest. --- # High Yield Spreads Today: Live Junk Bond Spread Chart - URL: https://katusaresearch.com/high-yield-spread/ - Type: page - Published: 2026-07-09 - Updated: 2026-07-27 - Author: Marin Katusa Katusa Research · Market Sentiment # High Yield Spreads Today: Live Junk Bond Spread Chart The ICE BofA US High Yield option-adjusted spread: what junk-bond investors demand over Treasuries. Updated daily from FRED. **High yield spreads sit at 2.67% as of July 07, 2026.** That’s near the tightest level of the past three years (2.59% in January 2025), and well under the 4.61% stress peak of April 2025. Tight spreads mean credit markets see little risk. That is exactly when they pay the least to take it. Reading | Value | When | Current | 2.67% | 2026-07-07 | 3-year low | 2.59% | January 2025 | 3-year high | 4.61% | April 2025 | 2008 crisis peak | ~20% | November 2008 | Covid spike | ~11% | March 2020 | The Gauge ## What the Spread Tells You Junk-rated companies pay a premium over Treasuries to borrow. That premium is the spread, and it moves with fear. Under 3%, credit investors are relaxed and money is easy. Past 7%, something is breaking. Near 20%, as in late 2008, the credit market is pricing mass default. Credit tends to sniff out trouble before equities do. Spreads started widening in mid-2007, months ahead of the stock market’s peak. That’s why traders watch this line even when they never touch a bond. Reading It ## Tight Spreads Cut Both Ways A 2.67% spread says default risk feels distant. It also says you earn almost nothing extra for owning risky debt. When compensation for risk gets this thin, small shocks move prices fast. The spread’s floor is well-defined; its ceiling is not. Reading the Gauge ## What Tight or Wide Spreads Mean A tight (low) spread means credit investors see little default risk, money is easy, and risk appetite is high. That comfort is itself a warning: you’re paid almost nothing to take risk, so surprises hit hard. A wide (high) spread means fear. Borrowing costs for risky companies jump, refinancing windows slam shut, and defaults follow. The widest readings in history have marked the best moments to buy risk assets. Range | What it means | Under 3% ← TODAY | Complacent. Easy money, thin compensation for risk. Today: 2.67%. | 3% to 5% | Normal. The long-run middle of the range. | 5% to 7% | Stress building. Credit is repricing risk ahead of equities. | 7% to 10% | Recession pricing. Defaults rising, liquidity thinning. | Over 10% | Crisis. Covid touched ~11%; 2008 neared 20%. Historically a generational entry point. | FAQ ## Frequently Asked Questions What are high yield spreads right now? 2.67% as of 2026-07-07, near the bottom of the past three years’ range. What is a high yield credit spread? The extra yield junk-rated corporate bonds pay over Treasuries of similar maturity. It is the market price of default risk, quoted as an option-adjusted spread. What happens when high yield spreads widen? Borrowing costs jump for risky companies, refinancing gets hard, and defaults follow. Sharp widening has preceded or accompanied every recession since the series began. Equities usually feel it with a lag. Why does this chart only go back three years? FRED’s license for ICE BofA data limits the downloadable window. The series itself dates to 1996: spreads peaked near 20% in the 2008 crisis and near 11% in the Covid panic of March 2020. More Live Data ## Other Katusa Research Dashboards [Buffett Indicator](https://katusaresearch.com/the-buffett-indicator/)[Shiller PE Ratio](https://katusaresearch.com/shiller-pe-ratio/)[Household Equity Allocation](https://katusaresearch.com/household-equity-allocation/)[Bank Lending Standards](https://katusaresearch.com/bank-lending-standards/)[Private Placement Monitor](https://katusaresearch.com/private-placement-monitor/) Related Reading ## More Analysis from Katusa Research - [Another Bank Bites the Dust](https://katusaresearch.com/another-bank-bites-the-dust/) - [What Will Happen to All the Debt in the Oil Patch?](https://katusaresearch.com/what-will-happen-to-all-the-debt-in-the-oil-patch/) - [Why Swap Lines Are Critical to Your Foreign Investments](https://katusaresearch.com/heres-why-swap-lines-are-critical-to-your-foreign-investments/) This page is for information only. It is not investment advice, an offer, or a solicitation to buy any security. Data comes from public sources and can contain errors or delays. Do your own research before you invest. --- # Buffett Indicator Today: Live Chart and Current Reading - URL: https://katusaresearch.com/the-buffett-indicator/ - Type: page - Published: 2026-07-09 - Updated: 2026-07-27 - Author: Marin Katusa Katusa Research · Market Sentiment # Buffett Indicator Today: Live Chart and Current Reading Total US corporate equity value divided by GDP, from Federal Reserve data. Warren Buffett once called it the best single measure of where valuations stand. **The Buffett Indicator sits at 218% as of Q1 2026.** That’s down from a record 228.7% the quarter before, and roughly triple the long-run average of 86%. At the 1982 market bottom, this gauge read 32%. Stocks then returned close to 18% a year for nearly two decades. Reading | Value | When | Current | 218.1% | Q1 2026 | Record high | 228.7% | Q4 2025 | Dot-com era | 162.6% | Q1 2000 | Record low | 32.2% | Q2 1982 | Average since 1947 | 86.1% | 79 years | The Gauge ## What the Buffett Indicator Measures The math is simple. Take the value of all US corporate equities, then divide by GDP. Stocks are claims on the economy’s future output. When their price runs far ahead of the economy itself, you’re paying more for every dollar of underlying activity. Buffett told Fortune in 2001 that this ratio is “probably the best single measure of where valuations stand at any given moment.” He also warned that buying near 200% is playing with fire. Methodology ## How We Calculate It We divide the Federal Reserve’s measure of corporate equities (Z.1 financial accounts, series NCBEILQ027S) by nominal GDP. Both series come from FRED and update quarterly. Some sites use the Wilshire 5000 as the numerator instead. The signal is the same either way. Context ## What 218% Has Meant Before History is blunt here. The gauge crossed 163% at the top of the dot-com bubble in early 2000. A 49% drawdown in the S&P 500 followed. It bottomed near 32% in 1982, right before the strongest bull market of the century. Today’s reading is far above both. One honest caveat: US companies earn more abroad than they did in 1982, so the ratio drifts higher over time. Even adjusting for that, 218% is extreme by any historical yardstick. Reading the Gauge ## What a High or Low Buffett Indicator Means A low ratio means the stock market is small next to the economy that feeds it: you’re buying future output cheap, and the decades that followed low readings were the best in market history. A high ratio means prices have run far ahead of production. Every dollar of GDP is carrying more market value, and forward returns from high readings have been thin to negative. Range | What it means | Under 80% | Cheap. The 1982 low of 32% preceded an 18-year bull market. | 80% to 120% | Fair value. Most of market history lives here. | 120% to 140% | Rich. Returns from here have historically come in below average. | 140% to 200% | Bubble territory. The dot-com mania peaked near 163%. | Over 200% ← TODAY | Uncharted. Buffett called buying here “playing with fire.” Today: 218%. | FAQ ## Frequently Asked Questions What is the Buffett Indicator right now? 218.1% as of Q1 2026. The record is 228.7%, set in Q4 2025. What is a good Buffett Indicator reading? The long-run average since 1947 is about 86%. Readings under 100% have historically marked fair to cheap markets. Above 140% put you in dot-com peak territory, and today’s market trades well beyond that. How is the Buffett Indicator calculated? Total US corporate equity value divided by nominal GDP. We use Federal Reserve Z.1 data for the numerator and BEA GDP for the denominator, both via FRED, updated quarterly. Does a high Buffett Indicator mean a crash is coming? No. It is a valuation gauge, not a timing tool. Markets stayed expensive for years in the late 1990s and again after 2020. What high readings have reliably predicted is weak returns over the following decade, not the date the weakness starts. More Live Data ## Other Katusa Research Dashboards [Shiller PE Ratio](https://katusaresearch.com/shiller-pe-ratio/)[High-Yield Spreads](https://katusaresearch.com/high-yield-spread/)[Household Equity Allocation](https://katusaresearch.com/household-equity-allocation/)[Bank Lending Standards](https://katusaresearch.com/bank-lending-standards/)[Private Placement Monitor](https://katusaresearch.com/private-placement-monitor/) Related Reading ## More Analysis from Katusa Research - [The Dethroning of the US Dollar](https://katusaresearch.com/the-dethroning-of-the-us-dollar/) - [How Much of This Asset Class Is in Your Portfolio?](https://katusaresearch.com/how-much-of-this-asset-class-is-in-your-portfolio/) - [Why Gold Stocks Have 300%+ Upside From Here](https://katusaresearch.com/gold-stocks-300-upside/) This page is for information only. It is not investment advice, an offer, or a solicitation to buy any security. Data comes from public sources and can contain errors or delays. Do your own research before you invest. --- # Shiller PE Ratio Today: CAPE Chart Back to 1871 - URL: https://katusaresearch.com/shiller-pe-ratio/ - Type: page - Published: 2026-07-08 - Updated: 2026-10-02 - Author: Marin Katusa Katusa Research · Market Sentiment # Shiller PE Ratio Today: CAPE Chart Back to 1871 S&P 500 price divided by ten years of inflation-adjusted earnings. Robert Shiller’s CAPE, updated monthly from his Yale dataset. **The Shiller PE stands at 40.58 as of September 2026.** The only month in 155 years with a higher reading band was the dot-com peak, when CAPE touched 44.2 in December 1999. For scale: the market paid 32.6 times cyclically adjusted earnings in September 1929. Today it pays 40.58. Reading | Value | When | Current | 40.58 | September 2026 | Record high | 44.20 | December 1999 | September 1929 peak | 32.56 | September 1929 | Record low | 4.78 | December 1920 | Average since 1881 | 17.8 | 145 years | The Gauge ## What CAPE Smooths Out A regular PE ratio uses one year of earnings. One year can lie. Earnings collapse in recessions and balloon at cycle peaks, so the plain PE often looks cheapest right before trouble. Shiller’s fix: average ten years of earnings and adjust them for inflation. The result strips out the business cycle and leaves the underlying price of a dollar of normalized profit. His broader work on asset prices won the Nobel in 2013. Context ## What a CAPE of 41 Means The long-run average is 17.8. Today’s market trades at more than twice that. Readings this high have appeared exactly twice before: 1929 and the late 1990s. Both times, ten-year forward returns landed near zero. CAPE says nothing about next quarter. It has been elevated for most of the past decade while the market kept climbing. What it prices is the next ten years, and at 41x it prices them thin. Reading the Gauge ## What a High or Low CAPE Means Think of CAPE as the price of a dollar of normalized earnings. A low CAPE means stocks are cheap relative to what companies actually earn through a full cycle, and buying cheap has paid: the best ten-year runs in history started from single-digit and teen readings. A high CAPE means you’re paying up for the same earnings power, which has historically compressed the next decade’s returns toward zero. Range | What it means | Under 10 | Generational lows. 1920, 1932 and 1982 all bottomed here, each before a historic bull run. | 10 to 20 | Cheap to fair. The 145-year average is 17.8. | 20 to 30 | Elevated. Still workable, but forward returns thin out. | 30 to 40 | 1929 territory. The pre-crash peak was 32.6. | Over 40 ← TODAY | Dot-com peak zone. Only 1999-2000 (record 44.2) and today have traded here. | Go deeper ## Get the research behind the data — free to your inbox. [Get Katusa’s free insights](https://join.katusaresearch.com/subscribe/) FAQ ## Frequently Asked Questions What is the Shiller PE ratio today? 40.58 as of September 2026, against a 145-year average of 17.8. What was the CAPE ratio in 1929? It peaked at 32.6 in September 1929, right before the crash. Today’s reading is higher. What is the highest Shiller PE ever recorded? 44.2, in December 1999 at the top of the dot-com bubble. Is a high Shiller PE bad for stocks? Not immediately. High CAPE readings have historically meant weak returns over the following decade, not an imminent crash. The market spent most of the 2010s above average and kept rising. Why use CAPE instead of the regular PE ratio? One year of earnings swings with the business cycle, so the plain PE can look cheap at exactly the wrong moment. Ten years of inflation-adjusted earnings smooth that cycle out. More Live Data ## Other Katusa Research Dashboards [Buffett Indicator](https://katusaresearch.com/the-buffett-indicator/)[High-Yield Spreads](https://katusaresearch.com/high-yield-spread/)[Household Equity Allocation](https://katusaresearch.com/household-equity-allocation/)[Bank Lending Standards](https://katusaresearch.com/bank-lending-standards/)[Private Placement Monitor](https://katusaresearch.com/private-placement-monitor/) Related Reading ## More Analysis from Katusa Research - [The Debt Time Bomb: Amend, Extend and Pretend](https://katusaresearch.com/the-debt-time-bomb-amend-extend-and-pretend/) - [When Bad Means Good: Spotting a Resource Market Poised to Skyrocket](https://katusaresearch.com/bad-means-good-spot-resource-market-poised-skyrocket/) - [Warren Buffett’s Billion-Dollar Silver Buy Signal Is Back](https://katusaresearch.com/warren-buffetts-billion-dollar-silver-buy-signal-is-back/) This page is for information only. It is not investment advice, an offer, or a solicitation to buy any security. Data comes from public sources and can contain errors or delays. Do your own research before you invest. --- # Deal Desk by Katusa Research Wait List - URL: https://katusaresearch.com/deal-desk-by-katusa-research-wait-list/ - Type: page - Published: 2026-07-06 - Updated: 2026-09-24 - Author: Marin Katusa The Deal Desk · Powered by Katusa Research # The Deal Desk Opens Soon Claim Your Seat One deal a week, read straight from the filings: the structure, the math, and what the people signing the paperwork are telling you. **The first readers get in before the public.** Join the waitlist and you’re at the front of the line. ## Join the Waitlist Enter your email and we’ll save your spot. No cost, just early access when the desk opens. I consent to receiving information from Katusa Research via email. I understand that I can unsubscribe at any time. ## What Waitlist Readers Get - **First through the door.** When the desk opens, waitlist readers are invited before anyone else, while the first 1,000 seats are still open. - **The Private Placement Monitor, early.** The live dashboard my team runs every morning, with every Canadian resource raise the moment it files, opens to waitlist readers first. - **A hand in what it becomes.** You’re joining during the build. New dashboards, sources, and features ship to early readers first, and what you tell us shapes what this turns into. See you at the desk. **Shokan K.** Editor, Deal Desk --- # Gold / Silver Ratio - URL: https://katusaresearch.com/gold-silver-ratio/ - Type: page - Published: 2026-07-06 - Author: Marin Katusa Market Intelligence How many ounces of silver does it take to buy one ounce of gold? The gold-to-silver ratio is the oldest gauge in precious metals — a fast read on whether silver is cheap or expensive relative to gold. When it runs high, silver has historically been the bargain. ## Gold / Silver Ratio Ounces of silver per ounce of gold, since 1970 10Y25YMAX Current ratio 67 67 oz of silver = 1 oz of gold Long-term median ~63 Since 1970 2020 record ~125 Silver’s cheapest vs. gold in a century ## What the gold / silver ratio tells you The ratio simply divides the gold price by the silver price. At **67**, it takes 67 ounces of silver to equal one ounce of gold. It’s the classic relative-value gauge for the two metals — and one of the most-watched signals among silver investors. Here’s why it matters: the ratio is **mean-reverting**. When it spikes high, silver is historically cheap relative to gold, and silver has tended to outrun gold as the ratio falls back. When it drops low, silver is expensive relative to gold. The 2020 spike to roughly **125** — the most extreme in a century — preceded one of silver’s sharpest rallies. ### How to read it The dashed line marks today’s level. A high, falling ratio is the setup silver bulls look for; a low ratio suggests silver has already done the catching-up. At today’s ~67 the ratio sits close to its modern average — well off the 2020 extreme, but still far above the sub-20 readings of the bimetallic era. - High ratio → silver cheap vs. gold. Low ratio → silver expensive vs. gold. - Mean-reverting: extremes have marked turning points for silver. - Since 1970 it has swung from ~17 (the 1980 silver mania) to ~125 (2020). ## Frequently asked questions ### What is the gold-to-silver ratio? It’s the gold price divided by the silver price — the number of ounces of silver it takes to buy one ounce of gold. Today it’s about 67. ### Is silver cheap or expensive versus gold right now? At ~67 the ratio is near its modern average — silver is neither especially cheap nor expensive against gold, and well below the 2020 record of ~125. ### What is a normal gold/silver ratio? Since 1970 it has mostly ranged between about 30 and 100, with a long-term median near 63 and a record spike to ~125 in 2020. In the earlier bimetallic era it sat closer to 15–20. ### What does a high gold-to-silver ratio mean? A high ratio means silver is cheap relative to gold. Extremes have historically preceded silver outperformance — after the ratio spiked to a record ~125 in 2020, silver more than doubled within six months as the ratio normalized. Keep exploring ## More free monitors Commodities ### [Commodity Bargain Monitor](https://katusaresearch.com/commodity-bargain-monitor/) 3-year returns across 16 commodities — who’s cheap, who’s hot. Gold · Macro ### [Gold / S&P 500 Ratio](https://katusaresearch.com/gold-sp500-ratio-visualization/) Are hard assets cheap or expensive versus stocks? Gold · Bitcoin ### [Bitcoin vs. Gold Market Cap](https://katusaresearch.com/bitcoin-gold-market-cap/) How far has “digital gold” closed the gap on gold? [Read: Who’s Holding Your Silver Hostage →](https://katusaresearch.com/heres-whos-holding-your-silver-hostage/) [Read: Silver’s Identity Crisis →](https://katusaresearch.com/silvers-identity-crisis/) [Read: Buffett’s Silver Buy Signal →](https://katusaresearch.com/warren-buffetts-billion-dollar-silver-buy-signal-is-back/) Go deeper ## Get the research behind the data — free to your inbox. [Get Katusa’s free insights](https://join.katusaresearch.com/subscribe/) **Disclaimer.** For informational purposes only and not investment advice or a recommendation. Built from third-party price data and not guaranteed to be accurate or complete. Always do your own research. --- # Energy Bottleneck: The Electron Ceiling - URL: https://katusaresearch.com/energy-bottleneck-the-electron-ceiling/ - Type: article - Published: 2026-07-03 - Updated: 2026-07-02 - Author: Marin Katusa You never once worried about whether the lights would turn on. Power arrives when you flip the switch. That reflex, that power is infinite and instant and basically free, is one of the most reasonable assumptions you’ve ever made. It was true your entire life. **The companies racing to build artificial intelligence just found out it’s false. ** For most of the last twenty years, the biggest buyers of industrial-scale infrastructure were governments. That era is over. Five American tech giants will spend $595 billion building AI infrastructure this year alone. - **That number is bigger than the combined defense budgets of Germany, the UK, India, Saudi Arabia, France, and Japan.** That’s six of the ten biggest militaries on earth, at $500 billion between them. ## Every dollar of it runs on the thing you never think about… Microsoft, Google, Amazon, and Meta have all said the same thing out loud: power availability is now the limit on how fast they can build. They have chips on order, and plenty of cash is in the bank. The one thing these companies can’t conjure is electricity, so they sit in line and wait for the grid to give them some. For more than a decade, US electricity demand went nowhere. It sat flat below 3.75 trillion kilowatt-hours while utilities planned their entire strategy around a line that refused to move. Then AI arrived, and the line went vertical. Demand hit an all-time high of 4.06 trillion kilowatt-hours, a jump of roughly 9% in five years after more than a decade of standing still. **That’s the Electron Ceiling.** And power is not like the rest of the stack. A chip gets faster and cheaper every eighteen months; that’s the entire history of computing. A power plant does not. It obeys physics and permits, and both of those move on a timeline measured in years. ## You Can Design a Better Chip. You Can’t Design a Gigawatt. A large data center draws 500 to 1,000 megawatts. That’s about what a full-size power plant produces running flat out, all day, every day. And a training cluster never sleeps. Every minute it’s offline is a minute of idle hardware that cost billions to install. So the requirement is brutal and specific. Enormous amounts of reliable power, every hour, for decades, at a price you can plan around. Run that filter, and the field collapses fast. *Source: Katusa Research. Natural gas shown as combined-cycle baseload. * Solar and wind do real work on the broader grid, but at hyperscale they need storage, transmission, and backup to deliver the reliability these sites demand. Natural gas solves the always-on problem, then hands you fuel-price exposure no twenty-year budget can absorb. Nuclear runs around the clock, on stable fuel costs, from a single site, for decades. - **For a machine that runs continuously, the power feeding it must run continuously too. ** Over the last two years, the biggest technology companies on earth quietly signed more than 12,000 megawatts of nuclear power into binding contracts. Some as purchase agreements with existing operators, some as direct funding of the developers building the next generation of reactors. Every major hyperscaler, all at once, all reaching for the same boring asset. Line the deals up side by side, and the pattern is hard to miss. - **Four of the most sophisticated buyers in the world made the same move at the same time, before most of the market noticed power was the problem. ** Companies like that don’t coordinate, and they don’t commit this much capital on a hunch. When they quietly land on the same answer at once, the question worth asking is what they saw before everyone else did. It changes the whole AI question, too. You’ve been told the race goes to the best model. It may go to whoever locks up the power first, and that’s a very different list of companies to own. ## The Energy Bottleneck Shifted… Again But the next generation of reactors needs a specialized fuel that America barely produces. And the supply chain for it still runs through the one country this entire buildout was built to escape. America is now building reactors it cannot yet fuel. A few things to carry out of this: - **Power is the AI bottleneck, not chips.** The companies building AI have said so themselves. The constraint moved to the one input that can’t be accelerated by software. - **The biggest buyers already moved.** More than 12,000 megawatts of nuclear is under contract across every hyperscaler at once, while most of the market is still watching Nvidia. - **Own what every model needs. **You don’t have to guess which model wins. You can own the power, the fuel, and the infrastructure every one of them needs. ## One more thing… That was the industrial side: the machines, the power, the metal. There’s a monetary side stacking on top, and it’s repricing gold right now. The same players spending hundreds of billions to build through this wall are printing the dollars to do it, and money that never touched gold is pouring in. Here’s why I bring it up… - **Two weeks ago I handed KRO members a small gold company and one instruction: buy under $2. It’s around $3.45 today. ** **That’s better than 71% in under two weeks**, while the gold price itself fell. My members saw it first. And that’s the whole point of getting in early… and next week, you can. **It’s our 10th anniversary at Katusa Research… ** **And I’m reopening the 2016 founding price my first members paid, untouched for a decade. ** Everything lands in your inbox in a few days. Don’t miss it. Regards, Marin **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Thank You Page DD - URL: https://katusaresearch.com/thank-you-page-dd/ - Type: page - Published: 2026-06-29 - Updated: 2026-07-06 - Author: Marin Katusa ![Katusa Research] # You're Confirmed — Welcome to The Deal Desk Powered by Katusa Research. Your seat is locked. You're one of the first 1,000 readers inside. 📩 **Add deal-desk@mail.beehiiv.com to your contacts** so every issue lands in your primary inbox, not your promotions tab. It's the difference between catching a deal while it's open and reading about it after. ## What Happens Next ▶ **Your first issue lands within a few days** — one deal, read from the filings. The structure, the math, and what the people signing the paperwork are telling you, whether they meant to or not. Watch for it from the Deal Desk. ▶ **The Private Placement Monitor goes to you first.** The live dashboard my team uses every morning opens to beta readers before the public sees it. Your first issue will show you how to use it. ▶ **It will get sharper** — you joined during the build. New dashboards, sources, and features ship to beta readers first, and what you tell us shapes what this becomes. Hit reply any time with what you want to see. ### Your First Stop: The Private Placement Monitor Every Canadian resource raise, the moment it files. CAD$2.49 billion across 215 placements as of right now — and it updates while you sleep. Beta readers get the keys before the public. [Open the Private Placement Monitor →](https://katusaresearch.com/private-placement-monitor) Welcome to the desk. **Shokan K.** Editor, Deal Desk © 2026 Katusa Research. All rights reserved. [Privacy Policy](https://katusaresearch.com/privacy-policy/) · [Terms](https://katusaresearch.com/terms-of-use/) --- # West Point Gold Report - URL: https://katusaresearch.com/west-point-gold-report/ - Type: page - Published: 2026-06-29 - Author: Marin Katusa Disseminated on behalf of **West Point Gold Corp.** (TSX-V: WPG | OTCQX: WPGCF) [Download the PDF](https://katusaresearch.com/wp-content/uploads/2026/06/Westpoint-Gold-Report.pdf) #### Disclaimer This content is disseminated for West Point Gold Corp. pursuant to a paid marketing services agreement between New Era Publishing Inc. and West Point Gold Corp. Pursuant to Section 17(b) of the Securities Act of 1933, compensation of US$250,000 has been received for the distribution of this material. This is NOT a solicitation to buy or sell securities. Past performance is not indicative of future results. Investing in mining and exploration stocks involves significant risk, including the possible loss of all principal. #### Important: High-Risk Investment Investing in mining and exploration stocks involves a high degree of risk. You could lose your entire investment. #### Paid Sponsorship This content is disseminated for West Point Gold Corp. Katusa Research has received cash compensation in the amount of US$250,000 for the preparation and dissemination of this content. Katusa Research and its directors, employees, and members of their households may directly or indirectly own shares of West Point Gold Corp. Therefore, Katusa Research is biased. Measures are in place such that no shares will be sold during the active awareness campaign. #### Not Investment Advice Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. The information provided is for informational purposes only and does not constitute a recommendation to buy, sell, or hold any security. If you need personal investment advice, please consult a qualified and registered broker, investment advisor, or financial advisor. #### Mineral Resource & Technical Disclosure Mineral exploration is subject to a high degree of risk. The Company has no defined mineral resource or reserve at Gold Chain. The conceptual exploration target referenced herein is not a mineral resource. Scientific and technical information should be reviewed in the context of West Point Gold Corp.’s public filings and the qualified-person statements contained therein. Drill intervals are downhole lengths and not necessarily true widths. #### Past Performance Disclaimer Past performance is not indicative of future results. Historical drill results referenced in this content should not be taken as an indicator or predictor of future drill results, resource conversions, or stock prices. #### Do Your Own Due Diligence Before making any investment decision, readers should review West Point Gold Corp.’s public filings available at [www.sedarplus.ca](https://www.sedarplus.ca), including technical reports and financial statements. Information regarding West Point Gold Corp. has been derived from its public filings, news releases, and corporate presentation dated May 25, 2026. © 2026 New Era Publishing Inc. / Katusa Research. All rights reserved. · Disseminated for West Point Gold Corp. · TSX-V: WPG | OTCQX: WPGCF | FRA: LRA0 --- # The metal in your pocket has no price - URL: https://katusaresearch.com/the-metal-in-your-pocket-has-no-price/ - Type: article - Published: 2026-06-26 - Updated: 2026-06-25 - Author: Marin Katusa Your phone buzzed in your pocket this morning. The tiny weight that made it shake is tungsten. So is the edge of the drill bit in your garage, the cutting tool that machined your car’s engine, and the core of an armor-piercing round. You’ve held this metal a thousand times. Now try to buy it. There’s no tungsten exchange or a futures contract and no fund that holds the metal. The price is set by a handful of weekly assessments most investors never read, in a market so small that one government office can move it with paperwork. That office sits in Beijing. And over the past sixteen months, it taught the West a lesson I call the **Permission Premium**: the price you pay when a commodity requires someone else’s signature. ## One Signature Took Tungsten from $390 to $3,400… Start with what tungsten actually does, because almost nobody can say. It’s the toughest working metal we have. It carries the highest melting point of any metal and nearly the density of gold, which makes it the material of last resort: cutting tools, mining and drilling bits, aerospace parts, armor and munitions. About 60% of American consumption goes into cemented carbide, the stuff that cuts everything else. Now the supply side… - **China mined 67,000 of the world’s 85,000 tonnes last year, roughly 79%.** The United States hasn’t mined a single commercial tonne since 2015. Most commodity markets have suppliers, but this one has a gatekeeper. ## China’s $3,000 “Permission Slip” In February 2025, Beijing put tungsten under export licensing. It wasn’t a *ban *per se, but more of a permission slip. Where approvals sit in drawers and every Western buyer starts carrying extra inventory just in case. China’s exports of APT, the intermediate product that becomes tungsten powder, fell almost 70% through the first eleven months of 2025. The price did the rest… A license, after all, is a mine that produces delay. And the market spent the year pricing the delay. APT in Rotterdam started 2025 near $390 per metric ton unit. This spring it printed around $3,400, roughly nine times higher in eighteen months, with violent swings along the way. ## Tungsten Panic Buyers Arrive The buyers showing up now don’t seem to care about price. In May, Reuters reported the European Union shortlisted tungsten, alongside rare earths and gallium, for its first joint critical-minerals stockpile, with storage talks underway at Rotterdam. Governments don’t buy because the chart looks cheap. They buy because the alternative is being caught empty, and they fix lateness with size. The second buyer is stranger… **The Financial Times reported that Chinese traders have spent the past year working through American scrap yards.** Bidding for used carbide inserts, drill bits, and worn tooling, sometimes at five times normal market prices. U.S. tungsten scrap is up 350% since May 2025. The metal itself is up 200%. The *waste* is outrunning the *metal*. My favorite detail in the whole story is that China bans tungsten scrap imports at its own border. So, the buying routes through recyclers in the Philippines, Taiwan, Vietnam, and South Korea, where the scrap becomes powder and product China can legally bring home. - **The country that controls 79% of the mines is quietly buying back the West’s garbage through four other countries’ furnaces.** On June 15th, China’s revised Mineral Resources Law took effect. Giving Beijing authority over total mine output, on top of quota cuts already squeezing its own smelters. ## The wrong move is buying every junior with tungsten in the deck… In a permissioned market, the prize isn’t the biggest deposit, or the prettiest map. It’s the first tonne a Western customer can qualify without Beijing’s signature: feedstock under contract, processing on friendly soil, timelines measured in months. The Sangdong mine in South Korea just restarted after thirty years dark, and buyers treated it like a lifeboat. The scrap story is the part that keeps our attention. The West spent decades shipping its used carbide overseas for pennies, and China just repriced that junk drawer at five times market. Somebody owns those collection networks, those furnaces, those customer qualifications. Most of them aren’t public yet. Most investors will read this and go buy the biggest tungsten deposit on a map. That’s the wrong tonne. In a permissioned market, the only tonne worth owning is the one a Western buyer can take delivery of without Beijing’s signature: contracted feedstock, processing on friendly soil, timelines in months. A handful of companies already clear that bar. Some of them aren’t public yet. - **The ones that survive our Survival Audit will land in** [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/) **first.** The next time your phone buzzes, remember what’s inside it. A metal with no exchange, one gatekeeper, and a price that needed permission to exist. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The companies Uncle Sam buys next - URL: https://katusaresearch.com/the-companies-uncle-sam-buys-next/ - Type: article - Published: 2026-06-19 - Updated: 2026-06-18 - Author: Marin Katusa For thirty years, China ran the most patient heist in industrial history. Beijing picked the industries the modern world would run on: rare earths, batteries, refining, and solar. It subsidized producers below cost and held the price until foreign competitors quit. Every price war ends the same way: the side with deeper state pockets wins. By the time Washington looked up, China controlled the modern economy’s physical backbone. America still led in software and capital markets, but the materials behind semiconductors, grids, and AI infrastructure sat in Chinese hands. Dominance at the application layer has a ceiling when a rival holds the raw inputs. **So, Washington entered the deal itself.** The Department of War took equity in rare earth miners and magnet makers. The DOE backed uranium enrichment with loan guarantees. The CHIPS Act pushed billions into American fabs. Warrants, equity, offtakes: rebuilding what three decades of cheap imports dismantled. America has run this playbook before. Every time, the investors who spotted the bottlenecks early got paid. ## Uncle Sam’s Stock Portfolio The US government doesn’t normally buy companies. But it will if it has to. It regulates them, taxes them, and when things get bad enough, bails them out. What’s happened since January 2025 breaks that pattern. Washington built what we call ‘Uncle Sam’s Cap Table’. Since then, the US government has put $21 billion into sixteen direct ownership deals. The Department of War led with seven. Commerce took a 9.9% stake in Intel. The Development Finance Corporation moved into critical minerals, healthcare, and infrastructure. Instead of building a sovereign wealth fund, the U.S. built something more American: a cap table. The tools will look familiar to anyone in private markets: - Warrants give Washington a share of the upside if the company wins - Equity stakes mean the government profits when the industry it is backing grows - Loans pull projects across the gap that private money won’t bridge alone - Offtake agreements create guaranteed buyers before a facility is even built Each tool targets a specific problem Washington identified: ## What Does That Look Like in Practice? When Washington backed MP Materials, it committed to buying 100% of their magnet output for ten years above a fixed price floor. I’ve sat across the table from mining executives for twenty-five years, and they all carry the same quiet fear: build the project, then go begging for a customer. Washington just deleted that fear from MP’s spreadsheet. - **The full table runs in this month’s edition of** [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/)**:** **16 investments across critical minerals, defense, energy, chips, and metals. ** Nine of the sixteen are critical mineral plays. That number jumped after Beijing restricted seven rare earth elements in April and October 2025. Washington moved within weeks… New equity deals, expanded DoW purchase commitments, and faster permits for domestic processing. These are strategic investments made carefully in companies that sit at a chokepoint America cannot supply on its own. Korea Zinc is the only zinc and gallium hub outside Chinese control that can serve US demand. MP Materials runs the only active rare earth mine in the country. Centrus Energy holds the only licensed HALEU enrichment facility on US soil. **Washington is buying control of things it cannot afford to import anymore. ** Private money followed. Every government deal on this table pulled in more capital, because a government commitment cuts the risk on projects that private funds had passed on for years. **This is not how Washington normally operates. ** Outside of a crisis, it almost never owns strategic private companies outright. Uncle Sam rarely deploys direct ownership, warrants, and industrial financing at this scale unless the threat has become existential. ## Washington’s Best Bets When the free market cannot move fast enough, Washington stops watching and starts spending. In all that time, Washington took direct equity stakes in private companies exactly once: TARP in 2008, when the financial system was days from collapse, and that was the rare exception. Even then, the returns are clear… Three of the four government equity bets beat or matched the market during one of the most volatile stretches in modern financial history. **The data says Washington picks better than its critics admit. ** Seventeen years later, Uncle Sam is running the same playbook. And the early returns look familiar. Every company where Uncle Sam took a position has beaten the S&P 500 over the same period, except one. One miss out of seven is not a bad record for a portfolio built around national security bets. Washington is backing companies that sit at chokepoints they can’t afford to leave exposed, and the market is starting to agree with that logic. ## Take these three things with you: - **Government equity flipped from *sell signal* to *buy signal*.** When Washington takes warrants instead of writing bailout checks, it’s betting on upside, not absorbing losses. - **Follow the offtake, not the grant. **A guaranteed buyer changes a project’s economics more than free money ever does. - **Chokepoints get funded first. **Critical minerals took more of Washington’s deals than defense, chips, and metals combined. That tells you where the next deals land. **That brings me to the question we spent the **[**June KRO answering**](https://join.katusaresearch.com/subscribe/)**:** **where does Uncle Sam buy next? ** Beijing’s export cuts left more chokepoints than Washington has filled. And a short list of companies sits exactly where the last sixteen sat before the government showed up with a term sheet. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The SpaceX Launch Tax - URL: https://katusaresearch.com/the-spacex-launch-tax/ - Type: article - Published: 2026-06-12 - Updated: 2026-06-11 - Author: Marin Katusa Quick test for Friday morning. If SpaceX opens 40% above the indicated IPO price, did the business improve 40% before lunch? I don’t think the rockets got forty percent better between your alarm and the opening bell. That difference between what the company is worth and what your order says you paid, is the whole game inside the most-watched deal on the planet. I’ve sat on the other side of it a few hundred times, in financings one-thousandth this size in resource markets. - **SpaceX is expected to offer 555.6 million shares at an indicated $135 per share.** That’s almost exactly $75 billion of gross proceeds. If the underwriters use the full overallotment option, the raise can reach $86.25 billion. At that price, the company is worth about $1.77 trillion before a single public share even trades. Nothing on record is a close second place – not even the previous most valuable company on the planet, Saudi Aramco. In fact, SpaceX’s base raise alone beats Aramco, ENEL (Italian Energy Corporation), and Meta combined. ## The Crowd Has the Easy Part Right SpaceX matters. Starlink beams WiFi into homes around the world, reusable rockets changed launch economics, and Starship could change them again. Add defense contracts, AI infrastructure, and Elon Musk’s capital-market gravity, and investors feel late before the stock even opens. Feeling late is *expensive*. A record-setting IPO tells you the company can command capital. It also tells you the company chose a generous market. Issuers sell when the story is strong, the order book is deep, and the price can absorb ambition. That makes the deal historic. It also makes the first public hour dangerous. The implied valuation is about $1.75 trillion. SpaceX reported about $18.7 billion of 2025 revenue and a net loss. At the IPO price, investors are looking at a revenue multiple near 90 times before any first-day markup. A stock can deserve a premium and still punish the first buyer who pays for every future win before the first quarterly call. **Call it the Launch Tax.** The* Launch Tax* is the premium investors pay when scarcity, headlines, and regret get added to the quote. You can see the tax before the stock even trades. ## Who’s Allowed to Sell you SpaceX SpaceX may sell less than 5% of the company in the IPO. That small float can make Friday look easy. If enough buyers crowd into a thin window, the price can levitate. The important question is who wants liquidity? - **Google wrote SpaceX a $900 million check in 2015, when the company was worth about $10 billion.** At this IPO valuation, that stake has become one of the most valuable private-company positions on earth. When a decade-old private stake finally gets a public exit ramp, you should ask who needs liquidity as much as who wants exposure. Fast-tracked index inclusion could put 30% of the float in passive hands within 15 days, compared to 4% if traditional rules of inclusion were followed. Reuters reported that SpaceX is considering a large retail allocation and unusual insider liquidity in stages. Elon Musk also keeps overwhelming voting control after the deal. - SpaceX is selling less than 5% of itself. - Through dual-class shares, Musk’s 42% equity stake gives him 79% of voting power. **It’s an auction for a souvenir, run by the most eager buyers in the room.** And then the calendar takes over, where Musk and the largest backers are locked for 366 days. Everyone else comes free in seven percent slices at 70, 90, 105, and 120 days, with more tied to earnings, have a look: Retail demand can help lift the first few trades, especially if SpaceX employees are not the only ones looking for liquidity. - **Add in the possibility of index buyers and a small float, and the stock can squeeze higher fast.** The setup is built for emotion, and usually where regular investors make the wrong trade. It’s easy to turn a 10-year thesis into a one-hour order. They let the opening print decide position size. They confuse participation with conviction. The discipline is not complicated… just separate access from allocation. An IPO fill is not a mandate to build the whole position before lunch. ## The Friday Rule The question is not whether SpaceX becomes important – it already is. It’s how much of your 2036 position belongs in the first public hour. - **For most regular investors, the discipline is simple and psychologically difficult: separate access from allocation, and separate story quality from execution price.** Like an [alligator investor](https://katusaresearch.com/the-way-of-the-alligator/), keep enough cash to stay useful if the Launch Tax fades. The market is about to hand you a 95-times-sales bet on AI infrastructure wearing a rocket company’s name. The biggest returns in that race won’t land on the most hyped logo… **They’ll land on the un-hyped suppliers that get paid no matter which AI wins:** [**the power, the metal, the fuel, the grid**](https://join.katusaresearch.com/subscribe/?)**.** SpaceX may become one of the most important public companies in the world. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Watch the Cement Trucks, Not the Missiles - URL: https://katusaresearch.com/watch-the-cement-trucks-not-the-missiles/ - Type: article - Published: 2026-06-05 - Updated: 2026-06-04 - Author: Marin Katusa When a war winds down, you sell the war trade. Crude just had its worst month in a year, and a deal to reopen the Strait of Hormuz is all but done. Every reflex you’ve got says lighten up on energy. Cheniere went the other way. On May 28, the same week oil fell apart, it handed Bechtel $4.69 billion to build more export capacity. Gas that won’t reach a single buyer until the back half of the decade. **Energy companies don’t write a $4.69 billion check on a guess about next quarter.** It’s what a company that lives and dies on this trade believes about the next ten years… Signed into a falling market by people who read it better than anyone on the tape. ## The “Poured Runway” Rule There’s an old rule in businesses that build big, expensive things: you don’t pour a runway until you know the planes are coming. A runway is concrete, permits, years, and money you can’t claw back. Nobody pours one on a *maybe.* And you can’t pour one in a hurry. Permitting, engineering, and construction run for years. By the time the demand is obvious to everyone, it’s far too late to start laying asphalt. - **So a freshly poured runway is worth more than any forecast. It means someone already knew and was willing to bet concrete on it.** The US LNG build is exactly that. Sabine Pass, Corpus Christi, Plaquemines, and now Golden Pass, which shipped its first cargo in April as the ninth American export terminal, were all running below capacity while analysts still forecast a global gas glut. The concrete set before anyone could point to the demand. ## Then the planes landed, all inside four months… Nord Stream stayed dead, and a missile hit Qatar’s Ras Laffan. A cyclone shut Australia’s export coast, Iranian crude came off the water, and Russian terminals dropped 40%. Seven separate holes blown in global supply… There was one place with spare gas already liquefying and ready to load: the US Gulf Coast. Nobody else had capacity sitting idle, waiting for the call. **So, the call came to America.** US exporters loaded a record 32.15 million tonnes in the first four months of 2026, up 28% on the same stretch last year. The extra 7 million tonnes came in just above the 6.93 million Qatar lost over the same period, almost exactly tonne for tonne. And the build doesn’t stop here. - **The capacity already under construction more than doubles America’s export reach again before the decade is out.** And into a world that is short of gas… and getting shorter. ## Building Into a Falling Market Shell made the same bet in April, paying $16.4 billion for a Canadian gas producer. And a Philadelphia shipyard is building the first American-made LNG carrier since 1977, with delivery due in 2028. - **You don’t break ground on a 2028 carrier because gas had a good March****.** You do it because you’ve already read the next decade, and you want the asphalt down before anyone else sees it coming. The crowd selling the de-escalation is trading the planes. The companies pouring concrete into a falling market are telling you the runway mattered more. ## What Doesn’t Reverse This is why this month’s gas price is the least interesting number on the page. Henry Hub up 20% on a heat wave, TTF cooling as Hormuz reopens — that’s weather and headlines, and it cuts both ways. Capacity doesn’t. **A terminal under construction doesn’t unpour because crude had a bad month**. The permits are signed, and the contracts run for twenty years with named buyers on the other end. None of it cares what the front-month did on a Friday. You can still see who, because they’re the ones writing nine- and ten-figure checks into a market everyone else is leaving. The macro case is built, and the policy is in place, with demand locked in for years. - **Now the question every reader should be asking: who do you own to capture this trade?** The cleanest way to express this trade is through the producers… the companies that turn cheap American gas into global LNG at a massive spread. The operator already pocketing the spread and the one the market is pricing for a failure it hasn’t earned, are broken down in *Katusa’s Resource Opportunities, Cut to Kill.* **[[ Get the issue → ]](https://join.katusaresearch.com/subscribe/)** Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Thank You Page BB - URL: https://katusaresearch.com/thank-you-page-bb/ - Type: page - Published: 2026-06-03 - Updated: 2026-08-21 - Author: Marin Katusa ![Katusa Research] # You're In — The Black Book is on its way to your inbox You've just joined 400,000+ serious investors who receive Marin Katusa's commodity intelligence every Friday. 📩 Your first Friday brief arrives at **9:00 AM EST**. Check your spam or promotions folder and move us to your primary inbox so you never miss an issue. ## What to Expect ▶ **Weekly Friday Brief** — Marin's macro commodity thesis and an under-the-radar company deep-dive, delivered at 9 AM EST. ▶ **Special Situation Alerts** — Time-sensitive setups with specific company names and tickers when Marin identifies an inflection point. ▶ **Boots-on-the-Ground Research** — Insights from 500+ site visits across 100+ countries. No PR spin, no secondhand analysis. ### Want Marin's Full Market Intelligence & the Portfolio He's Tracking? The free Friday brief gives you Marin's macro views and commodity themes. Katusa's Resource Opportunities gives you his full portfolio — the specific companies he's tracking, his entry targets, and real-time alerts when he acts. [See What's Inside →](https://join.katusaresearch.com/subscribe/) © 2026 Katusa Research. All rights reserved. [Privacy Policy](https://katusaresearch.com/privacy-policy/) · [Terms](https://katusaresearch.com/terms-of-use/) --- # Compute as a Commodity - URL: https://katusaresearch.com/compute-as-a-commodity/ - Type: article - Published: 2026-05-29 - Updated: 2026-05-28 - Author: Marin Katusa On May 12, 2026 the CME Group and Silicon Data announced the first futures contract market in history that settles against the rental price of an Nvidia GPU. The contracts go live later this year, pending regulatory review. Terry Duffy, the CEO of the CME, said it directly: *“Compute is the new oil of the 21st century.”* It was 1983 when Oil went digital. **And I’ve heard the phrase “this is the new oil” many times over the last two decades. ** - But the way I read it, the market is about to start pricing compute the way it already prices oil, power, copper, uranium, and freight. One week after CME’s announcement, ICE launched its own competing GPU futures product tied to the Ornn Compute Price Index. Two exchanges racing to financialize the same commodity is how a new market forms. ## Back to 1983 On March 30, 1983, NYMEX listed the first WTI crude oil futures contract. The major oil companies hated it, OPEC hated it. And for the first eighteen months, volumes were so thin that a lot of people thought the contract would die on the vine. By 1986, when Saudi Arabia walked away from its swing-producer role and oil collapsed from around thirty dollars to under ten, the NYMEX curve was the only price anyone trusted. Four years later, Iraq invaded Kuwait and the WTI strip became essential. Every refiner, airline, and treasurer worldwide relied on it to determine future oil costs. The textbook stops the story there. - **NYMEX made oil prices transparent, hedging took off, and modern energy markets were born. ** As a resource investor, the part that got left out matters the most to me. A producer with a Permian position could finally lock in his selling price years forward, his cost of capital fell, and banks would lend against reserves they wouldn’t touch before. That’s where **Apache**, **Anadarko**,** EOG**,** Pioneer**,** **and **Devon** came from. ## The Contract Industrialized Oil Halliburton compounded for two decades on the same logic: a forward curve gave their customers long-dated visibility for the first time. And a producer who can see three years out signs three-year service contracts. Ditto with bankers providing debt based on P1, P2 and P3 resources. Pipe, rigs, steel, storage, ports: every physical thing upstream of the barrel repriced against the curve. Financing got cheaper, capital flowed in, long-duration contracts became possible, and the whole upstream supply chain scaled to match. - **The people who made the real money owned the things the contract made valuable.** ## Spark Spread Yes, we made up that phrase. Silicon Data built the index the CME contract will settle against. The** H100 Rental Index** pulls daily pricing from cloud providers, colocation operators, brokered cluster sales, and private rental platforms. It covers more than 80% of the global GPU rental market. The rate fell through late 2025 as new supply hit the market, then climbed back above $2.60 by May 2026 as premium inventory got scarce. Picture 10,000-GPU cluster like a Class-A office tower. The owner carries fixed costs: the power contract, the cooling system, the land lease, the chip financing. Revenue floats with the rental rate. - **At $2.60 per GPU-hour, one H100 running around the clock produces about $22,800 a year in gross rental revenue. The 10,000-unit cluster runs about $228 million a year at that rate. ** Move the rate down to $1.90, and that same cluster produces $166 million. That’s the same building, and same costs, creating a $62 million revenue swing, with zero change in operations. That’s what futures markets get built to solve. Revenue moves like a commodity while costs sit fixed like real estate, and the gap between them is the operator’s *“spark spread”. * CME and Silicon Data are building the instrument to hedge it. - **A GPU-hour also carries something crude oil didn’t: basis risk built into the product itself. ** An H100 in a power-constrained region with shared networking and variable uptime is a different asset from one in a secured facility with cheap power, direct fiber, and near-zero downtime. Early oil futures faced the same problem around crude grades and solved it by pricing quality spreads. **Premium GPU clusters are already trading at a spread to the index. ** The best-located, best-powered sites are starting to look less like server farms and more like Permian acreage: scarce, high-margin, and hard to replicate. ## The Mirror Trade At the Milken Institute this month, BlackRock CEO Larry Fink said that compute futures could become a new asset class. Because the U.S. is short on compute, chips, memory, and power. When a compute carries a public forward curve, governments stop treating AI as software. Instead, it is seen as strategic infrastructure, the same way they treat pipelines, ports, and power grids. - **The IEA puts global data-center electricity at 415 TWh in 2024 and projects it reaching 945 TWh by 2030.** U.S. data centers alone will account for nearly half of U.S. electricity demand growth over the rest of the decade. The moment the contract goes live, every cluster owner in the world starts treating their power contract, copper supply, uranium offtake, and gas line as a fixed input they’d better lock down. Before the curve starts pricing in the next squeeze. [**This is where Katusa’s **](https://join.katusaresearch.com/subscribe/)[**Resource**](https://url8329.click.katusaresearch.com/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdFPJP9UxZ5Nk2-2B-2BqnMJZN3dzwEH2NVWn8x9KDc14hq6e-2FPBvNnq1OtE59RJht-2FGjxBZtOwxTQIA58FDlKPJxeH1b2I2jgRCydhDpD6GHF7OvGKrEV6UkrnkSFw78qcl7LPXK4zmslvgCVFNOns4x9MA-3DzOKS_AU8oF2B84393VN4NqZh-2B46xLoDJA1idYNWqHZbZCvaHsqteydRFaX3n20GttTDNUkjDq4bjg5m7Rou0YSbUHcMQlzxvjEGq3P6RCi3O1UetpbrCXXgMEmC-2F86YxYxw5NWui70a8sC16xMW-2BZ8Ie4q57AhfK40DaA7F1zfgWtVBp9VbTQnR9-2FDw91ozMcCoLXW6wXbGO9t-2BDMKKL9WWMcdA-3D-3D)[** Opportunities has an edge**](https://join.katusaresearch.com/subscribe/)**.** Everyone is going to chase Nvidia, CoreWeave, and the obvious AI capex names. Those trades are already priced in. Upstream bottleneck, the physical thing the cluster owner now has to lock down, is where the hidden value is. Compute behaves more like electricity than copper: hard to store, local, quality-adjusted, full of basis risk, and dependent on bottlenecks the cluster owner doesn’t control. **There are Five Bottleneck Buckets: ** - **Power**. Natural gas, nuclear, SMRs, grid capacity, interconnection queues. - **Metals**. Copper, aluminum, silver, rare earths, transformers, switchgear. - **Data-center infrastructure. **Cooling, substations, land, permits, transmission. - **Financialization**. CME futures, forward curves, compute hedging, structured products. - **Scarcity signals.** GPU rental rates as a live market read on AI infrastructure stress. Reuters reported this week that U.S. power consumption is on track to hit new records in 2026 and 2027, with most of the growth coming from AI data centers and crypto. **Compute futures are the new price signal to watch.** And power, uranium, gas, copper, transformers, and grid infrastructure are the physical bottleneck on the other side of it. **[The mirror trade is on the bottleneck side](https://join.katusaresearch.com/subscribe/).** Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Exxon already mined this trade once - URL: https://katusaresearch.com/exxon-already-mined-this-trade-once/ - Type: article - Published: 2026-05-22 - Updated: 2026-05-21 - Author: Marin Katusa I bet you can’t name the company that built the world’s first rechargeable lithium battery. If you said Tesla, Panasonic, or any name with “battery” in it… you’re off by fifty years and an entire industry. The patent is US 4,009,052 and it was filed April 5, 1976. The assignee of the patent was Exxon Research and Engineering Co. **The oil company invented the battery.** And then they walked away from it. In October 1973, OPEC cut supply and America felt its first energy chokehold. You’ve seen the photos of gas stations rationed by license plate with lines around the block. Exxon wasn’t surprised. Their own geologists had quietly concluded years earlier that global oil would peak by 2000. And the embargo was the public confirmation of a private thesis. The battery was the hedge against the day their main product ran out. Then oil prices recovered, peak-oil got pushed out, and Exxon shelved it. Fifteen years later, Sony commercialized a version. Exxon spent the next four decades pumping crude oil. - **Last month, 50 years after Whittingham filed that patent, ExxonMobil produced its first battery-grade lithium from an Arkansas brine field.** The same company that invented the battery, abandoned it, and returned to mine the metal behind it. And “white gold” just hit a two-year high. ## Below Cash Cost Was Always Temporary To see why, rewind eleven months. In June 2025, lithium fell to $8,259 per tonne, below what it costs most miners to pull it out of the ground. Projects went dark and technical teams scattered. Feasibility studies dropped from dozens per year to fewer than ten, and new exploration dried up with them. The metal powering the grid buildout was selling at a loss. Miners need 6 months of sustained high prices before they commit to a restart. And at least twelve more months from that decision before the first production comes out the other end. The industry spent two years digging a supply hole, it will take three years to climb out of. Heading into 2026, S&P Global’s base case called for lithium to remain in a 109,000-tonne surplus. Smaller than 2025, but still a surplus. The market wasn’t priced for a supply shock. Then two came back-to-back: - **On February 25th, Zimbabwe’s Minister of Mines suspended all lithium concentrate exports with no warning and no end date. ** Zimbabwe was on track to produce 124,000 tonnes LCE in 2026, more than the entire S&P-projected global surplus and supplied 15% of all spodumene shipped into China. A partial lifting came April 27th, but a 10% export tax remains, and a full concentrate ban is locked in for January 1, 2027. - **CATL’s Jianxiawo mine, the largest hard rock lithium operation in the world, remained offline after restart delays that began in late 2024.** Zimbabwe’s disruption alone was enough to wipe out the entire forecasted cushion. Add CATL’s offline output, and the surplus S&P projected for 2026 had turned into a deficit before Q1 was over. ## Rack up the Lithium The Iran war put 20% of global oil and LNG flows through the Strait of Hormuz under threat, pulling forward EV buying by years. The UK recorded 86,120 EV sales in March 2026. EU battery electric registrations rose 51% year-on-year, with more than 500,000 units sold across Europe in Q1. BYD pushed a record 135,098 vehicles overseas in April. **The fastest-growing source of lithium demand is no longer cars.** BNEF surveyed 22 of the biggest battery makers. - **They found that energy storage will make up 42% of battery cell production by the end of 2026. This is a rise from under 20% in 2022. ** At least 11 cell plants built by companies like General Motors, Ford, and Volkswagen switched from making EVs to storage devices because grid demand for lithium is outpacing car sales. **EV sales are no longer the binding driver of lithium, storage is.** Battery storage’s installed capacity has increased almost 18x in 2025 compared to what it was in 2020. **40% of that growth came in the last 2 years.** The driver behind the steepest part of that curve is AI. A hyperscale data center burns 100+ megawatts continuously, and the grid can’t ramp that fast, so the data center brings its own battery. **Every rack going online is a lithium order****, indirectly. **That’s a demand vector that didn’t exist in any 2023 forecast. ## 3 Lithium Engines Running The market’s already moving… **LIT**, the Global X Lithium and Battery Tech ETF, returned 162% over the past year. **BATT**, the Amplify Lithium and Battery Technology ETF, returned 138% over the same period. And that’s against the Nasdaq-100’s 71% gain. **The US government moved too…** The DOE loaned $2.26 billion in Thacker Pass, Nevada, and the USGS found large lithium deposits in the Appalachian Mountains, enough to cover 328 years of US imports. The reason: China still supplies over 70% of the lithium-ion batteries the U.S. imports. The last comparable setup was 2016, when lithium ran on a confirmed supply shortage with EV penetration under 1% of new car sales. The last time this setup, lithium tripled. And that was with one demand engine. **There are three running now:** EVs, grid storage, and AI infrastructure, with the surplus S&P forecast for 2026 already gone. Exxon’s bet in 1976 was that oil would eventually run out. They were right about the depletion thesis, just fifty years too early. **They reopened the bet last month.** Fifty years later, the world is building that storage faster than any supply model projected two years ago. Read the full breakdown of fast-moving commodity sectors inside [*Katusa’s Resource Opportunities*](https://join.katusaresearch.com/subscribe/). Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Gold Audit Time - URL: https://katusaresearch.com/gold-audit-time/ - Type: article - Published: 2026-05-15 - Updated: 2026-05-14 - Author: Marin Katusa Quick test for you… Name the last U.S. president who let outsiders count the gold at Fort Knox. If you said Trump, Obama, Bush, or Clinton, you’re off by half a century. Gerald Ford was the last one, back in September 1974. The world has had six recessions, four wars, two financial crises, the creation of Bitcoin, and an AI rush since anyone outside the Treasury Department put eyes on America’s gold and counted it. **Right now, three of the largest gold balance sheets on earth sit in three different rooms with three different definitions of *we have it*. ** One of those rooms is being audited by a Big Four firm this year. The other two aren’t. And the room being audited is the one you trust the least. ## The Three Vaults, One Auditor Vault one is Fort Knox. The U.S. Treasury reports 8,133 metric tons of gold across all its depositories for a total of 261.5 million ounces of gold. With 147.3 million ounces at Fort Knox alone. Treasury Secretary Bessent told Bloomberg in February 2025 that an internal audit was completed on September 30, 2024, and: *“…all the gold is there. Any U.S. senator who wants to come and visit it, can arrange a visit through our office.”* Senator Mike Lee of Utah (who supported the audit push) said he had been repeatedly denied entry to the base anyway. On May 10, 2026, in an interview with Sharyl Attkisson on *Full Measure*, President Trump was asked what happened to the Fort Knox audit he and Elon Musk had floated in early 2025… He paused, then said: *“Which one are you talking about?”* After Attkisson reminded him, Trump answered: *“Well, we wanted to go knock on the door, Fort Knox — very thick door — and to see whether or not we have any gold in there… I do want to go to Fort Knox sometime. I want to see if the gold is there, which I’m sure it will be.”* The president of the country that holds the largest reported gold reserve in the world thinks the gold is there but hasn’t confirmed it personally. According to sitting U.S. senator from Utah, Mike Lee, he can’t get in to verify the gold is there. This reminds me of what President Reagan said, “*Trust*, but verify.” ## Vault Two is in Beijing The People’s Bank of China reported 2,321 tonnes as of April 2026, its 18th straight month of disclosed purchases. Goldman Sachs analyst Lina Thomas, estimated that China added 15 tonnes of gold in September 2025 alone. China’s official purchases explain only a small fraction of the gold moving through the country. - **The PBOC officially added 7 tonnes in Q1 2026. Over the same period, 345 tonnes were withdrawn from the Shanghai Gold Exchange.** No foreign auditor sets foot in Chinese vaults. It’s highly doubtful they will anytime soon. The gap between what Beijing reports and what the market *believes* is roughly the size of the entire German gold reserve. ## Vault Three is the Surprise Entry On March 24, 2026, Tether, the stablecoin issuer most gold investors still treat as a meme, announced its first full independent financial statement audit. Three days later, the Financial Times said it was ‘KPMG’. - **Tether Gold’s reserves grew to 707,747 fine troy ounces, about 22 tonnes by the end of Q1 2026, with roughly 5.8 tonnes added in three months.** When you’re buying physical gold in volumes larger than China, a clean audit will put you on the map. ## The Congress “Gold Price” - The Treasury books its 261.5 million ounces of gold at $42.22 per ounce. That’s the statutory price Congress set in 1973. At $4,650 today, the difference is roughly $1.2 trillion of unrecognized assets sitting in the ledger. On the All-In Podcast in March 2025, Secretary Bessent admitted he had considered cashing it in, then walked it back in the same breath: *“I said we’re going to mobilize the asset side of the balance sheet and all the gold. Said he’s going to revalue the gold. I can say today we’re not revaluing the gold.”* Five months later, a Federal Reserve principal economist published a paper on the Fed’s own website analyzing exactly how a revaluation would work. Governments don’t commission how-to papers on transactions they aren’t studying. **Whatever happens, three things already stand.** - The most scrutinized gold balance sheet of 2026 belongs to a crypto company, not a country, and they will be 3rd party audited soon—or not. - The Treasury holds $1.2 trillion of unrecognized gold, and the Fed’s own economist already published the playbook for using it. - The element you trust most, gold, has been counted the least. **The audit calendar has become must-watch news.** Once the Three Vaults frame loads, the question changes from whether tokenized gold demand is real to who’s already on the other side of it. Every ounce backing Tether Gold (XAU₮), and every ounce in USDT’s wider gold sleeve, came from a producer, a refiner, or a custodian. - **Two of them have been in our portfolio inside** [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/) **for months, delivering early gains to subscribers.** Both collect a cut of every ounce that leaves the ground. [Subscribers already know which two](https://join.katusaresearch.com/subscribe/). And both run the kind of paper trail a Big Four firm could walk into tomorrow. Names and reasoning live inside KRO… Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Oil’s Phantom Barrels - URL: https://katusaresearch.com/oils-phantom-barrels/ - Type: article - Published: 2026-05-08 - Updated: 2026-05-07 - Author: Marin Katusa When you read that China imports 11% of its oil from Malaysia, you picture tankers leaving Malaysian ports. You should check the math. Malaysia produces 355,000 barrels a day and consumes nearly a million. The country uses three barrels for every one it pumps out of the ground. Indonesia is worse: 605,000 barrels of production a day against 1.7 million in consumption. It has to fill that 1.1 million barrel gap somehow. Yet Chinese customs data says Indonesia and Malaysia together supply 21% of China’s crude imports. Two net importers, larger combined than Saudi Arabia on China’s official ledger. The math doesn’t square. The gap between the arithmetic and the official numbers is the most important trade setting up in global energy right now. ## Phantom Barrels The barrels are real, but there’s a little problem… The exporter on the customs slip isn’t. Iranian crude moves to a transshipment point off the Malaysian coast: Linggi, Tanjung Pelepas, the southern straits. There, the cargo is transferred ship to ship, blended with crude of legitimate origin, given new paperwork, and sailed to a Chinese port flying a Malaysian or Indonesian flag. Russian crude takes a similar route through Singaporean and Indonesian waters and has done so since 2022. The Iranian version of the route is older, built up after the 2018 sanctions reimposition, and has carried the bulk of Iran’s oil revenue for the better part of a decade. The cargo gets logged as transit in Singapore, blended in Indonesian waters, and recorded as Indonesian or Malaysian on the Chinese customs slip. This isn’t unheard of. - **Venezuela ran a version of this play during the 2019–2024 sanction years, called “**[**Ghost Ships**](https://www.bbc.com/news/articles/c4g562vz34ro)**”.** Their cargoes were reflagged through Cuba and Russia. And it was growing until the US military stepped in. AIS spoofing, where a ship broadcasts a fake location, is up over 200% since 2022. *Screenshot from PlanetLabs website “*[*Dark Fleet*](https://www.planet.com/pulse/illuminate-the-dark-fleet-with-planet-maritime-domain-awareness/)*”* **If you’re keeping track, that’s three sets of paperwork for one set of barrels.** Analysts call them phantom barrels. They carry real crude on fake paperwork. This is the trade that lets Iran sell roughly 1.4 million barrels a day under sanctions that, on paper, are total. Kpler tracks the flows in real time, and S&P Platts has published case studies on the route. The wires report the official numbers because the official numbers are what governments release. It’s just that the math doesn’t add up, and every analyst who matters knows this. What changed in the first quarter of 2026 is that the phantom route *cracked*. ## Cracks in “Old Oil” Three pressures collapsed onto the phantom-barrel trade in the same quarter. On February 28, the United States and Israel went to war with Iran. The Strait of Hormuz (which carries roughly a fifth of the world’s seaborne oil), became contested. Insurance markets pulled war-risk coverage on March 2 with 72 hours’ notice, and transits dropped 81%. Russia’s seaborne export capacity was knocked offline by 40% over the same period. The cause was sustained drone strikes on terminals, refineries, and the shadow fleet itself, all of it on the public record. - **Venezuelan crude, which was just under 5% of China’s imports and three-quarters of Venezuela’s total exports, ran to zero in April 2026. ** The barrels that used to settle in yuan now settle in dollars and ship to refineries in the US sphere. Add Iran’s roughly 11% (laundered through Indonesia and Malaysia), Russia’s net loss to China of around 6.6% of imports, and Venezuela’s ~5%. By April, more than a fifth of China’s crude had walked off the customs ledger. ## The Rise of America Beijing has a strategic reserve and public estimates put it above 1 billion barrels. - **At ordinary consumption rates, that buys China months of cushion against the shortfall, not years.** After that, China sits down with Washington. Higher oil prices for China, a weaker yuan, and a settlement currency that says United States on the front of every note. The phantom barrels were China’s way of buying crude on China’s own terms — sanctioned product, settled outside the dollar system, at a discount nobody had to declare. That arrangement is closing. What replaces it is a deal at market prices, in dollars, on America’s terms. The deal is forced by inventory clocks, not by political resolve. China can buy at the new price in dollars, or it can run its refiners short. Every month that passes without a deal is a month closer to a refining slowdown that no Five-Year Plan can wave away. The wires will tell you the official numbers, but the official numbers don’t reconcile. That’s the trade. - **The 4 names that capture this trade are in the May issue of** [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/) **— *Cut to Kill*.** [**[ Get the issue → ]**](https://join.katusaresearch.com/subscribe/) Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Silver’s Identity Crisis - URL: https://katusaresearch.com/silvers-identity-crisis/ - Type: article - Published: 2026-05-01 - Updated: 2026-04-30 - Author: Marin Katusa If you bought silver during the run up to $116 in February, you’ve spent the last six weeks wondering what went wrong. The metal didn’t break… The story did. Because you measured with a yardstick that isn’t built for the job. The yardstick is the U.S. dollar. The most actively managed asset on the planet, managed for expansion, by design, by people who don’t lose any sleep over your silver position. I get the appeal. A silver coin in your hand feels more honest than another government promise. You can drop it on a table and hear the argument. When you measure silver in dollars, you’re measuring a hard asset against a unit that gets actively diluted on purpose. But there’s a better yardstick. It just doesn’t fit on a bumper sticker. ## “Silver Is Money” Is What Trips You Up You’ve heard the slogan a thousand times. At gold shows, in keynote slides, in the bio of every silver bull on X. *Silver is money.* Maybe you’ve said it yourself. I’ve nodded at it for 25 years out of politeness. Germany dropped the silver standard in 1871. The U.S. demonetized silver two years later. By 1900 the world ran on gold. Silver’s monetary career is over, the bumper sticker outlived it by 150 years. The dollar is a managed currency engineered for expansion; silver is a passive lump of metal that gets dug out of the ground. They have nothing in common except that one is used to price the other. ## The Era Where Silver Led Every Metal Step back from the last six weeks and look at the era that matters: the largest M2 expansion in modern history. Since March 2020, silver has returned 437% against 193% for gold, 192% for platinum, and a 15% loss for palladium. That isn’t a coincidence. Silver does exactly what it’s supposed to do when the unit measuring it gets diluted on purpose. The slogan has been hiding that mechanism behind a worse story for 150 years. ## The Yardstick That Actually Works Anchor silver to M2 instead. It’s the broadest practical count of how many dollars are floating around. When M2 grows, every existing dollar becomes a thinner claim on real things. Silver is real things: in a vault, a panel, a contact, or a circuit. The price doesn’t go up so much as the unit measuring it shrinks. Three reference points come out of it. The 2011 ratio puts silver near $97 today. We hit it in February at $116, then corrected through it. The 1980 ratio puts silver near $500. Money supply back then was less than a tenth of what it is now. **Today’s $70 sits below both**. Treat that as a ruler though, not a target. I am not calling for $500 silver. I don’t know anyone who can forecast silver to the dollar without lying to himself first. ## The Bumper-Sticker Bulls Just Sold the Bottom The bumper-sticker bull buys silver because it’s “money.” When the slogan gets tested by a 30% correction, the thesis breaks with it… sell at the low, buy back at the top. The reason to own silver doesn’t survive contact with a price chart. The M2 bull buys silver because monetary expansion is structural. Deficits rarely shrink for long. The Fed’s balance sheet has not gone back to its old world. And M2 has a habit of growing after every political promise to “get serious.” That is a different reason to own silver. But it gives the thesis a spine that survives a bad month on the chart. When silver corrected from $116 to $70, the bumper-sticker crowd pulled $4.68 billion out of SLV in Q1 2026 alone. That’s against just $1.44 billion of inflows. ## You Can’t Survive This Trade on a Slogan Silver investors often get the macro thesis right, then buy whatever has “silver” in the name. Some of the biggest silver-branded companies do not have the silver exposure investors assume. Pan American Silver (the company with silver in its name) gets more of its revenue from gold than from silver. That’s the question the room doesn’t want. - **74% of the world’s silver **[**comes out of the ground as an accident**](https://katusaresearch.com/heres-whos-holding-your-silver-hostage/?)**.** In this month’s edition of [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/?), we put every major silver producer in the world through the screen. A few of the things we found: ✓ **The most consistent operator in the large-cap group has 5.8 years of reserve life left **and management has decided not to fix it. We name the company and explain why that’s a *deliberate* choice and not a failure. ✓ **The cleanest mid-cap operator in the sector has 2.4 years of reserve life and 100% of its production in a jurisdiction that’s getting harder by the year.** The screen flags it as the strongest operator in the group. It’s also the riskiest position in the group. Both things are true. ✓ **We screened the entire junior silver universe and named the shortlist that meets every criterion we use: **geology, balance sheet, and valuation disconnect. Most of these names trade tight enough that a KRO recommendation would set the price for everyone behind us. Subscribers see the shortlist. They get there before the crowd does. [**[ Get the April KRO right here → ]**](https://join.katusaresearch.com/subscribe/?) Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Gold’s Funeral Phase - URL: https://katusaresearch.com/golds-funeral-phase/ - Type: article - Published: 2026-04-17 - Author: Marin Katusa Your hand has been hovering over the sell button. Gold just closed out its worst month since August 2008 — down 11.6%. Ninety-five percent of GDX mining stocks are in bear-market territory, up from five percent four weeks ago. The friends who laughed at your gold position eighteen months ago are having a very good week. In the back of your head, a question forms… **The one every gold investor asks at this point in every cycle:** what if they were right and you were wrong? Your gut remembers the wrong history. The history it should remember is the reason you bought gold in the first place. ## Remember This 2008 Part? The last month gold had that look like March 2026 was back in August 2008. Gold ran from $250 to $1,003, the crowd had finally been convinced, and then Lehman collapsed. The financial system tried to liquidate everything it owned into cash. Within months, the price collapsed to $712, a 30% crater that erased eight years of patience in a single stroke. The obituaries were immediate. Gold was broken, it wasn’t a hedge anymore, it had failed the one test it was supposed to pass. Sell before it got worse. **What most forget is what came *after* the capitulation.** Within months, gold bottomed. Three years later it was trading at $1,900 — a new all-time high, 167% above the low, and the largest three-year move of the entire 2000s bull market. Every investor who sold in October 2008 watched that move from the sidelines. And 2008 was not even the most dramatic version of the pattern. The current ~18% drawdown is the next row in that table. ## The Data Doesn’t Make This a *Close* Call… We can track extreme gold washouts with simple backtests. These are moments when investor pessimism gets as stretched as it is right now. We can look at nine historical instances over the last twenty years. Eight of those nine rolled higher one year later, for an 89% win rate and a median one-year return of 10.1%. **On those setups, gains of +10% were roughly four times more likely than losses of 10%+.** Narrow the filter to the exact condition we are in right now… with GLD more than 18% below its 52-week high and the signal gets louder. - **Five prior instances happened since 2006, and every one of them was higher a year later.** The results are a median one-year return of 15.5%. A sample of five is not a promise. But that asymmetry is what serious investors build careers on, not what they get scared out of by just one red month. The math hasn’t been on the side of the sellers at this point in the cycle. Nor in any of the five prior instances. And there is no structural reason this one should be the first. ## The Scare of Drawdowns Continues With the Miners (GDX) Over the last 14 years, there’s another signal that flashed 4 times in the GDX. And the index has given amazing returns in the months to follow. **The same signal flashed again last month.** When over 95% of miners in GDX are in bear market territory, GDX’s median return over three months is 21.8%. Since the last signal, GDX is already up 22%. ## What’s Different This Time Every previous *Funeral Phase* resumed because a structural thesis survived the capitulation. The 1970s had inflation and Bretton Woods. 2008 had the financial crisis and the first round of QE. 2020–22 had COVID stimulus and peacetime debt expansion at a historic scale. **This cycle has something the others didn’t.** - **Tether: The largest stablecoin on earth, a token now settling more daily volume than Visa — is buying physical gold to back its reserves.** That’s a sentence that did not exist in any prior gold bull market. Central banks are accumulating at a record pace on top of it, and sovereign debt is expanding faster than any fiat can absorb. The structural bid for gold is wider and more indifferent to retail sentiment than ever. The Funeral Phase does not care about the headlines because the buyers who matter don’t watch CNBC. Why do these corrections still work on sophisticated investors? Memory is short and emotional. What comes to mind is last month, when the account was bigger. It’s the physical sensation of watching a position turn on you, and the friend who will mention this, unprompted, at the next dinner. The history in the table above is the useful one. - **Every generation of gold investors has faced this moment, and the ones who sold at the bottom paid for it for years — sometimes for the rest of their careers.** Gold might go lower from here. Bases form over weeks, not days. But lower is not broken, and a drawdown is not a thesis. The thesis would be that central banks stop buying, Tether stops accumulating, and sovereign debt starts shrinking. None of those things has happened. Gold does not need you to believe in it. It needs you to outlast the people who don’t. Every investor who built real wealth in gold stared at a number like the one on your screen, read headlines like the ones in your feed, and had the same argument with his own gut that you are having with yours. The ones who sold in 1975 paid for it until 1980. The ones who sold in October 2008 watched the largest three-year move of the decade without them. The ones who sold in 2022 missed the run to $5,500. **If you didn’t take profits and *Katusa free rides* a few months ago like we published to members, we were doing in** [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/checkout/subscribe-now-checkout-010-2/)**…** Put your hand down. The sell button will still be there tomorrow. — Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Here’s who’s holding your silver hostage - URL: https://katusaresearch.com/heres-whos-holding-your-silver-hostage/ - Type: article - Published: 2026-04-10 - Updated: 2026-04-17 - Author: Marin Katusa You bought silver because you thought it was money. The people digging it up disagree. The phone in your hand has silver in it. So does the car in your driveway, the solar panel on your neighbor’s roof, the radar in the fighter jet that flew over your house this morning, and the surgical tools in the last hospital you walked into. Silver is everywhere you look once you start looking. And the people pulling it out of the ground aren’t trying to find any of it. That’s the hostage situation you don’t see in the price. ## The Mines That Don’t Want Silver 74% of the world’s silver comes out of the ground as an accident. Copper miners, zinc miners, lead miners, gold miners. They’re chasing something else, and silver falls out as a bonus. They don’t care what silver trades for. They care what copper trades for. - **Of the ten largest silver-producing mines on the planet, only two actually run on silver economics.** The other eight would keep digging if silver went to zero. They’d slow down if copper crashed, even at $200 silver. When demand surges, supply can’t chase it. The tap is controlled by metals nobody’s talking about. And it gets worse. Higher prices should bring more drilling, that’s how markets work. For silver, they didn’t. Silver prices have tripled over the last five years, while drilling fell by roughly 25%. ## Demand Doesn’t Negotiate Silver isn’t jewelry money anymore. 59% of demand is industrial, and industry doesn’t check the chart before it buys. Solar panels need silver to move electrons across the cell. Nothing else works as well at the price. Every battery EV uses 25 to 50 grams, roughly double that of a gas car. Defense systems run on it. The U.S. spent $997 billion on its military last year and the procurement officers signing those orders probably never opened a silver chart in their lives. The U.S. added silver to its critical minerals list. China moved to restrict exports. Solar panels can’t substitute their way out of silver. EVs can’t either. Neither can radar, neither can the operating room. The result: the market has run a deficit for five years running. London’s vaults, the world’s largest silver clearing hub, have drained 40% in four years. This is what makes today different from 1980 and 2011. Those rallies were leverage and mania. This one is built on physical demand from systems that have to run. ## What You Own vs. What You Think You Own Now, pull up your silver positions. **The biggest “silver miner” in your portfolio probably isn’t a silver miner.** Pan American Silver, the company with silver in its name, gets just 24% of its revenue from silver. It’s a gold company wearing a silver jersey. Several mid-tier names you’ve heard of operate in jurisdictions you wouldn’t park a car in. One of the biggest has under three years of reserve life left. At $116 silver in January, every operator looked like a winner. Margins were fat. Cash was flowing. Twitter was celebrating. Then silver corrected to $73 and the average operators got exposed in real time. Hot money exits faster than it enters. The opportunity now isn’t “buy silver.” It’s knowing which companies survive when margins compress, costs rise, and governments start asking for a bigger piece. And it’s knowing where the next pounds are coming from, because somebody has to actually find more of this metal, and almost nobody is drilling for it. ## Three Things to Carry with You We published 9 jaw-dropping silver facts in the April KRO to subscribers. I’ll share 3 of them here… **1. Supply that can’t respond to price isn’t supply. It’s a hostage situation.** When 74% of production is controlled by miners chasing other metals, silver can rise for years before output catches up. **2. A company with “silver” in its name is a marketing decision, not a business model.** Read the revenue mix before you read the ticker. **3. The catalyst already happened. **The deficit is five years old and the vaults have been draining the whole time. You’re not early. You’re on time. **This month’s** [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/) **is the silver report we’ve been building toward.** We tore apart every major producer by cost structure, jurisdiction, mine life, and return on capital. We named the operators built to survive a margin compression and the ones that won’t. But the section subscribers are talking about is the **junior explorer screen**. **We pulled apart the entire junior silver universe…** **Ranked 18 names by development tier…** - **And showed which ones have the geology, the balance sheet, and the liquidity to actually re-rate when the next leg hits.** Several trade for under $1 per ounce of silver in the ground while the metal trades at $74. We don’t recommend names where our footprint distorts the price. But we show you the exact map. [**[ Read the April KRO → ]**](https://subscribers.katusaresearch.com/checkout/subscribe-now-checkout-010-2/) Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Thank You Page - URL: https://katusaresearch.com/thank-you-page/ - Type: page - Published: 2026-04-09 - Author: Marin Katusa ![Katusa Research] # You're In — Welcome to Katusa Investment Insights You've just joined 400,000+ serious investors who receive Marin Katusa's commodity intelligence every Friday. 📩 Your first Friday brief arrives at **9:00 AM EST**. Check your spam or promotions folder and move us to your primary inbox so you never miss an issue. ## What to Expect ▶ **Weekly Friday Brief** — Marin's macro commodity thesis and an under-the-radar company deep-dive, delivered at 9 AM EST. ▶ **Special Situation Alerts** — Time-sensitive setups with specific company names and tickers when Marin identifies an inflection point. ▶ **Boots-on-the-Ground Research** — Insights from 500+ site visits across 100+ countries. No PR spin, no secondhand analysis. ### Want Marin's Full Market Intelligence & the Portfolio He's Tracking? The free Friday brief gives you Marin's macro views and commodity themes. Katusa's Resource Opportunities gives you his full portfolio — the specific companies he's tracking, his entry targets, and real-time alerts when he acts. [See What's Inside →](https://join.katusaresearch.com/subscribe/) © 2026 Katusa Research. All rights reserved. [Privacy Policy](https://katusaresearch.com/privacy-policy/) · [Terms](https://katusaresearch.com/terms-of-use/) --- # Thank You Page KII - URL: https://katusaresearch.com/thank-you-page-kii/ - Type: page - Published: 2026-04-08 - Author: Marin Katusa # **Email Pending Confirmation** A confirmation link has been sent to your email. ![Marin Katusa] Please check your email for a confirmation link from **subscribers@katusaresearch.com **and expect to receive Marin Katusa's latest insight on Friday. --- © 2026 Katusa Research. All rights reserved. [Privacy Policy](https://katusaresearch.com/privacy-policy/)| [Legal Information](https://katusaresearch.com/terms-conditions-use/) --- # Katusa Investment Insights — Free Weekly Brief – X - URL: https://katusaresearch.com/kii-2026-x/ - Type: page - Published: 2026-04-07 - Author: Marin Katusa Katusa Investment Insights — Free Weekly Brief # Every Friday, 400,000+ Investors Get the Commodity Intelligence Wall Street Won't Publish While analysts wait for consensus, Marin Katusa is already on the ground — walking mine sites, reading geology reports, and meeting CEOs across 100+ countries. By the time it's on Bloomberg, the move is over. Get the intelligence first. 400,000+ Weekly Readers 20+ Years Track Record $2B+ Financings 100+ Countries Visited As Seen In Wall Street Journal Bloomberg CNBC New York Times Free Access Get This Friday's Brief Join 400,000+ serious investors. Delivered every Friday at 9am EST. Next Edition Drops In 00 Days : 00 Hrs : 00 Min : 00 Sec YES — SEND ME THIS FRIDAY'S BRIEF 100% free. No spam. Unsubscribe anytime. - Weekly Friday commodity intelligence brief — 9am EST - Special Situations alerts with company names & tickers - No ads. No conflicts of interest. No fluff. You're on the list. This Friday's brief lands in your inbox at 9am EST. Check your spam folder if you don't see it. - Weekly Friday commodity intelligence brief — 9am EST - Special Situations alerts with company names & tickers - No ads. No conflicts of interest. No fluff. Katusa Research Independent Financial Research [Privacy Policy](https://katusaresearch.com/privacy-policy/) [Terms & Conditions](https://katusaresearch.com/terms-conditions/) [Disclaimer](https://katusaresearch.com/disclaimer/) [Contact](https://katusaresearch.com/contact-us/) **Legal Disclosure:** By using this site, please assume Marin Katusa, Katusa Research and its employees have a financial interest in all companies and sectors mentioned. The information provided is for informational purposes only and is not a recommendation to buy or sell any security. This is not financial advice. © 2026 Katusa Research. All rights reserved. 530–800 West Pender St, Vancouver, BC, Canada. --- # You’re not late. The frenzy hasn’t started. - URL: https://katusaresearch.com/youre-not-late-the-frenzy-hasnt-started/ - Type: article - Published: 2026-04-03 - Updated: 2026-04-02 - Author: Marin Katusa Gold just posted its worst month since 2008. Silver gave back a third of its value from the January highs. If you own resource stocks, March felt like the market was trying to tell you something… that the bull run you finally believed in had already ended. - But price doesn’t tell you where the cycle is. - It tells you where the emotion is. **And there’s a scoreboard for the cycle that nobody knows how to check.** It’s one that was flashing a very specific signal in the weeks before this correction even started. **Where’s the garbage?** Every resource (and sector) bull market in the last 40 years ends the same way. New companies flood the exchanges with fresh paper. Promoters dust off claims nobody wanted when copper was $3 and silver was an afterthought. Geologists who spent the bear market consulting start staking ground on weekends. The TSX Venture Exchange fills with fresh tickers attached to little more than a PowerPoint, a property map, and a prayer. The industry calls it *moose pasture*, and it means land that’s worth more to the moose than the shareholders. And moose pasture has a near-perfect record as a cycle-top indicator. So where is it? ## Six Billion Dollars and Only 4 New Faces Canadian mining companies raised $6.7 billion in January and February of 2026. - **That’s more than four times the same window three years ago,** - **And more than double last year’s pace (401 separate financings in just two months).** That money was committed before Iran, before $115 oil, before gold’s 18% drawdown. Almost all of that money went to companies that already existed, with projects that already had drill results and development timelines. So far this year, only 4 companies went public on the Venture Exchange, while $6.7 billion flowed into the sector around them. In my experience, that’s not a tell-tale sign of a gold rush or bull market top. ## Read the Check, not the Chart Instead, I’m seeing institutional and HNW capital making calculated bets on de-risked assets and ignoring everything else. I can say that in my office, I’m doing the same. The average deal size confirms who’s writing the cheques. - **In 2024, the typical financing raised $3 million.** - **Today, the average is $8.3 million.** That nearly threefold jump doesn’t mean more investors showed up. It means bigger investors showed up: fund managers who’ve walked the core shack, stress-tested the 43-101, and modelled the economics at three different metal prices before wiring a dollar. I call this the *Cheque-Size Signal* — and it may be the single most useful diagnostic for separating a mid-cycle correction from a cycle top. When the average cheque is growing, institutional money is accumulating with conviction. When it starts shrinking, the institutions are liquidating while retail investors arrive with excitement and smaller wallets. ## The Pasture Is Still Frozen I call this the Moose Pasture Test, and right now the market is passing it cleanly. When secondary financings dominate and new listings stay flat, institutional money is re-underwriting known assets at higher conviction. That’s what mid-cycle looks like… The money is serious, the deals are real, and the companies getting funded have actual projects with actual mine plans. When new listings explode and average deal sizes start shrinking, the institutions are heading for the exits while retail arrives with both hands open. The cheques get smaller because the cheque-writers get less sophisticated. That’s the cycle-top signal that has preceded every major resource correction in modern Canadian markets. Right now, the capital is overwhelmingly flowing into TSX-listed companies (in green). - **The hot money that funds anything with a pulse hasn’t arrived.** The promoters who can smell easy capital from three provinces or states away haven’t started filing prospectuses. The moose pasture is still frozen solid. And in resource investing, frozen pasture means the cycle has room to run. By early 2011, the TSXV had swollen to over 1,200 mining and exploration companies, with new listings flooding in every week. Many were attached to properties that nobody would have touched two years earlier. The collective market cap hit $45 billion, and everyone in Vancouver had a stock tip for the cab driver. Then the exchange lost 82% of its value over the next four years, a destruction of capital that wiped out nearly every late-cycle entrant. The moose pasture promoters disappeared, the retail cheques stopped clearing and the institutions had already left. That’s the movie, and every experienced resource investor recognizes the characters. But right now, it’s playing in reverse: cheque sizes are growing, not shrinking. New listings are flat, not flooding the market like at market tops. **While the crowd watches the gold price bounce, the deals are getting done.** - **This past month, we published on a pre-IPO financing in** [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/checkout/subscribe-now-checkout-010-2/)**, my premium research service.** It’s a legendary North American gold district that’s been locked behind closed doors for over a century, now consolidated under one roof for the first time. KRO subscribers got alerted to it well before it trades on any exchange. That’s what being in the room looks like. [**[ Get in the room → ]**](https://subscribers.katusaresearch.com/checkout/subscribe-now-checkout-010-2/) Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The “Watermark”: You’re grieving money you never had - URL: https://katusaresearch.com/the-watermark-youre-grieving-money-you-never-had/ - Type: article - Published: 2026-03-27 - Updated: 2026-03-26 - Author: Marin Katusa 1. **The 4 most expensive words in your portfolio.** You say them without thinking. They’re costing you. 2. **The phantom portfolio your brain built without telling you.** It’s valued at prices that no longer exist — driving every decision you make. 3. **The biggest fund managers on earth are doing the same thing.** And praying no one notices. | What’s your number? Don’t tell me you don’t have one. Every investor has a price seared into their memory. A stock that hit a high. Maybe you owned it, maybe you watched it run and kicked yourself for missing it. And that number is still sitting there, months or years later, shaping every decision you make around it. You pull up the chart. Your eyes go straight to the peak. And without realizing it, you just made that peak the most important number in your analysis. It’s not revenue, not cash flow. Not what the business actually earns. A number left behind from a moment that may never come again, like the stain on a basement wall after a flood recedes. The moment is gone. The momentum that caused the high price has passed. The gurus aren’t as loud as they once were. But the *mark* stays. And if you stare at it long enough, you start to believe the price belongs at that level that once was. **I call it the high watermark.** And it’s costing you more than you think. ## “It Used to Be…” These might be the four most expensive words in investing. “It used to be $50… Now it’s $25.” I hear some version of this almost every week. From retail investors, from friends at dinners, from people who have been in the markets for decades and still fall for it. And every single time, the same questions get skipped. *Why* was it $50? Was the whole sector caught in a mania? Was money cheap and flowing into anything with a ticker? Did a short squeeze jack the price up for three weeks before gravity took over? **The watermark investor doesn’t ask any of that.** They see $25 and their brain whispers *half off*. Like it’s a clearance rack and not a broken thesis. In 2022, lithium spot hit $80,000 a tonne. That was the flood level. Small developers with marginal deposits ran to $5, $8, $12 a share from pennies. Today, lithium sits at around $19,000 per tonne. If you’re still holding one of those small caps because “it used to be $8,” you’re ignoring that the $8 price required $80,000 lithium. At $19,000, that company’s foundation isn’t just lower… it’s likely underwater. Burning cash and waiting for a rescue. And it’s not just you anchoring to that number. The funds that bought near the top are trapped too. They’ll sell into every rally trying to get closer to their entry price, save their year, and protect their bonuses and jobs. - **That watermark is not a ghost in your head. A watermark is a ceiling.** And there’s institutional money reinforcing it every time the stock tries to bounce. And it goes deeper than *public* markets. ## Private Equity ‘Mark to Phantom Past Market’ There are trillions of dollars in private equity sitting on asset valuations that are quietly anchored to the same kind of phantom pricing. The manager knows the asset wouldn’t fetch the carrying value in a real sale today. But marking it down means killing the fund’s returns, their fees, and their next raise. So, they hold the watermark and pray. It is the same reflex at institutional scale — and it’s a topic I’ll be covering in depth soon. For a discount to be real, the value must remain the same. If the conditions that pushed the price to $50 evaporated, that $50 was never a real price. ## The Reflex You Don’t Notice You Have… Think about the last stock you researched. - **Before you looked at a single financial metric, did you glance at the 52-week high?** Chances are you did. Almost everyone does. It takes half a second and it feels like nothing — just orienting yourself on the chart. But in that half second, your brain sets an anchor price. If the stock is near the high, it* feels* expensive. If it’s far below, it *feels* bad. You made a valuation judgment before you read a single line of the financials. And that judgment wasn’t based on assets, margins, management, or the quality of the resource. You didn’t analyze the company. You compared it to its own ghost. ## The Phantom Portfolio and “Brutal Brain Calculation” Now this next part does the most damage… - **When a stock in your portfolio drops from its peak, your brain does something brutal.** It calculates what your position *would have been worth* at the high. Not what you paid. Not what it’s worth now. What the position *would have been worth* at the top. You build a ghost version of your portfolio — valued at the watermark — and you carry it around everywhere. You measure your real results against this phantom every single day. And every single day, you feel like you’re falling behind. Even when you’re sitting on gains. I’ve watched this play out across every commodity cycle I’ve traded through. A guy buys a stock at $15. It runs to $50. He doesn’t sell. Fine, maybe the thesis still holds. It pulls back to $30. He’s up 100% on his original investment. That’s an excellent result by any measure. But he doesn’t feel up 100%. He feels like he* lost* $20 a share. **The watermark hijacked his reference point.** $50 became his baseline, and now a winning trade *feels* like a losing one. Confidence shaken. Mindset changed. Ability to act frozen. A real gain turns into a real loss. Not because the market took his money, but because a number on a chart convinced him he already had more. You’re grieving money you *never* had. ## Clean the Wall Anchoring to peaks and 52-week highs is how our brains are wired. Losing something hits us about twice as hard as gaining the same thing. This is deep programming, and simply knowing about it doesn’t override it. What overrides it is discipline. **Next time you catch yourself measuring a stock against its watermark, force yourself through two questions.** - First: *what specific conditions created that peak?* Sector mania, cheap money, a squeeze, a speculative cycle — or real fundamental growth? - Second: *do those conditions still exist today?* If they do, the watermark might be telling you something useful. A strong business trading below its peak because of temporary market noise is exactly where the best opportunities hide. But if those conditions are gone — if the storm has passed — the watermark is a ghost. And you need to value what’s in front of you, not what’s behind you. **Three things to take with you:** - **The watermark is a record of conditions, not a record of value.** A stock’s peak tells you what the market believed at one specific moment. It says nothing about what the company is worth today. - **The phantom portfolio is the most expensive portfolio you’ll ever own.** Every dollar you “lost” from a peak is a dollar you never actually had. Stop measuring real positions against imaginary ones. - **If you can’t name the conditions that created the peak, you never understood the trade.** Before you anchor to any high, you need to explain exactly why it got there — and whether those reasons still hold. Stop staring at the stain and look at the foundation underneath. That’s where the answer is. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # One Water. Half the World’s Food Supply. - URL: https://katusaresearch.com/one-water-half-the-worlds-food-supply/ - Type: article - Published: 2026-03-20 - Updated: 2026-03-19 - Author: Marin Katusa Almost half of the world’s nitrogen fertilizer exports pass through ONE narrow waterway. That sentence should concern you more than oil at $100. In 1909, Fritz Haber figured out how to pull nitrogen from the air and turn it into ammonia. Carl Bosch scaled it. Together, they built the process that now feeds roughly half the planet. Today, roughly half the food on Earth depends on synthetic nitrogen fertilizer. Without it, the planet could support about 4 billion people. We have 8 billion. And right now, the machinery that makes all this possible runs through one of the most volatile regions on the planet. ## The Pressure Was Already There This crisis didn’t start on February 28th. China has been restricting urea and phosphate exports since 2021, with its phosphate ban running through August 2026. Russia and Belarus remain constrained by sanctions and shipping disruptions despite steady production. Those two pillars weakened first, and the global food system shifted its weight onto the one remaining backstop: the Middle East. Then Israeli strikes hit Iran’s South Pars gas field, the largest natural gas field on the planet. The 2025 Iran-Israel escalation temporarily halted roughly 12 million cubic meters per day of gas output. This time, the damage risks running deeper, and any sustained disruption tightens the global ammonia cost curve immediately. ## The Strait That Feeds the World Oil gets the headlines, but Fertilizer follows the same route, and almost nobody mentions it. - **Countries bordering the Persian Gulf account for ~49% of global urea exports and ~30% of global ammonia exports.** The Strait of Hormuz is also the chokepoint for roughly 44% to 50% of the world’s seaborne sulfur. Which is the key input for producing phosphate fertilizers like DAP and MAP. Most missed that last point. **QatarEnergy** has already halted production at the world’s largest single-site urea facility. Plants across Saudi Arabia and the UAE have curtailed output or gone dark entirely. At least three cargo ships have come under direct attack from Iranian forces since the U.S.-Israeli strikes began. Reports of sea mines are rising, insurance costs have surged, and vessels are refusing to enter the region. Markets responded fast. - **Urea prices at the New Orleans import hub jumped from roughly $475-$516 per metric ton to $683, a move of 44% in days.** North American fertilizer indexes climbed above $810 per short ton, surpassing last year’s peak. The fertilizer market doesn’t move slowly when supply chains tighten. Stocks moved just as fast. CF Industries, Nutrien, and Mosaic have all moved up to multi-month highs since the strikes began. The equity market priced this before most commodity desks caught up. ## The Worst Possible Moment About 50% of the nitrogen applied to U.S. corn goes in during spring planting. **A vessel loaded in the Persian Gulf today takes 30 days to reach a U.S. port and another three to four weeks to reach interior farm markets.** The *American Farm Bureau Federation* sent an urgent letter to the White House on March 9th. And their message was direct: fertilizer is stranded in the Middle East during the most critical window of the agricultural calendar. - **Agriculture Secretary Brooke Rollins confirmed publicly that roughly 25% of American farmers have not yet secured their fertilizer for this spring.** The choice facing those farmers is ugly. They can reduce nitrogen application, switch from corn (which needs heavy nitrogen) to soybeans. Or, absorb the cost and bet on crop prices recovering. None of those options are good. One Iowa corn grower put the math in plain terms. Anhydrous ammonia cost him $492 a ton in 2021. By January 2025, it was $745. Corn prices barely moved. Now add the current shock on top of that. - **At current levels, it takes roughly 133 bushels of corn to buy one ton of urea, the highest ratio since the 2022 spike.** Supply is stranded in the Gulf. And production costs are rising everywhere else. ## Washington is Scrambling Since the February 28th strikes, Dutch natural gas futures have climbed more than 56%. U.S. gas is up roughly 13%. That gap matters because European and Asian fertilizer producers run on expensive feedstock, and they’re getting squeezed from both sides at once. North American producers running on cheap domestic gas are the only ones whose economics have just improved. Washington noticed. And the White House confirmed this week it’s pursuing fertilizer from Venezuela and Morocco to offset Middle East disruptions. The Farm Bureau asked for military escorts through Hormuz, a Jones Act waiver, tariff suspensions, and federal cargo insurance. ## Three Pillars and No Backup Step back and look at the architecture of global fertilizer supply. - - China is restricting exports through August 2026. - Russia and Belarus remain constrained. - The Middle East now faces direct disruption. All three pillars took a serious hit within the same cycle. There is no swing supplier ready to absorb this. There is no strategic fertilizer reserve—unlike oil, nobody has been stockpiling ammonia in underground caverns. G7 countries don’t maintain fertilizer reserves the way they maintain oil stockpiles. When the system tightens, there is no release valve. ## The Lag Is What Kills You Farmers are adjusting application rates this week and Governments are rerouting supply chains. Buyers are competing for limited volumes at the worst possible point in the agricultural calendar. But none of that shows up at the grocery store *today*. Fertilizer doesn’t inflate food prices at the checkout. It inflates them at the field *months* before harvest. That lag is what makes this cycle easy to dismiss until it’s too late to act on. **Less fertilizer in the ground today means lower yields at harvest. **By the time crop data confirms it, the season is already locked in. That’s why this matters now—not in Q4. We profiled **CF Industries** and several other fertilizer plays in [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/checkout/subscribe-now-checkout-010-2/?) in late 2025, well before the Hormuz crisis made headlines. - **CF alone has climbed over 50% since.** **KRO subscribers had the playbook before the market priced it in.** [If you want to see what we’re watching next, you can join here](https://subscribers.katusaresearch.com/checkout/subscribe-now-checkout-010-2/?). Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Katusa Investment Insights — Free Weekly Brief - URL: https://katusaresearch.com/kii-2026/ - Type: page - Published: 2026-03-19 - Author: Marin Katusa Katusa Investment Insights — Free Weekly Brief # Every Friday, 400,000+ Investors Get the Commodity Intelligence Wall Street Won't Publish While analysts wait for consensus, Marin Katusa is already on the ground — walking mine sites, reading geology reports, and meeting CEOs across 100+ countries. By the time it's on Bloomberg, the move is over. Get the intelligence first. 400,000+ Weekly Readers 20+ Years Track Record $2B+ Financings 100+ Countries Visited As Seen In Wall Street Journal Bloomberg CNBC New York Times Free Access Get This Friday's Brief Join 400,000+ serious investors. Delivered every Friday at 9am EST. Next Edition Drops In 00 Days : 00 Hrs : 00 Min : 00 Sec YES — SEND ME THIS FRIDAY'S BRIEF 100% free. No spam. Unsubscribe anytime. - Weekly Friday commodity intelligence brief — 9am EST - Special Situations alerts with company names & tickers - No ads. No conflicts of interest. No fluff. You're on the list. This Friday's brief lands in your inbox at 9am EST. Check your spam folder if you don't see it. - Weekly Friday commodity intelligence brief — 9am EST - Special Situations alerts with company names & tickers - No ads. No conflicts of interest. No fluff. Katusa Research Independent Financial Research [Privacy Policy](https://katusaresearch.com/privacy-policy/) [Terms & Conditions](https://katusaresearch.com/terms-conditions/) [Disclaimer](https://katusaresearch.com/disclaimer/) [Contact](https://katusaresearch.com/contact-us/) **Legal Disclosure:** By using this site, please assume Marin Katusa, Katusa Research and its employees have a financial interest in all companies and sectors mentioned. The information provided is for informational purposes only and is not a recommendation to buy or sell any security. This is not financial advice. © 2026 Katusa Research. All rights reserved. 530–800 West Pender St, Vancouver, BC, Canada. --- # Katusa Special Situations Alert Thank You - URL: https://katusaresearch.com/kss-thank-you/ - Type: page - Published: 2026-03-12 - Author: Marin Katusa ✓ # CONFIRMED. ## You're in the room. We've **whitelisted your email** for **Katusa Special Situations Alerts**. Next Alert Monday, March 16th — 9:00 AM EST The full KR Special Situations Alert: the name, ticker, asset breakdown, and valuation math. -- Days -- Hours -- Min -- Sec To make sure the alert reaches your inbox: Move any email from **subscribers@katusaresearch.com** to your Primary tab or add the address to your contacts. — Marin Katusa & the KR Special Situations Team --- # Katusa Investment Insights — Free Weekly Brief - URL: https://katusaresearch.com/katusa-investment-insights-free-weekly-brief/ - Type: page - Published: 2026-03-11 - Updated: 2026-03-17 - Author: Marin Katusa Katusa Investment Insights — Free Weekly Brief # Every Friday, 400,000+ Investors Get the Commodity Intelligence Wall Street Won't Publish While analysts wait for consensus, Marin Katusa is already on the ground — walking mine sites, reading geology reports, and meeting CEOs across 100+ countries. By the time it's on Bloomberg, the move is over. Get the intelligence first. 400,000+ Weekly Readers 20+ Years Track Record $2B+ Financings 100+ Countries Visited As Seen In Wall Street Journal Bloomberg CNBC New York Times Free Access Get This Friday's Brief Join 400,000+ serious investors. Delivered every Friday at 9am EST. Next Edition Drops In 00 Days : 00 Hrs : 00 Min : 00 Sec YES — SEND ME THIS FRIDAY'S BRIEF 100% free. No spam. Unsubscribe anytime. - Weekly Friday commodity intelligence brief — 9am EST - Special Situations alerts with company names & tickers - No ads. No conflicts of interest. No fluff. You're on the list. This Friday's brief lands in your inbox at 9am EST. Check your spam folder if you don't see it. - Weekly Friday commodity intelligence brief — 9am EST - Special Situations alerts with company names & tickers - No ads. No conflicts of interest. No fluff. Katusa Research Independent Financial Research [Privacy Policy](https://katusaresearch.com/privacy-policy/) [Terms & Conditions](https://katusaresearch.com/terms-conditions/) [Disclaimer](https://katusaresearch.com/disclaimer/) [Contact](https://katusaresearch.com/contact-us/) **Legal Disclosure:** By using this site, please assume Marin Katusa, Katusa Research and its employees have a financial interest in all companies and sectors mentioned. The information provided is for informational purposes only and is not a recommendation to buy or sell any security. This is not financial advice. © 2026 Katusa Research. All rights reserved. 530–800 West Pender St, Vancouver, BC, Canada. --- # The Tokenized Gold Revolution - URL: https://katusaresearch.com/the-tokenized-gold-revolution/ - Type: page - Published: 2026-03-09 - Updated: 2026-03-19 - Author: Marin Katusa The Tokenized Gold Revolution | Katusa Research Special Intelligence Katusa Research Special Situations Intelligence Briefing # The Tokenized Gold Revolution Blockchain is transforming the world's oldest asset. Discover how the "Parallel Reserve" is creating unprecedented liquidity and security for gold investors. [Read Full Report Now](https://subscribers.katusaresearch.com/checkout/the-tokenized-gold-revolution/) The global financial landscape is undergoing a fundamental shift. As traditional institutions grapple with digital transformation, physical gold is finding a new home on the blockchain. - **Institutional Flow:** The massive shift of capital into Real-World Assets (RWAs). - **The Parallel Reserve:** Why decentralized gold is the ultimate hedge against CBDCs. - **Verifiable Scarcity:** How blockchain solves the age-old problem of "paper gold." Access the full intelligence report to position yourself for the next era of the gold market. Risk Disclosure Investing in commodities and tokenized assets involves significant risk. This content is for informational purposes only and does not constitute financial advice. © 2026 Katusa Research • [Contact Us](https://katusaresearch.com/contact-us/) • [Terms and Conditions](https://subscribers.katusaresearch.com/checkout/the-tokenized-gold-revolution/) • [Privacy Policy](https://katusaresearch.com/privacy-policy/) • [Full Testimonial and Returns Disclosures](https://join.katusaresearch.com/kr-testimonial-and-returns-disclosures/) Investing involves risk. Please read our Full Testimonial and Returns Disclosures. --- # Every robot needs 30 magnets. There aren’t enough. - URL: https://katusaresearch.com/every-robot-needs-30-magnets-there-arent-enough/ - Type: article - Published: 2026-03-06 - Updated: 2026-03-05 - Author: Marin Katusa A senior member of Katusa Research just got back from a trip to Austin, Texas. Between the robot barista at the layover San Francisco airport, to the Waymo self-driving car, and the food delivery robot… Things in society are coming to you and I fast. The rise of the robots isn’t a far-off reality anymore if that trip is any indication… It’s already here. **Now, most people couldn’t pick it out of a periodic table…** But this rare earth metal has become one of the key chokepoints in the race to build humanoid robots. - **Neodymium is up 113% in twelve months.** The price action over the past year says the market is starting to catch on. Citi projects 1.3 billion robots in operation by 2035. Four billion by 2050. By 2035, 60% of all robots will be domestic cleaning robots, roughly one for every three households on earth. Tesla plans to start selling humanoid units in 2027, targeting one million per year. Chinese manufacturers like Unitree Robotics and Fourier Intelligence are racing to match that pace. ## The 30-Motor Problem A single humanoid robot needs 30 or more motors, each powered by rare earth magnets called NdFeB (neodymium-iron-boron). No current alternative matches their power density. Ryan Castilloux, managing director of Adamas Intelligence, puts the math bluntly: hitting Musk’s goal of 10 billion robots by 2040 would need more than 100 times current global NdFeB magnet output. Even the low end breaks the math. One billion robots by mid-century (Morgan Stanley’s figure) would eat 1.6 million metric tons of copper per year. - **That’s 6% of today’s global copper demand, added to a supply chain already under strain.** NdPr oxide is the key rare earth input for robot magnets. It nearly doubled from $60,000/kg last July to over $120,000/kg by early 2026. BMI, a Fitch company, says the NdPr market will run a deficit for the second straight year in 2026 as EV motors, wind power, and robots all chase the same material. ## Copper’s 10 Million Tonne Hole Rare earths grab headlines, but copper may be the bigger constraint. An S&P Global study from January found that global copper demand will hit 42 million metric tons by 2040, a 50% jump from today. Supply, even with a doubling of recycled scrap, will fall 10 million metric tons short. S&P called it a “systemic risk” for global industry. And that deficit exists *before* robots. - **With robots factored in, S&P estimates 1.6 to 16.5 million metric tons of additional annual demand, depending on adoption scale.** Copper hit $13,000 per metric ton in early 2026, a record. Global output is set to peak in 2030 at 33 million metric tons, then *fall* as ore grades drop and costs rise. New mines take 17.9 years on average from find to first output. The fix for today’s gap won’t show up until the 2040s. ## Lithium’s Role in Robotics Lithium *looks* like the one metal with room to breathe. The market ran a surplus of 175,000 tonnes in 2023 and 141,000 in 2025, per S&P Global. Prices hit four-year lows. Headlines declared the lithium boom dead. **That surplus is shrinking.** S&P projects 109,000 tonnes in 2026, while Fastmarkets forecasts the market flips into a 1,500-tonne deficit by year-end. Prices already rebounded 56% in H2 2025, climbing from $10,800/mt to $16,900/mt by December. The price crash did real damage to future supply. - Arcadium Lithium and Core Lithium shut down mines in Australia. - Albemarle paused its global growth plan. In August 2025, CATL halted its Jianxiawo mine in Jiangxi province after a permit expired. That single site held 3-6% of global lithium supply. And when the news broke, Albemarle jumped 17%, Pilbara 16%, and lithium futures hit the daily limit on the Guangzhou exchange. The pipeline got gutted during the exact window when future demand was compounding. - **Citi projects that 1.3 billion AI robots will be operational by 2035, increasing to 4 billion by 2050.** Re-read that. Scaling to Musk’s 10-billion-unit projection and Adamas Intelligence says you’d need 10 times current global lithium production just for robots. **The IEA projects lithium demand from clean energy will grow 5x by 2040. That model was built before robots entered the picture.** Every bump in robot forecasts is a bump in lithium demand that most supply models haven’t priced in. ## 85% Of Refining Runs Through One Country China controls roughly 85% of global rare earth refining and 40-50% of copper smelting. When MP Materials, the only active rare earth miner in the U.S., stopped shipping raw ore to China last year, NdPr oxide prices jumped 40% in weeks. **One company’s supply shift moved a global market. **Now, western governments are spending to close the gap. The DOE put $1 billion toward rare earth supply chains. MP Materials is expanding Mountain Pass in California. The EU passed its Critical Raw Materials Act. But Mountain Pass has been “expanding” since 2022, and the average new mine takes 18 years to reach output. Policy and physical production run on very different clocks. ## Three Metals, One Math Problem Neodymium is up 113% in a year. Copper is at all-time highs with a 10-million-ton projected deficit. Lithium’s surplus is evaporating just as a new demand source enters the picture that most supply models haven’t accounted for. - **These three supply gaps share the same root cause: demand from robots, EVs, grid storage, wind, defense, and AI is scaling all at once.** The mines needed to feed that demand were never built when they should have been. The companies on the right side of these gaps — with permits in hand, production growing, and costs locked below spot… Are the ones we’ve been building positions in for the past two years inside [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/checkout/subscribe-now-checkout-010-2/?). Each one was picked using Katusa’s framework for telling which miners actually gain from supply crunches and which ones just talk about them. [**See What’s in the Portfolio →**](https://subscribers.katusaresearch.com/checkout/subscribe-now-checkout-010-2/?) Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Never Bet Against America - URL: https://katusaresearch.com/never-bet-against-america/ - Type: article - Published: 2026-02-27 - Updated: 2026-02-26 - Author: Marin Katusa Four years ago, every so-called expert in finance told you the same thing: America is done. The dollar will collapse. China owns the future. I disagreed, and I put that disagreement in writing: a 250-page book called *The Rise of America* where I laid out the data, made the calls, and signed my name to every one of them. So how did those calls hold up? Let’s run the tape. - **The S&P 500 sat at 4,200 in May 2021.** Today it trades north of 6,800, up over 60%. - **Gold traded at $1,900 an ounce.** It now sits above $5,000, a gain of more than 160%. - **Uranium languished near $30 per pound.** It punched through $100 in January, more than tripling. U.S. GDP back then stood at $23 trillion. It has since climbed to $30 trillion and now accounts for more than half the entire G7’s combined output. When trouble hits, money flows to the USA. The rule of law, markets and innovation ecosystem have no equal. The doomsayers and “America is Finished” crowd got it spectacularly, historically wrong. And the part that matters most to your portfolio… The best gains from these themes still lie ahead. ## King Dollar, Still on the Throne In the book, I argued the U.S. dollar would tighten its grip on the global financial system. It held roughly 59% of global reserves then. It still does. The Federal Reserve’s SWAP line network functions as a credit lifeline for allied nations, and any country that wants access to dollar liquidity plays by Washington’s rules. Everyone else gets locked out. Russia discovered what that looks like in practice. After the Ukraine invasion, the U.S. froze Russian reserves, severed SWIFT access, and cut Moscow off from the dollar architecture overnight. The BRICS bloc promised a new reserve currency, delivered nothing of substance, and watched the greenback’s share of global reserves barely budge. China faces its own structural wall. The renminbi lacks free convertibility, where Beijing’s financial system operates behind layers of opacity. And China’s property crisis, persistent deflation, and accelerating capital flight have done more to bury the “Chinese century” narrative than any argument I ever put on paper. ## America’s Energy Weapon I argued that energy dominance would hand the United States a strategic advantage no rival could match. Oil, gas, nuclear, renewables: no other country on earth commands that full spectrum. Every piece of that thesis has landed. **The U.S. now produces more oil *and* more natural gas than any nation in history**. American LNG shipments replaced Russian pipeline gas across swaths of Europe. And a wildcard I flagged in 2021, the collision between technology and power demand, blew the door wide open. **AI reshaped far more than Silicon Valley; it redrew the entire energy map.** Every hyperscale data center devours electricity on an industrial scale. And that surge in demand reignited the nuclear sector, drove uranium back toward $100 per pound, and pushed energy stocks in the S&P 500 up over 20% since January alone. - **The U.S. government just approved 10 new Westinghouse reactor builds and committed $2.7 billion to domestic uranium enrichment.** **And on February 12th, the DOE launched its Genesis Mission: **26 AI challenges aimed at cutting new nuclear reactor deployment time in half, speeding grid planning 20-100x faster and building real-time fusion digital twins. The U.S. government is now explicitly fusing AI with energy infrastructure to power the AI economy itself. That’s the kind of demand that plays out over decades. ## The Resource Supercycle HAS ARRIVED In *The Rise of America*, I laid out a collision course. Electrification, reshoring, and the energy transition would slam into each other and ignite a generational supercycle in critical minerals: copper, uranium, rare earths, and the entire supply chain behind everything from electric vehicles to AI servers. That collision arrived ahead of schedule. - **The CHIPS Act dragged semiconductor manufacturing back onto American soil.** - **The Pentagon now funds domestic rare earth projects to crack China’s stranglehold on processing.** - **Copper demand from data centers alone will rival entire nations’ consumption within a few years.** Gold confirms the thesis from a different angle. Central banks (led by China’s PBOC, now buying for 15 straight months) are stockpiling at a pace unseen in decades. Gold above $5,000 reflects a market repricing a world where hard assets carry genuine weight again. ## The Scoreboard Ahead The Rise of America holds up better than almost anyone expected. - **Since Q4 2019, the U.S. economy has grown 14.5%, the strongest run in the G7 by a wide margin.** Germany can barely hold above zero, Japan contracted last quarter, and the gap between the U.S. and its peers keeps widening. Tariff noise, stretched valuations, and political chaos will create volatility. Volatility shakes out weak hands and rewards those already positioned. **The sectors I identified in 2021 (energy, uranium, gold, critical minerals) remain early in their cycles**. And the structural forces behind them are compounding, not fading. Central banks are still buying, reactors are still being built. And the AI power buildout has barely broken ground. **If you read *The Rise of America*, you’ve watched one of the most profitable macro calls of the last five years unfold in real time.** If you haven’t read it yet, [grab a copy here](https://riseofamerica.com/). And if you want the specific stocks, the live analysis, and the portfolio positioning that converts these macro themes into real returns… That’s what I deliver every month inside ***Katusa’s Resource Opportunities***. [You can learn how to join those already in the room right here](https://join.katusaresearch.com/subscribe/?). **The most expensive mistake in investing hasn’t changed in 250 years.** Never bet against America. *– Marin Katusa* **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Project Vault: Washington’s $12 Billion Copper Bet - URL: https://katusaresearch.com/project-vault-washingtons-12-billion-copper-bet/ - Type: article - Published: 2026-02-20 - Author: Marin Katusa 534,000 tonnes. That’s how much copper sits in US warehouses right now. Inventories jumped fivefold in twelve months, which is the highest level since 1989. Trading houses like Mercuria, Hartree, and Trafigura spotted a fat arbitrage between New York and London prices last year. They shipped everything they could find to American ports while the rest of the world ran dry. Total US copper holdings now top 1 million tonnes when you count off-exchange storage. - **That covers 7 months of domestic demand and matches the entire annual output of Escondida, the world’s largest copper mine.** ## Washington Made It Happen With Project “Vault” Tariff fears pushed US copper prices above London benchmarks and traders exploited the spread. Imports hit 1.7 million tonnes in 2025, nearly double the prior four-year average. Trump spared refined copper from July’s tariffs. The arbitrage collapsed, but shipments kept coming. In early February, the administration unveiled Project Vault, a $12 billion critical minerals stockpile funded through public-private partnership. **Robert Friedland stood in the Oval Office for the announcement.** He said copper would “*undoubtedly be included*.” Washington added copper to its critical minerals list last November alongside lithium, cobalt, and rare earths with sixty materials making the cut. All 60 tied to energy security and defense. - **When governments hoard industrial metals, prices stop following normal cycles.** Copper held near $6 per pound through January despite recession fears and rate-cut debates. It touched $14,500 per tonne on the LME, which was a new record. Goldman warned prices overshot fundamentals. ## Four Forces Compounding Demand I’ve tracked copper through three major cycles. This setup looks a bit different for a few reasons… **Grid rebuilding** is the biggest driver. Global power demand rises nearly 50% by 2040. That means adding 330 Hoover Dams worth generating capacity every year for the next fifteen years. Transmission and distribution networks need $7.5 trillion in investment, and underground cables drive most of that growth. Copper dominates underground because it conducts better and resists corrosion. **EV growth** compounds the problem. A battery electric car uses 2.9 times more copper than a gas vehicle, including motors, wiring harnesses, battery packs, and charging systems. China became the first market where EVs outsold gas cars in 2025. Annual EV copper demand hits 6.3 million tonnes by 2040, up from 2.6 million today. **AI infrastructure** adds a new layer. Data centers now consumes 5% of US power. By 2030, that share reaches 14%. - **Each megawatt requires 30 to 47 tonnes of copper.** **Defense spending** rounds it out. NATO members pledged 5% of GDP on military budgets. Drones, missiles, and communications systems all run on copper-intensive electronics. Militaries will pay whatever copper costs. S&P Global projects demand is growing from 28 million tonnes today to 42 million by 2040. A 50% increase in a market already running tight. ## Supply Can’t Keep Pace Primary production peaks around 2030 and then declines as depletion sets in. South American ore grades dropped 44% since 2000. Miners move more rock, burn more fuel, and consume more water just to hold output steady. Chile produces a quarter of the world’s copper. Output fell in each of the last five months of 2025 while export revenues climbed on higher prices. Fewer tonnes mined and more dollars spent equals depletion in real time. New mines take an average of 17 years from discovery to production. It takes permits, reviews, consultations, legal fights… the pipeline cannot respond to today’s tightness until the mid-2030s. **Even aggressive recycling covers only one-quarter of 2040 demand.** The math points to a 10-million-tonne shortfall by 2040. That gap only closes through higher prices. **Smelting copper adds another chokepoint…** China controls over 40% of global smelting capacity, and that share keeps growing. Treatment charges collapsed as smelters multiplied faster than concentrate supply. Weaker operators got squeezed out. Building Western smelters costs billions and takes years. Nobody wants to build Western smelters while China keeps adding capacity ## The Copper Stock I’m Betting On… Copper trades near all-time highs while governments stockpile and deficits widen. Goldman Sachs calls it overvalued but the market keeps bidding. I’ve seen strategic metals reprice when supply constraints meet policy urgency. That’s where the new floor ends up higher than the old ceiling. Many copper deals have crossed my desk this year and most don’t survive due diligence. The ones worth owning share common traits: quality deposits, stable jurisdictions, and catalysts that work without $8 copper. **Just last month, my top copper pick nearly doubled since I first recommended it.** The company holds a joint venture interest in one of the world’s largest copper-gold deposits. The underground expansion is ramping up, and the major next door will need every ounce. **The stock ran hard and I do believe it will run harder as my thesis plays out.** A takeout before year-end wouldn’t surprise me, because the asset is too strategic to leave in small hands. That’s why I own a significant position. The reasons are all there: The world needs 50% more copper by 2040, supply peaks in four years and governments are stockpiling. **The math doesn’t work and I’m positioning to capitalize on it.** You can find the name of the stock (and strategy) in my premium newsletter – [Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/?). Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Jamie Dimon Sees Cockroaches. I See a Setup. - URL: https://katusaresearch.com/jamie-dimon-sees-cockroaches-i-see-a-setup/ - Type: article - Published: 2026-02-13 - Updated: 2026-02-12 - Author: Marin Katusa Gold just had its best year since 1979. Silver more than doubled. Then both sold off hard, right when the reasons to own them were getting stronger. Liquidity is breaking down in corners of the financial system most people aren’t watching. **Two multi-billion dollar companies collapsed last September on fake invoices and double-pledged collateral.** JPMorgan, Jefferies, and Barclays all had exposure but none of them caught it in time. In early 2008, nothing felt broken either. Leverage, funding, and trust between institutions were already cracking beneath the surface. Then the whole system came apart, but not as a stock crash… it was liquidity collapse. The same conditions are forming again. ## A World Built on Leverage Modern economies run on leverage. Governments borrow to roll deficits; corporations borrow to fund growth and funds borrow to amplify returns. Even conservative strategies depend on short-term funding staying available. For more than a decade, that structure worked because liquidity stayed abundant. Rates stayed low. Risk stayed hidden. After 2008, banks pulled back and regulation tightened. Something else stepped in. **Private debt.** Private credit funds started lending directly to the borrowers banks wouldn’t touch. Middle-market firms. Auto lenders. Roll-ups. The loans don’t trade often, don’t get marked daily, and offer higher yields in exchange for opacity. At first, private debt filled a gap. Over time, it became essential. J.P. Morgan estimates private credit assets at around $1.2 trillion, and the growth rate explains why it now sits at the center of the system. - **Over the past decade, private credit expanded at roughly 14.5% per year, while traditional bank lending grew closer to 3%.** Banks now lend hundreds of billions to private credit managers, private equity firms, and BDCs. Pension funds allocate to them. Insurance companies rely on them for yield. The credit risk moved off bank balance sheets. The funding links didn’t. The system doesn’t just touch private debt. It leans on it. ## In Leveraged Systems, Failures Rarely Arrive Alone Jamie Dimon said it best last year… *“If you see one cockroach, there are more behind the wall.”* **First Brands**, a $5 billion-revenue auto parts company, grew by borrowing aggressively and refinancing constantly. Prosecutors allege executives used fake invoices and pledged the same collateral multiple times. When it filed for bankruptcy in September, it had $12 million in cash and over $9 billion in liabilities. **Tricolor** collapsed the same month. It ran subprime auto loans — already one of the more fragile corners of consumer credit. Prosecutors allege executives manipulated loan data and double-pledged collateral to multiple lenders at once. Auto loans often reveal financial stress before it spreads. These were not fringe businesses. Auto parts. Auto loans. Ordinary consumer credit. They didn’t fail because demand vanished overnight. They failed because leverage met weak oversight while funding conditions tightened. Late-cycle failures always look like this. ## Why This Resembles the Start of 2008 The 2008 crisis did not begin with Lehman’s collapse. It began when lenders stopped trusting collateral. Funding markets seized. Repo desks pulled back. Margin calls cascaded. Assets that looked stable got liquidated. That same mechanism is visible again. The global repo market — the overnight funding system that allows banks and hedge funds to borrow cash against government bonds — now totals roughly $16 trillion, with close to 60% tied to the U.S. market. That concentration increases fragility. Repo works on confidence. When it cracks, leverage unwinds quickly. - **Hedge funds that rely on daily refinancing must sell immediately when funding tightens.** Now connect that to private debt. Private credit depends on confidence, rollover, and valuation stability. When liquidity tightens, the weakest credits surface first. Documentation gets questioned. Fraud surfaces. And lenders start pulling back. This is how systemic stress begins. ## Markets Are Already Sending Warnings You don’t wait for defaults to confirm a liquidity problem. You watch behavior. Capital has been moving away from risk for months. Valuations across growth sectors have reset. Capital moved from growth toward safety. The pattern is consistent: money looking for shelter. ## Precious Metals Feel Liquidity Stress First When liquidity tightens, even safe havens sell off early. At the peak of the 2008 crisis, gold fell roughly 30%. Silver collapsed more than 50%. Those declines had nothing to do with long-term value. Everything was sold to raise cash. Only later did gold and silver surge. The same setup is happening now. - **Since December 2025, CME has raised margin requirements on gold and silver multiple times.** Then switched to an entirely new percentage-based model in January. Each hike forces traders to post more cash — and in stressed markets, that cash comes from selling positions. That’s why gold and silver corrected sharply even as the reasons to own them got stronger. Silver took the worst of it because the U.S. silver market runs on paper. When margins spike, paper positions unwind first. Physical demand catches up later. ## How Contagion Builds Liquidity stress doesn’t blow up all at once. It builds. Repo tightens. Private credit strains. Risk assets sell off. Margins rise. Forced selling spreads. Then correlations spike. Everything sells together. And differentiation disappears. That’s when fear shows up. ## Why Physical Gold and Silver Matter in the End Liquidity crises punish leverage and they reward durability. Physical gold and silver don’t rely on refinancing. They don’t face margin calls. They don’t depend on counterparties staying solvent. **Demand for physical exposure is already rising.** Across Asia, gold and silver accumulation continues to grow — a bet on assets that sit outside the credit system entirely. Gold and silver rarely move straight up in these moments. They sell off early as margin calls force liquidation and that phase feels confusing, even bearish. It never lasts. Once leverage clears and confidence breaks, capital stops chasing returns and starts seeking refuge. That’s when physical assets reassert their role. Not as trades. As balance sheets outside the system. Volatility now is not a warning sign for gold and silver. It’s the setup. [And I’m positioning my portfolio accordingly](https://subscribers.katusaresearch.com/checkout/the-tokenized-gold-revolution/). Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # This signal has fired five times. It’s never been wrong. - URL: https://katusaresearch.com/this-signal-has-fired-five-times-its-never-been-wrong/ - Type: article - Published: 2026-02-09 - Author: Marin Katusa Gold dropped $900 from the highs. If you’re nervous, good. [You should be paying attention](https://subscribers.katusaresearch.com/checkout/the-tokenized-gold-revolution/). But not to the talking heads explaining why gold fell. Tariffs, dollar strength, profit-taking, those are stories. I trade data. Last week, the Gold VIX, a volatility indicator based on options pricing for GLD spiked above 38. That’s only happened five times since 2008. - Every single time, gold was higher six months later. 100% win rate. - Every single time, gold was higher twelve months later. Average gain: 20%. [The signal is live. Here’s how I’m playing it](https://subscribers.katusaresearch.com/checkout/the-tokenized-gold-revolution/). Silver was even more dramatic. 100% win rate at twelve months. Average gain: 52%. Now here’s the catch, the first three months after this signal was choppy with a 60% win rate. Real drawdowns and real pain. **That’s where we are right now.** The part that shakes people out. [Get positioned before the signal clears](https://subscribers.katusaresearch.com/checkout/the-tokenized-gold-revolution/). And this time, there’s a factor that didn’t exist in any of those prior signals: A $186 billion company is buying one to two tons of physical gold per week. Building what I call the Parallel Reserve. Acquiring royalty companies to lock in supply for decades. **A structural buyer that doesn’t care about your $900 correction.** That changes the math on what “twelve months later” looks like this time. I’ve put together the full thesis… who’s buying, what they’re targeting, and the three names I’m positioned in. [**[ Get The Parallel Reserve Report NOW ]**](https://subscribers.katusaresearch.com/checkout/the-tokenized-gold-revolution/) Regards, Marin Katusa Founder, Katusa Research **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Financial Hand Grenade - URL: https://katusaresearch.com/the-financial-hand-grenade/ - Type: article - Published: 2026-02-04 - Author: Marin Katusa **A financial network you’ve never used settled $11 trillion.** That’s Visa’s entire annual volume. Almost nobody in traditional finance noticed. No banks were used. No wire transfers. No SWIFT codes. But the company behind it noticed. And then they did something that won’t make sense to you yet. **They started buying physical gold. Tonnes of it.** Every single week. I’ll explain why, but first you need to understand what *stablecoins* are. Because without that, the rest of this letter is gibberish. The global financial system is fundamentally broken. Three billion people don’t have access to banking, they’re too poor for their deposits to matter. Billions more use ever-weaker currencies, watching inflation eat their money alive. Then there’s SWIFT, the international payments network. It’s excruciatingly slow, charges fees, and has become highly politicized. The dream is a currency that replaces all of these, providing: - A stable **store of value** - A free **means of payment** - Borderless monetary** transactions** Bitcoin was supposed to be the answer. Then it turned out to be extremely volatile and costly in fees. So, a decade ago, a tiny company created **USDT**, the first stablecoin. USDT is a digital token “tethered” to the value of the U.S. dollar, the strongest fiat currency in the world. Making its value extremely stable. Unlike Visa, Mastercard, or Bitcoin, USDT has no transaction fees. **Stablecoins appear to be the final, most beneficial iteration of crypto.** And for years, they met with *crickets*. **Stablecoins Light Up the Old Financial Order ** Then in 2020, global currencies began to break under the strain of COVID recovery. Hugely populous countries like Turkey, Iran, Ethiopia, Egypt, Nigeria… saw their currencies lose as much as 80% of purchasing power. All of this had happened before. But this time, there was a way for people to convert their weakening currency into something strong: USDT. Stablecoin usage has exploded since then. **Their total market cap is now $300B+, up 60x from five years ago.** Volume in the last two years has *tripled*. Stablecoins have ripped transaction value away from every other on-chain currency, including Bitcoin, hitting nearly 80% of crypto transactions by 2023. **Stablecoins now rival Visa and MasterCard’s trillion-dollar volumes.** They are a full-fledged parallel global payments system and settlement network. USDT is 60% of the market, and its market cap and volume continue to blow up. It’s grown by $48B in 2025 alone… more than its entire market cap in 2021. **More than 500M users in emerging markets transact in USDT. ** USDT now has more users than the combined populations of the United States and Canada. The U.S. Treasury Secretary expects the stablecoin market to expand to $3T by 2030. **In other words, it could 10x from here.** That creates a mammoth problem for the tiny company that created USDT. ## The Re-Dollarization of the World Has a Flaw USDT is bringing about an end to the global financial system as you know it. Stablecoins bypass all the gatekeepers: SWIFT, credit card networks, capital controls, and correspondent banks. Meanwhile, it’s a boon for the USD. Nearly 100% of stablecoins are denominated in U.S. dollars. So just as central banks are pulling back support… - **USDT is singlehandedly re-dollarizing the world.** The US Dollar is a strong currency. But since it was taken off the gold standard, it has been unbacked by anything except global trust in the dollar. But now the world’s trust in the dollar is evaporating faster than DC can raise the debt ceiling. BRICS nations will refuse to use USDT, or any other stablecoin based on the USD. So, the next evolution of money must be anchored outside the geopolitical system. **The company that created USDT saw this coming.** **And they’ve built a new financial instrument: a stablecoin that is a perfect store of value, infinitely portable, and has no fiat backing.** A true, sovereign-neutral monetary unit. **This time, it’s based on gold. ** The world’s future runs on stablecoins. The only question is whether those coins are backed by worthless paper, or by the oldest money on Earth. Predictably, people ignored gold-backed crypto at first. Now it’s begun reshaping the global financial system. And the company that created it stands the chance to build the first private global reserve currency in history. ## I call it The Parallel Reserve A monetary system operating completely outside government control. No voters. No Congress. No permission required. Backed by physical gold sitting behind Cold War blast doors in a Swiss nuclear bunker. **The man running it is 41 years old. Italian. ** When Bloomberg asked why he’s hoarding gold at a pace that rivals central banks, his answer should stop you cold: *“We believe the world is going towards darkness.”* This isn’t some gold bug on YouTube. This is the CEO of a $186 billion financial institution, a company that processes more transaction volume than Visa. And he’s not just buying bullion. **He’s quietly acquiring stakes in the companies that produce gold. FOUR so far. ** The regulatory filings contain the same phrase that translates to: ***“Intends to propose changes to ownership structure and operations.”*** That’s acquisition language. And I’ve identified exactly which companies are next. **And it’s already happening, right now.** Tomorrow, I’m going to show you the full blueprint. What the Parallel Reserve is, how it works… - **And the three specific gold investments I believe could deliver 200% to 500% returns as this plays out.** **This is the biggest and most exciting opportunity I’ve seen in 20 years of financing resource deals. ** I don’t say that lightly. Watch your inbox. Regards, Marin Katusa Founder, Katusa Research **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Gold’s “Fattest Profits” in History - URL: https://katusaresearch.com/golds-fattest-profits-in-history/ - Type: article - Published: 2026-01-30 - Updated: 2026-01-29 - Author: Marin Katusa They called it the London Gold Pool. Eight central banks had one mission: to keep gold at $35 an ounce. For seven years, they burned through billions defending that price. It was a coordinated effort to convince markets that gold wasn’t worth a penny more. On March 14, 1968, the market called their bluff. Buyers took $400 million in gold in a single session. The Queen declared an emergency bank holiday. The London market went dark for two weeks. When it reopened, the central banks stopped fighting. **Gold ran from $35 to $850 over the next twelve years. A 2,300% move.** The lesson was that central banks can delay price discovery. They can’t prevent it. I’m telling you this because central banks aren’t fighting gold anymore. They’re front-running it. The people who print the money would rather own gold than hold their own paper. I think they know the price is wrong. ## The Number Everyone’s Looking At Is the Wrong One At $4,900, the headlines scream ‘all-time highs.’ And they’re right, nominally. But zoom out and you’ll see what central banks are looking at. Gold is still cheap when you adjust for M2 money supply. The setup for much higher prices is staring us in the face. Since March 2020, the Federal Reserve created $6 trillion in new money, which is a 40% increase in M2. That’s more dollars conjured in four years than in the previous decade combined. Yet gold, the asset that’s supposed to protect against currency debasement, hasn’t even kept pace. It should have. But it hasn’t. Gold has caught up to its 2011 money-supply ratio. It remains well below its 1980 peak. Look at this chart. Despite hitting nominal all-time highs, **gold is cheaper relative to money supply than during previous peaks**. That yellow line (the actual gold price) should be tracking much higher if it maintained its historical relationship to M2. - Matching its 2011 money-supply ratio implies roughly $4,400 per ounce – a level gold has already exceeded. - If it matched the 1980 ratio? **$9,800**. That’s not a prediction. That’s just math. The same math central banks are using while everyone else stares at nominal prices and thinks they missed the move. ## The Professionals Aren’t Fading This Rally Look at how the big money is positioned. Watch what China has been doing for fifteen years. Look at the inflection point around 2015. That’s when China’s gold accumulation accelerated. It’s also when they started dumping Treasuries in earnest. This wasn’t a reaction to sanctions or inflation fears. This was a strategic decision made years before anyone was talking about de-dollarization. And China isn’t alone. When Washington seized Russia’s dollar reserves in 2022, it sent a signal to every finance minister in the world: your dollars are only yours if we say so. The “risk-free” asset was suddenly full of political risk. Central banks from Poland to Singapore have been repatriating their gold and adding to reserves at the fastest pace since the 1960s. - **An Invesco survey of 50 central banks found that two-thirds are moving their gold out of Western vaults.** - **Half plan to increase their allocation further.** They are preparing for a world where a nation’s wealth is measured not by how many U.S. bonds it holds… But by how many gold bars sit in their own vaults. ## The Pro’s Just Moved the Targets (Again) Wall Street is starting to see the same math. In the past month alone: J.P. Morgan raised their 2026 forecast to **$5,055**. Goldman Sachs bumped to **$5,400** by December. Bank of America is at **$6,000**. Jefferies went to **$6,600**. - **Ed Yardeni just issued a $6,000 target for year-end 2026. He sees $10,000 by 2030.** Notice what’s happening: the revisions only go in one direction. Every time gold hits a new high, the analysts scramble to catch up. ## The “Fattest Gold Profits in History” This global monetary shift is creating an overlooked opportunity in the companies that actually produce gold. The average all-in sustaining cost to mine gold runs about $1,500 per ounce. With gold above $4,700, that’s roughly **$3,200 in operating cash flow per ounce**, the fattest production margin in history. In 2022, when gold sat at $1,800, that margin was closer to $600 (AISC – $1,200). Today’s spread is five times larger. Yet the GDX trades at roughly 8x forward cash flow while the S&P 500 trades at 22x. Gold miners are generating record free cash flow, raising dividends, buying back stock and the market still prices them like this is 2020. I’ve seen this movie before. Could a dollar rally create a short-term pullback? Yes. But central banks were net sellers during the 2013 gold crash. Today they’re the largest buyers. That’s a different floor than any previous cycle. The last time gold miners traded at these valuations with margins this wide, the GDX doubled in fourteen months. That was 2016. The setup today is better. **And our gold stocks are moving significantly…** - **One of my largest gold holdings in the portfolio is up 275%** in the last year and a half (and climbing higher). - **A gold developer stock we just recommended to subscribers has achieved a DOUBLE** in just a couple of months. And going higher. These are exciting times in the gold market. **If you want the names and tickers, join us inside the Members Area of** [**Katusa’s Resource Opportunities**](https://join.katusaresearch.com/subscribe/?)**.** The institutions have made their move. Central banks have shown their hand. And I’m about to release my next big play any week now. – Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Copper at $6: The Squeeze Has Just Begun - URL: https://katusaresearch.com/copper-at-6-the-squeeze-has-just-begun/ - Type: article - Published: 2026-01-23 - Author: Marin Katusa **Fifty percent.** That’s how much more copper the world will need by 2040. S&P Global just released their January 2026 copper report, and the numbers hit like a freight train. Global demand climbs from 28 million metric tonnes today to 42 million by 2040. The supply side, you ask? Without major intervention, we’re staring at a 10 million tonne shortfall. Washington figured this out last November. They quietly tagged copper a “critical mineral.” And the government doesn’t hand out that label for fun. They did it because copper is the connective artery linking physical machinery, digital intelligence, infrastructure, and defense systems. Without it, the electrified future doesn’t happen. **Copper Price Records** The story is heating up now with the price touching a single day record of $6. If this price holds and closes this month above $6, a major copper bull cycle is underway. It’s the environment we’ve been talking about for almost 2 years, [as the arteries of AI and compute](https://katusaresearch.com/data-centers-dead-mines-and-the-moment-copper-stops-playing-nice/?). **Four Forces Hitting at Once** I’ve spent two decades tracking resource cycles, and this one feels different. The demand isn’t coming from one place, it’s coming from everywhere. **AI eats electricity.** When ChatGPT launched in November 2022, data centers used about 5% of US power. By 2030, S&P Global says that number hits 14%. These facilities will triple their share in just five years. Each megawatt of [AI data center needs 30 to 47 tonnes of copper](https://katusaresearch.com/data-centers-dead-mines-and-the-moment-copper-stops-playing-nice/?). Power distribution. Cooling systems. Server racks. The works. The AI training centers in China run even higher because they build with double redundancy across all equipment. More backup means more copper. **Ozempic Copper Inventories** JPMorgan pegged data center copper demand at 110,000 extra tonnes just for 2026. In 2025, tariff fears pushed U.S. buyers to accelerate COMEX copper imports, tightening global availability. That pull drained inventories worldwide. By January 2026, U.S. copper stockpiles were so low they would last only about three days if no new copper arrived. That’s down from just over seven days a year before. - **Because supply was that tight, buyers in the U.S. had to pay more for copper than the standard global price set in London.** This is because potential Section 232 tariffs keep excess inventories in the country. The grid needs a massive rebuild. - **The world must add the equivalent of 330 Hoover Dams of power capacity. Every single year. Until 2040.** Transmission and distribution networks need $7.5 trillion in investment over that stretch. Underground cables drive most of the growth. Copper dominates there because it conducts better and resists corrosion. Subsea cables connecting renewables across borders add another layer. Australia’s AAPowerLink project alone needs an estimated 70,000 tonnes of copper. **EVs multiply the problem.** A battery electric car uses 2.9x more copper than a gas vehicle. The metal runs through the wiring, battery packs, and motors. You can’t build an EV without copper. Period. - **China became the first market where EVs outsold gas cars in 2025.** Chinese electrics are now grabbing share across Asia, Europe, and Latin America. Global EV copper demand will hit 6.3 million tonnes annually by 2040. Up from 2.6 million today. **And let’s not forget two billion air conditioners.** That’s how many get installed between now and 2040. Each unit needs copper for heat exchangers and coils. Lee Kuan Yew the former Prime Minister of Singapore, called air conditioning “*the single most important invention of the twentieth century*.” The developing world is about to find out why. **Defense spending adds fuel.** NATO members pledged to hit 5% of GDP on military budgets. Modern weapons, drones, and communications systems run on copper-intensive electronics. This demand is inelastic. National security doesn’t negotiate on price. **Mines Can’t Keep Pace** Grasberg’s fatal incident shut their Block Cave zone until mid-2026. Chile crawled forward and Peru dealt with protests. These aren’t one-off problems. They’re symptoms of something deeper. - **Ore grades keep falling.** The easy deposits were mined decades ago. What’s left sits deeper, in harder places, with less metal per tonne of rock. - Costs climb every year. S&P Global’s data shows it clearly. - **New mines take forever **and the average project needs 17 years from discovery to first production. Permits. Reviews. Consultations. Legal fights. Even if companies threw massive capital at the problem today, real supply wouldn’t arrive until the early 2030s. The project pipeline can’t respond fast enough. **The deficit is widening fast.** UBS forecasts a **230,000 tonne** shortfall in 2025. That rises to over **400,000 tonnes** in 2026. Nearly four times larger than old estimates. The chart below shows the gap widening. And that’s before any supply shocks or demand surprises. **Inventories are paper thin.** LME and SHFE stocks sit near historic lows. They rarely cover more than a few days of global use. Even seasonal builds barely move the needle. The buffer that absorbed shocks in past cycles is gone. Any disruption moves price fast. The market has no cushion left. **What I’m Buying Now** Copper is flirting with record all-time highs at and above $6 per pound. The math supports sustained strength through 2026 and beyond where deficits widen and supply risks stay high. A Chinese recovery could pull even more metal into Asia. Many copper deals have crossed my desk this year and frankly, most don’t make the cut. The ones that do share common traits. Quality deposits. Stable jurisdictions. Clear paths to production. - **There’s one small cap stock sitting on a copper deposit so rich I expect a major to swallow it whole before year-end.** The asset is too strategic to leave in small hands. It’s already up nearly 100% in the last few months and I expect it to run more. I bought a big block of shares. **In this month’s *Katusa’s Resource Opportunities*, I break down exactly which copper plays I’m positioned in ahead of this cycle…** **Including the takeover target trading at a fraction of its in-ground value.** [You can become a subscriber right here](https://join.katusaresearch.com/subscribe/?). The world needs 50% more of a metal that takes two decades to bring online. Something has to give. Regards, Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** --- **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Buckle Up: Silver Miners are Pushing Towards 150% Margins - URL: https://katusaresearch.com/buckle-up-silver-miners-are-pushing-towards-150-margins/ - Type: article - Published: 2026-01-16 - Updated: 2026-01-15 - Author: Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** Forty-five percent. That’s the profit margin silver miners are running right now. And a year ago, it was 28%. At today’s prices approaching $90, S&P Global models show potential profit margins for top producers could rocket toward 150%. While everyone’s focused on the price, the profit margin story underneath is what actually matters. ## The Insane Math Behind $90 Silver Last year, it cost miners about $20.50 to pull an ounce of silver out of the ground on a Silver price that averaged $28. The math worked, but nobody got rich. This year, costs dropped a bit to around $20 per ounce thanks to lower fuel costs and treatment charges that fell nearly 40%. - **When your costs hold flat and prices triple, that’s not *good.* That’s a generational setup.** We’ve watched margin cycles for twenty years: the 2008 recovery, the 2016 bottom, the COVID snap-back. I can’t recall one moving this fast with this much room still to run. But don’t get crazy excited yet… ## Not Every Miner Wins Equally Silver stocks have been on a tear in the past year. - **The Silver Small Cap ETF ($SILJ) is up 217%. But the gap between the best and worst operators is blowing wide open.** And you have to know *why* you’re buying a ticker. **First Majestic** for example, was losing money in 2024 with negative margins. Now they’re running 45%, with production jumping over 20% and costs that dropped more than 30%. Their acquisition of Cerro Los Gatos was perfectly timed. They doubled capacity right as prices took off. **Fresnillo** is projecting 52% margins, up from 26% – their costs are falling while production holds steady. **Coeur Mining** expects 45%-plus after their Rochester expansion in Nevada came online. **Pan American** upgraded La Colorada in Mexico and should nearly double margins to 44%. These aren’t recommendations, but examples to show what’s happening in real-time with silver prices skyrocketing. Then there’s Hecla, a solid operator. Their primary silver costs on a byproduct basis have risen over 20% according to S&P Global models. In a race for pure silver leverage, they are currently lagging the aggressive margin expansion seen in peers like First Majestic. - **While the herd piles into the famous names, the real alpha is in the operators who have optimized their mines to print cash at $30 silver…** And are now absolute money fountains at $90+. ## The Jurisdiction Premium But here is where the retail crowd can get stuck, obsessing over headlines. The “smart money” looks at the financial plumbing. What you rarely hear discussed is the [“SWAP Line” indicator](https://youtu.be/2vxVSoJBHcA?si=4IfNSrhhycOxL8GI). The Federal Reserve maintains liquidity backstops with key central banks. This invisible tether keeps an economy plugged into the US financial system. It’s the difference between a volatile market and a solvent one. This financial reality is why the best operators aren’t leaving Latin America – they are capitalizing on it. **Pan American** didn’t run from Mexico; they optimized it. By upgrading La Colorada, they are set to nearly double their margins to 44%. They prioritized the asset over the noise. **First Majestic** made the same calculation. Their acquisition of Cerro Los Gatos – smack in the heart of Chihuahua – was perfectly timed. They focused on the high-grade rock and are now printing 45% margins. When you have a financial backstop, the “risk” is often mispriced. In a margin super-cycle, solvency matters more than silence. ## The World Needs More Silver Than It Produces That’s been true for five straight years. The Silver Institute puts this year’s shortfall at 117 million ounces. Since 2021, the cumulative gap has hit close to 800 million ounces… almost a full year of global production. Gone. Absorbed. Not coming back. Demand keeps climbing. - **Solar panels need it, and global solar PV installations jumped 64% in 2025.** Electric vehicles need two to three times more silver than gas cars. AI data centers are adding a whole new layer of consumption that barely existed five years ago. And there’s no good substitute for silver’s conductivity. Most silver comes as a byproduct from mining copper and zinc. Most people don’t know this but… - **Primary silver miners only account for 28% of total silver production in the world in 2025.** Higher silver prices can’t force more supply. It’s like trying to get more egg whites by raising the price of yolks. The chicken doesn’t care about your economics. Even so, higher prices have nudged miners back into the field. In 2025, silver drilling increased about 36% from 2024, reflecting renewed exploration interest. But the response falls short. Total drill holes in 2025 are around 26% lower than the 2021 peak of about 7,100 holes. That was when activity hit its highest level. More importantly, most programs focus on infill and step-out drilling at known deposits, not on finding large new systems. High-impact discovery results remain rare. As the chart above shows, drilling has recovered from recent lows, but not to levels that meaningfully expand global silver supply. ## What This Means For You Most people play silver through ETFs or bullion. They catch the metal’s move but miss the leverage. Mining stocks amplify everything. First Majestic went from losing money to 45% margins without building anything new. They just held the line on costs while silver did the heavy lifting. That cuts both ways. If silver drops hard, margins compress just as fast. Same leverage, opposite direction. The miners with the lowest costs and cleanest balance sheets will hold up best in a pullback and capture the most upside if the deficit keeps grinding. ## The Earnings are Coming… Q4 earnings hit in the next few weeks. The margin expansion I’m describing is about to show up in actual reported numbers. When companies that were breakeven a year ago start printing 40%-plus margins, analyst models have to reset. Price targets move and capital follows. Remember that 45% margin figure at the top? That’s the base case using conservative price assumptions. At current spot, the upside case is three times higher. Our team is getting a LOT of new silver deals crossing our desk. We will be doing a full detailed edition of ***Katusa’s Resource Opportunities*** on the sector and the best opportunities. [Click here to become a subscriber](https://join.katusaresearch.com/subscribe/?) so you don’t miss the report. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Market Data - URL: https://katusaresearch.com/market-data/ - Type: page - Published: 2026-01-09 - Updated: 2026-10-13 - Author: Marin Katusa --- # Oil’s Goldilocks Moment—And Who Gets Paid - URL: https://katusaresearch.com/oils-goldilocks-moment-and-who-gets-paid/ - Type: article - Published: 2026-01-09 - Updated: 2026-01-08 - Author: Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** **Everyone’s asking if it’s time to buy oil stocks.** **Here’s my answer. And the setup I’m waiting for.** | U.S. forces captured Nicolás Maduro on January 3rd. By Saturday, Trump declared America would “run Venezuela” and rebuild its oil fields. Exxon and Conoco are still owed $10 billion from the 2007 nationalization. Chevron has billions more ready to deploy. Venezuela holds 303 billion barrels of proven reserves. That’s 17% of the world’s oil. **And prices didn’t budge.** The market already priced in the near-term picture. Venezuela’s infrastructure is rotted. The skilled workers fled years ago. Even optimistic timelines put 4 million barrels per day a decade away. Traders will bid up barrels that don’t exist anyway, and that caps any bullish thesis. Which creates the real play. ## The Goldilocks Zone: $58-65 Works for Everyone We called for oil under $60 in our last report. It happened. So, is it time to load up on oil stocks? **Not yet.** The $58-65 range works for almost everyone right now. The U.S. wants it – cheap oil keeps inflation in check and gives the Fed room to cut rates. That matters when you’re carrying $36 trillion in debt. **Saudi Arabia wants it**. This range keeps their barrels competitive while growing market share. They’d rather sell more at $60 than less at $80. **Europe wants it**. Low prices squeeze Russia’s war budget. **China wants it**. Slow growth leaves refiners hungry for cheap feedstock. WTI traded in this band through most of 2025, where Middle East flare-ups pushed prices toward $70-75. Those spikes faded fast and the market kept snapping back to the same range. - **The world quietly agreed: oil that’s not too hot and not too cold.** This won’t last forever. But right now, it dictates who wins. ## The Inventory Trap Most investors see the tight price band and assume crude is coiled for a rebound. Price sits near recent lows. Analysts call for upside. **The physical market points the other way.** U.S. inventories went through a major reset after Covid. Stocks surged during lockdowns. They fell as demand recovered. Then Washington drained a huge chunk of its Strategic Petroleum Reserve during the Russia-Ukraine war. That history fools people into thinking inventories are still tight. They’re not. By December, commercial inventories were up 1.75% from the prior year. The SPR climbed nearly 5%. And that’s just onshore. - **The IEA’s November report flagged 80 million barrels of oil-on-water added in September alone… the highest since mid-2021. ** Most of it wasn’t sitting in tanks. It was parked on ships. Some trackers put the number closer to 100 million barrels. The largest buildup since the pandemic storage trade. ## The Oil Contango Playbook Contango happens when today’s oil price sits lower than the price for delivery later. The market’s way of saying: we have more barrels than we need right now. The six-month futures spread has been grinding higher. It just crossed above zero. *Once the spread sits comfortably positive, the market rewards storage over selling.* When contango forms, traders buy cheap prompt barrels, park them in tankers, and sell forward at higher prices. Refiners lock in cheap feedstock. Margins expand. **This is the setup.** Very Large Crude Carriers hold two million barrels each. In a loose market, they become floating tanks. VLCC spot rates act as an early warning. When traders book tankers for storage instead of transport, the fleet tightens fast. Day-rates spike before inventory data catches up. Since July, spot rates on the Arab Gulf-to-China route surged more than 700%. ## The Trade Venezuela changes nothing for oil prices in 2026. And everything for oil prices in 2030. The near-term setup rewards companies that profit from weak crude and wide spreads. Tanker operators filling with floating storage. Refiners locking in cheap feedstock. Players who treat contango as an opportunity, not the problem. **The contrarian oil trade most investors expect: Load up on producers and wait for a spike… isn’t the play. Not yet.** Not when the whole world agrees on $60 oil. Not when inventories are building. Not when the futures curve says store, don’t sell. **JUST RELEASED****:**** The Full January 2026 Edition of *Katusa’s Resource Opportunities* Report Covers:** **✓** **Which tanker stocks to watch—and the valuation levels where they become buys.** **✓ ****Mid-cap vs. large-cap refiner analysis: crack spread sensitivity, balance sheets, and the one name still generating positive free cash flow.** **✓ ****2026 price targets for gold, silver, copper, uranium, aluminum, and natural gas.** You’ll also find out the exact name of the copper stock I expect to get acquired this year (at much higher prices). Plus, specific entry points on our high-conviction uranium plays. [**[SUBSCRIBE TO KATUSA’S RESOURCE OPPORTUNITIES]**](https://join.katusaresearch.com/subscribe/) Regards, **Marin Katusa** *Founder, Katusa Research* **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # KR GOLD TOKEN MONITOR - URL: https://katusaresearch.com/kr-gold-token-monitor/ - Type: page - Published: 2026-01-06 - Updated: 2026-02-10 - Author: Marin Katusa --- # Oil is Flashing the Same Signal It Did Before the 2014 Crash - URL: https://katusaresearch.com/oil-is-flashing-the-same-signal-it-did-before-the-2014-crash/ - Type: article - Published: 2026-01-02 - Updated: 2025-12-29 - Author: Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** The last time oil looked this boring, it crashed 70% over the next 18 months. WTI has traded sideways for six months now, where every rally fades. Every dip gets bought. Goldman Sachs even turned bearish and most traders have moved on. We’ve been cautious too. But the supply data just changed and it’s flashing the same warning it did in late 2014. That warning preceded the best contango trade in a decade. ## Oil’s Supply Side Triggered a Shift This chart captures the current mood in the oil market. Five consecutive monthly declines have pushed sentiment toward fatigue rather than panic. Prices continue to drift lower without triggering forced selling. This pattern often appears when surplus conditions build beneath the surface. ## OPEC’s Role… OPEC increased production through 2025 and hinted at further additions in 2026. Simultaneously, demand growth slowed down. **China’s economic recovery lost steam**, freight rates remained weak, and global trade failed to gain sufficient momentum to absorb the excess barrels in the system. **Venezuelan exports to the US stepped up.** Production recovered to around one million barrels per day. **Russian crude isn’t coming back just yet**, but if there’s a resolution in Ukraine, it could unleash another wave of oil into the global supply. Put all this together: supply keeps climbing while demand lags. And that imbalance is now showing up clearly in the data… Supply is set to outpace demand through early 2026, and the surplus could approach seven million barrels per day by Q1. That level edges close to the extremes last seen during the COVID collapse. ## Why Saudi Arabia Wants Lower Prices Saudi Arabia has the cheapest oil on earth. When prices drop, high-cost producers bleed. Saudi gains market share. This time, the strategy has a second target: Russia. Russia’s oil income has already dropped thanks to sanctions and forced discounts. Low prices squeeze them harder. The late 1980s oil crash helped break the Soviet economy. Saudi remembers. The kingdom has balanced ties with Moscow and Washington for years. Right now, Riyadh leans toward the White House. ## Why Washington Won’t Stop It Cheap crude helps the Trump administration fight inflation. Refiners earn fatter margins on cheaper feedstock. The Strategic Petroleum Reserve gets refilled at bargain prices. A weaker Russia reshapes global supply and leaves the U.S. as the only large non-OPEC exporter with real scale. China benefits too. Both superpowers see value in a soft oil market. That alignment explains why supply keeps rising even as prices stay flat. ## The Contango Trade Is Forming When supply runs far ahead of demand, the market slips into contango. Spot prices drop because there’s too much oil today. Future prices stay higher because traders expect the glut to fade. That gap creates a simple trade. Buyers grab cheap crude now, store it, then sell futures at the higher forward price. Strategic reserves get refilled. Tanks fill up. Tankers turn into floating storage. Refiners lock in strong margins because their input costs stay low. This pattern showed up after the 2008 financial crisis, during the 2014-2016 price war, and again during COVID. Each time, the same group of stocks outperformed. Each time, most investors missed the setup because prices looked “boring” on the surface. WTI futures already slope upward. The early signs of contango are here. The spread between spot and 12-month futures has started to widen… Today’s curve looks a lot like the one we saw in 2014. The same early surplus, the same flattening spot price, and the same slow bend upward in the forwards. But two things make this cycle different. - Saudi and the U.S. now have aligned interests in keeping prices soft. - Interest rates sit much higher than they did a decade ago. Higher rates increase storage costs, eating into carry-trade profits. And expected rate cuts by Q1 2026 will likely make the economics even more attractive. ## Back to the Future: Which Stocks Won and Lost In 2014 During the 2014-2016 price war, tanker stocks were the clear winners. Floating storage demand exploded. Frontline and Euronav surged as traders scrambled for places to park cheap crude. Refiners outperformed because they bought cheap crude and sold finished fuels at stronger margins. Their input costs dropped faster than their product prices. Producers got crushed. High-cost shale names and leveraged drillers saw margins collapse. Many cut drilling or shut in wells. Some, like Linn Energy, went bankrupt. The pain lasted for two years. The lesson: in a surplus cycle, the companies that move oil beat the companies that pump it. The market still looks calm on the surface. But the pieces now sit in the same places that triggered the strongest contango runs of the last decade. Once the surplus peaks and the curve locks in, the window opens, and it doesn’t stay open long. **In the next issue of [Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/?)**, we’ll dig into the companies built for this cycle and how we can profit from Contango. **There are a lot of opportunities in oil stocks right now.** And it’s time to hunt. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Silent Rotation of 2026 - URL: https://katusaresearch.com/the-silent-rotation-of-2026/ - Type: article - Published: 2025-12-26 - Updated: 2025-12-23 - Author: Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** I stopped watching stock prices last month. Instead, I’ve been tracking something more valuable: *questions*. Not what retail traders type into Google… what institutional desks are searching on Bloomberg terminals. What complex queries are flooding high-level AI systems. The divergence is massive and it tells you everything about where money moves in 2026. - **Retail searches:** “Best AI stocks.” “Nvidia price target.” “ChatGPT subscription.” - **Institutional searches:** “SMR regulatory approval timeline.” “Uranium spot price supply deficit.” “Data center PPA 2026.” Do you see the gap there? The retail tourists are chasing software. The owners are hunting for power. There are three big trends and asymmetric setups unfolding right now, all hiding in plain sight. Let’s get you up to speed into the right investment ideas *before* the ball drops for 2026. ## Trend #1: You Can’t Print Energy The AI *Boom* is over. The AI *Power Panic* has begun. Data centers are projected to consume 165% more power by 2030. But the grid is old, broken, and maxed out. In Virginia alone, data centers already eat 26% of the state’s electricity. A quarter of the power of one state, gone. You can’t run 2026-level AI on a 1970s grid. **And nobody in Silicon Valley thought of asking until it was too late.** There’s a secret bidding war happening but it’s not for chips. It’s for baseload power. Microsoft, Amazon, and Google are quietly securing nuclear energy contracts because they know the truth: No power, no AI. Microsoft is restarting Three Mile Island. Amazon signed nuclear PPAs. Google is buying SMR capacity before most investors know what SMR stands for. - **Note:**** Refer to our “**[**Brother-in-Law Indicator**](https://katusaresearch.com/beware-the-bbq-pitch-counter-indicators-to-avoid-losing-money/)**” to see if something has gone mainstream.** And Meta is going a step further and creating its own Electricity Trading arm. I’ve been pounding the table on this for two years… In 2026, the best-performing asset won’t be the chipmaker. It will be the only fuel dense enough to keep the lights on without boiling the planet. Uranium, Nuclear and Enrichment. ## Trend #2: The Ledger of Everything - **Retail searches:** “*Next 100x meme coin*.” “*Solana airdrops*.” - **Institutional searches:** “*ERC-3643 compliance*.” “*BlackRock tokenized fund liquidity*.” “*Treasury bill tokenization yields*.” The dog coins are a distraction. Crypto stopped being a casino and its rails are becoming the backend of Wall Street. **This is the year of RWA — Real World Assets.** We’re moving from trading meme coins to trading tokenized Treasury bills, gold, and real estate. You haven’t heard about this because it’s incredibly early. Three years ago, tokenized RWA totaled $5 billion. Today: $30billion. And we haven’t left pilot phase. We believe 2026 is when this goes from pilot to production. The plumbing of finance is being ripped out and replaced. The banks aren’t fighting crypto anymore. They’re buying the infrastructure. BlackRock, Goldman Sachs, JPMorgan, they’re not dabbling. They’re deploying. Now imagine where this goes… Selling 1% of your house to buy a coffee. Trading a fraction of a New York skyscraper for a bar of gold, instantly. On a Sunday. With zero middlemen.. **That’s the rails being built right now.** The GENIUS Act just handed stablecoins their first federal regulatory framework. Bipartisan and signed into law. The compliance boxes are checked and the lawsuits are over. The institutions have permission. You can monitor search queries for “Tokenized Collateral.” When banks start using crypto tokens as overnight lending collateral at scale, the old financial system is officially dead. That threshold is already crossed. The biggest wealth transfer in 2026 won’t be a coin you trade. It will be the network that trades everything else. ## Trend #3: The Sovereign Shield - **Retail searches:** “Why is inflation high?” “Gold jewelry price.” - **Institutional searches:** “Central bank gold accumulation Q4.” “Debt-to-GDP sovereign default risk.” “Non-Cusip safe-haven assets.” This is the silent trend. The one front page headlines ignore because it breaks the narrative. While the S&P and Nasdaq soar, central banks are buying gold at a pace we haven’t seen since the end of World War II. From 2022 to 2024, they accumulated 3,220 tonnes, more than double the prior three-year period. - **The World Gold Council reports 81% of central banks expect to increase reserves further.** That’s among the highest convictions ever recorded. Why? They can do math… US debt-to-GDP sits at 124%. Japan is worse. Europe isn’t far behind. These debt loads aren’t sustainable. They’re mathematically unpayable. The people who actually run the monetary system are voting with their vaults. **Gold is an exit strategy from the fiat currency system****, not just a trade in 2026.** Stocks AND Gold are at all-time highs. That shouldn’t happen. When stocks boom, gold sleeps. When they rise together, the market isn’t betting on growth, but on dollar devaluation. Smart money is heavy in tech stocks, but parking profits in gold. **The Signal, or as I call it “The Silence”:** Gold is hitting record highs, but Google search volume and news mentions for “gold” is flat. This is the most bullish signal possible. It means the public haven’t arrived. When your Uber driver asks about gold coins, it’s time to sell. Right now? [I’m still buying the best gold stocks](https://join.katusaresearch.com/subscribe/?). ## The 2026 Trades Start Now Retail is chasing Nvidia, praying for past glory of alt coins. That’s yesterday’s narrative. The smart money moved months ago. They’re buying uranium miners while you debate AI multiples. Building on tokenized rails while you scroll past crypto headlines. Accumulating gold at the fastest pace since Bretton Woods while you watch tech stocks hit new highs. The Great Rotation of 2026 isn’t growth versus value. It’s infrastructure versus hype. Power versus software. Hard assets versus paper promises. If you’re still arguing about Nvidia’s price target in March, you’ve already missed it. **Over the coming months, in my premium service – [Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/?)…** I’ll be naming specific companies on the right side of each trend: - The power providers. - The protocol builders. - The hard asset accumulators. It will be the names that don’t show up on CNBC until the move is over. The window is open. It won’t stay that way. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Index Bomb Set to Blow in 3 Weeks - URL: https://katusaresearch.com/the-index-bomb-set-to-blow-in-3-weeks/ - Type: article - Published: 2025-12-19 - Updated: 2025-12-18 - Author: Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** On January 15th, 2026, MSCI will decide whether to kick Saylor’s MicroStrategy out of its global equity indices. If they do, every ETF and index fund tracking those benchmarks must sell. No hesitation. JPMorgan estimates $2.8 billion in forced liquidation from MSCI alone and up to $8.8 billion if other providers follow. It’s about a $100 billion category of companies that didn’t exist five years ago. One’s rewriting corporate finance and setting a trap for anyone who doesn’t understand the mechanics. I’ve spent my career in resource markets and what’s happening with Digital Asset Treasuries deserves your attention. Not because you need to trade them. Because the playbook is coming to assets you already own. ## The Zombie Resurrection In September, *Forward Industries*, a 60-year-old medical device company running on fumes, announced it was pivoting to accumulate Solana. The stock ran over 500%. Not because of earnings. Because investors found a new way to bet on crypto through their brokerage accounts. - **This is the Digital Asset Treasury Company (DAT or DATC) model.** A public company raises capital through stock and bond offerings to buy cryptocurrency. A closed-end fund wearing a corporate costume. Michael Saylor [built the blueprint](https://katusaresearch.com/the-infinite-money-glitch/?). His company now holds over 670,000 Bitcoin—just over 3% of all Bitcoin that will ever exist. Today, over 200 DATs trade publicly with combined market cap exceeding $110 billion. In the last 5 years, the growth in this sector has gone vertical. ## The Arbitrage Engine Here’s where it gets clever (and where the risk hides). When investors want DAT exposure badly enough, they’ll pay more than the underlying crypto is worth. If a company holds $10 of Bitcoin per share, buyers might pay $12. That premium unlocks a powerful loop. Issue new shares at inflated prices, buy more crypto, and each existing share now represents more Bitcoin. The stock rises. New buyers pay higher premiums. More shares issued. Saylor executed this relentlessly. In 2024 alone, Strategy raised $4.8 billion through convertible notes, including a $3 billion offering at 0% interest and 55% premium to share price. Every issuance above book value was accretive to existing shareholders. But the arbitrage only works while the premium holds. ## But When the Leverage Turns… In a downturn, DATs don’t just fall with crypto. They fall faster. The premium evaporates. Shares trade at a discount. The equity program becomes unusable, and nobody buys new shares below NAV. Meanwhile, debt service continues. Convertible notes carry interest. Secured bonds have covenants. A DAT trading at 1.3x NAV with meaningful debt? A 40% crypto correction doesn’t just hurt, it breaks the model. The leverage that amplified gains now accelerates losses, and there’s no mechanism to stop the bleeding. The DAT class of 2024 and 2025 operated exclusively in favorable conditions. The caution is that this model hasn’t been stress-tested by a prolonged bear market. ## Why Index Providers Are Drawing Lines MSCI’s review asks a simple question: Is Strategy an *operating business* or a *commodity holding vehicle*? Index providers exist to give investors diversified exposure to companies generating earnings, not single-asset investment funds disguised as corporations. - **If MSCI decides DATs don’t belong, the forced selling isn’t optional.** Every passive dollar tracking those indices must rebalance. Strategy alone could face $2.8 billion in redemptions from MSCI-linked funds and up to $8.8 billion if S&P, FTSE, and Russell follow. That pressure undermines the company’s ability to raise capital at premium valuations, threatening the entire treasury strategy. ## Here’s What I Keep Thinking About Physical commodity trusts already exist. Sprott runs them for uranium, silver, and gold. They hold metal, trade publicly, and issue new units when premiums allow. The basic mechanics work. But Sprott trusts can’t use leverage. They’re unleveraged, passive vehicles and closer to ETFs than to what Saylor built. Nobody has applied the full DAT playbook to physical commodities yet. - Imagine an operating company, not a trust that issues convertible debt to stockpile uranium. - Secured notes backed by U3O8 in licensed storage. - An ATM equity program that grows pounds-per-share when premiums hold. The same leveraged flywheel Strategy used to accumulate 3% of all Bitcoin. The mechanics work identically. Premium to NAV enables accretive issuance. Leverage amplifies returns. Shareholders get geared exposure without futures contracts or mining risk. **We haven’t seen a leveraged *Physical Asset Treasury*, yet.** The financial engineering and investor appetite both exist. And in a world where 18 companies compete to be the Solana DAT, someone will connect these dots. When they do, resource investors need to understand the playbook. The upside. The leverage trap. The index eligibility questions. - **Watch the MSCI decision on January 15th. It will shape how capital markets treat asset-backed corporate structures for years.** And pay attention when any mining company starts talking about “treasury strategy” in their investor presentations. Forward Industries was a 60-year-old zombie that reinvented itself overnight. The next Physical Asset Treasury won’t be. Regards, Marin Katusa **P.S. **Over the next year, Katusa Research will be taking a closer look at the treasury companies, digital and physical that are doing this right. Not the zombies chasing headlines. The operators building real infrastructure with real capital markets expertise. **If you’re running a treasury strategy and believe sophisticated resource investors should understand what you’re building…** **We want to hear from you – email [subscribers@katusaresearch.com](https://katusaresearch.com/?).** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Big Mistake: This Wasn’t in the Lithium Models Before - URL: https://katusaresearch.com/big-mistake-this-wasnt-in-the-lithium-models-before/ - Type: article - Published: 2025-12-12 - Updated: 2025-12-11 - Author: Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** **One-third.** That’s how much of Memphis’s peak summer electricity a single building will need when it’s fully operational. Not a factory. Not a smelter. Not a stadium. A room full of chips learning to *think*. Elon Musk’s xAI Colossus facility (pictured below) already runs 200,000 Nvidia H100 GPUs and consumes 250 megawatts. That’s enough power for 250,000 homes. And that’s phase one. Phase two scales to one million GPUs. That power requirement is over one gigawatt. But one problem… the grid couldn’t deliver it fast enough. So, in May 2025, xAI took a different approach and brought in 168 Tesla Megapacks. **More than $375 million in lithium-ion batteries. For backup power. For one building.** When Elon Musk posted on X that Colossus 2 would be “the first Gigawatt AI training supercluster,” he wasn’t bragging about artificial intelligence. He was describing a power problem. And six months later, the world’s largest lithium producers admitted they hadn’t seen it coming. This is the demand signal the lithium market didn’t model and it just flipped the lithium market. ## “The Big Upside Surprise” The lithium thesis was simple: electric cars. Model the adoption curve. Forecast battery production. Project demand. For three years, that thesis collapsed. Lithium hydroxide prices dropped 89% from their 2022 peak. Oversupply. Slower EV growth than expected. The narrative hardened. - **Then, in November 2025, came the moment every analyst had to update their decks.** Kent Masters, CEO of Albemarle, the world’s largest lithium producer, used the word “surprise” on an earnings call. **Grid storage had grown 105% year-to-date**. “*The big upside surprise this year*.” Grant Donald at Liontown said battery storage systems had “come from nowhere.” - **SQM’s leadership then said storage was growing 40-50% annually, and now accounts for 20% of total lithium demand.** Every major lithium model missed the fastest-growing demand category on the planet. They modeled cars. They didn’t model a single building in Memphis that needs one-third of the city’s electricity to train an AI. Three of the world’s largest lithium producers… All saying the same thing: Storage demand *exceeded* their forecasts. ## Why AI Companies are Bypassing the Grid Batteries scale in months. Power plants take years. AI companies building gigawatt-scale training clusters can’t wait. So they’re buying batteries instead of grid connections. S&P Global projects US data center power capacity will reach 134,000 megawatts by 2030, up 168% from 2024. - **Tesla reported record energy storage deployments of 12.5 GWh in the third quarter of 2025, nearly double the prior year.** The demand data confirms it. ## The Lithium Demand Curve Nobody Modeled Benchmark Mineral Intelligence released their 2025 figures. Global battery demand grew 28% year-to-date through August. China and Europe both topped 29%. EV sales hit 23% global growth on top of that, with Europe leading at 32%. But here’s the number that matters… Benchmark projects total battery demand will grow 7-fold by 2040. - **S&P Global forecasts lithium-ion battery manufacturing capacity will more than double to 6.5 TWh globally by 2030.** And China holds over HALF that market. Cumulative global battery storage deployments is projected to climb from 27 GWh in 2021 to nearly 778 GWh by 2030. That’s a 28x expansion in nine years. The market caught on and [lithium prices](https://carboncredits.com/lithium-prices-today/?) responded. Lithium spodumene gained 57% from its 2025 low of $8,259 per metric ton in June to $13,002 by November end. The spot market is repricing in real time. ## From Surplus to Shortage S&P Global projects the global lithium surplus will shrink from 84,000 metric tons in 2024 to 33,000 metric tons in 2025. When the miners miss it, it means the market hasn’t even started pricing it. That room full of chips in Memphis was the signal and the repricing is the opportunity. - **In this month’s **[***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/?)**… I detail exactly how to position your portfolio for the “Electro Dollar Age”.** Including the specific equities that will benefit most. If you want to be positioned before this market reprices, start here… [Learn how to become a member today](https://join.katusaresearch.com/subscribe/?). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Silver’s “Cooling Failure” Cover Up - URL: https://katusaresearch.com/silvers-cooling-failure-cover-up/ - Type: article - Published: 2025-12-05 - Updated: 2025-12-04 - Author: Marin Katusa **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** If you tried to trade silver last Thursday night, you saw something terrifying. **Nothing.** For 11 agonizing hours, the CME Group (the world’s largest derivatives exchange) went dark. Gold, oil, Treasury bonds, and crucially, Silver… all frozen. The “official” story will tell you it was a cooling system failure at the CyrusOne data center in Chicago. Maybe that’s true. But in my 20 years in this business, I’ve learned that there are no coincidences when money this big is on the line. - **Because the moment the screens flickered back on Friday morning… Silver violently repriced to a new all-time high above $55.** The reaction was the story. The system blinked and when it opened its eyes, the truth was staring it in the face. We are witnessing a market that is primed to break on contact. The paper market is glitching because the physical reality underneath is shifting tectonically. Here is what’s happening. ## The “China Drain” is Real While Western traders were staring at blank screens in Chicago, the real alarm bells were ringing in Shanghai well before that. For the last year, we have tracked a massive migration of physical metal from West to East. But that flow reached a critical breaking point. - **Shanghai silver inventories have just collapsed to decade lows**. Look at this chart. It is arguably the most important graphic in the commodities market right now: The supply squeeze in China keeps tightening. This is critical because China is the epicenter of industrial demand. When their warehouses go empty, they don’t just stop buying. They bid. And they bid high. Now, you might have seen a conflicting headline recently. The London Bullion Market Association (LBMA) reported that London silver vaults actually *rose* by 6.8% in October to 26,255 tonnes. **The bears cheered. “*See*?” they said. “*There is plenty of silver*.”** **They’re wrong. That inflow isn’t new mining supply.** It’s a reversal of the “London Squeeze,” where earlier tightness forced metal onto COMEX to plug holes, creating distortions. That metal was shuffled around to give the market breathing room, but it is not relief. It’s a shell game. And the shells are running out. ## The “London Loophole” is Closing While the computers were down in Chicago, the real panic was happening 4,000 miles away in London. The London Bullion Market Association (LBMA) vaults, which is the physical backstop for the entire global silver trade, are running on fumes. We are seeing reports that silver lease rates (the cost to borrow physical metal) have spiked. It looked like a dead heartbeat through 2024, barely above zero. They finally twitched in early 2025, stayed under 2% until June, then erupted to ~35% in October. The spike cooled, but the pulse is rising again and pushing back toward 6%. In plain English? There’s no metal left. The bullion banks are desperate. They are scrambling to find bars to deliver against paper contracts. And for the first time in history, the physical owners aren’t selling. They’re hoarding. ## The Electro Dollar Age and the AI Energy Vortex Why is the metal disappearing? It’s not just coins and bullion stackers. It’s a new, voracious beast we call the “AI Energy Complex.” You already know about the solar boom. But here is what the mainstream financial press missed: AI Servers use significantly more silver than traditional servers. According to data circulating from the Silver Institute and SMM (Shanghai Metals Market), - **AI servers require 2 to 3 times more silver than standard servers due to higher power density and complex cooling connectors.** Every time Big Tech builds a new data center, they are locking away millions of ounces of silver into circuit boards and high-performance connectors. We are in the Fifth Consecutive Year of a structural deficit. - **Demand:** Exploding (Solar + AI + EVs) - **Supply:** Flat (Mine production is stagnant between 810M – 830M oz) - **Inventory:** Critical (London is empty) ## Silver Can’t Bank on the Banks’ Forecast Earlier this year, the biggest banks on Wall Street told you to stay away. **J.P. Morgan** predicted silver would average just $36 in 2025. And **HSBC** had to scramble in October to raise their forecast to $44.50 for 2026. They missed the fundamental shift. They looked at silver as just a “monetary metal” that moves with interest rates. They forgot that it is the indispensable metal of the digital age. You cannot have ChatGPT, solar farms, or EV batteries without silver. That CME “glitch” was a warning shot. We smashed through the psychological $50 barrier. $55 is the new reality and the ceiling just became unlimited. Not to mention, the technicals in this market are starting to look incredibly “sexy”. The “glitch” was the system blinking. The data shows the plumbing is under maximum stress. **In this month’s **[***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/?)**… I detail exactly how to position your portfolio for the “Electro Dollar Age”.** Including the specific equities that will benefit most. [Learn how to become a member today](https://join.katusaresearch.com/subscribe/?). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Why Your Gas Bill Is 5x HIGHER Than it Should Be - URL: https://katusaresearch.com/why-your-gas-bill-is-5x-higher-than-it-should-be/ - Type: article - Published: 2025-11-28 - Updated: 2025-11-27 - Author: Marin Katusa *This week in Katusa’s Investment Insights…* - **Europe’s Crisis, Your Bill** — When Russia cut the gas, American LNG saved Europe’s winter. U.S. households are footing the tab. - **The Great American Gas Flip** — America now ships more gas overseas than its own citizens use. - **5x the Price, Same Molecule** — Henry Hub trades at $3.60. American families pay $17.63. Find out why. | **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** When the war in Ukraine shut down pipelines and emptied storage tanks, Europe faced dark reality. Russian gas deliveries collapsed. Industrial furnaces went cold. Energy ministers warned of rolling blackouts through winter. Europe was exposed. Then the ships arrived. Tanker after tanker of American LNG docked at European terminals. Within months, the U.S. Gulf Coast became Europe’s lifeline. The flow reshaped the entire regional market. Whenever the crisis hits, whenever the lights flicker, whenever the system buckles, Europe turns to the same country it loves to criticize, “**the evil Americans**.” ## America Became Europe’s Gas Station America produces more energy today than at any point in history. Natural gas drives that dominance with 38% of total U.S. energy production in 2024. Gas has ruled domestic output since overtaking coal in 2011. We built this massive supply machine for ourselves. Then Europe’s crisis changed everything. When Russian pipelines went dark after Ukraine, European factories started shutting down. Storage facilities hit critical lows. Brussels warned citizens to prepare for blackouts. **Europe had spent decades lecturing America about energy policy. Now they needed American gas to survive winter.** The tankers started sailing east. ## American Gas Flow Reshaped the Entire Regional Market Within three years, the United States built itself into the core supply pillar for Europe’s energy system. - **Europe is the world’s largest LNG buyer** in the first half of 2025, taking a quarter of global LNG imports. - EU imported 53.3 million tonnes in the first half of 2025, **the highest level ever recorded**. - More than **half of that volume came from American exporters**. The United States ships roughly 4.31 trillion cubic feet (TCF) of LNG every year, which is 2.5 times the Russian LNG exports. ## U.S. LNG Exports Jumped at a Speed No Exporter Matched In August 2025, the U.S. shipped 451 billion cubic feet (BCF) of liquefied natural gas (LNG), up 24.1% from a year earlier. That pace turned the Gulf Coast into the world’s busiest LNG corridor. - **Atlantic LNG freight rates climbed to $131,000 per day, the highest level in two years. It now costs 1.65 times the Pacific route.** That gap in the chart shows the gravity of the situation. Europe became the center of global LNG demand. Tankers keep heading to Rotterdam, Dunkirk, Zeebrugge, Bilbao, and other European ports because Europe’s grid depends on U.S. cargoes. Vessels stay tight, rates stay high, and the Atlantic basin absorbs the bulk of the fleet. **Freight only behaves like this when the system runs close to capacity.** And a system running close to capacity usually signals a structural shift. ## The Great American Gas Flip Europe’s key natural gas benchmark (TTF) dipped below €30 per megawatt-hour, a level below the €45–€50 seen in late 2024 due to ample supplies. Meanwhile, U.S. Henry Hub prices (the main domestic benchmark) rose 1.3x from ten months prior. For the first time in history, American ships more gas overseas than its own citizens use. The numbers prove it: - **U.S. households burned 3.05 trillion cubic feet in early 2024** - **LNG export plants consumed 2.57 trillion cubic feet, up 20% from last year** Seasonal behavior pushes that gap wider. Export plants run harder in the back half of the year because buyers in Europe and Asia rebuild inventories ahead of winter. Household demand moves in the opposite direction and drops by roughly a quarter as temperatures warm. Put those pieces together and the direction of the market becomes obvious… Export volumes will move ahead of residential demand for the first time, and the internal order of the U.S. gas system will shift with it. The strain shows up most clearly in household bills. - Henry Hub averaged $3.60 so far this year. - Power generators paid around $4.24. - Industrial users paid $5.07. - Commercial buyers paid $11.30. - American Families paid $17.63 per thousand cubic feet. **Read that again, households pay almost FIVE TIMES Henry Hub…** **And three to four times the rate paid by the biggest industrial customers.** Yes, delivery costs and utility infrastructure add some premium. But the real driver is simple: More gas leaves the country every month. Less stays home and prices adjust accordingly. Europe gets wholesale American energy. American families got the bill. Regards, Marin Katusa **P.S. We’re keeping a close eye on big oil and gas plays and MUCH MORE…** In the upcoming December issue of [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/?), we reveal **one company that’s moved over 200%** and caught the attention of one of the most profitable companies in the world. [**Learn the name and how to become a subscriber here**](https://join.katusaresearch.com/subscribe/?). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Data Centers, Dead Mines, and the Moment Copper Stops Playing Nice - URL: https://katusaresearch.com/data-centers-dead-mines-and-the-moment-copper-stops-playing-nice/ - Type: article - Published: 2025-11-21 - Updated: 2025-11-20 - Author: Marin Katusa In the 1870s, the hills around Morenci, Arizona were not known for mines. They were known for raids. Ranchers, including brothers Robert and James Metcalf, rode those canyons hunting Apache raiders and stolen cattle. They weren’t looking for a fortune. They were looking for payback. What they found instead were green stains on the rock. By 1872, those stains turned into the first small digs. By 1881, shafts crisscrossed the hillside. Over time, the hand-dug workings gave way to one enormous open pit. In the 1960s, that pit grew so large it erased the original town of Morenci from the map. Today, the Morenci Mine is the biggest copper producer in the United States. It ships more than 400,000 tons of copper a year for Freeport-McMoRan. The odds are better than zero that some of the copper inside the data center running this very article started life in that pit. ## Every AI Data Center Starts With a $60 Million Copper Bill U.S. data centers pull copper from mines like Morenci for internal wiring, server boards, power lines, and switchgear. By the time you cost out a modern build, copper accounts for about 6% of total capex. On a typical 100 MW data center with a $1 billion price tag, it works out to roughly $60 million in copper alone. That is before you factor in what happens when AI pushes every new build to run hotter, faster, and heavier on the grid. ## The Big Copper Problem Starting in 2026… Data centers already chew through a serious slice of the grid. In 2024, they used roughly 4% of all U.S. electricity. That share could double by 2030 as AI rolls out into everything from search to video to logistics. Copper sits at the center of that build-out… Every big facility needs copper-heavy power distribution. - **Cables** carry electricity from the substation to the switchgear. - **Busbars** move that power across panels. - **Transformers and switchboards** rely on copper to stay cool while they push huge currents. Inside the building, it does not stop. **Servers** use copper in their circuit boards and interconnects. Racks talk to each other through copper network cables over short, high-speed runs. **Cooling systems** lean on copper heat exchangers to pull heat away from the chips. AI workloads push all of this higher. More GPUs per rack. More power per square foot. More cooling per watt. New builds are heavier in copper than the last generation. - **Goldman Sachs **[**says**](https://url8329.click.katusaresearch.com/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdOdulr2oCgalDVKdBtfFYqkVNLUOg0Z22EleahwHBggSpeCgZqK0sj1wu3Nxhf7SahEA6poRqK8tdCniD-2BGAy-2FSwJXpd0nfN-2BUEbc6QloE6j6C1bDsFCPRnTSSt7JBkLjMdMWQbHUhxrNQBgDFFtnPa8wNSkLh9W31UK4nngWPKjflZQCe9j1SU8jtETNcPh0kJugqwpwp1d-2BPfjXtPgDklRKIt6Hk7O8HNp4YmYQdsQuvDJ_LegDzTFO0QQIRWK2-2Bk6gfGJCz9-2FSvu5CacxxzXzRn-2BKlOeH4-2FSBGwumXpLIe8QGhpykSk08d7XtBB1xN4V6nJklGTDaWDUZMH8FsaE2gNkwjq5J2l0C-2B27DRgmdZFuDIp1GcXZLp4QUxOgdM-2FyiL4rqrAnEWjawabhqT-2F-2FMn1jz8nAfNoOL28lu4CLOglL0M4xpdao4doEbA31wIEetcsQ-3D-3D)** AI will drive a 165% increase in data center power demand by 2030.** This means this massive leap will require extensive copper use for both on-site systems and the wider electrical grid. The numbers add up. - **Copper demand from new data centers alone is running at roughly 400,000 metric tons per year through 2035.** And that’s on top of everything the world already needs for power grids, EVs, construction, and industry. By the time we hit the second half of this decade, the AI build-out and the existing grid will be fighting for the same metal. That is the “copper problem” that starts to bite from 2026 onward. ## Copper is Critical in the Age of Electricity The energy system most people see is wires, turbines, and transformers. The part they never see is the rock. - **To make one tonne of coal, miners move about seven tonnes of material.** That sounds like a lot, until you look at copper. - **For copper, you can be moving more than 100 tonnes of rock, water, and other waste for a single tonne of metal.** That gap keeps widening. Ore grades at many big copper mines now sit well below 1%. The metal is there, but it is spread thin. To keep output flat, operators have to dig more rock, process more tonnes, and deal with more residue. That means higher capital costs, higher operating costs, and a longer slog from first drill hole to first shipment. **Even before AI showed up, the outlook was tight.** Major energy agencies have warned that planned copper projects do **not** fully cover projected demand for an electrified economy. The problem is simple: big new mines are expensive, slow to permit, and harder to find. Lead times run to a decade or more. Few boards want to approve $5-10 billion projects unless they believe high prices will stick. All of this lands on copper at once. We are asking the same metal to re-wire power grids, feed electric vehicles, harden data centers, and support normal construction and industrial use. At the same time, the easiest deposits are gone, and the new ones are deeper, lower grade, or in tougher jurisdictions. **That is what “copper critical in the age of electricity” really means.** You can watch real supply quietly disappear as high-cost mines shut off, causing price and supply disruptions. Like the world’s second-largest copper mine, Grasberg (in Indonesia), that just shut down due to a major landslide. **The United States is already acting like copper is scarce.** U.S. copper imports hit a record in 2025. As the country talks about reshoring supply chains, it is pulling in more foreign copper than ever to keep up with demand. In April alone, more than 170,000 tons of refined copper flooded into the U.S., the highest monthly volume on record. AI, the grid, and EVs are setting up a structural grab for copper. The physics of mining say supply will struggle, and the long-term forecasts reflect that tightening. Yet the market still prices copper like it is just another cyclical metal. When a market misreads a structural change, prices usually adjust. For copper, that means prices are likely to rise. That gap between narrative and price creates the opening for real opportunity. Regards, Marin Katusa **P.S.** I haven’t stepped foot in this one country since 2008. But the geology is too good to ignore for this one copper stock in our ***Katusa’s Resource Opportunities*** portfolio. [Get the ticker I am buying when you sign up](https://url8329.click.katusaresearch.com/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdFPJP9UxZ5Nk2-2B-2BqnMJZN3dzwEH2NVWn8x9KDc14hq6e-2FPBvNnq1OtE59RJht-2FGjxBZtOwxTQIA58FDlKPJxeH1b2I2jgRCydhDpD6GHF7OvGKrEV6UkrnkSFw78qcl7LPXK4zmslvgCVFNOns4x9MA-3D2C8G_LegDzTFO0QQIRWK2-2Bk6gfGJCz9-2FSvu5CacxxzXzRn-2BKlOeH4-2FSBGwumXpLIe8QGhpykSk08d7XtBB1xN4V6nJvWUj-2FByYoRfO13O9x-2FIa-2B9qyMK3H1OQj9euPfHrNqb6EPJ9T49j8taljAF3HQb1Pva3xp-2B29d4zF5rDbBtPT5WJXfrn8iRq8RGoe-2FNlD-2Fo47ZrKyI-2BCBVko7MIGmgug1w-3D-3D). --- # The Addiction That’s About to Break America - URL: https://katusaresearch.com/the-addiction-thats-about-to-break-america/ - Type: article - Published: 2025-11-14 - Updated: 2025-11-13 - Author: Marin Katusa - **$7 Trillion in Treasuries mature this year:** That’s Japan and Germany’s entire GDP combined, refinancing at TRIPLE the old rates. - **NATO allies are loading up on gold:** Portugal moved to 84% gold reserves, France to 75%, and they’re not stopping. - **Tether just showed its hand:** The $140B giant is buying stakes in gold companies instead of Treasuries. Why? | **Get real-time alerts right away. Follow on X: [@KatusaResearch](https://x.com/KatusaResearch?) and [@MarinKatusa](https://x.com/MarinKatusa?)** Don Coxe called it Financial Heroin twenty years ago. I was lucky enough to trade research with the BMO strategist back then, and he saw the trap before anyone. After 2008, central banks printed money to stabilize markets. But in doing so, they created a dependency that would define the next fifteen years. Zero percent rates became negative rates, and trillion-dollar deficits became standard operating procedure. Each crisis demanded bigger doses. Politicians promised the spending would generate growth that would pay down the debt. That promise died eighteen months ago when the Fed started losing money for the first time in its history. They’ve lost $200 billion so far. The withdrawal has begun. ## The Bill Nobody Can Pay Every addict breaks their own limits, and Washington just did the same. What began as an emergency tool has turned into a routine policy that goes like this: borrow more, spend more, then raise the limit again. The ceiling is a formality and not a boundary anymore. - **Each new hike signals the same thing to the world: America’s debt machine has no brakes.** August started with the U.S. debt ceiling at $36.1 trillion. Three weeks later, Congress raised it to $41.1 trillion. Five trillion dollars added with a single vote. By October 10th, total debt hit $37.89 trillion. The ceiling might as well not exist. - **This year, nearly $7 trillion in U.S. Treasuries mature. That’s nearly as much as the GDP of Japan and Germany combined.** Every bond rolling over gets refinanced at current rates, and the zero percent fantasy is dead. Look at his chart, and you see that more than half of America’s debt matures by 2028. America is locked into paying double or triple the old rates on trillions of dollars. - **The United States now spends more servicing debt than funding its entire military.** Your 401k holds these bonds. Your pension owns them. Your bank’s reserves sit in them. When the world’s safest asset becomes its biggest liability, where does money run? ## Portugal Knows the Answer Central banks started their exit two years ago without press releases. Portugal holds 84% of its foreign exchange reserves in gold. Four years ago it was 65%. France moved from 64% to 75% gold reserves since March 2021. Germany pushed to 77.5%. Country by country, vault by vault, the world’s reserve managers are trading paper claims for metal. From 2002 to 2010, central banks dumped 140 million ounces of gold. **After 2008 broke their confidence, they became net buyers every single year.** These are NATO members, EU founding nations and American military allies. These aren’t Russia or China. They’re converting paper promises into metal at the fastest pace since Nixon closed the gold window in 1971. - **Twenty years ago, gold represented 14% of global reserves. Today: 24%.** By 2030, if current pace continues, gold would represent 27% of global reserves. ## The Dollar’s Accelerating Exodus The numbers tell a story no Fed speech can spin. In 2001, the dollar was 72% of global foreign exchange reserves. Here in 2025, it’s now 56%. For 2027, it is projected to be 52%. That chart shows a steady erosion of trust. Central banks haven’t dumped dollars overnight; they’ve quietly diversified away from it year after year. The rise of regional trade blocs, new payment systems, and tariffs all chip away at the US Dollar’s monopoly: - **China** dumped roughly $370 billion in Treasuries since 2021. - **Saudi Arabia** accepts yuan for oil. - **The BRICS payment system** processes $4 trillion annually outside the dollar system. When the world’s reserve currency becomes a funding mechanism for uncontrolled spending, nations find alternatives. They don’t announce their departure on a loudspeaker. They just leave one transaction at a time. ## Silicon Valley’s Gold Rush While central banks accumulate physical metal, tech giants bet on something different: [tokenized gold that moves at internet speed](https://katusaresearch.com/the-worlds-newest-gold-buyer-made-13-billion-last-year/?). Tether controls $180 billion in reserves and processes the majority of stablecoin volume. Last quarter, they did something unprecedented. They took over $100 million in positions in gold-linked equity. It wasn’t ETFs and futures contracts, just direct stakes in companies positioned for gold’s tokenization. Paxos already tokenizes $500 million in gold. JPMorgan moves billions in tokenized assets daily. BlackRock’s tokenized fund hit $1 billion in under a year. - **Physical gold** solves the trust problem. - **Tokenization** solves the speed problem. When both merge, you get an asset that’s both ancient and cutting-edge. The company Tether quietly accumulated shares in sits at the intersection of both trends. ## The December Deadline The Fed meets December 18th and markets expect rate cuts. But with $7 trillion refinancing at higher rates, any cut gets overwhelmed by the debt tsunami. January brings the new Congress. The debt ceiling fight returns. The same politicians who raised it $5 trillion in August will perform the same show again. **Central banks aren’t waiting.** They’re buying gold at a pace that screams urgency. **Tether isn’t waiting.** They’re positioning for tokenized gold to replace Treasury bills as the crypto market’s reserve asset. - **Our November issue of **[***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/?)** reveals the company they’re betting on.** The same company positioned for both the physical gold surge and the tokenization revolution. If you wait for this story to hit Bloomberg, institutional money will already own the entire float. **Subscribe to Katusa Resource Opportunities before November 30th and get our full report.** [**Learn how to get behind the paywall right here**](https://join.katusaresearch.com/subscribe/?). Because when central banks abandon their own currencies, you don’t want to be the last one holding paper. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Incredible Bitcoin Price that Gold Mining Demands - URL: https://katusaresearch.com/the-incredible-bitcoin-price-that-gold-mining-demands/ - Type: article - Published: 2025-11-07 - Updated: 2025-11-06 - Author: Marin Katusa Imagine running a business where every year your costs climb, but the reward for all that work keeps shrinking. That’s the reality for Bitcoin miners in 2025. Mining Bitcoin isn’t a magic process. It’s math on steroids where rows of machines race to solve cryptographic puzzles. The first to solve one gets paid in new bitcoins, a kind of digital prize. Every four years, Bitcoin cuts mining rewards in half. It’s called “halving”, designed to create scarcity like gold. Except gold doesn’t halve your paycheck while your costs double. - The numbers are brutal: In 2020, miners earned 6.25 bitcoins per block. - After 2024’s halving, they earn just 3.125. Meanwhile, energy prices climbed 40% and mining difficulty hit all-time highs, pushing break-even costs to $90,000–$100,000 per Bitcoin. Same electricity bill. Same equipment costs. Half the revenue. **That squeeze isn’t new, it’s by design.** Bitcoin’s halvings force economic resets, clearing inefficiency and setting up the next phase. At today’s prices, the best operators squeeze single-digit profits. The rest pivot to AI hosting or shut down. This consolidation phase is washing out weak players. As supply growth slows and inefficient miners exit, price must eventually rise to rebalance incentives. The numbers tell the story… ## Bitcoin Needs $270,000 to Match Gold Mining Profits Based on today’s data and our calculations… Bitcoin would need to trade near $270,000 just to match the margins gold miners enjoy right now at $4,000 gold. Think about that number for a moment. It’s not a price target. It’s a reality check. It says that at current costs and current technology, Bitcoin mining has fundamentally unequal economics compared to gold mining. One can scale margins smoothly. The other hits halving walls every four years. Both chase scarcity, but they get there in different ways. Gold grows steady; Bitcoin grows through stress. ## Monster vs Minion Margins When gold trades at $2,900, miners earn healthy margins around 47%. Push that to $4,200, and margins stretch past 64%. Gold’s rally has comfortably outpaced the steady creep in costs. Bitcoin tells a rougher story. At $60,000, miners lose money, roughly -44% (negative) margins. Even if Bitcoin rockets to $155,000, profits rise to only 44%. To put things into perspective and compare apples to apples: - **Bitcoin would need to trade near $270,000 per bitcoin just to match the average margins current gold producers enjoy right now at $4,000 spot gold.** Every halving cuts rewards. Every hardware cycle raises costs. The “digital gold” (Bitcoin) lags the margins of the real thing. ## The Power Problem Bitcoin Can’t Solve Beyond the halving math, Bitcoin’s margin squeeze runs deeper. Power eats over 70% of a miner’s costs. Of course, gold producers hedge fuel or lock in long-term deals. But Bitcoin miners can’t. They run nonstop, and many are on spot energy prices, which fluctuate and have been increasing month after month this past year. So, when power spikes, profits vanish. Then comes the hardware treadmill. Every new ASIC model makes the last one a paperweight. To stay in the race, miners must keep buying, burning, and upgrading. The machinery that ruled in 2023 is dead weight by 2025. It’s now a grind, not a gold rush anymore. The business looks less like a tech breakthrough and more like a capital-heavy industry learning how to adapt. ## The Gap Is Widening, Not Closing And that gap you saw earlier in the chart? It’s not closing. It’s getting wider every quarter… Gold keeps climbing the profitability ladder while Bitcoin tightens through its reset phase. - In Q1 2025, gold miners earned about 51% margins, compared to Bitcoin’s 22%. - By Q3, gold margins hit 60%, and Bitcoin’s collapsed to break-even. But don’t take this as a sign of failure. It’s the market doing what it always does, pushing capital toward what’s profitable today. Bitcoin is consolidating while gold is cashing in. The biggest move now is that bitcoin miners are transforming mining campuses into AI and high-performance computing (HPC) data centers. ## The Great Mining Pivot Smart money moves like water. It doesn’t resist pressure, it finds a new path. The biggest Bitcoin miners are converting operations to AI data centers. - **Core Scientific** sold to **CoreWeave** for their infrastructure, not their Bitcoin. - **Bitfarms** hired Wall Street advisors to find AI tenants. - **Northern Data** already switched, higher revenue, predictable contracts, and no halving risk. But here’s the connection everyone’s missing we brought up last week… The profits from AI and stablecoins aren’t staying in crypto. They’re flowing into physical commodities. Tether made $13 billion from their stablecoin operations last year. Their first major investment? They bought 10.5% of Gold Royalty Corp, a physical gold streaming company. Not Bitcoin miners. Not crypto infrastructure. Actual gold in the ground. - **The pivot makes perfect sense. AI companies need 460 TWh of power by 2030 which is four times current levels.** Bitcoin miners own the exact infrastructure AI needs: massive power capacity, industrial cooling, and remote locations where nobody complains about noise. When your margin tightens, you don’t quit, you evolve. That’s what’s happening now. ## Bottom Line Bitcoin mining sits in a tough spot right now, but it’s part of the natural reset that clears inefficiency before the next rally. Gold, on the other hand, is thriving. Margins are fat, and costs are steady. The smart Bitcoin miners aren’t fighting this reality, they’re pivoting to AI. **The smartest crypto companies aren’t fighting it either, **[**they’re buying gold**](https://katusaresearch.com/the-worlds-newest-gold-buyer-made-13-billion-last-year/?)**.** The market hasn’t priced this divergence yet. - **Gold miners trade at historic discounts while Bitcoin miners still carry tech multiples.** That gap won’t last through Q1 2026. When the world’s most sophisticated operators abandon digital mining for physical assets, the message is clear: the current runs toward what’s real. Gold’s cashing in while Bitcoin catches its breath. One is minting profits, the other is resetting for the next big charge. Regards, Marin Katusa **P.S.** In November’s just-released [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/?), I reveal gold companies set to benefit from this pivot. The convergence of digital capital and physical commodities is just beginning. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The World’s Newest Gold Buyer Made $13 Billion Last Year - URL: https://katusaresearch.com/the-worlds-newest-gold-buyer-made-13-billion-last-year/ - Type: article - Published: 2025-10-31 - Updated: 2025-10-30 - Author: Marin Katusa On July 8, 2014, three friends announced something called *Realcoin* from a Santa Monica startup office. Four months later, Brock Pierce, Reeve Collins, and Craig Sellars rebranded it as **Tether**. The pitch was simple: one digital token equals one US dollar, backed by actual dollars in a bank account. Nobody thought it would work. Especially not the banks, who kept closing Tether’s accounts. Now it’s 2025. Stablecoins – all of them combined – processed more annually than Visa. In 2024, stablecoins moved $27.6 trillion which is more than visa and Mastercard combined: - Visa moved $15.7 trillion. - Mastercard: $9.8 trillion. Tether alone is closing in on $1.5 trillion in monthly transaction volume. And moving money faster than SWIFT, cheaper than Visa, and without questions from a bank teller asking mundane questions, holding up the line and making the wire process incredibly frustrating and time consuming. ## How Stablecoins Actually Work (Because Nobody Explains This) You wire $100 to a stablecoin issuer’s bank account. They mint 100 tokens to your wallet. Those tokens trade freely until someone redeems them, then they wire back your $100 and burn the tokens. The reserves sit in Treasuries earning interest while the tokens move globally for pennies. Tether claims this is how USDT works. Circle’s USDC proves it with monthly audits. - **The difference matters to investors and depositors because Tether made $13 billion in 2024 largely from Treasury interest on $113 billion in reserves.** But, Tether still won’t do a real audit. That’s another deep dive story, but the market doesn’t care. USDT dominates with $183 billion in circulation. Stablecoins are digital tokens that can also get backed by real-world stuff like Dollars, treasuries, sometimes even gold. You can send one across the world in seconds. You don’t need a bank. You don’t need business hours. You don’t need to wait in line at the bank and answer the tellers’ questions regarding the nature of your business. It’s programmable money that works like email. The rails are here and the world is starting to use the new tracks. ## Russia Just Did Something Nobody Expected After banning crypto in 2020, Russia legalized international stablecoin payments through licensed platforms in 2024. Not because they love innovation. Because they need trade rails that bypass SWIFT and the dollar system. **Canada:** Which usually trails regulatory trends by a polite 18 months, is finally waking up too. In October, they proposed their first national stablecoin framework that would be included in their upcoming budget… aiming to build rules without smothering the rails. **Japan:** Already launched its stablecoin regime. **The U.S.?** It passed the GENIUS Act in July, forcing reserve audits, legal oversight, and real-world backing. The message that this isn’t fringe finance anymore, we’re getting into regulated infrastructure. Called the **GENIUS Act** (Guiding and Establishing National Innovation for U.S. Stablecoins), it mandates 1:1 backing with dollars or Treasuries, monthly audits, and gives banks the green light to issue their own stablecoins. These aren’t experiments any longer. ## Visa Stopped Testing and Started Processing Payment giant **Visa** didn’t stop at just one test transaction. They turned it into a full-scale operation and made a massive announcement a few days ago. They’ve expanded their support to include four stablecoins – PYUSD, USDG, EURC, and USDC – across four blockchains, enabling users to exchange them for 25 national currencies. - **When a 66-year-old payment monopoly rebuilds its infrastructure for your technology, the experiment is over.** *Image Above: Visa Onchain Analytics Dashboard* With over 130 stablecoin-linked card programs in more than 40 countries, they’ve seen a 400% increase in volume year-on-year, reaching a $2.5 billion run rate. And they’re not alone. **Securitize**** – the biggest name in tokenizing real assets, is going public via a $1.25B deal with Cantor Fitzgerald’s SPAC.** Even Citi, JPMorgan, and BlackRock are experimenting with tokenized deposits and on-chain funds. ## 2025 is the Year Stablecoins Went Mainstream This is the dawn of something big, and the eyeballs are trending up in the media. Press coverage skyrocketed with the market cap increase. That’s where we are now. ## Stablecoin Adoption is Accelerating Let’s look at what’s happening on-chain. In 2023, stablecoins processed around $280 billion in monthly volume. This year, that’s ballooned to $1.28 trillion, or the market cap of three and a half Visas. And it’s still growing *faster*. DEX trades, business payments, and cross-border settlements are all piling in. This is becoming a type of financial internet, instead of just a niche playground for traders. And now it’s growing a gold layer. ## GOLD Stablecoins: No Central Bank Needed If stablecoins are version 2.0 of money, gold-backed stablecoins are version 3.0. Instead of being tied to fiat (and all the trust issues that come with it), they’re pegged to real metal with some perks. It’s vaulted, verified and moveable 24/7. **Tether Gold (XAUT)** **and PAX Gold (PAXG)** dominate the space. Each PAX Gold token represents one troy ounce of London Good Delivery gold sitting in Brink’s vaults. Serial numbers included. You can take delivery in Singapore, London, or New York – or trade it at 3 AM like any other token. Between PAX and Tether, they’ve pulled in billions of dollars by issuing gold-backed stablecoins. Together with a few other players like Kinesis and Comtech Gold, they’ve built a $2.9B market from almost nothing. That size and growth matters for an important reason, because all of a sudden it’s growing *faster* than even traditional gold ETFs. - **Since September 2022, tokenized gold AUM has surged 206%, outpacing the 147% gain in traditional gold ETFs.** With all this newfound riches, revenue and profit… stablecoins have their sights set on resources and commodities. ## The Acquisition Spree Begins Tether, the same company behind USDT and XAUT, now owns 8% of **Gold Royalty Corp (GROY).** This is a company one we’ve featured before as a *Katusa Special Situations Alert* and up ~280% since Feb 2024. Paolo Ardoino, Tether’s CEO since October 2023, is using their profits – estimated at $13 billion in 2024 alone – to buy into physical commodity streams. And even foreshadowed his intentions to the [Katusa Research audience](https://x.com/paoloardoino/status/1976205944934519093) on “X” weeks ago… Stablecoins aren’t just digital money anymore. They’re touching real assets, physical supply chains, and now even the mining industry itself. ## Stablecoins Crossed a Line of NO RETURN in 2024 They stopped being a crypto trading tool and became global payment infrastructure. For fifty years, we trusted fiat. Then came the debt, inflation, and dysfunction. So capital started looking for something better. **Now Visa, Mastercard, JPMorgan, and Bank of America are building on the same transparent rails.** The GENIUS Act gives them regulatory cover. **Foreign countries are creating their own frameworks to avoid dollar dependence.** The old system had one advantage: opacity. When Lehman Brothers was collapsing in 2008, nobody could watch their reserves drain in real-time on a public blockchain. With stablecoins, every redemption is visible. Every bank run is broadcast. In the November issue of ***[Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/?)***, we dive deep into the digital currency wave, - **How it’s reshaping global finance,** - **Rewriting payment rails, and** - **Kicking up serious dust in the gold mining industry.** For now, just know this… with billions of dollars moving on-chain, the future of money is already here. You’re not betting on cryptocurrency anymore. You’re betting on which company becomes the new digital Federal Reserve. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Manhattan’s Secret June 23 Order (First Time in 37 Years) - URL: https://katusaresearch.com/manhattans-secret-june-23-order-first-time-in-37-years/ - Type: article - Published: 2025-10-29 - Updated: 2025-10-28 - Author: Marin Katusa **DISSEMINATED FOR URANIUM ROYALTY CORP (NASDAQ:UROY)** New York didn’t debate. It **ordered**. On June 23, 2025, Governor Kathy Hochul directed the state’s public utility to build an advanced nuclear plant—New York’s first in 37 years. The state that hosts 40% of global finance just declared nuclear essential infrastructure. Not for climate goals. For grid reliability. **The 9:30 AM Reality Check** Here’s the grid’s dirty secret: Renewables can’t run trading floors. When the NYSE opening bell rings on a windless December morning, wind farms are expensive lawn ornaments. When Goldman Sach’s servers process a hundred billion-dollar trade, there’s no room for “intermittent” in the power supply. - **New York didn’t just order a nuclear plant for upstate. It ordered insurance for Manhattan’s grid.** Because when California’s grid failed, Silicon Valley went dark. New York won’t let that happen to Wall Street. The quiet part said loud: Only nuclear delivers carbon-free baseload at scale. And tomorrow, that nuclear baseload will keep Manhattan’s markets running whether Wall Street realizes it or not. **The Supply Shock** Every reactor needs fuel. Palisades (in Michigan) alone will again devour 400,000 pounds annually when put back into operation. New York’s advanced reactor? Even more on the initial load. - **Current mine production:** 75% of demand. - **Current stockpiles:** crumbs. - **Current timeline**: Accelerating monthly as demand is on track to double by 2024 For 30 years, America lived off a bizarre cold war dividend that enabled America to power cities with decommissioned Soviet warheads. Half of America’s nuclear fuel came from Russian bombs. That party ended, and we’ve been draining strategic reserves ever since. Now New York needs new nuclear. Michigan is restarting the old plants. And the cupboard is bare. Enter the company that saw this coming years ago. **Uranium Royalty Corp (NASDAQ: UROY)** They did something brilliantly simple: they applied the proven royalty model from gold mining to uranium’s supply crunch. They don’t dig holes. They don’t fight environmentalists. They don’t spend billions on mine infrastructure and equipment. **Why This Model Wins Now** Uranium mining is brutal and it can take a minimum of 10 years to bring a new mine online (if all goes well). Plus, there’s environmental permits. Local opposition. Technical challenges. These are capital requirements that can break companies. **Uranium Royalty Corp (NASDAQ:UROY)** They can be an ideal financing partner for uranium companies. Banks avoided uranium. Private equity wants control. Traditional investors demand instant returns. **UROY** offers something different… Patient capital for potential future cash flow. **UROY’s Fortified Balance Sheet:** With USD$220M (~CAD$305 million) in liquid assets as of September 2025, UROY is primed to pursue value-accretive royalty and streaming deals, turning market volatility into opportunity. | When a developer needs $50 million, they can either dilute shareholders into oblivion or sell UROY a royalty. There’s no dilution. No loss of control. Just a permanent partner who wins when they win. **Here’s what makes this model genius: Diversification without Dilution.** Mining is a tough business. Miners always face technical problems, permitting delays, capex over runs and many other problems that can cripple a stock share price. And unlike miners who see costs rise with uranium prices… Royalties are pure upside. **New York’s Nuclear Order** And the end of Russian supply create a perfect storm that utilities haven’t seen coming. They’ve been sleepwalking through decades of cheap uranium from dismantled warheads. Now they’re waking up to empty shelves and a producer community that barely survived the lean years. The miners that made it through are picking their partners carefully. Uranium Royalty Corp bought all existing royalties in the secondary market. And CEO Scott Melbye states that “*most of our new business opportunities are potential new royalties as a capital provider.”* **Manhattan’s Nuclear Future** New York’s advanced reactor will power the infrastructure of global finance. Palisades will hum again in Michigan. A dozen states will follow. Because when the Empire State admits it needs nuclear, everyone does the math. **The uranium to fuel this renaissance must come from somewhere.** The projects to produce it need funding. Every pound that moves from ground to reactor passes through the same bottleneck. - **And there is no way the big companies who need the uranium will rely on unstable production sources such as Kazakhstan, and Russia. ** UROY already owns 2.4 million pounds of uranium. And has 25 interests in 22 uranium projects at various stages including large producers such a McArthur River and Cigar Lake. **Uranium Royalty Corp built the mousetrap to capture that flow.** Not by taking massive risks or fighting endless battles, but by positioning itself as the partner the industry desperately needs. **When Wall Street’s grid chose nuclear, it chose uranium**. And when you choose uranium, there’s a compelling case for choosing the company that wins regardless of which projects succeed. Because in the end, they all need fuel. You should review UROY’s most recent Annual Information Form and other filings under its profile at sedarplus.ca and [www.sec.gov](https://www.sec.gov/?) for important information on its business and assets. Regards, Marin Katusa **IMPORTANT DISCLAIMER & DISCLOSURES** **Investing in stocks is HIGH RISK. You could lose All of your investment.** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Uranium Royalty Corp is a paid sponsor of this report.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. Katusa Research, its owners, directors, and employees are also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research partner company, New Era Publishing Inc. has received cash compensation in the amount of $1.25M from Uranium Royalty Corp and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the company’s SEDAR and SEC filings, press releases, and risk disclosures. The information contained herein regarding Uranium Royalty Corp. has been derived from its SEDAR+ and SEC filings, including scientific and technical information regarding its royalty assets which has been reviewed and approved by Darcy Hirsekorn, its Chief Technical Officer and is a professional geoscientist in Saskatchewan and a qualified person as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects and is registered as a professional geoscientist in Saskatchewan. Information regarding the projects underlying Uranium Royalty Corp.’s interests has been derived from the publicly available disclosure of the underlying operators and owners, including where referenced herein. Katusa Research, and its directors, employees, and members of their households directly own or may own shares of Uranium Royalty Corp (UROY/UROY.TSX). Therefore, Katusa Research is extremely biased. Measures are in place such that no shares will be sold during the active awareness campaign. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. These statements are subject to known and unknown risks including those set forth in Uranium Royalty Corp.’s most recent annual information form and other public filings available at www.sedarplus.ca and www.sec.gov. Neither Katusa Research nor Uranium Royalty Corp. undertake any obligations to update the information presented or to ensure that such information remains current and accurate, except as required under applicable law. --- # Here’s Why They’re Putting $50,000 GPUs in Tents - URL: https://katusaresearch.com/heres-why-theyre-putting-50000-gpus-in-tents/ - Type: article - Published: 2025-10-28 - Author: Marin Katusa **DISSEMINATED FOR URANIUM ROYALTY CORP (NASDAQ:UROY)** In late August, Mark Zuckerberg posted a video that could have crashed the market. He showed Manhattan being slowly consumed by a blue digital blob. Not Godzilla. Not aliens. It’s a data center footprint. His company’s next facility – ***codenamed Hyperion*** – is so large that it would cover 80% of Manhattan *if *you dropped it on top. Wall Street yawned. The media ran their thousandth “AI revolution” story. Meanwhile, in rural Louisiana, **something unprecedented is happening** that will determine who gets rich and who gets left behind over the next decade. ## Meta and OpenAI’s Nuclear Tell Here’s what Zuckerberg didn’t mention in his Hyperion video: Practically every tech CEO knows their AI dreams are physically impossible with today’s power grid. They’re signing contracts for electricity that DOESN’T EXIST YET. Think about that. OpenAI needs 10 gigawatts for Stargate alone. That’s the equivalent of about 10 nuclear reactors. It’s like ordering a fleet of rockets before inventing fuel. This impossible math has created a big energy problem. And there’s currently only one solution that runs 24/7, requires minimal land, and could potentially scale fast enough: **nuclear**. That’s why Meta just locked in a 20-year nuclear deal with Constellation Energy. It’s not a pilot program or a research partnership. It’s a two-decade commitment to split atoms for Instagram reels. ## The Violent Math Nobody Sees… In 2025, the world needs 193 million pounds of uranium. The world produces 165 million. That’s a 28 million pound hole. Before a single new data center powers up. Now add Meta’s proposed Manhattan-sized monster. Amazon’s nuclear purchases. Microsoft’s reactor plans. Google’s atomic ambitions. The supply deficit doesn’t grow gradually. **Meta’s nuclear deal with Constellation Energy includes something nobody’s talking about:** They’re literally bringing a dead reactor back to life. Plants that were shuttered, written off, forgotten. Suddenly valuable because a social media company needs to train language models. The nuclear graveyard of America—dozens of “permanently” closed facilities—just became the most valuable real estate. And every zombie reactor waking up needs one thing: uranium. Fresh fuel. Millions of pounds of it. **When supply can’t meet demand, prices *should* rise.** Ask anyone who bought uranium at $17 in 2016 and watched it climb past $70 in 2024—heading toward the $138 peak last seen in 2007. Things can always change just as quickly and there are many factors that can impact uranium prices and demand. *HIGH RISK: DISSEMINATED FOR URANIUM ROYALTY CORP (NASDAQ:UROY)* **KATUSA SPECIAL SITUATIONS STOCK ALERT:** | **Uranium Royalty Corp.** | **(UROY:NASDAQ | URC:TSX)** Every data center needs power. And when the world’s richest companies start writing checks with more zeros than most nations’ GDPs, they can create an upstream effect. **Uranium Royalty Corp (NASDAQ:UROY)** are not miners. They don’t dig holes or manage crews. They have “toll booths” to collect royalties. **When uranium moves from ground on a project they hold a royalty on to reactor—they can get paid.** Physical uranium bought when everyone thought nuclear was dead. **Uranium Royalty Corp (NASDAQ:UROY)** holds royalties on the McArthur River and Cigar Lake uranium mines in Saskatchewan, Canada, which are among the world’s largest and highest-grade mines. The company acquired these interests in 2021, during a period when nuclear energy was perceived as less favorable, positioning it to benefit from a resurgence in nuclear fuel demand. Royalties on McArthur River and Cigar Lake are where a lot of America’s nuclear fuel currently originates. *Note: Uranium Royalty Corp.’s NPI (net profit interest) model is a type of royalty that provides the company with a percentage of a project’s net profits, but only after all initial costs have been paid off. This is different from a gross revenue model, where payments start immediately and are based on sales, not profit.* This is the same model that has successfully been implanted by others in gold and silver. # The Tent Stakes Are Already in the Ground The servers are in tents. The nuclear deals are signed. The zombie reactors are stirring. The 28 million pound gap is real today—and potentially widening tomorrow if current trends continue. **UROY on NASDAQ. URC on TSX.** The first and only pure-play uranium royalty company on Earth… **Uranium Royalty Corp (NASDAQ:UROY)** already owns 2.4 million pounds of uranium. - **And has 25 interests in 22 uranium projects at various stages including large producers such a McArthur River and Cigar Lake.** You should review UROY’s most recent Annual Information Form and other filings under its profile at [www.sedarplus.ca](https://www.sedarplus.ca/home/?) and [www.sec.gov](https://www.sec.gov/?) for important information on UROY’s business, royalties and other assets. Regards, Marin Katusa and the KR Special Situations Team **IMPORTANT DISCLAIMER & DISCLOSURES** **Investing in stocks is HIGH RISK. You could lose All of your investment.** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Uranium Royalty Corp is a paid sponsor of this report.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. Katusa Research, its owners, directors, and employees are also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research partner company, New Era Publishing Inc. has received cash compensation in the amount of $1.25M from Uranium Royalty Corp and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the company’s SEDAR and SEC filings, press releases, and risk disclosures. The information contained herein regarding Uranium Royalty Corp. has been derived from its SEDAR+ and SEC filings, including scientific and technical information regarding its royalty assets which has been reviewed and approved by Darcy Hirsekorn, its Chief Technical Officer and is a professional geoscientist in Saskatchewan and a qualified person as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects and is registered as a professional geoscientist in Saskatchewan. Information regarding the projects underlying Uranium Royalty Corp.’s interests has been derived from the publicly available disclosure of the underlying operators and owners, including where referenced herein. Katusa Research, and its directors, employees, and members of their households directly own or may own shares of Uranium Royalty Corp (UROY/UROY.TSX). Therefore, Katusa Research is extremely biased. Measures are in place such that no shares will be sold during the active awareness campaign. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. These statements are subject to known and unknown risks including those set forth in Uranium Royalty Corp.’s most recent annual information form and other public filings available at www.sedarplus.ca and www.sec.gov. Neither Katusa Research nor Uranium Royalty Corp. undertake any obligations to update the information presented or to ensure that such information remains current and accurate, except as required under applicable law. --- # Putin Controls the Switch That Powers ChatGPT - URL: https://katusaresearch.com/putin-controls-the-switch-that-powers-chatgpt/ - Type: article - Published: 2025-10-27 - Author: Marin Katusa **DISSEMINATED FOR URANIUM ROYALTY CORP (NASDAQ:UROY).** Vladimir Putin has a potential “off switch” for the deployment of American AI. Not through cyber warfare. Not through sanctions. Through something far more sinister… Right now, America buys 27% of its enriched uranium supply from Russia. And it’s a full 50% in uranium when you include Russia, Kazakhstan and Uzbekistan. One phone call from Moscow could cripple some of the nuclear plants feeding Silicon Valley’s AI revolution. And Putin can potentially turn off the tap whenever he wants. Microsoft knows. Amazon knows. That could be a reason why they’re spending billions of dollars to not just resurrect past producing nuclear power plants like Three Mile Island, but also the vertical integration of the nuclear fuel sector. ## America’s Achilles Heel: We’re Nuclear Junkies in Denial 95%. That’s how much uranium America imports. And it produces 677,000 pounds, while consuming 45 million. Where does it come from? Kazakhstan (22%), Russia (12%), Uzbekistan (10%). Nations that are traditionally in Moscow’s sphere of influence. For context: At peak Middle East dependence, we imported 60% of our oil. **We’re 95% dependent on foreign uranium for a new supply.** But here’s the real nightmare: Russia is the current source of 27% of our enriched uranium – the processed fuel that actually powers reactors. - **Russia controls one-third of global conversion capacity and half of all enrichment.** In May 2024, Congress banned Russian uranium imports. The ban kicks in fully by 2028, unlocking $2.72 billion for domestic production. Three years to rebuild an industry some would say the country let weaken over four decades. America needs a fuel line… and fast. ## Microsoft Paid $1.6 Billion to Resurrect a Dead Nuclear Plant Training GPT-4 consumed 50 gigawatt-hours of electricity and the cost was over $100 million. Time: months of continuous processing on thousands of synchronized chips. Any power interruption corrupts the entire run. Months of work, hundreds of millions of dollars – vaporized. Now multiply that problem: **ChatGPT handles billions of prompts a day**. The average query uses about 0.34 watt-hours, about what an oven would use in a little over one second. By 2028, individual AI training runs will require 1 gigawatt of continuous power. By 2030? 8 gigawatts. **That’s about eight full nuclear reactors equivalent for a single AI model.** This may be a reason why: - Microsoft is spending $1.6 billion to restart Three Mile Island’s 835 MW reactor. - Amazon committed $500 million to X-energy for up to 5 GW of nuclear capacity. - Google signed its first nuclear deal with Kairos Power for 500 MW. For AI workloads that can’t tolerate a millisecond of downtime, it’s apparent that only nuclear works. America needs uranium. One company is ready to oblige… *HIGH RISK: **Disseminated on behalf of Uranium Royalty Corp*** ** KATUSA SPECIAL SITUATIONS STOCK ALERT: ** **Uranium Royalty Corp.** **(NASDAQ:UROY | TSX:URC) ** **Uranium Royalty Corp (UROY)** owns over 2 million pounds of uranium inventory above ground and royalties on projects ranging from exploration to production. It has 25 interests in 22 uranium projects at various stages, including large producers such a McArthur River and Cigar Lake. These are projects globally in various stages of development, including 6 strategic US assets. From royalties on producing assets to a 10% gross royalty on New Mexico’s Churchrock Project – **That’s one of America’s largest undeveloped deposits with 50.8 million pounds of uranium.** For perspective: US production just increased from 50,000 to 677,000 pounds in a single year – a 13-fold increase. And this is just the start. Energy Secretary Wright asserted in a speech to the International Atomic Energy Agency in Vienna recently… **That the US strategic uranium reserve needs to be continued and expanded.** All because of America’s dependence on foreign, even adversarial, sources. ## The Inevitable Collision Data centers currently consume 3% of US electricity. By 2030: an expected 8% based on Goldman Sachs estimates. Most of that growth will largely come from AI. Between five and six US facilities now produce uranium. Four more on standby could add 7.8 million pounds of capacity. Even at full capacity, we’d only meet approximately *half *our reactor needs. The infrastructure gaps are staggering. **There is only one uranium conversion facility** (Honeywell’s Metropolis Works). It was built in the 1950’s and running well its historic capacity. **And** **only one commercial enrichment facility** (URENCO USA). It’s in New Mexico, but not sufficient to meet all US needs, especially in a hyper-growth phase. **No US facility can produce HALEU (high-assay low-enriched uranium) for next-generation reactors. **Though there is HALEU capacity under development in the USA. Russia is currently the world’s only commercial supplier of it. ## The Dots You Need to Connect In 1954, Lewis Strauss predicted nuclear energy would be “too cheap to meter.” He was wrong about the timeline. But he might be right about the destination. Because AI changes everything. When a single training run costs $500 million in electricity, nuclear economics flip. When national security depends on AI supremacy, and the power narrative turns to nuclear, uranium becomes desirable. **Russia knows this. **That’s why they’re squeezing supply. **China knows this. **They’re locking up global uranium mines. **Silicon Valley knows this. **They’re moving to invest in reactors. **Uranium Royalty Corp (NASDAQ:UROY) **doesn’t need uranium to hit $100/pound to soar. They just need production to scale or projects they hold interests in to move towards production or scale up meaningfully. Which is happening. Right now. **The Russian ban created a countdown clock. Tech giants created insatiable demand.** We like Uranium Royalty Corp and are extremely biased. Regards, Marin Katusa and the KR Special Situations Team **P.S. **You should review UROY’s most recent Annual Information Form and other filings under its profile at [www.sedarplus.ca](https://www.sedarplus.ca/) and [www.sec.gov](https://www.sec.gov/) for important information on UROY’s business, royalties and other assets. **IMPORTANT DISCLAIMER & DISCLOSURES** **Investing in stocks is HIGH RISK. You could lose All of your investment.** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Uranium Royalty Corp is a paid sponsor of this report.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. Katusa Research, its owners, directors, and employees are also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research partner company, New Era Publishing Inc. has received cash compensation in the amount of $1.25M from Uranium Royalty Corp and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the company’s SEDAR and SEC filings, press releases, and risk disclosures. The information contained herein regarding Uranium Royalty Corp. has been derived from its SEDAR+ and SEC filings, including scientific and technical information regarding its royalty assets which has been reviewed and approved by Darcy Hirsekorn, its Chief Technical Officer and is a professional geoscientist in Saskatchewan and a qualified person as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects and is registered as a professional geoscientist in Saskatchewan. Information regarding the projects underlying Uranium Royalty Corp.’s interests has been derived from the publicly available disclosure of the underlying operators and owners, including where referenced herein. Katusa Research, and its directors, employees, and members of their households directly own or may own shares of Uranium Royalty Corp (UROY/UROY.TSX). Therefore, Katusa Research is extremely biased. Measures are in place such that no shares will be sold during the active awareness campaign. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. These statements are subject to known and unknown risks including those set forth in Uranium Royalty Corp.’s most recent annual information form and other public filings available at www.sedarplus.ca and www.sec.gov. Neither Katusa Research nor Uranium Royalty Corp. undertake any obligations to update the information presented or to ensure that such information remains current and accurate, except as required under applicable law. --- # America’s Uranium Problem Now Has a Federal Deadline - URL: https://katusaresearch.com/americas-uranium-problem-now-has-a-federal-deadline/ - Type: article - Published: 2025-10-24 - Updated: 2025-10-23 - Author: Marin Katusa **IMPORTANT**: **The next SPECIAL SITUATIONS ALERT is coming pre-market Monday October 27th. In this edition of *Katusa’s Investment Insights*, we get you up to speed.** | Nuclear energy just got a **timer**. On May 23, 2025, the White House signed three Executive Orders (EO’s) that fundamentally rewrote nuclear’s timeline. By May 29, the Federal Register made it official. The message was clear: America’s nuclear industry just shifted from geological time to Silicon Valley speed. The Department of Energy mapped the endgame with surgical precision—get at least three test reactors to criticality by July 4, 2026. ## Failure Is NOT an Option: The Orders in Plain English Forget the bureaucratic word salad. Here’s what these orders actually do—and why nuclear executives are scrambling to rewrite their five-year plans: EO 14301 stands up a DOE authorization lane for test reactors outside the National Laboratories and directs the Secretary to approve at least three reactors with a goal of criticality by July 4, 2026. For 70 years, if you wanted to test a reactor, you begged for a slot at Idaho National Laboratory. The wait? Five years minimum. Cost? Don’t ask. Your competition in China? Already built three reactors while you waited. Not anymore. Private test facilities are now legal. Full stop. EO 14300/14301 torches the NRC’s favorite delay tactic—infinite safety re-reviews. *“NRC review shall focus solely on risks that may arise from new applications permitted by NRC licensure, rather than revisiting risks already addressed in DOE or DOD processes”* It means the NRC just lost its ability to relitigate settled science. **What used to take 10,000 pages and ten years now takes a reference number and a rubber stamp.** If DARPA says your reactor is safe, the NRC can’t pretend they need to check the math again. ## The Department of Energy Isn’t Playing Around Look at this timeline: - June 18: DOE announces the new pathway - June 25: Industry Day (7 days later) - July 21: Applications due (26 days to prepare) - August 12: Winners selected (22 days to decide) - July 4, 2026: Three reactors go critical Long gone are admin delays and paper shuffling, it’s gas pedal time. That’s 381 days from announcement to atom-splitting. The Manhattan Project took 1,226 days. Apollo 11 took 2,978 days. - **The DOE just gave nuclear startups less time than it takes to obtain a full building permit for multifamily housing in San Francisco.** 11 companies are already selected. And that sprint is already changing how money moves in the sector now. **Time compression doesn’t just accelerate sentiment—it pulls forward actual purchase orders.** Fuel contracts move from “someday” to “Tuesday.” Engineering firms shift from proposals to mobilization. The uranium fuel cycle takes 18-24 months from yellowcake to fabricated fuel assemblies. Companies that want reactors critical by July 2026 need fuel contracts **now**. They’ll be the ones with permitted sites, credible manufacturing partners, and balance sheets that can fund 18 months of development without dilution. **And they’ll have uranium.** Lots of it, ready to go, right now. ## Reading the Nuclear Tea Leaves Smart investors are bypassing vanilla press releases—they’re now tracking procurement patterns. When you strip away the noise, three indicators separate real progress from corporate rhetoric. **First, watch the dilution patterns**. Nuclear development requires serious capital, and companies that have doubled their share count annually won’t survive the funding requirements ahead. Strong projects attract institutional capital at reasonable terms. Weak ones print shares. **Second, follow the uranium procurement trail**. Real projects leave evidence in quarterly filings—logistics expenses, conversion facility bookings, enrichment slots reserved. If a company claims they’ll achieve criticality by 2026 but shows no fuel cycle activity, they’re writing fiction. **Third, verify regulatory substance.** An NRC docket number represents years of technical work. DOE pathway confirmation means engineers have reviewed actual designs. Environmental permits mean state regulators have signed off. Checkmate. ## Using the Choke Point to Make Cash While headlines focus on reactor developers, the real bottlenecks lie in the fuel cycle, component manufacturing, and specialized construction capabilities. Markets price certainty. For decades, nuclear’s uncertain timelines made it uninvestable for all but the most patient capital. The White House just changed that calculation. And accelerated it. **Failure is not an option.** **Washington compressed nuclear’s timeline from geological to commercial.** The timer is running. Fuel orders are accelerating. Construction contracts are mobilizing. But while the crowd chases reactor developers with binary outcomes… **One company quietly assembled the perfect position: exposure to every project without the risk of any single failure.** They don’t build reactors. They don’t need permits. They don’t fight regulators. **Instead, they’ve imported a proven model from precious metals that’s created billions in shareholder value…** Now applied to uranium’s supply squeeze. As nuclear’s fast track changes unfold, they collect revenue streams from the one thing every reactor needs: fuel. **Monday morning pre-market, we reveal the ticker that cracked nuclear’s risk-reward equation.** The US Government has set the timer. And the clock is ticking. Regards, Marin Katusa and the KR Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Secret Pipeline that Runs Through Your Dinner Plate - URL: https://katusaresearch.com/the-secret-pipeline-that-runs-through-your-dinner-plate/ - Type: article - Published: 2025-10-17 - Updated: 2025-10-16 - Author: Marin Katusa The U.S. government just admitted we can’t feed ourselves. Last month, they quietly added potash to the Critical Minerals list. It’s the same designation as lithium and the same panic level as rare earths. Here’s what they’re not saying out loud: 86% of the fertilizer that grows your food comes from other countries. And the biggest suppliers aren’t exactly our friends. ## The 4X Trade That’s Setting Up Again The last time I wrote about fertilizer, Nutrien was left for dead. I targeted my first buy just below where it bottomed. The stock ran from its lows to almost 4X higher in two years. When governments panic about supply chains, boring commodities explode. And right now, Washington is panicking about fertilizer. ## Here’s What Washington Won’t Say Out Loud America plants 227 million acres of corn, soybeans, wheat, and rice. Those acres need 40-45 million metric tons of fertilizer every single year. Three nutrients keep those crops alive: - **Nitrogen** (57% of what we use) - **Phosphate** (25% of what we use) - **Potash** (18% of what we use) Now here’s the problem Washington just woke up to: **America barely produces any potash.** This imbalance matters because fertilizer is not something you can stockpile for long. Fields need it every spring. Any disruption in trade flows can leave farmers exposed at the worst time of year. And unlike price swings, physical shortages have no substitute. Russia and Belarus control global potash markets. China pulled back phosphate exports. Canada is basically America’s only lifeline for potash. The United States produces just 9% of the world’s nitrogen and 8% of global phosphate. In potash? It barely registers. That’s why those just hit the Critical Minerals list. Washington finally admitted what farmers have known for years: We’re one supply shock away from a food crisis. ## The Pattern That’s About to Repeat Look at this chart, then look at your grocery bill. In 2008, fertilizer prices exploded. Food inflation followed months later. After COVID and Ukraine? Same story. Fertilizer hit records. Food CPI went double-digits. The lag is consistent. When fertilizer spikes, your grocery bill follows. Right now, fertilizer prices are still bouncing around. But the setup is building: - Russia and Belarus still control potash - China has pulled back phosphate exports - Energy costs are swinging wildly - And farmers can only skip fertilizer for so long before yields collapse ## Spring’s Hard Deadline Corn needs more nitrogen than any other major crop. It’s the most fertilizer-hungry plant we grow at scale. Farmers can skimp on fertilizer once, maybe twice. But soil nutrients deplete. Yields drop. Eventually, you either buy fertilizer or accept smaller harvests. The problem is that no new U.S. potash production is coming to save us right away. Canadian mines are running at capacity with no room to expand. The logistics mess from COVID never got fixed, and supply chains are still cracking under pressure. When that spring buying season hits, we’re going to see exactly what happened in 2008 and 2022. Fertilizer prices spike. Food costs follow. CPI jumps. Except this time, Washington sees it coming and that’s why potash made the Critical Minerals list. ## The Phosphate Problem Here’s what should really worry you: In 2024, America uses mostly phosphate products (52% of total fertilizer volume). This matters because phosphate products like DAP and MAP are less concentrated than nitrogen fertilizers. We need more tons to get the same nutrient value. **And guess who controls phosphate exports? China.** They’ve already pulled back. If they cut more, we have a serious problem. Phosphate could be next on the Critical Minerals list. When that happens, phosphate stocks will do what lithium stocks did. ## The Trade Setting Up Right Now In my October issue of [Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/), we detailed: - Which of the three nutrients (N-P-K) offers the best risk/reward - The companies positioned to benefit from Critical Mineral status - Why one producer trading at a massive discount is my top pick This is about positioning before a government-driven restructuring of an entire industry. When Washington declares something “critical,” money follows. There are tax breaks, fast-track permits, protected status and guaranteed contracts. We saw it with lithium and we’re seeing it with uranium. Fertilizer is next. ## Fertilizer Wildcards Nobody’s Watching While everyone chases the majors, I’ve identified four junior fertilizer plays that could deliver explosive gains. After screening dozens of ghost projects and paper mines, only two passed our strict criteria… One U.S.-based potash play with some of the highest-grade intercepts ever drilled. And another with the tightest funding profile in the sector. - In [**October’s issue of *Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/), I reveal which junior trades at just 5% of its net asset value despite having Washington’s new “critical mineral” tailwind at its back. Plus, why one Utah project could be the next Nutrien-style runner. **The fertilizer sector is about to wake up. These juniors will move first.** Because this time, it’s about securing America’s food supply. And there’s nothing more critical than that. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # NASA’s “Moonshot 2.0” Will Explode Nuclear – and Uranium - URL: https://katusaresearch.com/nasas-moonshot-2-0-will-explode-nuclear-and-uranium/ - Type: article - Published: 2025-10-10 - Updated: 2025-10-09 - Author: Marin Katusa - **Nuclear just got a timer.** New policy speeds approvals; test programs cut months. See who’s still priced for delay. - **Capital is chasing heat, not headlines.** Utilities and federal cash back buildable designs and fuel supply. Winners: permitted capacity, strong cash, near-term restarts. - **The uranium pinch arrives first.** Reactors take years; fuel tightens in quarters. Re-contracting hits conversion/enrichment bottlenecks—position before prices jump. | NASA plans to build a new nuclear reactor within five years *on the moon.* The stated purpose is to enable long-term lunar missions. But the real, underlying purpose is radically more consequential. And there’s a reason NASA’s keeping it under wraps. 65 years ago, JFK laid the groundwork for the original moon landing: *“This nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon.”* The Space Race forced the U.S. to develop brand-new technologies, such as the rockets necessary to keep the Soviet Union at bay. And gave it a war-time economy by employing 400,000 people. And that’s what JFK was after: earning the U.S. decades of global dominance. ## The Stakes Are Far Higher This Time Putting a nuclear reactor on the moon by 2030 means kickstarting the domestic nuclear industry: re-onshoring supply chains, retraining a workforce, and jump-starting a permitting culture that’s learned to say no. More importantly, it will have taken the *only *route possible to dominate the AI race. China knows this. In April, they announced their own lunar reactor for 2035. Russia’s joining them. This next moonshot is a winner-take-all round. Which is why the world’s reigning superpower will stop at *nothing *to take nuclear to the moon. ## The U.S. Obliterates the NRC Roadblock The first step to resuscitating the U.S. nuclear industry lies with ending the organization responsible for killing it: **the Nuclear Regulatory Commission (NRC)**. According to former NRC Commissioner Jeffrey Merrifield, the NRC is “one of the primary obstacles impeding” advanced nuclear reactor development. For example, GE submitted a reactor design for approval in 1989. The NRC didn’t finish its review until eight years later*.* - **The latest reactor design to be approved by the NRC cost $500 million and required a 12,000-page application.** The NRC’s primary job is to approve nuclear plants. Yet in the past 45 years, it has issued only *two* construction permits for nuclear reactors: By contrast, China approved 10 new reactor constructions in a single day last year. If the U.S. is going to beat China and Russia with a nuclear reactor on the moon by 2030, the NRC needs to be neutered first. A July 2025 Executive Order did just that, ordering the commission to review and approve new reactor designs in just 18 months. ## Fewer “Dead Months” and More VIP Express Lanes Another Executive Order went much further, and for the first time, there is an “expedited pathway” to approve reactor designs. Designs that have been tested and certified by the Department of War or Department of Energy are auto-approved, ***with a rubber stamp and no further review from the NRC***. The DoE and DoW aren’t in the habit of impeding progress; they’re the ones who get stuff done. With them in charge, regulation time is over. The DoE has already… - - Created a pilot program for three new test reactors and plans to achieve power at all three within *one year*. - Mandated a working reactor on a military base by 2028. Support for the nuclear moonshot is now being led by two well-funded, pro-nuclear agencies. Which means it’s time to demolish the final nuclear brick wall. ## Global Capital Flows to Nuclear For a decade, renewables gorged on subsidies while nuclear starved. The numbers are staggering: Solar and wind consumed over $25 billion in federal subsidies from 2016-2022. Nuclear? A rounding error. The result was predictable, zero new nuclear plants while China built 37. **That just ended. Violently…** The One Big Beautiful Bill yanks cash in nuclear’s direction, drastically scaling back solar and wind subsidies while reversing an earlier sunset timeline for a nuclear power production tax credit. Treasury Secretary Scott Bessent also demanded that the World Bank remove prohibitions on its support for nuclear energy. And in June 2025, *the World Bank complied*. It’s a sea change in the global posture toward nuclear. For the first time since 1959, nuclear reactors are eligible for World Bank funding. Read that again. And not just that… - **The World Bank lifting its ban on funding nuclear provides political cover for private institutions to invest in nuclear, unlocking *trillions* in capital.** The NRC is gone. Subsidies are up. Global funding is flowing. If the government’s ambitions are successful, there will be a U.S. nuclear reactor on the moon in five years. ## Brace Yourself for the New Nuclear Boom As outlined in the Executive Orders, the U.S. government is pushing for ten new, full-size reactors on Earth by 2030. That’s not a pipedream. Westinghouse has already committed to build those 10 new AP1000 reactors in the U.S. **Then, the goal is to quadruple the U.S. nuclear reactor base in twenty-five years, to 400GW of capacity.** That would provide 65%+ of current U.S. power needs (up from ~20%), securing energy independence, outpacing China, and powering our AI-driven future. Energy Secretaries and multiple U.S. presidents have called for this before. But now, the time is right. The moves are necessary. The United States will get there because, as Warren Buffett always says: “Never bet against America.” As a new multitrillion-dollar market opens up, there are plenty of ways to profit from it, including fuel, infrastructure, and investing in nuclear itself. ## But there’s one sector that’s completely unready for this shift… The U.S. government is getting ready to defibrillate it into readiness. [And when it happens, you’ll want to be ready too](https://join.katusaresearch.com/subscribe/?). Regards, Marin Katusa and the Katusa Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Every Lithium Stock Just Woke Up From a 3-Year Coma - URL: https://katusaresearch.com/every-lithium-stock-just-woke-up-from-a-3-year-coma/ - Type: article - Published: 2025-10-03 - Updated: 2025-10-02 - Author: Marin Katusa Three weeks ago, the United States government did something it hasn’t done since they built the atomic bomb. The US Government wrote a check to buy direct equity in Lithium Americas. This wasn’t a loan, nor a grant. It was a skin in the game-ownership stake. Just two months ago, The Department of War also took a 15% equity stake in MP Materials (rare earth miner) in July 2025. For decades, the U.S. stayed out of the mines. And just like during the Manhattan Project (which built an atomic bomb) saw the US government invested in enrichment plants, expect that also soon. Now the signal is that the USA needs lithium secured. And the government just told you exactly how desperate they are. ## The Lithium Technical “Golden Star” That Fired Look what happened 72 hours after that check cleared. LIT, the lithium ETF that tracks the entire sector, did something it’s only done twice in history. It triggered what traders call a “Golden Star” signal, when price, volume, and three different moving averages converge simultaneously. The first time it happened was June 2016, and LIT **ran 64% in twelve months**. The Second time was January 2020. LIT **ran 128%**. - **Third time****: September 5, 2025. Three weeks ago.** Look at that chart showing years of nothing and dead money, where a massive base formed. Then it explodes on big volume, 40% more than the average. In twelve weeks, LIT ran from $38 to $57, moving 50% while you were reading about how lithium was dead, EVs were over, and sodium batteries would kill everything. The ETF just broke above every single moving average, with the next technical target at $60. Then $70. But here’s what created this setup [we warned was coming](https://katusaresearch.com/80-crash-700-demand-growth-this-sectors-math-doesnt-add-up/) months ago… ## The 87% Collapse That Changed Everything From October 2022 to May 2025, lithium prices fell 87%. Six weeks ago, lithium carbonate was trading at $8,500 per tonne. One problem: it costs $12,000-15,000 per tonne to dig it up. So, producers did the only rational thing, they stopped digging. The Australians shut down mines. Chinese lepidolite mines closed. Expansion plans died. - **Meanwhile, this year Tesla is projected to deliver 1.6 million cars including record Q3 delivery numbers and BYD delivered 3 million.** Every single EV needs 60-80 kilograms of lithium. The math was always going to break and the deficits are coming. In 2024 the lithium market was swimming in a 154,000-tonne surplus. Next year you’re looking at the first deficit in four years. According to the China Passenger Car Association (CPCA), new energy vehicle (NEV) retail sales in China reached a 58.5% penetration rate in September. **More than half of all new passenger cars sold in China were fully electric or plug-in hybrids.** The rapid shift to EVs in China is intensifying competition for lithium and straining supplies. LIT is the tourist trade where you can click buy and own the major players in the sector. LIT is up 50%, but look at the actual producers: - Albemarle: $86 (was $325) - Piedmont: $7 (was $82) - Standard Lithium: $3.86 (was $12.37) The biggest lithium producer in the Americas is still down 78% while lithium prices are already recovering. When lithium goes from $9,978 to Goldman’s $17,077 target, Albemarle doesn’t double, their margins go from negative to 40%. The stock goes up multiples. Maybe more. ## The Three-Wave Pattern That Rhymes I’ve invested in many commodity sector booms since 2003. Uranium, rare earths, lithium in 2016, lithium in 2020. There’s a familiar pattern every time: **Wave 1:** The ETF moves. Institutions need exposure fast. *(Now – LIT up 50%)* **Wave 2:** The producers recover. Real companies with real assets run 200-300% while the ETF goes up another 30%. *(Starting now)* **Wave 3:** The small caps go supernova. Explorers become producers. $100 million companies become billions. We’re 27 days into Wave 2. Albemarle is the largest lithium producer outside China. They’re trading at Depression-era valuations while the US government is literally buying lithium mines. Piedmont is a major lithium company in America. Last month, it merged with Sayona to form Elevra Lithium. The new entity now trades in the U.S. as depositary receipts. These are real companies trading like the lithium market died. Except it didn’t die. The government just injected it with adrenaline. The Golden Star signal has a timer. Historically, the biggest gains come in the first 90 days. We’re just weeks in, which means it’s time to start paying attention to lithium. Later this year or early in 2026, this will be on CNBC. Jim Cramer will be pounding the table about lithium. Reddit will have “discovered” lithium and the stealth phase of the market recovery will be gone. Right now, you’re seeing what the government saw three weeks ago: America needs lithium, it doesn’t produce it, and the companies that do are priced for bankruptcy. It solved part of their problem by buying into a mine. The US government doesn’t buy equity stakes in sectors that are dying. They buy them in sectors they know are critical, strategic, and in demand. Look at what happened to Intel stock. They just showed you their cards. And expect more money to come. LIT is proof the sector just hit an inflection point. Regards, Marin Katusa **P.S. My top lithium stock is up over 100% from its lows just 3 months ago.** [Click here to join *Katusa’s Resource Opportunities*](https://join.katusaresearch.com/subscribe/) and get the name and ticker symbol. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Meta Platforms (META) Gains Ahead of Q3 Earnings on Optimism for Strong Results - URL: https://katusaresearch.com/meta-platforms-meta-shares-rise-after-strong-q3-earnings-beat-and-positive-guidance/ - Type: article - Published: 2025-10-03 - Author: Marin Katusa *Key takeaways:* - *Meta Platforms will report Q3 2025 earnings on October 29, with consensus expecting strong revenue growth and continued operational momentum.* - *The company advanced in AI and ad technology, refreshed engagement across its core social platforms, and secured a $14.2 billion AI infrastructure deal.* - *Shares of Meta rose after the earnings announcement, with analysts offering optimistic forecasts and raising price targets.* - *Meta’s positive guidance for Q4 and robust year-over-year growth have reinforced confidence among retail and institutional investors worldwide.* ## **Meta Set to Report Q3 Results: Innovation and Expansion in Focus** Meta Platforms will announce its Q3 2025 earnings on October 29, 2025, with analysts expecting continued operational strength and global platform expansion. Consensus forecasts point to revenue above prior-year levels, supported by resilient demand for digital advertising and strong engagement across its flagship apps. Investor attention remains on Meta’s ongoing technology investments, particularly in AI, where the company has committed to multi-billion-dollar infrastructure buildouts expected to drive growth through 2026. Key areas of focus include advances in content recommendation systems, advertiser tools, and steady gains in daily active users across Facebook, Instagram, and WhatsApp. Analysts forecast daily active users will top 3.19 billion by the end of September 2025, marking another year of meaningful growth. The company’s strategy to deepen AI integration into its ad platforms is expected to enhance engagement and deliver improved targeting capabilities for businesses worldwide. ## AI Leadership and Global Engagement Fuel Meta’s Momentum Meta continues to reinforce its position in artificial intelligence, with investments in generative AI chat services for third-party websites that analysts expect will unlock new revenue streams by 2026. The company’s ongoing push into automation and AI technology is designed to enhance ad recommendation algorithms, deliver more relevant advertising, and improve return on investment for brand partners. A key area of investor focus remains Meta’s recently announced $14.2 billion partnership with CoreWeave, which will provide advanced cloud and AI infrastructure to accelerate product development cycles and support global reach. Analysts also anticipate strong engagement trends across North America, Europe, and fast-growing markets in Asia and Latin America. This global push is expected to contribute to improved monetization rates, reinforcing Meta’s adaptability in a competitive digital landscape. ## Market Reaction: Share Price Jumps, Analysts See Strong Upside Meta’s shares continue to trade near record highs ahead of the company’s Q3 2025 earnings release later this month. The stock closed at $727.05, up 1.35% on the day, extending its strong year-to-date performance. Investor positioning reflects confidence in the company’s trajectory, with enthusiasm building around its expanding ad platform and AI investments. Analysts expect Q3 EPS of roughly $6.74, according to consensus forecasts. Several firms have recently raised their price targets, pointing to disciplined expense control, accelerating user growth, and continued strength in the ad business. Anticipation also centers on management’s Q4 guidance, which many expect to highlight sustained margin expansion and capital investment in AI infrastructure. Analysts broadly recommend Meta as a long-term “buy.” They argue that its dominant social platforms, paired with early-stage leadership in AI, provide the foundation for durable growth through 2026 and beyond. With both retail and institutional investors watching closely, Meta’s Q3 results and outlook remain a key focal point for technology sector allocations. ## Positive Q4 Outlook: Navigating Growth and Innovation Looking ahead, Meta’s management issued positive guidance for Q4 and the full fiscal year, underscoring confidence in their operational strategy and technology investments. The company plans to further deploy AI-powered services and expand advertising formats in international regions, leveraging its broad data footprint and extensive user reach. For investors evaluating positions, Meta’s consistent performance, expanding AI partnerships, and innovation pipeline present a compelling case for ongoing growth. As the digital economy continues to evolve, Meta’s agility and global presence position it as a leading force in social technology and digital advertising, attracting broad investor interest in both developed and emerging markets. --- # Palantir Technologies (PLTR) Jumps on Q3 Earnings Beat and New Government Contract Win - URL: https://katusaresearch.com/palantir-technologies-pltr-jumps-on-q3-earnings-beat-and-new-government-contract-win/ - Type: article - Published: 2025-10-03 - Author: Marin Katusa *Key takeaways:* - *Palantir Technologies posts a 48% year-over-year revenue jump to $1 billion in Q2 2025, significantly beating market expectations.* - *The company lands a landmark 10-year U.S. Army contract valued at up to $10 billion, consolidating 75 prior contracts into a single streamlined agreement.* - *Recent operational milestones mark Palantir’s strongest government sector expansion to date, underpinning its strategic position in federal software procurement.* - *Stock price movement reflects strong investor response, while analysts remain positive, forecasting steady EPS and revenue growth through 2026.* ## Palantir’s Q3 Triumph: Earnings Beat and a $10 Billion Government Win Palantir Technologies has reached an inflection point, combining operational strength with a historic contract win. In its Q2 2025 earnings report—released August 4—Palantir posted revenue of $1.00 billion, a 48% year-over-year leap, well above the consensus estimate of $939.29 million. Net income translated to an EPS of $0.16, outperforming the projected $0.12 by 33%. This growth is attributed to increased demand for Palantir’s artificial intelligence-powered data platforms among both commercial clients and government agencies, solidifying its standing in the data analytics space. The standout achievement, however, is Palantir’s freshly awarded 10-year Enterprise Service Agreement with the U.S. Army, valued at up to $10 billion. Announced in early August, this deal consolidates 75 individual contracts—15 where Palantir served as prime contractor and 60 as subcontractor—into a single, streamlined contract. The scale allows the Army to leverage buying power for significant software discounts and reduces administrative burdens. Notably, this is Palantir’s largest contract vehicle to date, further anchoring its relationship with the Department of Defense and reflecting a strategic evolution in how the federal government approaches software procurement. ## U.S. Army Mega Deal: What It Means for Palantir’s Future The U.S. Army contract is not just sizable in dollar value but transformative in scope. It marks a new era for how military technology is bought and deployed, moving away from fragmented, short-term buys to coordinated, long-term partnerships. As underscored by Army officials, this approach is expected to bring greater efficiency while maximizing the government’s leverage for cost savings over the contract’s 10-year span. While the full $10 billion isn’t guaranteed at signing—the Army is only required to fulfill a minimum purchase—the agreement paves the way for Palantir to expand its portfolio of federally-backed AI, analytics, and battlefield management solutions. Operationally, the announcement is evidence of Palantir’s D.C. ascendancy and signals the Pentagon’s growing reliance on agile, data-driven firms. This federal momentum builds on Palantir’s already deep government ties. Since 2008, the company has secured over $1.9 billion in U.S. federal contracts, with the Army being its single largest client. The new deal cements Palantir’s leadership, particularly as AI becomes central to both national defense and enterprise IT strategies. ## Stock Surge: Analyzing the Price Moves and Analyst Sentiment Following the dual news of the earnings beat and Army contract, Palantir’s stock witnessed pronounced swings as both retail and institutional investors recalibrated their positions. While after-hours and opening trading reflected bullish momentum, the broader trend has been toward consolidation, mirroring the company’s shift from speculative growth stock to a more established defense technology leader. As of August, Palantir held a trailing EPS of $0.30 and a notably high P/E ratio of over 620. For Q3 2025, analysts expect EPS in the $0.12–$0.14 range, with revenue targets near $1.1 billion—a continuation of its upward trajectory. Consensus analyst ratings remain moderately positive, citing steady earnings growth (forecasted at 9.7% for the next fiscal year) and improved revenue visibility due to the Army contract. However, high valuation metrics are flagged as a point of caution, with some experts recommending cautious accumulation versus full allocation. The market response indicates growing confidence in Palantir’s operational execution and its long-term prospects in government tech contracts. ## What’s Next: Strategic Vision and Growth Outlook Looking ahead, Palantir’s future rests on the successful execution of its current commitments and continued innovation in AI-enabled analytics. The Army agreement provides a predictable foundation for growth and intensifies Palantir’s competitive moat against both legacy defense contractors and new software entrants. The company’s pipeline now extends beyond defense—with expansion initiatives in healthcare, finance, and global commercial markets—while maintaining its core focus on high-value, mission-critical federal work. For investors, Palantir’s Q3 performance and recent federal win position it as a key player in the intersection of technology and government. In an environment where data and intelligence are vital, Palantir’s scale, government backing, and ability to consistently beat expectations create compelling reasons to monitor its trajectory closely. --- # NVIDIA (NVDA) Analyst Predicts 40%+ Upside on Data Center Demand – Latest Targets and Risks - URL: https://katusaresearch.com/nvidia-nvda-analyst-predicts-40-upside-on-data-center-demand-latest-targets-and-risks/ - Type: article - Published: 2025-10-01 - Author: Marin Katusa *Key takeaways:* - *Nvidia reported Q2 2025 data center revenue of $26.3 billion, marking 154% growth and driving record profit margins.* - *The company’s market cap reached $4 trillion, positioning Nvidia as a dominant force in AI infrastructure and data center solutions.* - *Analysts predict 40%+ stock upside, forecasting robust demand for enterprise-grade AI GPUs and sustained data center expansion.* - *Major risks include sales concentration among only three clients, making up 53% of data center revenue, but institutional investor confidence remains strong.* ## Nvidia’s Leap: Setting New Standards for AI and Data Center Tech Nvidia’s recent performance demonstrates the company’s continued ascent as an undisputed leader in the AI hardware and data center GPU market. By Q2 2025, Nvidia’s data center segment surged to $26.3 billion in revenue, a 154% year-over-year jump from the previous year. This remarkable growth was not an isolated event—just two years prior, all of Nvidia’s data center sales hovered near $14.5 billion per quarter, illustrating how demand for high-powered GPU solutions has transformed the sector. This operational momentum reflects Nvidia’s dominant presence in enabling AI workloads, cloud compute, and enterprise applications. The launch of their H100 and next-generation Blackwell GPUs has helped the company expand its reach from hyperscaler data centers, like AWS and Google Cloud, to sovereign cloud zones across Europe and the Middle East. Nvidia’s commitment to research and development is also substantial, with R&D spending reaching $10.5 billion in 2025—25% higher than last year—focused on accelerating new AI and autonomous computing platforms. Notably, Nvidia’s FY2025 revenue topped $88 billion, with net margins above 50%. The company’s free cash flow rose to $28 billion, fueling aggressive innovation and share repurchases. Major partnerships with OpenAI, Meta, Amazon, and Google underpin its strategic position at the heart of AI infrastructure—and over 75% of Fortune 500s now deploy Nvidia’s solutions in mission-critical cloud and enterprise environments. ## Data Center Demand: Fueling Explosive Growth and Market Leadership Nvidia’s influence extends far beyond traditional chipmaking. CEO Jensen Huang described data centers as “AI factories,” and Nvidia’s GPUs are now the backbone of global AI deployments. In June 2025, Nvidia became the first company to reach a $4 trillion market valuation, outpacing Amazon, Alphabet, and briefly surpassing Apple. This achievement underscores not just investor confidence, but Nvidia’s ability to pivot from a pure hardware supplier to an AI platform company. The market for data center GPUs is projected to balloon from $121.6 billion in 2025 to $295.2 billion by 2032, with Nvidia commanding a leadership stake through continual innovation in photonics, server architecture, and software. The expansion of AI training clusters by Azure and Oracle and the adoption of Nvidia’s Grace Hopper Superchips by government agencies further amplify growth prospects. Despite intense competition, Nvidia’s unique integration of hardware and software platforms sets it apart. Gross margins of 76%, operating income at $46 billion, and institutional ownership exceeding 70% all signal investor conviction in the company’s capacity to sustain high profitability and seize new opportunities. ## Stock Outlook: Analyst Targets and Price Movement Analysis Analyst coverage for Nvidia remains resoundingly bullish. Several leading Wall Street analysts have recently raised their price targets by 40% or more, citing explosive data center revenue growth and robust enterprise demand. Forward P/E ratios in the 60–75 range highlight premium valuation—yet many analysts argue these multiples are justified given Nvidia’s unparalleled earnings growth and its pivotal role in the global AI infrastructure shift. In the past 12 months, Nvidia stock delivered a 240% return for shareholders, outperforming Apple, Microsoft, and Amazon by a wide margin. Earnings per share have surpassed $15, with annual EPS growth that beats all major technology competitors. Analysts recommend accumulating the stock, anticipating ongoing upside as GPU deployments and software adoption scale to new highs. The consensus remains that Nvidia has room to grow further, with projected demand for GPUs and AI chips outpacing supply and stretching well into the next decade. Institutional buying activity continues to swell, reinforcing both short- and long-term bullish sentiment among retail and professional investors. ## Risks: Market Concentration and Customer Dependence No story of growth is complete without consideration of risks. Nvidia’s Q2 2025 earnings revealed that more than half of its data center revenue—about $21.9 billion—came from just three major customers. If any of these clients were to reduce spending or change providers, Nvidia’s revenue could face sudden pressure. While the probability of an immediate shift is low, the scenario demands attention as the company continues to scale. Another potential risk is the broader competitive environment. As hyperscalers invest in building proprietary chips, Nvidia must continue to innovate and deliver unmatched value, lest it cedes ground to emerging rivals. The company’s focus on full-stack infrastructure, including photonic interconnects and modular servers, is a strategic response to this threat. Nevertheless, institutional investors maintain confidence, with over 70% of NVDA shares held by major funds. Nvidia’s sizable cash reserves ($36 billion) and robust profitability offer financial flexibility to weather disruptions, invest in next-gen solutions, and maintain dividend and buyback programs for shareholders. --- # Rivian (RIVN) Stock Bounces on Analyst Double Upgrade—New Targets Point to 25% Upside - URL: https://katusaresearch.com/rivian-rivn-stock-bounces-on-analyst-double-upgrade-new-targets-point-to-25-upside-2/ - Type: article - Published: 2025-10-01 - Author: Marin Katusa *Key takeaways:* - *Rivian receives a double analyst upgrade and higher price targets, pointing to a possible 25% upside for investors.* - *Company showcases strong Q2 2025 operational results—outpacing many peers in delivery growth and factory efficiency.* - *Recent analyst actions have shifted sentiment towards a more positive stance, with price targets reaching as high as $21.00.* - *Stock price jumped following the news, reflecting renewed institutional and retail interest in RIVN.* ## Rivian on the Move: Strong Deliveries and Efficiency Gains Highlight 2025’s Momentum Rivian Automotive continues to post impressive operational metrics in 2025, reinforcing its position as a competitive force in the electric vehicle market. The EV maker delivered more than 36,000 vehicles year-to-date through Q2 2025, up roughly 14% over the same period last year—a signal of both robust demand and improved manufacturing processes. The company’s Normal, Illinois plant has increased its run-rate capacity to approximately 75,000 units per year, an uptick from 60,000 at the start of 2024. In addition to higher output, Rivian has improved its gross margin by nearly 7 percentage points year-over-year and narrowed its quarterly net loss, reflecting better cost controls and supply chain management. The R2 SUV, launched in June 2025, has quickly gained pre-orders, adding confidence to management’s guidance for full-year deliveries to exceed 75,000 units. These operational wins, paired with commitments to reduce cash burn and target adjusted EBITDA break-even in late 2026, have resonated with both retail and institutional investors. ## Analyst Double Upgrade Ignites New Optimism in RIVN In mid-September 2025, investor sentiment around Rivian got a substantial lift after two major Wall Street firms upgraded the stock within the same week. Most notably, Mizuho upgraded Rivian’s rating from “Neutral” to “Buy” and increased the 12-month price target from $12.00 to $14.00, citing operational execution that beat expectations. Stifel Nicolaus also moved its price target to $16.00 from $13.00 and shifted its rating to “Buy.” By September 24, 2025, the broader analyst community had raised the ceiling, with some price targets reaching as high as $21.00. The average 12-month price target among 24 industry analysts stood at $14.07, with a consensus rating of “Hold.” Five analysts rated the company a “Buy,” compared with three “Sell” and sixteen “Hold” recommendations, a clear improvement in bullish outlook versus just one quarter earlier. Since then, Rivian’s share price has slipped from $15.79 to $14.61 as of October 1, 2025. The pullback reflects short-term profit-taking after the rally, combined with renewed concerns about EV sector demand softness and high interest rates pressuring growth valuations. ## Price Action: Investors Respond Quickly to Wall Street Upgrades News of the double upgrade triggered a swift reaction in RIVN shares, which surged as much as 1.7% intraday and closed at $15.79 on September 24, 2025. Trading volume came in more than 40% above the 30-day average. Since then, the stock has pulled back to $14.61 as of October 1, 2025, as profit-taking set in and broader concerns about EV demand and financing conditions weighed on sentiment. While short-term sentiment remains mixed—analysts’ average target of $14.07 suggests a modest downside from current levels—several firms see outsized upside if Rivian can hit its operational milestones. The top price target of $21.00 implies roughly 43% above current trading levels, making RIVN an intriguing candidate for both growth-focused retail investors and institutions seeking high-beta exposure in the EV sector. ## What’s Next for Rivian—Profitability in Sight? As Rivian enters the last quarter of 2025, all eyes are on delivery performance, cost management, and product rollout. The slated expansion into new international markets by early 2026 and the upcoming launch of its second-generation delivery van for Amazon could further lift revenue and unit economics. Meanwhile, management reiterated during the recent earnings call their commitment to cash flow discipline—aiming for positive adjusted EBITDA as early as Q4 2026. For now, Rivian stands out as both a turnaround and growth play. Institutional ownership remains above 60%, signaling strong conviction. As analysts and investors adjust models based on recent upgrades and improving fundamentals, volatility is likely to persist. For investors willing to accept risk for potential double-digit upside, RIVN will remain a closely watched ticker on screens worldwide in the months ahead. --- # When These 2 Maps Merge, You’ll Want to Own This - URL: https://katusaresearch.com/when-these-2-maps-merge-youll-want-to-own-this/ - Type: article - Published: 2025-09-26 - Updated: 2025-09-25 - Author: Marin Katusa Take a close look at these two maps. The left shows America’s 94 nuclear reactors, built decades ago and scattered across empty land. The right shows America’s 2,847 data centers, the beating heart of the AI revolution. **By 2030, both maps will look like the one on the right.** Every major data center will have its own nuclear reactor. Not miles away. Not connected by transmission lines. Built directly on-site, like having a personal power plant in the parking lot. Oracle is already building a 1GW facility powered by three reactors. Microsoft has teams designing nuclear-powered data centers. Google just committed to 500MW of on-site nuclear by 2030. This is an inevitability because AI has hit a power wall that only nuclear can break through. *“We need another 90 gigawatts of power in America.”* – Former Google CEO Eric Schmidt That’s the equivalent of building 90 more nuclear reactors. By 2030. But tech companies aren’t waiting for sluggish utilities to build. They’re doing something unprecedented: installing reactors AT their data centers. Small modular reactors (SMRs) can be deployed in 3-5 years, stack like Lego blocks, and provide the exact power profile AI demands: - **Concentrated**: No transmission losses, no grid dependence - **Compact**: Critical when data center land costs $2M/acre - **Constant**: 24/7 uptime, no weather dependence The scramble for SMRs began with Silicon Valley “barging the queue” to lock up nuclear capacity… The U.S. only has 94 operating nuclear reactors total. And a full *one-third* of them have already sold their power or are in talks with tech companies to provide them with power. ## Always-Increasing Demand, Meet Dwindling Supply Here’s how desperate they’re getting… Meta recently signed a deal to fund 1.1 GW from an Illinois reactor. But not to use the power, just to make sure the plant stays open until they need the power. No matter how many nuclear plants get bought up, demand keeps growing even faster*.* - **OpenAI says it needs 35 GW of power for just seven data centers, or 35% of the current U.S. nuclear base.** - **The U.S. data center pipeline expected through 2030 would require ALL current nuclear power available in the U.S. today.** The shortage is critical. Texas now lets grid operators disconnect data centers during power crunches. Imagine your billion-dollar AI facility going dark because there’s simply not enough electricity. That’s what’s made the world suddenly ready for SMRs. They deliver the exact power profile AI needs: always-on, concentrated, baseload. But more importantly, they can be deployed in 3-5 years, versus 5-7 for alternative forms of energy. Speed to power is everything. ## Hyperscale Power Is Coming at Hyperspeed Natural gas plants take 5-7 years to build. And SMRs are expected to take 3-5 years. Not only that, but SMRs are dirt cheap, especially if you’re a tech company. Meta, for example, expects *total* ’25 capital expenditure of $70B. Oklo’s 15 MW SMR is expected to cost just $70M**.** **That’s 0.1% of Meta’s annual budget—and less than the contract of a single AI developer.** Google intends to be buying SMR power from Kairos by 2030. Amazon alone intends to build out 5GW of SMRs. In fact, in just *one year*, the data center SMR pipeline exploded from 0GW to 18GW. That’s 20% of America’s entire nuclear base—enough to power 14 million homes. But here’s what everyone’s missing: This isn’t about SMRs powering data centers. It’s about nuclear and data centers becoming **the same thing**. ## The Trillion-Dollar Equation: AI = GPUs + SMR Everyone seems to miss the middle word in SMR: “modular.” Modularity is what makes SMRs custom-fit to be used as on-site power for data centers. They were designed from the start to be stacked to accommodate a data center’s precise needs: Once built on-site, SMRs don’t need transmission lines. Or distribution. In other words, SMRs solve every problem with power, all at once. Which means that “data centers” will soon refer to the fully integrated **energy + compute stack**. Countless operators are already bringing the GPU + SMR dream to fruition: In other words, any future growth in data centers will be matched by growth in nuclear SMRs. ## Soon, These Two Maps Will Merge… But while everyone’s focused on the union, they’re missing what makes it possible. Every single SMR, all 18GW in the pipeline, representing 20% of America’s entire nuclear fleet, needs one critical input: **uranium**. **Yet the U.S. only produces 5% of the uranium we already consume.** The other 95% is imported from Russia, Kazakhstan, and other countries that could cut the U.S. off tomorrow. **Now imagine what happens when Google, Microsoft, and Amazon suddenly realize their shiny new reactors are dependent on Russian uranium.** The last time we had a uranium supply crisis, prices shot from $7 to $140. But that was before tech companies needed to fuel hundreds of reactors. This time? There’s a chance any demand shock will be exponentially larger. They’ll scramble for domestic supply. And they’ll pay whatever it takes to secure it. Regards, Marin Katusa and the Katusa Special Situations Team ***P.S.**** The demand for SMRs from AI is really the icing on the cake—albeit a lot of icing. [We’ll show you exactly how to play this at the source](https://join.katusaresearch.com/subscribe/).* **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Gold/S&P500 Ratio Visualization - URL: https://katusaresearch.com/gold-sp500-ratio-visualization/ - Type: page - Published: 2025-09-23 - Updated: 2026-10-02 - Author: Marin Katusa Market Intelligence This ratio divides the gold price by the S&P 500 — the cleanest gauge of hard assets versus stocks. When it’s high, gold is dear and equities are cheap; when it’s low, stocks are expensive and gold is the overlooked bargain. Today it sits near the bottom of its half-century range. **Extreme reading:** at 0.55, the ratio sits in the lower third of its readings since 1970. ## Gold / S&P 500: Ratio Chart and What It Means 55-year history · log scale 10Y25YMAX #### Historical extremes - 1980 peak **~6.0** - 2000 low **0.18** - 2011 spike **1.68** - Today **0.55** #### Reversion scenarios (illustrative) - Stocks −40% **→ ~0.92** - Gold +50% **→ ~0.83** - Both at once **→ ~1.4** #### Key pattern The ratio has bottomed near major stock-market peaks (2000, 2021) and surged in resource bull markets (the 1970s, and 2008–2011). Extremes have marked turning points, not permanent states. Ratio = gold price ÷ S&P 500 index level. ## What the gold / S&P 500 ratio means This single line captures a tug-of-war that has driven markets for a century: **hard money versus financial assets**. Dividing the gold price by the S&P 500 tells you how many “units” of the stock market one ounce of gold can buy — a quick read on which side of that trade is cheap. When the ratio is **high** (1980, 2011), gold is expensive and stocks are unloved. When it’s **low** (2000, 2021, and today), stocks are richly valued and gold is the overlooked bargain. It’s a macro compass, not a timing signal — but the extremes have repeatedly marked major turns. ### How to read it The chart is on a **log scale** so both the 1980 spike and the 2000 trough are legible. The dashed green line marks today’s level so you can see how rarely the ratio has been this low. Stretches well below that line have historically rewarded gold and hard-asset buyers. - High ratio → gold dear, stocks cheap. Low ratio → stocks dear, gold cheap. - Peaked above 6 in 1980; bottomed near 0.18 in 2000. - Today ≈ 0.55 — the lower third of the 55-year range. ## Frequently asked questions ### What is the gold-to-S&P-500 ratio? It’s the gold price divided by the S&P 500 index level — a one-line gauge of how hard assets are valued against U.S. stocks. When it’s high, gold is dear and equities are cheap; when it’s low, stocks are expensive and gold is the overlooked side of the trade. ### Is gold undervalued compared to stocks? By this yardstick, gold is inexpensive: at about 0.55 the ratio sits in the lower third of its 55-year history, despite gold’s strong run — because stocks have run even harder. Stretches like this have historically favored hard-asset buyers, though the ratio is a compass, not a timing signal. ### What was the highest gold-to-S&P-500 ratio ever? Within this chart’s 55-year window, the ratio peaked just above 6 in early 1980 — gold mania meeting a depressed stock market — and bottomed near 0.18 in 2000 at the peak of the dot-com boom. Today’s 0.55 sits far closer to the bottom than the top. Keep exploring ## More free monitors Commodities ### [Commodity Bargain Monitor](https://katusaresearch.com/commodity-bargain-monitor/) 3-year returns across 16 commodities — who’s cheap, who’s hot. Gold · Bitcoin ### [Bitcoin vs. Gold Market Cap](https://katusaresearch.com/bitcoin-gold-market-cap/) How far has “digital gold” closed the gap on the real thing? Live charts ### [Market Data](https://katusaresearch.com/market-data) Build your own chart from gold, silver, oil, bitcoin and more. [Read: Gold’s Funeral Phase →](https://katusaresearch.com/golds-funeral-phase/) [Read: You’re Not Late →](https://katusaresearch.com/youre-not-late-the-frenzy-hasnt-started/) [Read: Who’s Holding Your Silver Hostage →](https://katusaresearch.com/heres-whos-holding-your-silver-hostage/) Go deeper ## Get the research behind the data — free to your inbox. [Get Katusa’s free insights](https://join.katusaresearch.com/subscribe/) **Disclaimer.** For informational purposes only and not investment advice or a recommendation. Reversion scenarios are hypothetical illustrations, not forecasts. Built from third-party price data and not guaranteed to be accurate or complete. Always do your own research. --- # Bitcoin Gold Market Cap - URL: https://katusaresearch.com/bitcoin-gold-market-cap/ - Type: page - Published: 2025-09-23 - Updated: 2026-10-02 - Author: Marin Katusa Market Intelligence How does Bitcoin’s market capitalization stack up against gold’s — the original store of value? This live chart tracks both since 2014, alongside the Bitcoin-to-gold ratio, so you can see exactly how far “digital gold” has closed the gap on the real thing. ## Bitcoin vs Gold Market Cap: Live Comparison Chart Digital gold vs. physical gold, market capitalization over time 1Y5YMAX ## Why the Bitcoin-to-gold gap matters Gold has been the world’s benchmark store of value for thousands of years, with an above-ground market capitalization measured in the tens of trillions. Bitcoin — often called **“digital gold”** — is barely fifteen years old, yet its market cap has already climbed into the trillions. Watching the two side by side answers the question every resource and monetary-hedge investor eventually asks: **is Bitcoin actually catching up to gold, and how much room is left to run?** The dashed line tracks Bitcoin’s market cap as a percentage of gold’s. When it rises, capital is rotating toward the digital hedge; when it falls, the metal is reasserting itself. Both tend to move together during bouts of currency debasement — which is the real story here. ### How to read this chart The market-cap axis is **logarithmic**, so each gridline is roughly 3× the one below it — the only honest way to plot two assets that differ by an order of magnitude. Two events are marked: the first time Bitcoin’s market cap crossed **$1 trillion**, and the January 2024 approval of U.S. **spot Bitcoin ETFs**, which opened the door to institutional capital. - Gold’s market cap still dwarfs Bitcoin’s by more than 20×. - Bitcoin has grown from a rounding error to several percent of gold’s value in under a decade. - The ratio is volatile — it spikes in crypto bull runs and resets hard in bear markets. ## What is the market cap of gold? Gold's market cap is roughly **$29 trillion** right now, based on a spot price of $4,154.30 per ounce as of Oct 02, 2026 at 5:24 PM EDT. Unlike a stock, which is valued by its shares, gold's market cap is the estimated total value of all the gold ever mined, though the exact amount can't be known for certain. The math is: about 220,000 tonnes of above-ground gold (the World Gas Council's rough estimate, ≈7.07 billion troy ounces) × $4,154/oz ≈ $29.4 trillion, so the figure moves with the daily gold price. ## Frequently asked questions ### Is Bitcoin’s market cap bigger than gold’s? No. Gold’s above-ground market cap is roughly $29 trillion, while Bitcoin’s is around $1.2 trillion — so gold is still more than 20 times larger. Bitcoin would need to rise many multiples to match it. ### What is gold’s total market cap? Multiplying the gold price by the ~216,000 tonnes (~7.07 billion troy ounces) of gold ever mined gives a market cap in the high-$20-trillion range at today’s prices. ### How is Bitcoin’s market cap calculated? Bitcoin’s market cap is its price multiplied by the coins in circulation (about 20 million of a fixed 21 million cap) — the same figure quoted by sources like CoinMarketCap. ### What would Bitcoin be worth if it matched gold’s market cap? With roughly 20 million coins in circulation, Bitcoin would need to trade north of **$1.4 million per coin** to equal gold’s ~$29 trillion market cap — about 24× today’s price. Whether it ever closes that gap is exactly what the ratio line on this chart tracks. Keep exploring ## More free monitors Commodities ### [Commodity Bargain Monitor](https://katusaresearch.com/commodity-bargain-monitor/) 3-year returns across 16 commodities — who’s cheap, who’s hot. Gold · Macro ### [Gold / S&P 500 Ratio](https://katusaresearch.com/gold-sp500-ratio-visualization/) Are hard assets cheap or expensive versus stocks? Live charts ### [Market Data](https://katusaresearch.com/market-data) Build your own chart from gold, silver, oil, bitcoin and more. [Read: Gold’s Funeral Phase →](https://katusaresearch.com/golds-funeral-phase/) [Read: Who’s Holding Your Silver Hostage →](https://katusaresearch.com/heres-whos-holding-your-silver-hostage/) [Read: You’re Not Late →](https://katusaresearch.com/youre-not-late-the-frenzy-hasnt-started/) Go deeper ## Get the research behind the data — free to your inbox. [Get Katusa’s free insights](https://join.katusaresearch.com/subscribe/) **Disclaimer.** For informational purposes only and not investment advice or a recommendation. Market-cap figures are estimates built from third-party data — a World Gold Council above-ground-gold estimate and CoinMarketCap-style Bitcoin market cap (price × circulating supply); they are not guaranteed to be accurate or complete. Always do your own research. --- # Amazon (AMZN) Stock Volume Rises After Q3 Earnings Beat and Strong Sales Guidance - URL: https://katusaresearch.com/amazon-amzn-stock-volume-rises-after-q3-earnings-beat-and-strong-sales-guidance/ - Type: article - Published: 2025-09-22 - Author: Marin Katusa *Key takeaways:* - *Amazon reported Q3 revenue guidance of $174‒$179.5 billion, beating Wall Street’s prior consensus.* - *Earnings per share (EPS) for Q2 came in at $1.68—well above the $1.31 estimate—showing robust operational efficiency.* - *Retail and AWS growth, plus global logistics investments, underline Amazon’s continued expansion and innovation.* - *AMZN stock volume surged after earnings, with analysts pointing to ongoing upside potential for institutional and retail investors.* ## Amazon Delivers a Standout Quarter: Revenues and Growth Outpace Expectations Amazon once again captured the spotlight following its latest quarterly earnings announcement, reporting clear strides across its business lines. For Q2 2025, Amazon posted revenue of $167.7 billion, which reflects a 13.3% year-over-year increase, easily outpacing analyst forecasts of $161.8 billion. EPS for the quarter hit $1.68, handily beating the Wall Street consensus of $1.31—a positive deviation of over 28%. The company’s own revenue guidance for Q3 lands between $174 billion and $179.5 billion, signaling confidence and momentum heading into the peak retail season. Amazon Web Services (AWS) continues to drive growth, along with the core retail segment. The technology giant’s recurring investments in global logistics, automation, and artificial intelligence underline the operational strengths behind these figures. Amazon’s annual revenue now stands at $637.96 billion, while net income reached $59.25 billion over the past year, confirming its standing among the world’s most profitable and innovative companies. Innovation and efficiency programs remain center stage for Amazon, including efforts in supply chain optimization and deeper integration across markets worldwide. This strategy is reflected in operating margins and the sustained acceleration of key business segments—from Prime services to third-party marketplaces and AWS’s expanding client roster. ## Guidance Signals Optimism: What Investors Are Watching This Fall Attention now turns to Amazon’s Q3 forecast, with management projecting revenue between $174 billion and $179.5 billion—exceeding analysts’ consensus of $172.8 billion. This bullish guidance not only supports expectations of a dynamic holiday season, but also demonstrates management’s strong conviction in the resiliency of its e-commerce and cloud segments. Guidance for next year is also robust, with analyst projections showing anticipated earnings per share rising to $7.44 in 2026, up nearly 18% from current levels. The ongoing focus on logistics and cloud infrastructure modernization is seen as a pivotal lever for maintaining the company’s leadership in global commerce and technology. The growth narrative isn’t limited to the U.S. Amazon continues to expand internationally, laying groundwork for further gains in Europe, Asia, and Latin America—areas that are expected to play a critical role in future earnings cycles. ## Stock Volume Spikes: How Wall Street Is Reacting to AMZN’s Performance Following the Q2 earnings surprise and upbeat Q3 guidance, AMZN stock saw an immediate uptick in trading activity. Investors reacted strongly; trading volume jumped notably as both retail and institutional traders repositioned ahead of year-end. The stock price prior to earnings was $234.11 and, despite a subsequent minor dip, the market’s focus remains on Amazon’s longer-term earnings power and margin improvements. The company’s current price-to-earnings ratio is around 35.29, while the forward ratio stands at 36.68. Analysts predict a 17.9% annual EPS growth for Amazon, indicating strong medium-term potential. Quarterly swings are common in big tech, but the recurring pattern of exceeding estimates and raising guidance reveals why investor sentiment remains solid. Market strategists emphasize Amazon’s diversified business, robust cash flows, and innovative edge as foundational advantages, supporting ongoing interest from large funds and long-term holders. Those monitoring options and volatility have also noted increased derivatives activity, suggesting bets on continued price momentum in the coming quarters. ## What’s Next for Amazon? Eyes on Expansion and Earnings Power Looking ahead, Amazon is well-positioned to capitalize on key holiday shopping trends and the rise in global e-commerce demand. The company’s consistent reinvestment in technology and logistics, paired with a solid leadership team, continues to draw favorable reviews from both buy-side and sell-side analysts. For investors, AMZN offers a unique combination of stability, growth, and recurring innovation—a rare trifecta in today’s shifting market. With both operational strength and forward-looking strategies, Amazon remains a core holding for global institutional investors and an attractive opportunity for retail portfolios. The next quarterly earnings report, scheduled for October 30, 2025, will be closely watched as a bellwether for broader retail and tech sector fundamentals. --- # Tesla (TSLA) Shares See Increased Trading Following New Battery Tech Announcement - URL: https://katusaresearch.com/tesla-tsla-shares-see-increased-trading-following-new-battery-tech-announcement/ - Type: article - Published: 2025-09-22 - Author: Marin Katusa *Key takeaways:* - *Tesla has announced a new battery technology, featuring aluminum-ion advancements, promising up to 745 miles of range and full charging in just 15 minutes.* - *Battery innovations could close the gap between high-performance and standard batteries, benefiting both users and Tesla’s product longevity.* - *Despite a new tech reveal, Tesla’s Q2 2025 operational performance saw lower revenues and vehicle deliveries compared to last year.* - *Tesla’s stock price became more volatile after the battery news, with analysts split on future outlooks amid evolving EV market dynamics.* ## Next-Gen Battery Breakthrough: Tesla’s Technology Leap Tesla has unveiled a significant upgrade in battery technology, aiming to boost electric vehicle (EV) performance and user convenience. Announced in late August 2025, Tesla’s new aluminum-ion battery architecture delivers up to **745 miles of maximum range**, nearly doubling previous lithium-ion standards. Full charging now can be completed in as little as **15 minutes**, aligning EV refueling times closer to traditional gas vehicles. This innovation addresses two persistent challenges for EV buyers—range anxiety and slow charging. Tesla’s battery leverages **aluminum’s natural abundance and high electrical conductivity** for faster ion transfer, improving both lifespan and safety. With an estimated lifespan of **up to 3,000 charge cycles** and early production costs projected to be 30% lower than current lithium-ion batteries, the company is positioned to set new industry benchmarks for cost and reliability. Tesla targets the introduction of these batteries into production vehicles within the next 18 to 24 months. Tesla’s breakthroughs extend beyond just materials. The company’s recent patent filings revealed proprietary doping techniques for nickel-based batteries, raising retained charge capacity from 83% to nearly 91%. This development allows customers to charge their performance vehicles up to 90% daily—matching the convenience previously reserved for standard battery models. Executives at Tesla emphasized that these advances are not incremental but foundational, sharply closing the gap between the brand’s performance and standard-range offerings. ## Operational Highlights: A Mixed Quarter Amid Innovation While the new battery announcement signals long-term promise, Tesla’s Q2 2025 operations reflect the EV market’s current headwinds. In the latest quarter, Tesla delivered **384,122 vehicles**, a **13.5% decline year-over-year**. Total automotive revenue fell by 16% to **$16.6 billion**, and overall revenues dropped 12% to **$22.49 billion**. The company’s net income attributable to shareholders was **$1.17 billion**, down 16% year-over-year. The challenging quarter followed a stretch of rapid growth between 2021 and 2023, as the EV industry now contends with slowing demand, affordability constraints, and stiffer competition from both U.S. and foreign automakers. Notably, Tesla remains committed to a strategy of leveraging operational efficiency and vertical integration—manufacturing critical components, reducing costs, and adapting quickly to changes in the global auto market. Despite these pressures, Tesla continues to invest aggressively in innovation, channeling capital into production optimization and new product development, including its battery supply chain and manufacturing technologies. ## Price Action: Stock Volatility and Analyst Perspectives Tesla stock (TSLA) became notably more active after the new battery announcement in late August 2025. The share price initially surged by nearly 5% following the announcement, as investors responded to the long-term potential of the technology. However, the euphoria was tempered by the quarterly earnings report, which highlighted a contraction in both revenue and deliveries. Analysts remain divided on Tesla’s outlook. Several bullish institutions argue that the battery innovation, if commercialized at scale, could provide Tesla a critical moat against an increasingly crowded EV space. Price targets among these groups range from $290 to $340 per share for the next year, with expectations of margin recovery and renewed consumer interest. Other analysts remain cautious, warning that near-term valuation pressures and competitive threats from traditional manufacturers could limit upside. They advise investors to closely monitor demand signals, production scaling capabilities, and actual implementation timelines for the new battery technology before making major allocation decisions. ## What the Future Holds: Can Innovation Outpace the Challenges? Tesla’s battery announcement arrives at a crossroads for the company and the global EV market. On one hand, technical achievements such as the aluminum-ion battery and nickel-based doping may place Tesla at the front of the next phase of sustainable transportation. On the other, operational and financial results highlight the present-day realities of an evolving and contested market space. For both retail and institutional investors, the company’s future will hinge on its ability to scale up new technologies across mass-market models, maintain cost advantages, and adapt to a shifting regulatory and economic environment. As the rollout of new battery platforms accelerates in 2026 and beyond, stakeholders across the investment spectrum will be watching for confirmation that Tesla’s blend of innovation, efficiency, and market positioning can continue to deliver results. --- # The Gold Price is Wrong - URL: https://katusaresearch.com/the-gold-price-is-wrong/ - Type: article - Published: 2025-09-19 - Updated: 2025-09-18 - Author: Marin Katusa In May 1999, the Bank of England announced it would sell 415 tons of Britain’s gold reserves. Gold was $282 an ounce. Gordon Brown, then Chancellor, called it a “restructuring to more productive assets.” They sold at the absolute bottom. Today that gold would be worth $48 billion. They received $3.5 billion from the gold sales in 1999. The British press still calls it “Brown’s Bottom”, the worst trade in central banking history. Here’s why I’m telling you this: Today, central banks are doing the opposite. China, Poland, India, they’re buying record amounts at $3,600 an ounce. Either they’re making the worst trade since Gordon Brown, or they know something the market doesn’t. They know gold’s price is wrong. ## Why Central Banks Know What You Don’t Gold isn’t tired and it might not be peaking yet. Even if at $3,700 an ounce, the headlines say, “all-time highs.” But zoom out and you’ll see the real story. Investors are looking at the wrong number, and central banks might see something entirely different. Gold is still cheap when you adjust for money supply, and the setup for much higher prices is staring us in the face. Since March 2020, the Federal Reserve created $6 trillion in new money. - **That’s a 40% increase in M2 money supply and more dollars created in four years than in the previous decade combined.** Yet gold, the asset that’s supposed to protect against currency debasement, hasn’t even kept pace. It should have, but it hasn’t. And the gap between what gold costs and what it should cost is $800 per ounce. We’ve created a chart that reveals something most investors miss: **Gold is actually *cheap* relative to the global currency fiat money supply**. Despite hitting nominal all-time highs, gold is actually *cheaper* relative to money supply than during previous peaks. At $3,600, everyone knows that gold is at nominal all-time highs. But relative to M2 money supply, it’s well below historical peaks. This suggests significant upside potential if the market catches up to monetary expansion. - **If gold matches its ****2011 money-supply ratio****, you’re looking at about ****$4,400 per ounce****.** - **If gold matches the ****1980s ratio****, it’s about $****9,700 per ounce****.** The divergence is massive. Gold has been playing catch-up since 2020 when money printing went vertical, but it still hasn’t closed the gap. Central banks know it. They’re buying at record levels. The general public is still looking at nominal prices and missing the real story that investors are starting to pick up on. ## The Professionals Are Loading Up Now look at how the big money is positioned. Since early 2024, managed money long contracts have absolutely crushed shorts. Those blue bars dominate the red ones by a factor of 5-to-1. September’s net long positioning is the strongest we’ve seen since April. Translation: the pros are leaning hard into gold. Hedge funds, traders, money managers, are not fading this rally. They’re piling in and think this will continue, with good reason. Rates are bending lower, deficits are ballooning, tariffs are flying, and the geopolitical issues continue to be a tinderbox. Smart money knows it. ## The 50% Profit Jump Already Happening Forget everything you know about gold miners from the last decade. At $3,600 gold, the average North American producer generates $2,200 per ounce in margin (assuming $1,400 all-in sustaining costs). Here’s the math: - At **$2,900 gold**, the top miners were pocketing about **$1,500 per ounce**. - At **$3,650 gold**, the top players are pocketing **$2,250 per ounce**. **That’s a ****50% jump in profits**** on just a 26% rise in gold. Operational leverage at its finest.** And this time, miners are better positioned than in past cycles. Balance sheets are stronger, debt is lower, and discipline is higher. The free cash flow pouring in now is funding dividends, buybacks, and growth without the reckless dilution of old. This isn’t 2011 when miners destroyed capital chasing growth. Balance sheets today carry minimal debt. They’re returning cash via dividends and buybacks. Barrick alone bought back $1 billion in shares last year. Simply put: gold miners are running printing presses of their own. ## The Math Doesn’t Care About Headlines Gold at $3,700 isn’t expensive, it’s mispriced. Central banks aren’t waiting for confirmation and nowhere is that more evident than China adding 225 tons in 2024 and continuing in 2025. The $6 trillion in money supply created hasn’t disappeared anywhere, it’s sloshing around the system, looking for scarcity. And there’s nothing scarcer than an asset that hasn’t been printed since the Big Bang. Gordon Brown sold at $282 thinking gold was dead money. Today’s central banks are buying at $3,600 knowing it’s cheap relative to the currency they’re creating. [One of these trades will define the next decade](https://join.katusaresearch.com/subscribe/). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Research - URL: https://katusaresearch.com/research/ - Type: page - Published: 2025-09-10 - Updated: 2026-09-10 - Author: Marin Katusa #### Latest Research ### [Gold’s Marketing Budget](https://katusaresearch.com/golds-marketing-budget/) [Marin Katusa](https://katusaresearch.com/author/anne-gonzales/) - September 4, 2026 Every dollar of Washington’s interest bill is an argument for gold. ### [The Tax on Standing Still](https://katusaresearch.com/the-tax-on-standing-still/) [Marin Katusa](https://katusaresearch.com/author/anne-gonzales/) - August 28, 2026 You missed the split point on the letter “K”. ### [Three days left](https://katusaresearch.com/three-days-left/) [Marin Katusa](https://katusaresearch.com/author/anne-gonzales/) - August 21, 2026 Of copper outside America. 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This marks a 17% jump from the preceding quarter and a staggering 94% increase from the same period the previous year. The company’s Data Center segment stood out, accounting for $30.8 billion in revenue — a 112% rise year-over-year — buoyed by strong global demand for Hopper platform products and anticipation around Blackwell AI computing solutions. On the earnings front, GAAP earnings per diluted share hit $0.78, up 16% from Q2 and more than double the prior year. Non-GAAP earnings per share reached $0.81, an increase of 19% quarter-over-quarter and 103% year-over-year. These milestones reflect NVIDIA’s operational efficiency, fueled by strategic advancements in AI technologies and robust customer adoption across enterprise, cloud computing, and AI-centric industries. NVIDIA’s CEO, Jensen Huang, highlighted that “demand for Hopper and anticipation for Blackwell — in full production — are incredible as foundation model makers scale pretraining, post-training, and inference.” The ongoing surge in industrial robotics and “agentic AI” adoption by enterprises further underscores NVIDIA’s business momentum this quarter. ## AI Hardware Expansion and Global Partnerships Power Performance NVIDIA’s results extend beyond financials, underscoring a wave of successful hardware launches and ecosystem development. The company is ramping up full-scale production of the Blackwell AI platform, meeting growing demand from cloud service providers, hyperscale customers, and research institutions. These advancements support ongoing breakthroughs in physical AI, robotics, and country-scale AI infrastructure. Strategic partnerships remain critical, with NVIDIA deepening collaborations with leading technology firms and government stakeholders worldwide. The company announced new generative AI models and expanded Omniverse integrations, driving new applications in autonomous vehicles, robotics, and smart infrastructure. Initiatives like Project DIGITS and NVIDIA Media2 aim to democratize next-generation AI technology for researchers, students, and content creators globally. ## Price Movement: Share Performance, Analyst Consensus, and Investor Sentiment NVIDIA’s Q3 results brought heightened activity to its stock, with trading volumes surging in the days following the announcement. The combination of strong revenue growth and operational excellence contributed to a boost in investor confidence, even as the share price continued to show notable volatility amid broader tech sector trends. Analyst reactions have generally reflected confidence in NVIDIA’s continued leadership in AI, with many raising their price targets in the wake of earnings. However, price movement analysis reveals that some experts caution against overextension, pointing to high valuation multiples and increased competition in the data center and edge computing markets. The blend of bullish and cautious perspectives suggests that while NVIDIA is strongly positioned, short-term market swings may persist as the broader economic backdrop shifts. Investment banks and equity research firms largely maintain “buy” or “outperform” ratings, with several upgrading their forecasts to reflect ongoing demand for AI hardware and an expanding pipeline of high-value partnerships. Institutional sentiment remains positive, with many funds increasing their positions in the company given its strategic importance in the AI supply chain. ## Looking Ahead: What to Watch in the Next Quarter As NVIDIA eyes future quarters, management is guiding for **Q4 FY2025 revenue of $37.5 billion (plus or minus 2%)**, signaling expectations for sustained growth. Gross margins are projected to remain strong, with a non-GAAP gross margin target of 73.5%. The next quarterly dividend of $0.01 per share is scheduled for December 27, 2024, for shareholders on record by December 5. Industry observers are focused on NVIDIA’s execution in ramping up production of its Blackwell platform and expanding into new AI-driven markets like industrial robotics and enterprise workflow automation. For retail and institutional investors, NVIDIA’s ability to maintain technology leadership and generate value through innovation will remain key benchmarks moving forward. With AI adoption surging across broad sectors, the company appears poised to further consolidate its status at the heart of the next computing era. --- # Gold’s Next Gear: 3 Charts Every Serious Investor Should See - URL: https://katusaresearch.com/golds-next-gear-3-charts-every-serious-investor-should-see/ - Type: article - Published: 2025-09-09 - Updated: 2025-09-10 - Author: Marin Katusa Gold just posted its 6th best year in history and hit a new all-time high. And we’re only in September. The last time we saw numbers like this were the 1970s—when Nixon killed the gold standard, oil embargoes shocked markets, and inflation ran wild. Today, I’m showing you three charts that prove we’re in the middle of something massive. And major investors are now paying attention. The Fed’s putting the bow on a gift to gold holders. Let’s dive into the data… ## Fed Rate Cuts Are Gold’s Rocket Fuel Look at this 25-year history of gold versus Fed rates. Those green circles on the chart aren’t decorations—they’re wealth creation events. During the 2007 to 2011 rate cutting cycle, gold surged 118 percent. In 2020 to 2021, another cutting cycle—gold jumped 35 percent. Now check the right edge of this chart. Rates peaked and turned down. The dotted line shows where we’re headed. This isn’t some wild theory. This is what happened—twice. When the Fed pivots from hiking to cutting, gold doesn’t just rise. It explodes. The mechanism is simple: when rates drop, the opportunity cost of holding gold drops. When they print, gold wins. Every. Single. Time. But here’s what most investors miss: we’re not just entering another rate-cutting cycle. We’re entering one with $37 trillion in government debt that needs refinancing. Every basis point the Fed cuts saves Washington billions. It’s not just looking at monetary policy changes anymore—we’re in fiscal survival mode. ## We’re In A 1970s-Style Gold Boom The greatest gold years in history all happened in the 1970s. Every single top-five year on record. This chart should stop you cold. Nixon ending the gold peg: 47%. OPEC oil embargo: 67%. Watergate scandal: 72%. And the biggest—Iran crisis plus Soviet invasion: 127%. Now look at 2025. As of September 5th, gold is up 37% year-to-date. That already makes it the 6th best year on record. We’re matching 1978’s performance—with four months still to go. Here’s the kicker: Gold doesn’t rally on good news. It rallies when empires crack. When systems strain. When trust breaks. The 1970s taught us that. And the numbers say we’re living through something similar right now. Except this time, it’s not just an oil crisis or a political scandal. It’s a global monetary reckoning decades in the making. ## North American Money Changes Everything This is the smoking gun. ETF flows by region tell the real story. Blue is North America. Red is Europe. Green is Asia. From Nov 2024, North America flipped to steady net buying—lifting total flows—while Europe/Asia stayed choppy. Meanwhile, Europe and Asia? Choppy. In and out. No conviction. But North America? They’re buying every dip. And every rip. Total flows turned positive—those gray bars—and North America is doing all the heavy lifting. This shift happened fast, and it’s accelerating. When the smartest institutional money on the continent flips from seller to buyer, you pay attention. But it’s not just the suits piling in… ## The Costco Validation Want proof this is real and goes beyond Wall Street? Check this out… Gold in Canada just hit $5,000 per ounce. And Costco—yes, Costco—is completely sold out of gold coins and bars. Across the entire country. Think about that. The place where you buy bulk toilet paper can’t keep gold coins in stock. Canadian Maple Leafs. Royal Canadian Mint gold bars. Gone. This is Main Street. When regular people are clearing out Costco’s gold inventory, you know something’s shifting. The institutions showed us the move in those ETF flows. Now retail is confirming it at the checkout counter. The setup is clear. The money is moving. The shelves are empty. And history suggests what comes next. We’re at the beginning of gold’s next gear. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Home - URL: https://katusaresearch.com// - Type: page - Published: 2025-09-08 - Updated: 2026-08-10 - Author: Marin Katusa Gold Spot / USDGold / USD — Silver Spot / USDSilver / USD — WTI Crude / USDWTI / USD — Copper Spot / USDCopper / USD — Marin's next market brief drops in: --Days --Hrs --Min --Sec Join List [edit](https://katusaresearch.com/wp-admin/post.php?post=75403&action=edit) ### [Three days left](https://katusaresearch.com/three-days-left/) Of copper outside America. Then what? [edit](https://katusaresearch.com/wp-admin/post.php?post=75394&action=edit) ### [The Pentagon’s Shopping List](https://katusaresearch.com/the-pentagons-shopping-list/) Uncle Sam issued multiple term sheets. [edit](https://katusaresearch.com/wp-admin/post.php?post=75382&action=edit) ### [Bessent’s Notepad](https://katusaresearch.com/bessents-notepad/) Washington rescued the yen. Can it rescue what's next? [edit](https://katusaresearch.com/wp-admin/post.php?post=75364&action=edit) ### [America is Building Reactors it Can’t Fuel](https://katusaresearch.com/america-is-building-reactors-it-cant-fuel/) Only two countries make this fuel at scale and neither is a friend. [edit](https://katusaresearch.com/wp-admin/post.php?post=75346&action=edit) ### [The Last Time Gold Looked Dead, It Rose Sevenfold](https://katusaresearch.com/the-last-time-gold-looked-dead-it-rose-sevenfold/) Gold is down 25% from its record and the miners fell 36% into the fattest margins they have ever earned. [edit](https://katusaresearch.com/wp-admin/post.php?post=75331&action=edit) ### [The Debt You Can’t See](https://katusaresearch.com/the-debt-you-cant-see/) Apply the “Toothpaste Principle”. [edit](https://katusaresearch.com/wp-admin/post.php?post=75288&action=edit) ### [Gold’s Obituary Just Got Published](https://katusaresearch.com/golds-obituary-just-got-published/) $18 billion fled gold. Look who’s buying it. ## **Latest Reports** Private Placement MonitorNew 98open now Raise*|*Terms*|*Warrants [Open the monitor →](https://katusaresearch.com/private-placement-monitor/) **Legal Disclosure:** By using this site, please assume Marin Katusa, Katusa Research and its employees have a financial interest in all companies and sectors mentioned on the website. The information provided is for informational purposes only and is not a recommendation to buy or sell any security. This is not financial advice. --- # The 3 “Tells” That Will Move Energy Stocks Before Any Handshake Does - URL: https://katusaresearch.com/the-3-tells-that-will-move-energy-stocks-before-any-handshake-does/ - Type: article - Published: 2025-09-05 - Updated: 2025-09-10 - Author: Marin Katusa - **Peace trades through spreads, not speeches.** The Brent-Urals gap at $5-10 still signals friction. Watch for sustained spreads under a single-digit number—that’s when Russian oil truly returns. - **Trump weaponized India’s trade deficit.** $87 billion in U.S. exports vs. $4 billion to Russia forced Delhi to pressure Moscow. Tariff threats moved more than tanks. - **Europe built LNG *panic* infrastructure.** 78 bcm added in under 3 years, but pipeline gas costs 40% less. When gravity returns, only sub-$35 breakeven barrels survive. Trump just forced Putin to the negotiating table. Not with missiles or sanctions, but with a threatened 100% tariff on Indian goods. The whole story is hiding in three simple charts that most investors haven’t connected yet. - **Let me show you why a spread between two oil grades matters more than any press conference in Geneva.** Before February 2022, Russian Urals crude and global Brent crude were like twins—trading within a couple dollars of each other. Then war broke out. Sanctions hit. The spread exploded past $30 per barrel as buyers fled Russian oil. Today? We’re sitting at $5-10 which is better than the crisis, but here’s what matters: that gap is still five times wider than normal. This spread is your early warning system (Tell #1). When Russian oil starts trading at near-parity with Brent for weeks straight, peace is getting priced in. And when that happens, every energy company in Europe faces a reckoning. Why? Because European refineries are like kitchens built for a specific recipe. Hundreds of billions in infrastructure designed to cook heavy, sour Urals crude. They’ve spent three years forcing different ingredients through their systems at higher costs. The evidence is already in the import data. Russia supplied over a quarter of Europe’s oil in 2018. By 2024, it was nearly zero. The U.S. rocketed from dud to 15% market share. Norway surged to 14%. Watch what happens when peace talks get serious. Those American and Norwegian barrels will quietly lose market share to “other” sources. The oil will flow through Turkey, through ship-to-ship transfers, through creative paperwork—the same shadow channels that kept Russian oil moving to Asia throughout the war. ## The Real Disruption Comes in Natural Gas Europe performed an infrastructure miracle after Russia cut pipeline flows—adding 78 billion cubic meters of LNG capacity in under three years. Floating terminals that usually take five years to plan and build went from contract to cargo in ten months. Between 2021 and 2024, Europe’s LNG imports rose by 17%, underscoring the bloc’s deliberate shift toward seaborne supply. The United States emerged as the clear winner in this transition, with its share of Europe’s LNG imports surging from 26% in 2021 to 46% in 2024. Here’s the trillion-dollar problem… Russian pipeline gas lands at $6-7 per million BTUs. American LNG delivered to Europe? Try $10-12. That’s a 40-70% premium Europe pays every single day to keep the lights on. When peace tilts this math back toward pipelines, the entire LNG boom deflates overnight. ## Which Brings Us to Trump’s Masterstroke… He understood what European diplomats missed. Namely, that India had become Putin’s economic lifeline, buying 2 million barrels daily from Russia and saving $13 billion annually on discounted crude. But India sells America $87 billion worth of goods each year. Russia? Just $4 billion. **When you’re earning 22 times more from one customer than another, the choice becomes binary.** Trump started with 25% tariffs. When Modi didn’t flinch, he doubled to 50%. - **Then came the nuclear option:** 100% tariffs on all Indian goods unless Putin sat down for peace talks. Not on Indian oil imports—on everything from pharmaceuticals to textiles that keep India’s economy humming. Delhi got the message. Indian diplomats suddenly discovered urgent reasons to discuss “regional stability” with Moscow. Within weeks, Putin agreed to meet on American soil for the first time since the invasion. ## So How Do You Position For Peace Before It’s Announced? The same way professionals do—by watching what trades, not what politicians say. - **Start with that Urals-Brent spread. Every week it stays under $3, peace probability rises.** The market knows Russian barrels are finding buyers without friction. When that spread holds tight for a month, not days, the game has changed. **Next, track European oil imports by source.** The U.S. and Norway shares will drift lower while “other” origins mysteriously grow. Those are Russian barrels wearing new paperwork. Bureaucrats will insist sanctions remain intact even as the oil flows shift beneath their feet. **Finally, watch LNG import growth rates and regasification utilization.** When import growth stalls and spare regas capacity builds, pipeline economics are winning. When all three signals align—tight spreads, shifting import sources, and LNG momentum stalling—the European energy deck gets reshuffled at warp speed. Prices drop. Margins compress. Dividends that looked safe at $80 oil come under siege at $60. We’re not buying European energy stocks yet. **Let peace arrive and drive the weak players to the wall first.** But when blood runs in the energy sector, three names top our list: **Company ****#1** with its $25-30 breakeven Northern European barrels, **Company #2’s** pure oil focus and falling debt, and **Company #3’s** balanced portfolio with actual cash flow today. These tells move together—and hit companies differently. Europe-heavy sellers feel it sooner. Global sellers cushion it better. Debt, capex timing, and payout policy decide who defends returns and who needs higher prices just to stand still. **We ran that math this month so you don’t have to.** Want the full tiers, entries, and risk triggers? [They’re in the September edition of Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/?). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Deflation’s Quiet Funeral - URL: https://katusaresearch.com/deflations-quiet-funeral/ - Type: article - Published: 2025-08-29 - Updated: 2025-09-10 - Author: Marin Katusa The chair didn’t bring a victory banner to Jackson Hole. He brought a shovel. In one speech and one framework update, the Fed quietly buried the 2020 experiment—no more “let it run hot to make up the past.” What’s left is simpler, sharper, and friendlier to real assets than most investors realize. ## The Four Lines That Changed Everything *“We continue to view a longer-run inflation rate of 2 percent as most **consistent with our dual-mandate goals,” *Powell said. Sounds boring? It’s not. That sentence, backed by the new Statement on Longer-Run Goals, just killed the Fed’s 2020 “make-up” strategy. No more averaging. No more “shortfalls” language on employment. Just a clean, hard 2% target. Reuters confirmed it plainly: the Fed returned to flexible inflation targeting. The make-up approach is gone. Why now? Powell flagged the new reality: tariff shocks, slower labor-force growth, and policy shifts. That means more inflation risk than the pre-2020 world. PCE sits at 2.6%, Core at 2.8%, both stubbornly above target. Powell himself flagged it: goods deflation is fading, services stay sticky. ## The Fed just told you deflation/disinflation as the default is over… The objective is 2%—not under, not “averaged.” Here’s the mechanism: - If growth softens → cuts come to protect employment - If inflation re-accelerates → no tolerance for “let it run” overshoots This is a Fed facing supply-side frictions, fiscal dominance, and structural labor shortages. In practice, this reduces tolerance for fresh overshoots and raises the odds of earlier rate support if jobs wobble but without abandoning the 2% anchor. The net result is a dovish-leaning, inflation-aware setup that historically favors gold and real assets when real yields ease. **But Powell’s 2% religion faces a bigger test than inflation data…** Washington needs to roll $7 trillion in debt this year, and the math only works at lower rates. ## Is Trump Quietly Wishing for a Market Crash? The debt ceiling used to mean something. Between 1917 and 2015, Congress lifted it fewer than 80 times, mostly for wars or recessions. Since 2016? It’s an annual circus, as predictable as pumpkin spice lattes. Here’s the kicker: the ceiling sits at $36.1 trillion, but debt already hit $37.14 trillion on August 8. We’ve blown through the guardrail by over a trillion dollars. The government is literally spending money it’s not authorized to spend. Mark your calendar, by the end of September, Congress will have already started their song and dance to legitimize what they’ve already done. Welcome to Washington’s new normal: break the rules first, ask permission later. ## The Real Problem: Refinancing at High Rates Debt at this scale doesn’t just sit there. It comes with a bill. - **Washington now spends over $840 billion a year on interest payments alone, more than it spends on defense.** That’s what happens when rates rise, and the pile of IOUs gets taller. And the wall of maturities is brutal. In 2025 alone, nearly $7 trillion of Treasuries are set to mature. Think of it like a homeowner with a giant mortgage facing a reset at double the interest rate. Uncle Sam has to roll that debt over, but at today’s yields, the costs are staggering. No wonder Trump is hammering the Fed to cut. Every percentage point off the yield curve saves the government hundreds of billions over time. ## Why Treasuries Look Like Yesterday’s Trade To refinance, the government needs investors to line up and buy Treasuries. But ask yourself: why would anyone rush into bonds yielding 6-7% when the S&P 500 has been crushing Treasuries for years? Look at the scoreboard… Since 2019, stocks have left bonds in the dust. - **Even with the 2022 correction, the equity bull run has outpaced the safety trade**. If you’re running money, do you want equity upside or a Treasury coupon that barely covers inflation? Exactly. That’s Washington’s problem. ## Enter Trump’s Master Stroke: Scare Money into Safety This is where it gets interesting because the government needs buyers for its bonds. The Fed won’t be the sugar daddy forever, and foreign buyers (China, Japan, Saudi Arabia) aren’t as eager as they once were. So how do you drive demand? You make Treasuries look appetizing again. One way is a rate cut, lowering yields so bond prices rise and attract capital. Another way is more chaotic: engineer an environment where investors run away from risk. Think tariffs, recession fears, labor market weakness, or even a market crash. In chaos, safety wins. Investors dump stocks and crowd into Treasuries. A market correction plus rate cuts equals cheaper refinancing for $37 trillion in debt. Trump gets his lower rates and a Treasury bid. Problem solved until the next crisis. Problem solved, at least for now. ## If Trump Gets His Rate Cuts… It’s not just about cheaper government debt, lower rates are rocket fuel for certain sectors: **Infrastructure plays** suddenly make sense again. When money gets cheap, those capital-intensive projects with 20-year payoffs start looking attractive. Think utilities, toll roads, airports, boring stuff that prints money when financing costs drop. **Cash flow kings** become the new growth stocks. Companies sitting on real earnings and fat dividends? They’ll look like gold when the speculative froth gets blown off. I’m talking about the pipeline operators, the REITs with locked-in leases, the consumer staples that keep churning out cash no matter what. What about speculative markets? That’s where it gets interesting… Rate cuts usually mean party time for risk-free assets. But if we get cuts because of a crisis, not strength, all bets are off. The last time we saw emergency cuts was 2020, and we know how that played out, massive volatility first, then a face-ripping rally. ## Mark These Dates… - **PCE (July)**: Friday, August 29 - **FOMC + SEP**: September 16-17 The September meeting brings fresh dot plots. If the dots confirm what Jackson Hole started, a Fed ready to cut for employment but allergic to overshooting 2%, the funeral becomes a memorial service. The Fed hinted of rate cuts at Jackson Hole. Trump’s about to bury the old playbook. And with that, gold is shining bright. That’s exactly the kind of shift I track for my subscribers in [***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/), where the real signals, not the headlines, show where capital is flowing next. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Tape Money vs. Till Money - URL: https://katusaresearch.com/tape-money-vs-till-money/ - Type: article - Published: 2025-08-15 - Updated: 2025-08-14 - Author: Marin Katusa The stock market runs on two different operating systems simultaneously, and most people can only see one at a time. This month, investors bid up tiny nuclear start-up Oklo Inc. (OKLO) to over $80 per share, up 850% in the last year, weeks after it won a contract to power an Air Force base in Alaska. Here’s the kicker: Oklo has no revenue, no certified reactor, and years of permitting ahead. Yet its scorching tape still pulled in tens of thousands of new eyeballs from Robinhood accounts. **Welcome to the split personality of modern markets…** A stock can add a billion in market cap before lunch on a headline that barely fills a tweet. No permits. No product. No paying customers. But the price rips, volume explodes, and by 3 p.m., the company is selling new shares at the *higher* price to fund the dream. That’s **tape money** at work – the market voting on itself. Months later, the engineers are still wrestling with physics, the lawyers are wrangling permits, and the accountants are staring at a revenue line stuck at zero. The only thing that pays salaries, interest, taxes, and dividends is the **till** – real cash from real customers. That’s **till money** and it wins the endgame. Most investors get hurt because they confuse the two. Some even pick a side and make it a religion. The winners speak both dialects and know when to switch. ## Two markets inside one ticker On the surface, a ticker is a single story: up, down, or flat. Underneath, two currents run in opposite directions. **Tape money** chases *attention*. It feeds on price, options flow, short positioning, and fresh narratives. It loves scarcity, sizzle, and speed. It can turn a press release into a moonshot and a rumor into a rout. **Till money** funds *operations*. It shows up in purchase orders, service contracts, gross margin, and repeat business. It scales slowly… until it doesn’t. The till is steel, quiet and load-bearing. Both are real. Both can make you rich. They just answer different questions. - **Tape asks:** What will someone pay me tomorrow? - **Till asks:** What will this enterprise earn for years? If you don’t understand which river you’re swimming in, you’ll get swept away by the current, either from FOMO or from clinging too long to a “great story” that never ships product. ## Why The Till Feels Boring… Until It Pays Off Your Mortgage The till is slower because it has to be. Factories get built. Interconnects get scheduled. Customers are trained; service teams hired; working capital tied up. None of it trends on social media. All of it matters. Then one quarter the lights come on: recurring revenue, widening margins, a balance sheet that funds itself. The tape crowd says you’re “late.” The accountants say you’re “on time.” And investors who showed up when the story became a system get paid for a decade. Meanwhile, the till doesn’t trend, it pays. In Q2, **Exxon** generated $11.5B CFO and $5.4B Free Cash Flow, returning $9.2B to owners. **Chevron** mailed back $5.5B and hit record Permian output. **Suncor** delivered $2.7B AFFO and $1.0B free funds flow with $1.45B returned. Compounding is the quietest miracle in finance. The till is where it lives. ## Making Money: How Pros Actually Switch Gears **Phase 1 – Story Stage:** When a company lives on slides, treat it like tape money. Rent, don’t own. Use strict position sizing. Trim into strength. Let the market pay you to watch the narrative unfold. **Phase 2 – Milestone Stage:** Watch for the story to earn dates, dollars, and documentation. Permit filings on schedule. Binding contracts with creditworthy counterparties. Committed project financing. Real engineering milestones. **Phase 3 – Business Stage:** When narratives become systems, recurring revenue, predictable margins, self-funding growth, convert trading gains into core positions you’d hold through a bad quarter. Let the till fund your wealth. ## The Market is a Beauty Contest You’re not paid for guessing what a company is worth. Price isn’t moral, it’s information, like when Oklo trades at $80 with zero revenue, that’s not “madness.” That’s the market saying this narrative has enough momentum to become self-reinforcing due to future expectations of value milestones. High stock prices create cheap currency for growth. Growth can retroactively justify high prices. The beauty contest becomes beautiful. But cash flow is a consistent winner. Hype raises capital; only the till keeps companies alive when sentiment shifts and market sentiment changes. The sophisticated investor reads both signals: Let the beauty contest fund your research, let the cash register fund your wealth. Stop moralizing price action and start translating it. ## I Don’t Sneer At Tape It’s a signal, and on the right day, a gift. But I don’t marry it either. If a name doubles on narrative, I’m happy to take a *Katusa Free Ride* and let the house’s money ride, *only* if the calendar fills with real milestones. - **In the latest edition of *Katusa’s Resource Opportunities* – Investors are sitting on 257% gains and taking a big free ride on one of their gold positions.** If the milestones slip and the story reverts to sizzle, I treat it like a rental and move on. If a company graduate on time from prototype to operations, with capital committed and customers who pay, I’ll size it like a business and let compounding do the heavy lifting. That’s the whole playbook, just proper sequencing. Every bull mints tape millionaires. But only the smart ones stay rich, because they graduate to the till. Keep this in mind… Let the tape invite you to the party and let the till pay for the house. Regards, **Marin Katusa** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The King Commodity Coming for Every Company’s Cash - URL: https://katusaresearch.com/the-king-commodity-coming-for-every-companys-cash/ - Type: article - Published: 2025-08-08 - Updated: 2025-08-07 - Author: Marin Katusa Most corporations in the S&P 500 are in the business of actively destroying their own capital. It’s their only option. They have to hold cash and cash equivalents, their “treasury”, as a buffer to make payments and for strategic flexibility. Corporate treasuries are generally invested in “risk-free” Treasury bills or money market funds. They’re both convenient short-term parking spaces for cash. Only they *destroy* cash’s value. The CAGR on T-Bills over the past century is a paltry 3.4%, before inflation and the erosion of value from money printing. - **Using T-Bills to preserve capital is like trying to keep an ice cube cold on a summer day by… holding it.** They just barely slow the inevitable decline in a corporate treasury’s value. Even before the downgrading of U.S. debt by Fitch and S&P, traditional treasury investments have not been as “risk-free” as they might seem. They effectively force companies to *pay* for the privilege of losing purchasing power to inflation. On top of that, investors expect a certain rate of return, usually the 10% average return of the S&P 500. If a company earns 4% on T-Bills and investors expect 10%, the corporate cash reserves are no longer an asset. They’re just a drag on returns, a liability in disguise. But there’s a single commodity, *an asset with no issuer*, that has: - a perfectly fixed supply (like gold); - zero inflation/debasement (unlike currency); - global, 24/7 markets; and - *deep* liquidity (and growing deeper). Those attributes alone make it seem well-suited to replace T-Bills in treasury holdings. But there’s another element actively afflicting public companies, and it’s making that new commodity a *necessary* holding. ## The S&P 493: Wealth Destruction in Slow Motion Over the past decade, the S&P 500’s performance has been driven almost entirely by the “Magnificent 7”: Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. They’ve had an average CAGR of 47% per year. - **The CAGR of the other 493 stocks? Just 7%.** With that kind of performance, capital is naturally flowing *away* from the S&P 493 and *toward* the Mag 7. A decade ago, the Mag 7 were less than 10% of the S&P 500. Now, 1 in 3 dollars in the index is concentrated in just those 7 companies. Meanwhile, the S&P 493 is bleeding out. Liquidity is drying up, options are going dark, and raising capital is becoming more difficult. IPOing has gone from a dream to a nightmare, *unless* a corporation can somehow keep up with the growth rates of the Magnificent 7. 493 of the best companies in the world have cash hoards that are losing value by the minute, stuck in Treasury bills that are barely keeping their nose above water. And they’re achieving atrocious returns by top-of-market standards. Which is why they’re beginning to buy the commodity whose performance is blowing *everything* else out of the water, including the Magnificent 7: Bitcoin isn’t just the antidote to the treasury problem, providing a store of capital, along with liquidity, flexibility, and financial stability. - **For the first time, Bitcoin levels the playing field, letting every public company compete with the big tech stocks.** Because of this, Bitcoin is providing an all-new kind of return for corporations and it’s going to take their cash. ## Treasuries Go BRR Instead of the meager T-Bill rates, companies are converting their treasuries to Bitcoin to achieve the new benchmark: **BRR (Bitcoin Rate of Return)**. Here’s what the BRR has looked like over the typical 1-, 3-, 5-, and 10-year timeframes: Positioning treasury reserves in BTC, provided it continues to appreciate near historical rates, looks to outpace the cost of capital from investor expectations by a *wide* margin. It turns cash and cash equivalents from a headwind into a growth engine, from a “dead” asset into an appreciating asset. Instead of destroying shareholder value, it creates massive new growth. Here’s what growth looks like for a $1M treasury parked in T-Bills vs. BTC from 2020 to today: There’s no error in that graph: - **The T-Bills would be worth about $1.1M. The BTC would be worth almost $10M.** This is a complete paradigm shift of treasury management from futile capital “preservation” to actual capital growth. This isn’t just the largest financial innovation since the S&P 500. Because as each marginal company puts Bitcoin on their balance sheet, the performance of the S&P index will move toward that of Bitcoin. - **In other words, Bitcoin effectively is the new S&P 500.** The real risk now comes not from buying crypto, but from ignoring the new treasury benchmark: BRR. ## Survival of the HODLest So how will this unfold? The leveraged companies making the news by raising billions to buy Bitcoin are flashes in the pan. The majority that have gone public this year have fallen by half or more. And it won’t be the top of the S&P 500. They can afford for their cash to not be high-growth. Both they and their investors have roundly rejected the idea. It’ll start with the bottom 98% of the S&P 500, especially companies that are about to get delisted. Just like a few crazy people did in the early 2010s, they’ll convert some of their cash into crypto. It’ll be a financial strategy, not speculation. As the price of Bitcoin continues to rise, it’ll quickly become obvious that they’re gaining on their peers. Their performance will start to approach that of big tech. And with a burgeoning balance sheet, they’ll have more capital to reinvest, acquire, or undercut their competitors. Companies still holding cash and T-Bills will look like they dozed off at the wheel. They’ll *have* to buy Bitcoin to keep up as long as it’s not too late. Because once a critical mass moves, *not* moving will become a liability. Laggards will be punished by the market. And every marginal adoption will make Bitcoin more stable, more secure, and more attractive as a treasury asset. Katusa Research is actively tracking this new commodity market set to capture corporate treasuries. And when we see a real opportunity, you’ll be the first to know. Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Silver Isn’t Precious Anymore, Just Critical - URL: https://katusaresearch.com/silver-isnt-precious-anymore-just-critical/ - Type: article - Published: 2025-08-01 - Updated: 2025-07-31 - Author: Marin Katusa “Keep taking pictures,” Buffett said. “Every picture you take makes me more money.” He’d famously purchased $1billion of silver the year before 1998. At the time, that was one-quarter of the global mine supply of silver. And one-quarter of all silver was used for developing film. Buffett may have laughed, but he wasn’t really joking. He actually *owned* the entire photography development market. Then along came digital cameras. And silver demand slid for decades from **229 Moz** in 1999 to an all-time expected low of **24 Moz** in 2025. A quarter-century ago, another quarter of silver was used for jewelry and silverware. Combined demand in 2023 was almost exactly the same as 1993. One leg of the silver demand stool has been sawn off and used for kindling, and the second is wobbly at best. But over the past two years, something has occurred that happens *extremely rarely *in commodities. It’s transforming silver in ways that Buffett couldn’t have predicted. And it’s going to completely change investor sentiment. ## Solar Is Served on a Silver Platter As consumer use for silver has dwindled, it’s actually found *two* other primary uses. They’re both already far greater than any photography demand. And they’re still growing. Unlike gold, silver isn’t just pretty. It’s also extraordinarily useful in unpredictable ways. It is the most conductive metal on planet earth, making it the most efficient metal for photovoltaic cells **solar power**. “*Silver is…** the best electricity conductor in the world**, so it’s going to play a very important role [in solar] going forward.” – Bank of America Commodities Director Francisco Blanch* Silver’s moving from your dinner table and camera to the solar grid**,** and supply’s about to snap. From 2019 to 2024, silver used for solar rose from 75Moz to 198Moz or, 20% of global demand. But solar’s growth isn’t stopping, and silver is along for the ride. BloombergNEF, famous for underestimating solar growth, expects solar to have record breaking year in 2025, with 698GW of new capacity installed. Then 753GW in 2026, and 780GW in 2027. - **That would put solar silver demand at around 20% of total silver supply.** Fortunately, the silver intensity of solar panels has been dropping in a process known as “thrifting”. Standard solar cell (PERC) usage has dropped from 18.5 mg to 10 mg. At a macro scale, that looks like GW per Moz of silver going up: But that’s about to shoot into *reverse*. Because standard solar cells are being replaced by “TOPCon” cells which already increased from 23% of the market to 60% in China in 2024 alone. TOPCon cells use more than twice as much silver as PERC cells. And the most efficient solar cell type in the world, HJT, requires 1.5-2x as much silver as TOPCon. If TOPCon’s market share climbs to 84% in the next four years (as projected) and global solar capacity additions hit BloombergNEF’s forecast of 827GW… - **Silver’s annual solar demand could reach 557Moz, 54% of annual supply.** By itself, solar could keep the silver market humming. But silver didn’t just become a solar metal. ## Silver Is an *Industrial* Metal Now Solar’s conductivity makes it the most crucial metal for the electrification of the industrial world. Take solid-state EV batteries, for example. Silver is lightweight and highly conductive, helping EVs achieve better mileage. Samsung’s next-gen solid-state EV battery has twice the energy density of its competitors and gets 600 miles on a single 9-minute charge. Samsung already has an agreement to begin production and when it does, every car manufacturer will have to play catch-up. - **If that battery were used in just 20% of global car production, it could take an additional 514 Moz of silver.** In the unlikely event that silver’s demand from solar and EVs falls in the coming years, there are other sources of demand waiting to take over or already spiking: - Every AI data center chip - Every advanced electrical relay - Every smart grid infrastructure upgrade - Every U.S. manufacturing facility All of them ratcheting up silver demand. Which is why the global industrial silver demand is soaking up nearly all of the silver on the planet. Don’t mishear me: Silver is still a precious metal. But now it’s a highly industrial metal too. And that competition is making silver more valuable than ever before. ## The Developing Metal The math is simple and brutal: annual silver supply of roughly 1 billion ounces faces potential demand of 1.1+ billion ounces from just solar and EVs combined. And at the same time, the market has entered its fifth straight year of structural deficit nearing a total 1B ounces. - **This is more market forces, at a greater magnitude, than silver has ever had before.** Which is why investors and even *central banks* are beginning to accumulate silver again at historic rates. In June 2025 alone, silver ETFs saw $1.6B in net inflows more than all of 2024. Already this year, silver has appreciated by 32%, to just under $40. But that’s just the beginning. Despite record-breaking industrial use, silver is still priced like an afterthought. Gold gets the headlines, but silver has the torque. What’s likely to come could rival what Buffett saw back in his day and the returns could be incredible. Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Canada’s Money Metrics Crisis – Part II - URL: https://katusaresearch.com/canadas-money-metrics-crisis-part-ii/ - Type: article - Published: 2025-07-25 - Updated: 2025-07-24 - Author: Marin Katusa Elbows up for Canada! Canada just reclaimed its crown in global mining finance. In 2024, the Toronto Stock Exchange and TSX Venture raised over $7.7 billion across more than 1,100 deals, according to TMX data. That’s a ~45% jump from the previous year. It puts Canada ahead of the ASX in mining finance leadership for the first time since 2020. Gold deals dominated. Lithium and uranium stayed strong. New listings surged. And once again, Canada looked like the world’s top destination for resource capital. On the surface, this is great news. Longer-term public market activity is collapsing. Mining IPOs are at record lows. Trading volumes are drying up. Capital outflows are accelerating. And even Canada’s own pension giant is putting more chips into U.S. assets. There’s a dangerous split forming. Canada’s stock exchanges are helping junior miners raise seed capital. But the follow-through funding needed to build mines, scale businesses, or go public is disappearing. This split is already impacting the resource sector. Juniors can raise a few million to drill. But getting to +$300 million in equity mine project finance? That’s becoming harder and rarer, rarer than even a gold mine. Without deep markets, institutional participation, and consistent liquidity, Canada risks becoming a place where projects start but don’t finish. Meanwhile, crypto is becoming the new liquidity engine. The global crypto market now clears $90+ billion daily, nearly 9x the TSX’s volume. Younger investors are migrating to liquidity and crypto assets. So is the capital. Exchanges that used to dominate small-cap trading, like the TSXV, are now dwarfed by digital markets. So, is Canada truly back? Or is this a last spark in a fading fire? The following charts highlight the fractures, some widening, some newly emerging across Canada’s capital market system. ## The IPO Pipeline Has Collapsed In 2021, Canada saw over 50 IPOs in the 2nd and 4th quarters. In June 2025, that number was just **two**. This isn’t just a slowdown. It’s a shutoff. The IPO market connects early-stage companies to public capital. Without it, innovation stalls. Growth delays. And exchanges lose relevance. Startups that might have listed on TSX or TSXV are either heading to the U.S. or skipping public markets entirely. For mining and energy firms, this matters deeply. IPOs help juniors graduate. Without that path, even well-funded exploration stories may never reach production. ## Canada’s Pension Giant Is Voting With Its Wallet The Canada Pension Plan Investment Board (CPPIB) oversees over $700 billion. In 2021, 38% was in U.S. markets. Today, that number is 47%. Meanwhile, CPPIB’s Canadian holdings dropped from 16% to just 12%. That’s a sharp reallocation. It shows that Canada’s largest institutional investor sees more opportunity abroad than at home. This shift reflects deeper concerns about growth, scale, and liquidity within Canadian markets. And CPPIB sets the tone for others. Hedge funds, family offices, and global funds follow that signal. For capital-intensive sectors like mining, this means fewer long-term partners willing to back the big stuff. ## Capital Is Moving in One Direction – Out Since January 2025, Canada has recorded four straight months of net capital outflows. In February alone, the country lost nearly $35 billion in net investment, its steepest outflow in years. In May 2025, foreign investors dumped a net $2.8 billion in Canadian investments. At the same time, domestic funds sent $13.4 billion south of the border. This kind of outflow creates a chain reaction. The dollar gets volatile. Borrowing costs rise. Institutional confidence fades. And domestic capital becomes harder and more expensive to raise. Even if Canada attracts short-term inflows (like in mining financings), it means little if the long money keeps walking out the door. ## Trading Desks Are Quiet, And That’s a Problem - NYSE: around **$150 billion/day** - NASDAQ: over **$105 billion/day** - Crypto markets: over **$100 billion/day** - TSX: around **$10 billion/day** - TSXV: just **$0.07 billion/ day** Volume is a vote of confidence. Big investors need liquidity. Retail traders want tight spreads. When volume shrinks, price discovery weakens, and spreads widen. That makes Canada less attractive for traders and long-term funds. For mining and energy stocks, tight liquidity makes it harder to raise capital or justify coverage and usually comes with steep discounts to the market price of the equity. Even a small financing can tank a share price. That scares off institutional support. Meanwhile, crypto markets, fast, liquid, and open 24/7, are now where a growing share of risk capital goes. ## One Hand Full, One Hand Empty Canada may have reclaimed its position as the top global mining finance hub, but the celebration is short-lived. The funding surge is real, but it’s not enough. The deeper ecosystem, i.e., IPOs, trading volumes, institutional confidence, capital retention is under stress. And if those cracks widen, even record financings won’t save the system. Canada’s capital market doesn’t need to be flashy. But it does need to be functional. If it can’t support growth, scale, and long-term risk-taking, the rest of the world will and already is. At **Katusa Research**, we study the macro forces driving capital flows and market structure, whether in Canada, the U.S., or beyond. Our focus is on helping investors navigate both favorable and challenging environments with confidence. In our premium newsletter, [*Katusa’s Resource Opportunities*](https://join.katusaresearch.com/subscribe/?), we highlight the critical metrics most miss, so investors can act early, stay liquid, and find the signal in the noise. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Private Placement Monitor - URL: https://katusaresearch.com/private-placement-monitor/ - Type: page - Published: 2025-07-23 - Updated: 2026-08-04 - Author: Marin Katusa # Canadian Private Placement Monitor A live tracker of private placement financings on the TSX Venture Exchange (TSX-V), CSE, Cboe Canada (NEO) and TSX. Deal size, unit pricing, warrant terms, brokered status and hold periods, updated as filings are made. [US](/us-private-placement-monitor)Canada K Katusa Research · Market Intelligence # Private Placement Monitor Every Canadian resource private placement, the moment it files. Live · Window **60d** · Updated **—** [New to private placements? Read the Guide ↗](https://katusaresearch.com/guide-to-private-placements/) — Placements — Open now — Capital raised — New this week All Open Closed Any deal Brokered Non-brokered Warrants ITM 14 days30 days 60 days90 days180 days Any size≥ $1M≥ $5M ≥ $10M≥ $25M NewestLargestHighest share price Recent activity Issuer Size Unit Price Warrant Hold Lead Latest Status **Belgravia Hartford Capital Inc.** BLGV · CSE — Bitcoin · C$500K · announced 9 Jul 2026 · Open **BluEnergies Ltd.** BLU · TSXV — Oil & Gas · C$10.1M · announced 9 Jul 2026 · Open **North Valley Resources Ltd.** NVR · CSE — Copper, Gold, Critical Minerals · C$1.7M · announced 4 Jun 2026 · Open **F4 Uranium Corp.** FFU · TSXV — Uranium · C$1.0M · announced 16 Jun 2026 · Closed **Resouro Strategic Metals Inc.** RSM · TSXV — Titanium, Rare Earths, Gold · C$2M · announced 8 Jul 2026 · Open **East West Minerals Ltd.** EW · TSXV — mining · C$827K · announced 12 Jun 2026 · Closed **Royal Road Minerals Limited** RYR · TSXV — Gold, Silver, Antimony, Copper · C$10M · announced 8 Jul 2026 · Open **NU E Power Corp.** NUE · CSE — Energy · C$3M · announced 23 Jun 2026 · Partially closed **Thunder Mountain Gold, Inc.** THM · TSXV — Silver, Gold, Zinc, Copper, Lead · US$6.4M · announced 8 Jul 2026 · Open **Homerun Resources Inc.** HMR · TSXV — Silica · C$15M · announced 8 Jul 2026 · Partially closed **Primary Hydrogen Corp.** HDRO · TSXV — Hydrogen, REE · C$1.5M · announced 4 Jun 2026 · Closed **PJX Resources Inc.** PJX · TSXV — Gold, Zinc · C$6.3M · announced 18 Jun 2026 · Partially closed **Talamore Mining Corp.** TALA · TSXV — Gold · C$130M · announced 7 Jul 2026 · Open **Ashley Gold Corp.** ASHL · CSE — Gold · C$500K · announced 7 Jul 2026 · Open **Big Ridge Gold Corp.** BRAU · TSXV — Gold · C$7M · announced 23 Jun 2026 · Closed **Americore Resources Corp.** AMCO · TSXV — Silver · C$3M · announced 15 Jun 2026 · Partially closed **Cleghorn Minerals Ltd.** CZZ · TSXV — Gold · C$550K · announced 4 Jun 2026 · Open **Tower Resources Ltd.** TWR · TSXV — Gold · C$1.1M · announced 16 Jun 2026 · Partially closed **Nevada Sunrise Metals Corporation** NEV · TSXV — Gold, Copper, Lithium · C$1.3M · announced 8 Jun 2026 · Partially closed **Highcliff Metals Corp.** HCM.H · TSXV — mining · C$1.3M · announced 12 Jun 2026 · Partially closed **Westmount Minerals Corp.** WMC · CSE — Base Metals, Precious Metals · C$1.0M · announced 18 Jun 2026 · Open **Viridian Metals Inc.** VRDN · CSE — Copper, Nickel, Cobalt · C$750K · announced 14 May 2026 · Closed **Germanium Mining Corp.** GMC · CSE — Germanium · C$700K · announced 6 Jul 2026 · Open **Purecore Metals Inc.** PURE · CSE — mining · C$1.5M · announced 5 Jun 2026 · Closed **Magna Mining Inc.** NICU · TSX — Copper, Nickel, Precious Metals · C$140M · announced 6 Jul 2026 · Open **Gold Terra Resource Corp.** YGT · TSXV — Gold · C$9.7M · announced 6 Jul 2026 · Open **CleanTech Vanadium Mining Corp.** CTV · TSXV — Vanadium, Fluorspar · C$1.6M · announced 16 Jun 2026 · Open **Signature Resources Ltd.** SGU · TSXV — Gold · C$600K · announced 6 Jul 2026 · Open **Global Power Solutions Corp.** PWER · TSXV — energy · C$1.0M · announced 21 Apr 2026 · Closed **A.I.S. Resources Limited** AIS · TSXV — Gold, Silver, Copper, Antimony · C$644K · announced 19 Jun 2026 · Closed **Kootenay Resources Inc.** KTRI · TSXV — Gold, Silver, Copper · C$571K · announced 20 May 2026 · Partially closed **NSJ Gold Corp.** NSJ · CSE — Antimony · C$530K · announced 19 May 2026 · Closed **Generation Uranium Inc.** GEN · TSXV — Uranium · C$350K · announced 3 Jul 2026 · Open **Trifecta Gold Ltd.** TG · TSXV — Gold · C$1.7M · announced 3 Jul 2026 · Closed **Kapa Gold Inc.** KAPA · TSXV — Gold · C$1.9M · announced 29 May 2026 · Partially closed **Rathdowney Resources Ltd.** RTH · TSXV — Zinc, Lead · C$600K · announced 19 Jun 2026 · Partially closed **Standard Uranium Ltd.** STND · TSXV — Uranium · C$890K · announced 30 Jun 2026 · Partially closed **Storm Exploration Inc.** STRM · TSXV — Gold, Base Metals · C$2.6M · announced 2 Jul 2026 · Open **Phenom Resources Corp.** PHNM · TSXV — vanadium, gold · C$5.4M · announced 17 Feb 2026 · Closed **Manning Ventures Inc.** MANN · CSE — Lithium · C$599K · announced 17 Jun 2026 · Closed Free access See all **** placements You’re seeing the 20 most recent. Enter your details to unlock the full feed and receive the ultimate guide: The Black Book of Private Placements. Country Select your country… Canada United States Other Email Which best describes you? (helps us tailor what you see) Select one… Self-identified for content purposes only. Full verification happens before any investment. This dashboard aggregates publicly available information from EDGAR and other public sources for informational purposes only. It is not an offer, solicitation, or recommendation to buy any security, and nothing here is investment advice. Investor status entered above is self-identified and is used only to tailor content. Unlock the full feed By submitting, you agree to receive emails from Katusa Research. You can unsubscribe at any time. See more +20 Warrant moneyness In the money — share price above strike Out of the money — share price below strike No warrant attached Reading the Terms ## How to Read Private Placement Terms: Warrants and the 4-Month Hold ### Brokered vs. non-brokered In a brokered deal, an investment dealer markets the placement and takes a commission. In a non-brokered deal, the company raises directly from investors it already knows. Most Canadian junior financings are non-brokered: typically three-quarters or more of the deals tracked here in a month. Brokered deals run larger and often signal institutional demand. ### Units and warrants Many placements are sold as units: one common share plus a fraction of a warrant. A half warrant shows as “0.5 wt” in the table. Each full warrant lets you buy another share at a fixed strike price for a set term, usually 24 or 36 months. That’s the draw for experienced investors. More upside, no extra capital up front. ### Pricing and discounts Placement pricing is negotiated off the market price, within exchange rules. TSX Venture Policy 4.1 caps how deep the discount can go. Watch the steep ones. A deal priced well under market can mean selling pressure the day the paper frees up. That’s why the hold period matters. ### The four-month hold Shares bought under the accredited-investor exemption can’t be resold for four months and one day after closing. That’s the “4 mo” in the Hold column. Mark the date. When a large placement comes free-trading, the stock can take pressure, and deal-savvy traders track these unlocks closely. Methodology ## Where the Data Comes From: SEDAR+, Checked Hourly The monitor reads Canadian regulatory filings from SEDAR+ on a rolling basis. It cross-references exchange bulletins from the TSX, TSX-V, CSE and Cboe Canada, then reconciles them against issuer press releases. Each deal is tracked through its full lifecycle: announced, amended, partially closed, closed. Size, pricing, warrant terms, syndicate and hold dates are captured as they’re disclosed. Snapshots above refresh hourly. Inside the app, updates land as new filings are processed. Go Deeper ## Learn Before You Invest Private placements are usually limited to accredited investors, and the risks are real. You can’t sell during the hold. Dilution is built in. And a financing priced at a steep discount can cap the stock for months. Read these before you put money in any deal: [**Ultimate Guide to Private Placements in Canada and the USA**Exemptions, mechanics, and how allocations actually work. The full playbook.*Read the guide →*](https://katusaresearch.com/guide-to-private-placements/)[**How Small Investors Can Hit It Big in Private Placements**Why the best deals rarely reach retail, and how to position yourself anyway.*Read the article →*](https://katusaresearch.com/how-small-investors-can-hit-it-big-in-private-placements/)[**All Private Placement Articles**Every Katusa Research piece on financings, warrants and deal structure.*Browse the archive →*](https://katusaresearch.com/KII/private-placements/) FAQ ## Frequently Asked Questions What is a private placement?A private placement is a sale of securities directly to selected investors under a prospectus exemption, rather than through a public offering. In Canada, the accredited-investor exemption is the most common route. Companies choose placements because they’re faster and cheaper than a prospectus. Investors join because deals are often priced at a discount and frequently include warrants. Are private placements risky?Yes. You can’t sell during the four-month hold. Existing shareholders get diluted. And issuer quality varies: early-stage companies raise this way precisely because they aren’t cash-flowing yet. Position sizing and due diligence matter more here than in open-market buying. How long does a private placement take to close?Most Canadian private placements close within two to eight weeks of announcement. Many close in tranches, which the monitor shows as “Partial.” Terms can also change between announcement and final close: upsized, downsized or repriced. What is the four-month hold period?Shares issued in a Canadian private placement under most exemptions can’t be resold for four months and one day from closing. The shares carry a restrictive legend during that window. Once the hold expires, the stock trades freely. That’s why participants and traders both track unlock dates. What is the difference between a brokered and non-brokered private placement?A brokered placement is marketed by an investment dealer for a commission, typically 6 to 7% in cash plus broker warrants. A non-brokered placement is sold directly by the company, with no dealer in the middle. Neither is automatically better. Brokered deals run larger and can signal institutional demand. Non-brokered deals dominate the junior market. Can U.S. investors participate in Canadian private placements?Often, yes. U.S. accredited investors can join many Canadian placements under exemptions such as Regulation S and Rule 506. The issuer has to permit U.S. subscribers, and extra resale restrictions can apply. Some deals on this monitor are priced in U.S. dollars for exactly this reason. Confirm eligibility with the issuer or your broker before wiring anything. Related Reading ## More Analysis from Katusa Research - [The First City of Capitalism: Silver’s Time to Shine](https://katusaresearch.com/the-first-city-of-capitalism-silvers-time-to-shine/) - [The Uranium Bull Market Has Officially Started](https://katusaresearch.com/the-uranium-bull-market-just-reached-an-inflection-point-and-has-officially-started/) - [Data Centers, Dead Mines, and Copper’s Reckoning](https://katusaresearch.com/data-centers-dead-mines-and-the-moment-copper-stops-playing-nice/) The Private Placement Monitor is for information only. It is not investment advice, an offer, or a solicitation to buy any security. Data comes from public filings and can contain errors or delays. Verify terms against the issuer’s own disclosure before you invest. --- # The Town That Accidentally Became the Internet’s Power Outlet - URL: https://katusaresearch.com/the-town-that-accidentally-became-the-internets-power-outlet/ - Type: article - Published: 2025-07-11 - Updated: 2025-07-10 - Author: Marin Katusa Welcome to this week’s *Investment Insights*… - **The Day Google Almost Went Dark:** July 10, 2024 — a single equipment failure nearly crashed 70% of global internet traffic. - **Data Center Power Contracts Up BIG:** Dominion’s 5-year wait for new connections shows infrastructure can’t keep pace. - **The Parking Lot Running the Internet:** Virginia Beach is where huge undersea cables surface — feeding data centers that handle 70% of global traffic. | One year ago this week, the lights stayed on in Northern Virginia by pure luck. At 7 PM on July 10, 2024, a single piece of equipment failed near Fairfax. - **Within milliseconds, data centers processing 70% of the world’s internet traffic began dropping off the grid like dominoes.** Grid operators at PJM watched their control screens flash red. Power plants had to slash output instantly. Dominion Energy held its breath as the system teetered on the edge of cascading blackouts that could have darkened the entire East Coast. **We came that close to learning what happens when Google goes dark.** The North American Electric Reliability Corporation was so alarmed that they launched an emergency task force within weeks… *“The grid is not designed to withstand the loss of 1,500-megawatt data centers”*, they concluded. Here’s the terrifying part: Since that near-miss, data centers have only gotten bigger. **Dominion alone now has 40 GW of contracted power for data centers, up 88% since last July.** By 2030, grid operator PJM expects 32 GW of increased demand on its system, with all but two of those gigawatts coming from data centers. We’re not building infrastructure fast enough to prevent the next failure. And this time, we might not be so lucky. That lightning arrestor failure last July exposed what tech executives have been whispering about for years. ## The Secret Everyone Knows But Nobody Talks About Ask any tech executive about their biggest fear, and after a few drinks, they’ll tell you the truth. It’s not competition. It’s not regulation. It’s electricity. Training a single large AI model burns through 1 gigawatt-hour of electricity. That’s enough to power 1,000+ American homes for a month. - **The math is terrifying. By 2028, data centers will consume up to 12% of total U.S. electricity, up from 4.4% in 2022.** In six years, your ChatGPT queries and Netflix binges could use more power than the entire state of New York. For half a century, U.S. electricity demand grew at a sleepy 2-3% a year. Today, it’s exploding at 20-25% annually. That’s 20 gigawatts of new capacity needed every year, an entire Portugal’s worth of power generation. Look at this projection and tell me we don’t have a problem: But here’s the kicker: All that data, every Google search, every Instagram post, every Zoom call has to physically travel somewhere. And for 70% of global internet traffic, that somewhere is a nondescript “parking lot” in Virginia Beach. ## The Most Valuable Real Estate Nobody’s Heard Of Most people have no idea that 70% of the world’s internet traffic flows through Northern Virginia. It started innocently enough. A few data centers popped up near Washington D.C. in the 1990s, close to government agencies, good fiber networks, and stable power. Nothing special. Fast forward to today: Northern Virginia runs about 6,000 megawatts of data center capacity. That’s enough electricity to power six million homes running everything at once. - **The region has more data centers than the next three largest U.S. markets combined.** Drive down General Booth Boulevard in Virginia Beach, and you’ll pass what looks like the world’s most boring office park with no signs and no logos. Just some squat concrete buildings behind serious fencing. What’s hidden inside changes everything. Inside those buildings, massive underwater cables surface after crossing entire oceans, Microsoft and Meta’s lines from Spain, Google’s from France, Latin America’s digital economy flowing through fiber from Brazil. **This is where the cloud actually touches the ground.** From this landing point, twenty miles inland, that data hits Northern Virginia’s data center cluster. That’s 51 million square feet of servers, cooling systems, and backup generators. **It’s the largest concentration of computing power on Earth…** ## When Geography Becomes Destiny This didn’t happen by accident. Northern Virginia had three things Silicon Valley didn’t: proximity to government agencies (early cloud adopters), cheaper land, and crucially, access to massive power generation. But now those advantages have become a bottleneck. **Dominion Energy**, the regional utility, just announced a five-year waiting list for new large power connections. So, if you want to build a data center in the world’s data center capital today, you’ll get power in 2030. Maybe. That’s why Microsoft just agreed to pay Constellation Energy to restart Three Mile Island, yes, *that* Three Mile Island. They’re so desperate for reliable power, they’re bringing back a nuclear plant that’s been shut down since 2019. Government policy is making it worse. It takes 5-10 years to approve new transmission lines. Environmental reviews for power plants can take even longer. Meanwhile, AI companies needed power *yesterday*. - **This desperation for power is creating a fundamental shift in how we measure economic dominance.** ## The Electro-Dollar Emerges For a century, controlling oil meant controlling the global economy. But something fundamental has shifted. Look at this chart showing how much electricity different countries need to generate a dollar of GDP: The U.S. has gotten dramatically more efficient, using 37% less electricity per dollar of GDP per capita than in 2013. We’re squeezing more economic value from every electron. Meanwhile, we have: - 94 nuclear reactors (20% of our electricity). - Natural gas reserves for decades. - The world’s most robust transmission grid. This combination creates what I call the “Electro-Dollar”, economic power backed not by gold or oil, but by the ability to generate and deliver electrons where they’re needed most. And right now, they’re desperately needed in Northern Virginia. **The Clock Is Ticking** Right now, Northern Virginia utilities are turning away billion-dollar data center projects. Not because they don’t want the business, but **because they physically cannot deliver the power.** Every month of delay costs tech companies millions. They’re getting desperate enough to consider everything: offshore power barges, private nuclear reactors, even laying their own transmission lines. The infrastructure gold rush has started. The parking lot in Virginia Beach where those cables surface? It’s about to become the most valuable real estate in America. Not because of what’s on top of it, but because of what flows through it and, more importantly, what powers it. **The next great American fortunes won’t be made in code. They’ll be made in copper wire, concrete, and kilowatts.** Because when everyone realizes the internet has a power problem, it’ll be too late to buy cheap insurance. Regards, Marin Katusa **P.S. In**** the just-released July edition of *Katusa’s Resource Opportunities*, ****we reveal how we’re going to position for Dominion’s $50.1 billion infrastructure buildout—[and why the 88% surge in data center power contracts is just the beginning](https://join.katusaresearch.com/subscribe/?).** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The $480 Billion “Extinction Event” for Your Daily Commute - URL: https://katusaresearch.com/the-480-billion-extinction-event-for-your-daily-commute/ - Type: article - Published: 2025-07-04 - Updated: 2025-09-08 - Author: Marin Katusa In 1908, Henry Ford’s first Model T rolled off the assembly line. Within 20 years, the horse-drawn carriage industry vanished. Blacksmiths, stable operators, carriage makers, entire professions disappeared. Today, a similar disruption is unfolding. Only this time, it’s measured in quarters, not decades. Last Sunday in Austin, Texas, Tesla launched its robotaxi service. Tesla CEO Elon Musk said on X the Tesla AI robotaxi launch began in Austin on Sunday afternoon with customers paying a $4.20 flat fee. This wasn’t *just* a product launch… It was the starting gun for what McKinsey projects will become $378B- $486B in revenue for autonomous ride-hailing services in North America and Europe by 2035. That’s in just two continents. In one decade. As the chart shows, China, Europe, Japan and the U.S. are all on track to see major growth by 2040. Rapid adoption rates for autonomous vehicles are the key reason analysts project such huge revenue for robotaxis. ## The Safety Numbers That Changed Everything Look at the data that’s making this inevitable. Tesla demonstrated over 3.2 million miles per accident on Full Self-Driving (FSD) in 2023, outperforming human-driven Tesla at 588,000 miles and Waymo at 476,000 miles. - **That’s 5.4 times safer than human drivers, making insurance companies are recalculating their entire business model.** But safety isn’t what’s driving adoption. Economics is. When you remove the driver, who takes 60-80% of every fare, the unit economics transform completely. ## The Quiet Leaders Already Winning While Tesla grabbed headlines last week, the real story is who’s already operating at scale. **Waymo** is already doing what Tesla’s aiming for. With over 250,000 fully autonomous rides happening each week across cities like San Francisco, Phoenix, and Los Angeles. Think about that: 250,000 rides. Every week. No drivers. Meanwhile, in China, the numbers are even more staggering. According to its IPO filing, **Pony.ai** operates over 250 robotaxi vehicles, with each vehicle completing an average of 15 orders per day. A report from Huajin Securities indicates that **Apollo Go** has launched nearly 1,000 robotaxi vehicles across China, with its daily order volume in Wuhan now on par with local traditional taxis. In Wuhan, robots already match human taxi volume. ## The Manufacturing Moat Nobody’s Discussing Here’s what separates the dreamers from the dominators: scale. Waymo’s challenge isn’t technology, they’ve solved that. It’s manufacturing. Tesla’s advantage is that they already produce vehicles at massive scale. Tesla has mass-manufacturing capacity, and it pioneered remote software updates it can use for self-driving upgrades. That’s why Volkswagen is entering the race too. The sector offers enough of an opportunity for Volkswagen to greenlight the production of at least 10,000 robotaxi vehicles, potentially more. ## China’s Trillion-Dollar Head Start While American companies navigate regulations, China is deploying with military precision. - **Pony.AI** sold 20 million American depositary shares in the IPO, raising $260 million. It also raised an additional $153.4 million in concurrent private placement. The company achieved a $5.25 billion valuation on its first trading day. - **WeRide**, known for autonomous taxis, vans, buses and street sweepers, is testing and conducting commercial pilots in 30 cities across seven countries. Robotaxi services were US$2.6 million in the fourth quarter of 2024 for Pony.ai with revenue growth of 422.2% year-over-year. ## The Platform Play Everyone’s Missing The smartest move in this space isn’t building robots – It’s controlling distribution. Uber said last week it was partnering with Pony AI to deploy the China-based robotaxi developer’s vehicles onto its ride-hailing platform. Uber is partnering with everyone, Waymo, Pony.ai, WeRide. They don’t need to solve autonomous driving… they already *own* the demand. ## Three Catalysts About to Accelerate Everything **1. Regulatory Clarity Is Finally Here** In 2022, the global robotaxi market size was valued at 1.76 billion dollars, while the revenue growth expectation for 2030 is pegged at 98.59 billion dollars, with a CAGR of 65.3%. That 65% compound annual growth rate assumes current regulatory frameworks. California just approved expansion, China’s racing ahead and Europe’s creating unified standards. **2. The Capital Flood Has Started** In July, Alphabet’s then-CFO, Ruth Porat, announced a multiyear investment by Google’s parent into Waymo on an earnings call, which amounted to $5.6 billion in total. Amazon’s Zoox is a ramping production. Chinese companies are raising hundreds of millions in US markets. **3. Customer Acceptance Tipped** Since launching in November 2019, WeRide’s robotaxis have completed 1,700 days of commercial operations on open roads in China and the Middle East without a single accident. Five years. Zero accidents. Millions of rides completed. The safety argument is over. Waymo and Tesla both show lower crash rates than human drivers. But it’s important to know that Tesla’s system is Level 2 (driver still needed), while Waymo is Level 4 (fully driverless). This makes Waymo’s safety record even more impressive. ## Here’s The Investment Landscape So Far **Pure Plays:** - **Pony.ai (PONY)** – $5.25B valuation, 422% revenue growth - **WeRide (WRD)** – $4B valuation, operating in 30 cities **Platform Aggregators:** - **Uber (UBER)** – Partnering with all major players - **Alphabet (GOOGL)** – Waymo + $5.6B commitment **Manufacturing Scale:** - **Tesla (TSLA)** – Early stages but massive production capacity - **Volkswagen** – 10,000 unit commitment **Dark Horses:** - **Amazon** – Zoox targeting 10,000 units/year - **Baidu** – 1,000 vehicles already deployed in China Not every player survives… GM poured $10 billion into Cruise before retreating and Tesla faces federal probes over FSD crashes in bad weather. ## The Uncomfortable Truth This isn’t about whether robotaxis will transform transportation. **They will**. The only questions are: How fast? Who wins? What dies? **Here’s a timeline reality check…** Analysts and industry experts note that establishing robotaxis may still take years, primarily due to the challenges of ensuring safety and reliability. Some analysts believe Tesla can expand faster, in part because Waymo has helped pave the way by overcoming regulatory and technical challenges. Waymo spent 15 years solving the technology and now everyone’s copying the playbook. **By 2027, major cities will have thousands of robotaxis. By 2030, urban car ownership becomes economically irrational.** The race started last Sunday at $4.20 a ride. **Where it ends will create the biggest transportation fortunes since the railroad barons.** [Will you participate or watch?](https://join.katusaresearch.com/subscribe/) Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Bitcoin Custody Coup That’s Rewiring Global Finance - URL: https://katusaresearch.com/the-bitcoin-custody-coup-thats-rewiring-global-finance/ - Type: article - Published: 2025-06-27 - Updated: 2025-06-26 - Author: Marin Katusa It’s Amsterdam, 1602. The Dutch East India Company, the most valuable corporation to ever exist, announces the world’s first IPO. It issues stock certificates, essentially paper receipts for “ownership” in ships, spices, and trading routes. The certificates give investor *liquidity*. They let investors hold onto *and* trade pieces of paper, instead of being locked into holding a specific piece of cargo. Yet skeptics promptly label them “worthless paper.” Four centuries later, that “worthless paper” concept has evolved into a $124 trillion global equity market. ## Fast Forward to 2024… Bitcoin is king, the most valuable cryptocurrency to ever exist. But it’s a monarch locked in its own castle. Secure and powerful, yes, but unable to leave its blockchain. It’s powerless, for example, to interact with Ethereum’s smart contracts or DeFi apps. Bitcoin holders have the title to Fort Knox, but can’t use the gold inside. ## ## So we’re witnessing another “*worthless paper*” moment: “Wrapped Bitcoin.” You put your real Bitcoin or gold in a vault, a custodian. They give you a travel-friendly IOU, a token that can be used on other blockchains. This is Bitcoin uncaged. Wrapped Bitcoin is usable across the broader financial infrastructure for: - **Collateral** (e.g., in new lending protocols) - **Liquidity** (e.g., in decentralized exchanges) - **Fuel** for new financial products (e.g., yield-bearing Bitcoin treasuries) As with the worthless paper from 400 years ago, wrapped Bitcoin has seen immediate success. Already, Bitcoin holders have quietly locked up $28 billion worth of BTC in digital vaults. That’s over half the size of Barrick Mining. accumulated faster than it takes to get a California construction permit. But like any glacial shift in global finance, the movement began with a few sharp jolts, starting with a wildly controversial deal. ## A $10 Billion Handshake *Shatters* Bitcoin Last August, in a Hong Kong boardroom, a $10 billion deal took place. With it, BitGo, *the* custodian to the “wrapped” Bitcoin vault sealed a new custody arrangement. The deal brought with it a controversial stakeholder, a consolidation of power, and reduced transparency in the custodianship of the Bitcoin. Now here’s the thing: If you have gold in a vault, you need to trust whoever has the keys to your vault. A lot. So, it naturally took all of 48 hours for the crypto world to erupt. **MakerDAO,** one of DeFi’s largest lending protocols, with billions in assets held an emergency vote. The verdict? 88% voted to dump their wrapped Bitcoin held by BitGo. It was the beginning of the most dramatic power shuffle in crypto history. **Nearly overnight, wrapped Bitcoin splintered from a single custody monopoly into a 15-player marketplace.** BitGo’s dominance crumbled. And one major player spotted the opportunity, and swooped in. ## Coinbase Fills the Custody Vacuum It’s September, 2024. Coinbase, the major crypto exchange, launches cbBTC. It captures $4.7 billion in market share faster than any financial product in crypto history. **Remember when Schwab eliminated trading commissions?** Everyone said they were either bold or crazy. A year later, they’d absorbed TD Ameritrade and become the undisputed king of retail brokerage, with $6 trillion in client assets. Coinbase just played the same card. They understood what Wall St. institutions *actually* want: one-click wrapping, regulatory clarity, no committees, no drama. And they gave it to them. Those institutions immediately took the bait. - **Just this week, news broke Jane Street are backing a $1 billion Bitcoin treasury company, ProCap.** Their plan is to use wrapped Bitcoin to generate yield through lending and derivatives. **The institutional wall of money has arrived in Bitcoin.** It knows that Bitcoin isn’t just about HODLing anymore. It’s active, yield-generating, and *finance-shaping.* Which means the last one in the game has the most to lose. ## Now, the Regulatory Dam Is Breaking In late 2024, the regulations started to crumble: - Europe finally gave crypto clear rules, - America put the commodities regulator in charge, and - Singapore invited 40 major banks to experiment. The response has been immediate and unbelievably gargantuan. JPMorgan started moving $300 billion in overnight loans on the blockchain, BlackRock’s tokenized treasury fund hit $2 billion, and Franklin Templeton spread their fund across six different blockchains. And the Depository Trust and Clearing Corporation (DTCC) is preparing its own tokenized collateral management platform, enabling real-time transfers and smart contract automation. **When the company that clears all of Wall Street’s trades prepares for $3 quadrillion (not a typo) in tokenized securities, it’s clear we’re not experimenting anymore.** Wrapped assets are the future of crypto, and the future of currency. Which is where the story takes an unexpected turn… ## Gold Goes on the Chain Because a perfectly tradeable wrapped Bitcoin makes trading physical gold obsolete. The only way for gold to survive is by also being wrapped and perfectly tradeable. **And that’s exactly what’s happened. **Each gold token represents one troy ounce of London Good Delivery gold sitting in Swiss vaults. Tokenized gold eliminates storage costs, insurance headaches, and transaction friction faster than the gold ETF revolution of the 2000s. Unlike the gold bars in your safe, these trade 24/7, divide into millionths, and settle in seconds. For centuries, the gold market struggled with liquidity constraints. Blockchain technology cracked the code in just 24 months. PAX Gold and Tether Gold now command over $1.7 billion combined, with daily volumes exceeding $100 million. The real tell shows up in chaos: When geopolitical tensions spike, PAXG volume jumps 900% in a week. Smart money isn’t calling their broker at 3 a.m. They’re buying digital gold on their phone as the market reacts. ## The Inevitable Convergence Every major exchange is now launching their own wrapped bitcoin: Kraken’s kBTC, 21Shares’ 21BTC, Threshold’s sBTC. The math is simple and brutal. Industry projections show $500 billion in tokenized assets by year-end 2025. But that’s looking backward, not forward. **This kind of growth reminds me of the early days of the ETF boom.** When Vanguard and Fidelity started competing with BlackRock’s iShares, everybody won, especially investors who understood the bigger picture. **The real opportunity isn’t in picking winners. It’s in understanding that we’re watching the birth of a new financial system.** One where every asset, from bitcoin to bonds, from gold to real estate, becomes liquid, programmable, and globally accessible. AI is flashy. Wrapped Bitcoin is *foundational*. It’s not a product story, it’s a protocol shift. And this “worthless paper” is setting itself up for a quadrillion-dollar remaking of the global financial system. Unlike AI, this transformation doesn’t need a breakthrough. It just needs time. Regards, Marin Katusa and the Katusa Research Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Testimonial and Returns Disclosures - URL: https://katusaresearch.com/testimonial-and-returns/ - Type: page - Published: 2025-06-26 - Author: Marin Katusa ## **Testimonial and Returns Disclosures** Before you buy any of the products or services on our website, please read this… The following contains facts, figures, explanations, annotations, full testimonials, and other resources about the promotional pieces on the Katusa Research websites. In short, these are the resources used to put together the previous promotion. As you have seen, we publish testimonials in our promotions. All those testimonials are the words of real subscribers that we received in real letters, emails, surveys, customer service tickets (via Zendesk) and other feedback (telephone – however this method needs a written follow up from the subscriber before being used in marketing and promotional material). **We publish this information to let you know that these results are possible and have been achieved by real people after reading our research.** **However, you should also understand that we are advertising these testimonials because they are not typical.** **These results are examples of the very best possible outcomes.** Each testimonial received has a date and time stamp of when it was received and the name and email of the person that sent it. When we receive testimonials from a subscriber, we veil their last name and any identifying details to protect their privacy and identity. We are aware that personal feedback and the financial results they share is personal and sensitive. Some subscribers do not feel comfortable sharing this information with us, especially knowing that we may publish it. You should keep these questions in mind when assessing whether to purchase our products and whether you could obtain similar results. **Past results like these are no guarantee of any future result.** We wouldn’t recommend anticipating such outstanding results with your own investments. Yes, you *could* have results like these – or perhaps even better. But, it’s simply not prudent to assume you will immediately make large investment returns. **Instead, we urge you to read our work carefully, to follow our risk management strategies conscientiously, and to invest cautiously while setting expectations that are based around our long-term performance *averages*.** **If you have ANY questions** or want more information about the marketing material you just viewed, you can send us an email to [subscribers@katusaresearch.com](mailto:subscribers@katusaresearch.com). Or you can also call our Customer Service team, from Monday through Friday, 8 a.m. through 4 p.m. Pacific Time. Our phone number is: 1–(778)–737-7381. Note long-distance charges from your phone company may apply depending where you are calling from. --- # Solar Goes 24/7 Today—Have You Met Its Toll-Collector? - URL: https://katusaresearch.com/solar-goes-24-7-today-have-you-met-its-toll-collector/ - Type: article - Published: 2025-06-16 - Updated: 2025-09-10 - Author: Marin Katusa *Disseminated on behalf of SolarBank Corp (NASDAQ: SUUN)* Netflix was never about red-envelope DVDs; those were just the decoy. The payday came the instant tech let them flip a switch to **streaming**—and a sleepy mail-order shop became a $500 billion titan almost overnight. **Solar is at that exact switch-flip now.** Panels were the envelopes. Sub-$100/MWh batteries just turned them into a 24-hour power network. **Because batteries—the streaming of solar—are now feasible.** For the first time, that makes “**Solar+**”—solar and batteries together—possible… **And *solar+* produces electricity that’s ultra-cheap, and crucially, always on tap.** It finally cracks solar’s intermittency problem—day or night, power is there when you need it. **Companies that have been waiting for this moment are moving at light speed.** - In 2020, battery installations were less than 5% of solar installations. - In 2025, they’re expected to hit 60%—or the equivalent capacity of all solar installed in 2023. *Source: Ember 2025* Between 2025 and 2027, the percentage of collocated solar+ is expected to grow by 50%. For early movers, that growth is paying dividends. - **Battery operators in Texas, for example, had half a billion in revenue in 2023. And Tesla saw Solar+ revenue jump 67% in Q4 ’24.** Analysts at Wood Mackenzie put the U.S. solar-plus-storage opportunity at roughly $120 billion in cumulative cap-ex by 2030. **Which is why I want to introduce you to a decade-old company…** Still with room for growth—that’s positioned itself for this exact moment. **KR SPECIAL SITUATIONS ALERT** **SolarBank (NASDAQ: SUUN)** ***SolarBank’s 22-yr contracts start minting next summer—read on.*** SolarBank has always had Solar+ in its sights. Any entrant to the space must take as much ground as possible, establishing a position to reap the rewards for decades. So SolarBank has worked with more than 1,000 commercial, industrial, institutional, and private property owners to secure sites for solar installation. And they’ve spent twelve years building out hundreds of solar projects totaling more than 100 MW. SolarBank worked its way up to world-class clients, including: - **Honeywell International** – closed a $41M USD transaction for three NY projects. - **Qcells** – announced $49.5M USD transaction for four NY projects. - **Fiera Real Estate** – first collaboration with the multibillion-dollar real estate firm in 2024. - **The Ontario IESO** – completed over 70 owned and operated solar projects with capacity of nearly 28.8 MWp under long term Feed-in-Tariff contracts. ## It’s All Preparation for The End Game: Solar+ And SolarBank is now rapidly moving forward with building out lucrative battery projects. The first SolarBank BESS (battery energy storage system) broke ground in Ontario, Canada, in February 2025. **Once operational the contract will pay out USD$1,221 per MW per business day—for a 4.74 MW battery.** This is one of* three* near-identical projects SolarBank has under development and long term contract. **Oh, and each one of those contracts pays out for 22 years.** The same month as it broke ground on the first BESS project, SolarBank announced another collaboration to develop its first bona fide Solar+ project: A 3.06 MW solar + 1.2 MWh battery storage project in Buffalo, New York. As it rolls out Solar+, the next step for SolarBank is to target one of the most energy-intensive industries of all… The one that made streaming possible in the first place. ## Byte Blackouts, Meet Storage Solutions Data centers, like the ones that host your email data and let you chat with ChatGPT, have two major downsides: First, their energy needs and costs are extremely high. Second, they can *never* have a lapse in power supply—or they risk losing data. Solar+ solves both of those. It provides energy that’s cheaper than the power from the grid. And with batteries, it provides an uninterruptible, instant-on power supply. **And here’s the kicker: It can also be deployed in *months*, not decades.** So SolarBank is moving aggressively into the data center solar power supply market, too. **In April 2025, the company nabbed Jonathan Martone to advise the company in building out a data center pipeline.** - *Jonathan has significant contacts and is one of the leaders in North America in understanding site selection and the components to ensure a successful operation. – SolarBank CEO Dr. Richard Lu* SolarBank is looking to become a “grid fixer” for America’s data-drunk future—**and make bigger revenues doing it**. **Right now, we believe SolarBank has significant potential future value.** But their projects are coming online fast, and they’ve got a more than 1GW solar+ pipeline. They’re dead-set on capturing their share of a sector that’s experiencing exponential growth. As they get in early to the solar+ market, there’s a window to get in on SolarBank as it grows. **Jeff Bezos offered to buy Netflix for $12M in 1998. It’s worth 40,000x that now.** **[Get the Full SolarBank Briefing Right Here](https://katusaresearch.com/solarbank-suun/?)** Put the stock on your radar, read their filings and stay on top of their news. We’re watching closely. Regards, Marin Katusa and the Katusa Special Situations Team **IMPORTANT DISCLAIMER & DISCLOSURES** **Investing in stocks is HIGH RISK. You could lose all of your investment.** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **SolarBank Corp. is a paid sponsor of this report.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. Katusa Research, its owners, directors, and employees are also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED: **In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research partner company, New Era Publishing Inc. has received cash compensation in the amount of nine hundred thousand dollars from SolarBank Corp. for a 6 month marketing agreement starting January 1, 2025, and is thus extremely biased. SolarBank has paid an additional $450 thousand dollars for an additional 3 month marketing campaign on June 1. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained herein regarding SolarBank Corp. has been derived from its SEDAR+ and SEC filings, including scientific and technical information. Information regarding the projects underlying SolarBank Corp.’s interests has been derived from the publicly available disclosure of the underlying operators and owners, including where referenced herein. Katusa Research, and its directors, employees, and members of their households do not own shares of **SolarBank Corp (SUUN.Nasdaq). **However, Katusa Research is extremely biased since this is a sponsored editorial. **HIGH RISK: **The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE: **By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS: **This report contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, “forward-looking statements”) that relate to the Company’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “expects”, “will continue”, “is anticipated”, “anticipates”, “believes”, “estimated”, “intends”, “plans”, “forecast”, “projection”, “strategy”, “objective” and “outlook”) are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. In particular and without limitation, this report contains forward-looking statements pertaining to the Company’s expectations regarding its industry trends and overall market growth; the Company’s growth strategies the expected energy production from the solar power projects mentioned in this report; the number of homes expected to be powered by the Company’s development projects; the reduction of carbon emissions; the receipt of incentives for the projects; the expected value of EPC Contracts; and the size of the Company’s development pipeline. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. These statements speak only as of the date of this report. Forward-looking statements are based on certain assumptions and analyses made by the Company in light of the experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate and are subject to risks and uncertainties. In making the forward looking statements included in this report, the Company has made various material assumptions, including but not limited to: obtaining the necessary regulatory approvals; that regulatory requirements will be maintained; general business and economic conditions; the Company’s ability to successfully execute its plans and intentions; the availability of financing on reasonable terms; the Company’s ability to attract and retain skilled staff; market competition; the products and services offered by the Company’s competitors; that the Company’s current good relationships with its service providers and other third parties will be maintained; and government subsidies and funding for renewable energy will continue as currently contemplated. Although the Company believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect, and the Company cannot assure that actual results will be consistent with these forward-looking statements. Given these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements. Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks, uncertainties, assumptions and other factors, including those listed under “Forward-Looking Statements” and “Risk Factors” in the Company’s Annual Information Form for the most recently completed financial year, and other public filings of the Company, which include: the Company may be adversely affected by volatile solar power market and industry conditions; the execution of the Company’s growth strategy depends upon the continued availability of third-party financing arrangements; the Company’s future success depends partly on its ability to expand the pipeline of its energy business in several key markets; governments may revise, reduce or eliminate incentives and policy support schemes for solar and battery storage power; general global economic conditions may have an adverse impact on our operating performance and results of operations; the Company’s project development and construction activities may not be successful; developing and operating solar projects exposes the Company to various risks; the Company faces a number of risks involving Power Purchase Agreements (“PPAs”) and project-level financing arrangements; any changes to the laws, regulations and policies that the Company is subject to may present technical, regulatory and economic barriers to the purchase and use of solar power; the markets in which the Company competes are highly competitive and evolving quickly; an anti-circumvention investigation could adversely affect the Company by potentially raising the prices of key supplies for the construction of solar power projects; foreign exchange rate fluctuations; a change in the Company’s effective tax rate can have a significant adverse impact on its business; seasonal variations in demand linked to construction cycles and weather conditions may influence the Company’s results of operations; the Company may be unable to generate sufficient cash flows or have access to external financing; the Company may incur substantial additional indebtedness in the future; the Company is subject to risks from supply chain issues; risks related to inflation; unexpected warranty expenses that may not be adequately covered by the Company’s insurance policies; if the Company is unable to attract and retain key personnel, it may not be able to compete effectively in the renewable energy market; there are a limited number of purchasers of utility-scale quantities of electricity; compliance with environmental laws and regulations can be expensive; corporate responsibility may adversely impose additional costs; the Company has limited insurance coverage; the Company will be reliant on information technology systems and may be subject to damaging cyberattacks; the Company may become subject to litigation; there is no guarantee on how the Company will use its available funds; the Company will continue to sell securities for cash to fund operations, capital expansion, mergers and acquisitions that will dilute the current shareholders; and future dilution as a result of financings. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this report are expressly qualified in their entirety by this cautionary statement. There are several risks associated with the development of the projects detailed in this report. The development of any project is subject to the continued availability of third-party financing arrangements for the project owners and the risks associated with the construction of a solar power project. There is no certainty the projects disclosed in this report will be completed on schedule or that they will operate in accordance with their design capacity. If the EPC agreements are terminated, then SolarBank will not realize the full contract value. In addition, governments may revise, reduce or eliminate incentives and policy support schemes for solar power, which could result in future projects no longer being economic. SolarBank is expanding into the data center industry, but it does not currently have any data center projects under development or that it has secured rights to. SolarBank does not have any contracts with the parties mentioned in this news release. It is in discussions with various other parties regarding potential data center opportunities and will provide details in a future news release if an agreement to acquire or develop a data center is concluded. The development of any data center project is subject to identifying a suitable project site, receipt of required permits, entry into contracts for construction and the use of the data center, the availability of third-party financing arrangements for the Company and the risks associated with the construction of a data center. --- # “The Sun Has Won”—and It’s Not Even Close - URL: https://katusaresearch.com/the-sun-has-won-and-its-not-even-close/ - Type: article - Published: 2025-06-13 - Author: Marin Katusa *The greatest shortcoming of the human race is our inability to understand the exponential function.* – Harvard physicist Al Bartlett You’ll never guess why solar power was invented by AT&T back in the mid-‘50s. It was with wildly modest intentions: Powering payphones in remote areas. The first demonstration of a scrappy, cobbled-together “solar panel” generated just enough power to slowly spin a tiny toy Ferris wheel. No one (not even AT&T) understood the exponential growth potential of this new technology. - **But last year, solar panels produced 3x the amount of energy used by the entire U.S. back when that Ferris wheel was spinning.** **Because solar has a single secret superpower no other major source of energy has.** Energy sources like coal or natural gas have a fixed cost of extraction. So even as the amount drilled for or mined rises by orders of magnitude, their prices stay roughly the same—over *centuries*. But solar cells are *manufactured*, not extracted. **That means solar becomes *much* cheaper with every successive cell manufactured—and *70 billion* solar cells were manufactured last year.** So from 1985-2025, while coal was going nowhere, the price of solar fell off a cliff. The graph below shows the last 45 years of cumulative GW of production vs price, on a log scale. *Source: **Fraunhofer Institute for Solar Energy Systems (ISE) Photovoltaics Report** (May 2025)* Nothing but solar is capable of this kind of ongoing price decrease. Which is why… - **Within a decade, the single biggest source of electrical power on planet Earth will be solar.** And that switch is happening much, *much* faster than even the “experts” are predicting. ## Everyone Is Wrong about Solar For the last quarter-century, some of the most reputable organizations in the world have wildly underestimated solar power growth predictions. For example, the International Energy Agency (IEA) publishes predictions about solar’s growth in its annual World Energy Outlook report. In its 2009 report, the IEA predicted that by 2029, installed solar capacity would increase 10x, to 244 GW. - **It hit that milestone in just six years—and has nearly 10x’d *AGAIN* from there.** For much of the 2010s, solar deployment beat the IEA’s five-year forecasts by 200%+. *Source: **International Energy Agency World Energy Outlook reports **(2017-2025)* They constantly revise their forecast upward to try to keep pace with reality. - In 2021, they said 2023 would bring 218GW of installation. - In 2022, they said 257GW. In 2023, they said 406GW. BNEF, a Bloomberg subsidiary, tried the same. But the reality was that 447GW were deployed—**more than twice their original predictions**. And it made exactly the same mistake in 2024. The trouble with solar predictions is that no one has learned the lesson from the last 70 years of solar. The experts are still assuming linear growth. **But solar is growing exponentially.** From that first Ferris wheel, through the ‘80s and ‘90s and early ’00s, it looked like solar was barely moving. Now all at once—this year—solar is becoming the global standard for electricity generation. ## Growth at the Speed of Light To understand where solar is actually headed, take past reality and work forward from there. Here’s how rapidly solar deployment has grown—for the past two decades: - In 2004, it took **one year** to install 1 GW of solar power. - In 2010, it took **one month**. - In 2016, it took **one week**. - In 2024, it took **about 12 hours**. That’s the equivalent of 3.4 football fields of solar installed *every minute*. Here’s what that looks like over the past 15 years. Note that the y-axis in the chart below is *exponential*—and solar is breaking out *above* that trendline. *Source: **PV ThinkTank’s (Mis)forecasting the future report*** At the current growth rate, solar capacity is doubling about every three years—or growing 10x every decade. According to ISES, solar power will surpass nuclear generation in 2026, wind in 2027, dams in 2028, gas in 2030, and coal in 2032. And in just 25 years, solar capacity will exceed 75TW—or 6x the world’s current electricity generating capacity. - **That will make solar humankind’s largest source of primary energy—not just electricity.** Which means we’re closer to AT&T’s Ferris wheel in terms of total solar deployment than we are to what’s coming. *Almost all the demand for solar panels still lies in the future. – The Economist* Exponential growth is difficult to see at first—until suddenly, it looks like it was inevitable. It’s not often the future is this easy to predict. Fortunately, it’s also not difficult to profit from an exponentially growing technology. **You just have to recognize the opportunity.** We’ve already done the legwork for you… **Identifying a company that is capitalizing on the massive solar growth in the United States.** In the next 2 days, we’re going to show you how they’re on the verge of hitting their “**Netflix Moment**.” Regards, Marin Katusa and the Katusa Special Situations Research Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # 80% Crash, 700% Demand Growth: This Sector’s Math Doesn’t Add Up - URL: https://katusaresearch.com/80-crash-700-demand-growth-this-sectors-math-doesnt-add-up/ - Type: article - Published: 2025-05-30 - Updated: 2025-05-29 - Author: Marin Katusa *In this week’s Investment Insights…* - **Crash or Setup? **700% Lithium Demand vs. a Starving Pipeline: Supply surge ends in 2027; capital taps shut in 2024 — see who survives. - **Battery Storage Now Eats 15% of Lithium — Models Miss It:** Grid demand is up 85% in 2024; analysts still file it under “EV.” - **$15k/Tonne Shutdown Level — High-Cost Lithium Mines Go Dark:** Exploration budgets halted; giants are shelving half their projects. | Sometimes you have to check back in with a “left for dead” sector. Lithium carbonate prices have cratered more than 80% from their late-2022 peak as wave after wave of new supply hit the docks. Lithium mines from Australia’s Pilbara region to Zimbabwe pushed global output 35% higher year-on-year — the sharpest surge on record. According to the IEA, lithium use expanded 30% as EV makers grabbed every cell they could find, but supply growth still outran it. But prices imploded, taking the producer’s cash flow with them. The short-cycle nature of hard-rock spodumene meant material came fast; the long-cycle nature of funding and building next-generation mines suddenly froze. - **Global lithium exploration budgets surged to an all-time high of $1.1 billion in 2024, continuing the momentum from 2023’s dramatic increase.** The spending boom reflects sustained investor confidence in lithium demand despite market volatility, with Canada and Australia leading the charge. That clash — surging need versus overshoot — sets the stage for the metal’s ‘final boss’ test. If prices can hold this new floor, the bulls may get a clean runway. ## **Why The Sell-Off Ran Too Far** Cash costs for new lithium from major producers now sit dangerously close to current spot prices. Even industry giants admit half their projects are now “under”” review”—that’s code for *scrapped*. The industry already mothballed several high-cost mines in Western Australia when prices sliced below $10,000 per tonne. Brine and hard-rock projects can ramp up in 12-24 months, but mega-mines still need 6-8 years. The pipeline beyond 2027 is thin, and the IEA sees a supply deficit opening “by the 2030s” under current policies. ## **Capital Is Drying Up at the Worst Time** The price collapse wiped out producers’ cash flow just when new projects needed funding the most. Credit markets that welcomed lithium deals two years ago now slam shut. With capital pipes closing, the forward mine slate thins quickly. - **The IEA calculates that meeting its base-case lithium demand will still require 55 additional average-sized mines by 2035.** Refining bottlenecks are still dangerous: three countries — China, Chile, and Argentina — control **roughly 70% of battery-grade lithium chemicals**. Any export curb (think China’s graphite chess move) — or even a paperwork delay — could shove the market from surplus to shortage overnight. ## **Demand Tailwinds Nobody’s Modeling Right** Here’s the demand catalyst hiding in plain sight: battery storage. Grid-scale battery projects jumped 85% in 2024 and now consume 15% of all lithium cells. **Catalyst #1: Grid Storage Revolution** Everyone focuses on electric vehicles. They’re missing the bigger story. Grid-scale battery installations jumped 85% in 2024, now consuming 15% of global lithium supply. Why does this matter? AI data centers need stable power. If small modular reactors slip past 2030 (likely), batteries must fill the gap. That’s pure upside for lithium demand. **Catalyst #2: Chemistry Shifts Don’t Matter** Bears claim LFP batteries will crush lithium demand. They’re wrong. LFP packs use the same amount of lithium per kWh as nickel-rich batteries. The chemical change hurts nickel and cobalt, not lithium. **Catalyst #3: Policy Deadlines Force Action** Watch these dates: - Late 2025: Chinese subsidies reset, forcing cathode makers to restock. - July 2026: EU Critical Raw Materials Act kicks in, requiring “friend-sourcing.” - Ongoing: North American battery plants need a supply to claim $35/kWh tax credits. Demand isn’t plateauing. In the IEA’s stated-policies outlook, lithium use has already tripled since 2020 and is on track to triple again by 2035, topping 700,000 tonnes of lithium. *Supply must sprint just to stand still.* ## **4 Signals That Mark What a Bottom Looks Like…** - **Project delays:** Three Australian spodumene mines already pushed expansion plans; more will follow. - **Take-or-pay offtakes:** OEMs locking in multi-year floor prices signal fear that the cheap window is closing. - **Predatory M&A:** Strategic buying of assets at a half-built stage, before feasibility ushers in the turn. Rio Tinto bought Arcadium Lithium at fire-sale levels in 2024. - **Exploration Stall:** Budgets halted after a four-year boom. And we’re ticking all four boxes right now. ## **Finding Plays That Actually Work** **Target the cost killers.** The cheapest integrated producers will crush competitors when markets turn ugly. These tier-one converters have the muscle to survive price wars and grab market share. **Hunt for permitted brownfields.** These sites already spent the big money on infrastructure. When lithium prices spike again, they can ramp up fast while others scramble for permits. **Collect royalty checks.** Streaming deals give you cash flow without the headaches of running mines. You get paid whether the operation runs smoothly or hits snags. What could still go wrong? Trade wars can kill deals overnight. New tariffs or export bans freeze supply chains and send costs through the roof. Sodium batteries are lurking but still years away. This tech could put a ceiling on lithium demand, and smart money watches for breakthrough announcements. Two mega-brine projects in Chile and Argentina could flood markets if they hit nameplate capacity simultaneously. That’s millions of tonnes of new supply in a compressed timeframe. ## **The Bottom Line** The math is brutal: lithium demand needs to triple again by 2035, but new mine approvals have stalled. Something has to give. - **Supply, meanwhile, must add 55 average-sized new mines just to stay even in the IEA’s conservative scenario.** Track offtake deals and construction slowdowns. When you see both in the same week, the breakout clock starts—[and the first 100-300% gains will come lightning fast](https://join.katusaresearch.com/subscribe/?). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # A 60-Year-Old Copper Split Is Re-Emerging - URL: https://katusaresearch.com/a-60-year-old-copper-split-is-re-emerging/ - Type: article - Published: 2025-05-23 - Updated: 2025-05-22 - Author: Marin Katusa On an August morning in 1965, a New York scrap dealer shouted **34 cents a pound** for copper. An hour later a telex from London printed **55 cents**. Washington had just capped U.S. prices after the Tonkin Gulf Resolution exploded Vietnam spending. Europe, free to float, let copper rip higher. The spread ballooned; Chile, Peru, and Zambia, all short of cash, jacked royalties or seized mines. **By 1974 one-third of global output sat in government hands and the metal had tripled.** That price divorce didn’t start in a mine, it started in a policy office. Today another policy split is opening, this time between Chicago’s CME contract and London’s LME benchmark. And the echoes from 1965 are getting louder. ## Yield Squeeze Meets Hard-Asset Hunger Ten-year Treasuries hover near 4½ percent and climbing. Investment-grade spreads are creeping wider. Junk yields are breaking north of 8 percent. When credit costs jump too high, CFOs shelve smelters, data centers, and apartment towers, exactly the projects that soak up copper. Copper is no inflation hedge – it’s the metal of expansion. Rising yields say the construction engine is downshifting, yet the price of the red metal refuses to roll over for long. But why? ## Warehouse Chess: Stockpiles Shift East Visible inventories climbed through February, then turned south in March. More revealing is *where* those tonnes now sit. At Christmas, LME warehouses held **86 percent** of exchange copper; by mid-April, their share slid to **54 percent** while Shanghai’s doubled to **46 percent**. China is restocking quietly just as Western buyers pull metal westward to front-run tariff talk. Days of supply have fallen since March. If that slide extends into Q3, the seasonal maintenance lull, copper will greet autumn with its thinnest cushion in a decade. ## Tariff Gap: America’s Price Jumps the Track Since October, CME-registered stocks are **up 57%** while LME stocks are **down 29%**. Futures tell the same tale. For most of 2024, the two contracts moved in lockstep; after New Year’s the CME price sprinted ahead. American fabricators have responded by pulling copper across the Atlantic at the fastest pace since 2018. - **The last time CME traded at a sustained premium to LME was 2005, right before copper tripled in two years.** ## Investors back in 1965 had two winning plays… The first was to **own secure-jurisdiction mines** that sold into the capped U.S. price once Washington lifted controls in the 1970s. And second was to hold royalty papers on nationalizing countries, governments paid out even when they seized equity. For years I’ve stressed [my **+SWAP** Line and **-SWAP** Line idea](https://katusaresearch.com/swap-lines-are-one-of-the-most-important-things-youve-never-heard-of/)… I still expect more takeovers, higher taxes, and bigger royalties in the -SWAP Line nations. ## What Breaks First – Price or Policy? Copper has whipsawed 10 percent up, 11 percent down, then 4 percent up again in ninety days. That volatility writes a simple take home message: - **Higher borrowing costs** threaten near-term demand. - **Tariff brinkmanship** reroutes trade flows and inflates U.S. prices. - **Inventory migration** hints at a supply squeeze the headlines haven’t caught. Should the White House formalize tariffs this summer, the spread could explode faster than a cathode can cross an ocean. If bond yields buckle into a Fed rate cut, the growth side of the equation lights up too. **THREE FORCES NOW TUG ON COPPER:** A credit squeeze that cools demand, an inventory draw that tightens supply, and a tariff threat that skews regional pricing. History says such policy-driven spreads rarely die quietly. The last one rewired the global mining map and handed patient investors windfall gains. We’re not betting on a melt-up tomorrow… **We’re positioning for an asymmetric payoff when today’s gap resolves the only way a scarcity premium can, higher.** Those moves should add even more risk premium to copper and lift prices in the years ahead. *This month inside **Katusa’s Resource Opportunities** I detail the stocks already outperforming on the CME premium.* [You can read it before the next Tonkin-style headline appears](https://join.katusaresearch.com/subscribe/?). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # White House Loophole Could Unleash 200 New Reactors - URL: https://katusaresearch.com/white-house-loophole-could-unleash-200-new-reactors/ - Type: article - Published: 2025-05-16 - Updated: 2025-05-15 - Author: Marin Katusa Another day, another government agency gets blown to smithereens. This time it’s the Nuclear Regulatory Commission (NRC) that’s on the chopping block. Because within weeks, the White House is expected to announce a new set of executive orders that will effectively render the NRC defunct. The orders are expected to enable the Department of Energy and Department of Defense to skip NRC rules and fast-track new nuclear plants. **This is the most important news for the U.S. nuclear industry in the past fifty years.** Because for at least that long, the NRC has been strangling the industry alive. In fact, it’s made it all but impossible for new nuclear to be developed in the U.S. For example, the original NRC licensing scheme was 50 pages long. The new version that the NRC has been simplifying for *five years* is 1,100 pages. - **The last reactor design to be approved by the NRC cost $500 million and required a 12,000-page application.** The full application had about two million pages of supporting documentation. **That’s a 650-foot stack of paper, taller than the Washington Monument.** Because the NRC still uses 1970s-era standards and bloated reviews, it hasn’t approved a single new reactor permit since 1978. According to former NRC Commissioner Jeffrey Merrifield, the NRC doesn’t know “when to stop” adding new regulations. And that it is “one of the primary obstacles impeding” advanced nuclear reactor development. So much so, that LAST Energy is suing the NRC for “unlawfully impeding progress in the industry.” Washington, DC, is fed up. And has finally decided to do something about it. ## The Only Bipartisan Power Source in Washington Congress has been strongly pursuing nuclear growth for a decade. In fact, for the first time since *Richard Nixon* was president, both Democrats and Republicans have nuclear energy development in their platform. - **Democrats see it **as necessary for achieving net zero and fighting climate change; - **Republicans see it **to establish total energy security and create new jobs. Even the past five presidents have been advocates, with the amount requested for nuclear development steadily rising since 2000. There are three crucial reasons both parties want to eliminate any roadblock to nuclear development: - **Nuclear Exports** – The U.S. could regain its primacy in nuclear exports, reducing the trade deficit. By 2050, the market is expected to be $1.9 trillion and China and Russia have dibs on 2/3 of that market. - **National Security** – Nuclear power is more important for national security than AI or semiconductors. Without nuclear power, there is no supply chain for nuclear weapons. - **Energy Security **– Independent, self-sustainable energy is the only answer, and nuclear enables that. That’s why there has been a steady drumbeat of large pro-nuclear legislation, regardless of administration or control of Congress. Several of the laws above were specifically designed to force the NRC to fix its process. In seven years, the NRC made little to no progress. Meanwhile, Canada’s CNSC and the UK’s ONR have already updated their licensing strategies. Finally, in 2024, Congress passed the ADVANCE Act to drag the NRC into the 21st century and turn it from a barrier into an enabler of new nuclear plants. The Act directed the NRC to consider ways to simplify and shorten the review process for advanced reactors, speeding up the development of new nuclear power plants. **It still isn’t working.** Project 2025, the current administration’s public playbook, outlines exactly what to do in this circumstance: *p. 365: “Ensure that the Nuclear Regulatory Commission facilitates rather than hampers private-sector nuclear energy innovation and deployment.”* Each bill took a step, but the coming executive orders will be the biggest shift yet. There’s no more waiting for the extraordinarily anti-nuclear NRC to move faster. Now it’s time for them to be avoided altogether. ## Big DoE Energy Instead of regulation, it’s time for R&D. And for support to be redirected to two agencies that are immensely well-funded and inarguably pro-nuclear. Like I said, this is *big*. Because the Department of Energy is quite pro-nuclear. In April 2022, it implemented a $6 billion Civil Nuclear Credit Program to prevent reactors from shutting down prematurely. It’s giving Palisades $1.5 billion to be the first recommissioned nuclear facility in U.S. history. And it’s contributing billions of dollars to the development of new reactor types. It has even called for a *tripling* of the U.S. nuclear fleet: ***“We need two hundred [more nuclear reactors] by 2050.”** – Former U.S. Secretary of Energy Jennifer Granholm* And proclaimed a return to exporting technology: ***“The U.S. Government will… recover our position as the world leader in exporting best-in-class nuclear energy technology.”*** *– United States Department of Energy* The current Secretary of Energy, Chris Wright, left the board of a nuclear startup in order to assume his current position. The coming executive orders will marry the *will* of the Department of Energy with the *money* and *technology* from the Department of Defense. The Department of Defense has extraordinary energy needs and happens to already own dozens of mobile nuclear reactors. It can also absorb risks in ways that the private sector cannot. And it has *lots *of funding. - **A single year of the DoD budget, if redirected, could fund reactors covering roughly 85 % of U.S. electricity demand.** Oh, and the cost of nuclear per MWh would drop by about 60 percent. The White House wants an advanced reactor on-grid within three years. Doubters say ‘never.’ History says ‘likely.’ The U.S. government already has contracts with three companies to get advanced reactors running by 2029. Expect DoD and DoE to deploy serious capital to accelerate nuclear, a federal push on the scale of the original Manhattan Project. As a new trillion-dollar market opens up… **There are plenty of ways to profit from it, including fuel, infrastructure, and investing in nuclear itself.** The new Executive Orders are expected to drop within weeks, which means there’s limited time to play this. My subscribers and I have invested in and profited from several energy opportunities in nuclear and uranium. [And there’s a LOT more to come](https://join.katusaresearch.com/subscribe/?). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Beware the New Golden Ruler - URL: https://katusaresearch.com/beware-the-new-golden-ruler/ - Type: article - Published: 2025-05-09 - Updated: 2025-05-08 - Author: Marin Katusa Did you catch Warren Buffett’s retirement warning? “*Obviously, we wouldn’t want to be owning anything that we thought was in a currency that was really going to hell*,” Buffett said. “*There could be things that happen in the US that make us want to own a lot of other currencies*.” Here’s a 10-second snapshot before we dig into this week’s missive… - **42 % of Project 2025 is already law** — Next: clip the Fed’s wings and revive a modern gold standard. - **Even a partial gold backing would send bullion**; a stricter formula multiplies the upside. - **Policy is moving faster than markets** — banks are getting in front of the coming repricing in gold. | It’s no secret that the goal of **Project 2025 **is to reshape the structure of the U.S. government. But most people have *no idea* just how rapidly the 900+ page Project 2025 playbook is being made law—or what’s planned for the next few months. **In just 91 days, 42% of Project 2025’s recommendations have been implemented.** In other words, **the vast majority of this plan is likely to become reality**, including many things that previously seemed unthinkable. Coming up very quickly on the Project 2025 agenda is something that has long been beyond criticized by experts: a reversal of President Nixon’s 1971 repeal of the gold standard. Chapter 24 of the playbook outlines specific plans to make two dramatic moves: - **Rein in the Federal Reserve** (you’ve already seen this begin to unfold). - **Bring the gold standard back** (this process is already beginning), possibly on the way to “free banking.” This has nothing to do with what the “expert” economists say. Throw out the usual rule book for what’s possible. If the will of the people in charge is a return to the gold standard, it has a good shot at becoming the law of the land. ## Back to the Future of Currency Of course, people with something to lose returning to the gold standard are going to fight it tooth and nail. People like current Fed Chair Jay Powell: *“I don’t think [the gold standard] would be a good idea. Congress would have to pass a law saying that our job… is to manage the level of the dollar, and then we would not be looking at maximum employment.”* **Former Fed Chairman Alan Greenspan** after he retired, sing a very different tune: *“I view gold as the primary global currency.”* And before he rose to the Federal Reserve: *“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation.”* Greenspan’s fears have come to pass over the past half century. Prior to the “**Nixon Shock**,” the U.S. saw several iterations of the gold standard—in fact, this is the longest it’s gone without a major currency iteration. As the U.S. has slowly shifted away from a true gold standard, inflation has risen—and growth has declined. If the growth from the ‘70s was maintained through today, median income would be $40k higher than it is. And the economy would be 20% larger—or ~$5 trillion. With a single stroke of a Sharpie, the current administration could achieve several of its most desired and difficult objectives: - Limit the amount that the money supply can grow—**reining in government spending**. - **Curb inflation**, the great enemy of the incumbent. - Completely **neuter the Federal Reserve**. A return to the gold standard has support at the highest levels. ## The Color of Winning **Because there’s nothing Trump likes more than gold.** He himself made a 400% return by investing in gold in the ‘70s, calling it “easier than the construction business.” But he doesn’t just love gold. **He actively agrees with Project 2025**—and sees the gold standard as positive for the U.S. Here he is in separate interviews: *“We used to have a very, very solid country because it was based on a gold standard.* *Bringing back the gold standard … boy, would it be wonderful. We’d have a standard on which to base our money.”* The current leaders have uncovered a pathway to make that true. The *M.O.* of the current administration is to find a loophole—some arcane, barely relevant historical precedent—and exploit it. And they’ve found just the one. In his address, President Nixon indicated that the U.S. would not permanently go off the gold standard: *“I have directed Secretary Connelly to **suspend temporarily** the convertibility of the dollar into gold.”* According to former Trump chief strategist Steve Bannon, **that order is “going to be reviewed strongly in the second term**… Talk about getting rid of the Fed, maybe you start with converting back to gold.” Roosevelt and Nixon, who both helped take the U.S. off the gold standard, used executive orders and proclamations to do so. The current administration feels that it may do the same to bring it back. The roadmap to get there exists. Any route taken to return to the gold standard would have an *immense* impact on demand for and the price of gold. ## Going for the (Price of) Gold **Under a return to the gold standard, what would the new price of gold be?** The final few iterations of the gold standard in the U.S. used a fractional reserve system, just like banks do with money. So the answer must consider what percentage is used for that fractional reserve system. Skip the next two lines if you’re not a numbers person… There are 261M ounces of gold in U.S. reserves. At $3,400/oz, that’s worth about $900B. There is about $19T in M1 money supply outstanding, which means current reserves would back 4.8% of the money supply. - **To back just 10% of the M1 money supply would require gold to double in value.** The graph below shows the approximate prices of gold required at every level of fractional reserve backing: **At 50% backing, gold would have to rise 10x from its current level.** The alternative is for current reserves to grow. The U.S. would need more than 2 billion ounces to get to 100% backing at current gold values—or about 1/3 of all gold ever mined. That would have a similar effect on the price of gold. But the math is not important. What’s important is this: - ***Any *****effort to return to the gold standard is going to send gold through the roof—and those efforts are already here.** The groundwork is already being laid. And investors will seek refuge in gold anyway, as they always have. Regards, Marin Katusa **P.S. one of my major gold holdings is up 60% in the last two months.** **And I think it has much, much further to run.** To get the name of the company, [become a subscriber to Katusa’s Resource Opportunities today](https://join.katusaresearch.com/subscribe/). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Silicon Valley’s “Colder War” is Heating Up - URL: https://katusaresearch.com/silicon-valleys-colder-war-is-heating-up/ - Type: article - Published: 2025-05-02 - Updated: 2025-04-30 - Author: Marin Katusa Amazon, Microsoft, Google, and Meta compete viciously for talent, market share, and AI dominance. But beneath the surface of their rivalry, they’re making identical energy bets and spending billions on nuclear power. These bitter enemies wouldn’t align their strategies unless something fundamental was forcing their hand. That something is the brutal math of powering AI. Tech giants have collectively secured 84 GW of total clean energy **with the** **nuclear portion growing from 0% to 14.2% of their portfolios in just 12 months**. While these companies fight for digital supremacy, they’re simultaneously racing to lock up nuclear capacity. Amazon paid $650 million cash for a nuclear-powered datacenter. Microsoft signed a premium-priced deal to restart a dormant reactor. When arch-rivals make identical moves, smart investors take notice. ## AI Energy Powers: Tech’s $100/MWh Energy Gamble The top four hyperscalers, Amazon, Google, Meta, and Microsoft are writing checks across 34 states to secure power for their operations. Namely solar, wind and nuclear… Look at what’s happening: - The nuclear portion of their energy portfolio jumped from 0 to 7.6 GW in 12 months. - Microsoft is paying roughly $100/MWh for nuclear power, a 67% premium over typical $60/MWh renewable contracts. - Amazon’s Talen Energy acquisition secures 960 MW of direct nuclear power, bypassing the grid entirely. - Datacenter energy demand is projected to grow at 19% annually through 2029, hitting 260 TWh. For energy investors, this marks a big market shift. Companies making small modular reactors, nuclear fuel suppliers, and utilities with nuclear assets can now benefit from the growing demand for power. And then there’s this… ## Solar Boom vs. Wind Bust: Money Follows the Sun in 2025 Solar just crushed expectations. U.S. solar generation surged 31.1% in February while wind tumbled 5.2%. Your electricity now comes more from panels than turbines. Smart money spotted this shift months ago. Companies like **NextEra** and **Invenergy** are investing heavily in this trend. They’re racing to finish big projects, such as the 250-MW Skeleton Creek Solar installation, by year-end. Construction is moving fast across America’s heartland. - **The Southwest Power Pool will add a staggering 5,550 MW of new capacity this year – enough to power 1.7 million homes.** This explains why transmission buildout hit overdrive. SPP approved a $7.68 billion grid expansion last October – their largest ever. Each dollar invested returns $8-9 in economic benefits. - **Grid connection times have been slashed from 4 years to just 12 months.** And industry analysts predict AI tools will reduce this further to 6 months by 2026. “We’re slashing connection timelines from four years to just one,” says SPP CEO Lanny Nickell. This acceleration directly impacts project completion rates and investor returns. SPP forecasts a 75% load increase by 2035. Data centers alone will consume more electricity than entire cities. Utilities in Texas and the Midwest are rushing to secure capacity. And solar energy is a top priority. The rise in solar energy links to the nuclear trend. Both sources offer the reliable generation that AI needs to grow. - **The difference? [Solar projects can be built in months, not years](https://katusaresearch.com/solarbank-suun/).** The message to investors is clear: Follow the construction boom in North America. Projects breaking ground today will generate cash flows for decades. ## Coal’s Surprising 41% Surge Coal isn’t dead – it’s making a comeback. U.S. coal-fired generation jumped a shocking 41.3% year-over-year in February. - **Coal now provides 19.6% of America’s electricity in 2025, up from 17.1% last year – defying predictions of its rapid decline.** The numbers tell a complicated story about energy transition. Coal generation increased to 62.3 million MWh in February while natural gas held steady at 39% of the generation mix. - **Together, fossil fuels now account for 57.4% of U.S. electricity, up from 54.5% a year ago.** U.S. power plants have 121 days of coal stockpiles, which is 8.5% below the five-year average. This shows sustained demand, not just temporary usage. Coal stockpiles dropped by 6.7 million short tons in February, well above the 10-year average draw of 672,000 tons. Plants are burning coal at a sustained rate. Companies like **Peabody Energy (BTU)** and **CONSOL Energy (CEIX**) are experiencing a current financial windfall, but smart investors believe this as a cyclical opportunity rather than a long-term trend. ## The Big Picture: America’s Energy Transformation Is Following Multiple Paths These three trends—nuclear’s tech revival, solar’s growth, and coal’s surprising strength—show a complex view of America’s energy future. It’s not just a shift from fossil fuels to renewables. Instead, each sector is evolving at its own pace. For investors, this creates targeted opportunities in multiple energy segments simultaneously: Uranium, Nuclear, Solar, and Major energy companies. The companies that will outperform are those positioned at the intersection of these trends… Particularly those providing the critical infrastructure that connects generation to consumption. - **My biggest energy winner in the portfolio is trading at decade highs and climbing. While paying me handsomely (plus 8% dividend at the *KRO* cost base) to hold it.** These are the types of opportunities I reveal in detail in my premium research letter – *Katusa’s Resource Opportunities*. [You can get on the list for the next issue right here](https://join.katusaresearch.com/subscribe/). Regards, Marin Katusa ## Must See TV… **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Thank You Page – Solar Report - URL: https://katusaresearch.com/thank-you-page-solar-report/ - Type: page - Published: 2025-05-01 - Updated: 2025-05-12 - Author: Marin Katusa # **Thank You!** *You’ve been added to **Katusa’s Investment Insights** email list. (You can unsubscribe at any time)* **You're one step closer to the best investment opportunities and research on the planet.** A copy of our **special report** has been sent to your email. You can also view your copy by clicking the image. SOLAR'S GOLDEN DECADE *The Investor’s Roadmap to Capitalizing on America’s 26% Solar Growth Rate* - **Make sure you add Katusa Research to your primary inbox and whitelist our emails**. You don’t want to miss any **opportunities** or **alerts**. [**Click here to view your copy**](https://katusaresearch.com/wp-content/uploads/2025/05/Solars-Golden-Decade-A-Katusa-Research-Report-2025.pdf) **[NOTE: Please Read our Full Testimonial and Returns Disclosures](https://join.katusaresearch.com/kr-testimonial-and-returns-disclosures/?_gl=1*13gmrrk*_gcl_au*ODUzMTMyMzc3LjE3NDE3OTU1MDYuMTMwOTY5MTM1MS4xNzQ0MTQ2MDcyLjE3NDQxNDYwNzI.*_ga*MzI2NDk3OTQ4LjE3NDE3OTU1MDg.*_ga_7ZL5WY9H6L*MTc0NjA0ODY4NC4xMDMuMS4xNzQ2MDUyMzEyLjE3LjAuMA..*_fplc*TFQ5eHJmM25wNEZQUUt0SHNtNEt5cTM4aWlrZXB5NEtXNVhIVkNhaHVHYVg5TGVCT2IlMkZubms1a2NoTG5hNGFvTUtLZmxybVlnMUxDT2R0dXV5bDk0QmtjbTJkMExTMiUyQkgwSFdjcWJtdFp2cmFja2xESUEwNVl5bno5QnE0ZyUzRCUzRA..)** Copyright © 2025 Katusa Research. All rights reserved. --- # The $1B Week – Gold’s Acquisition Engine Just Roared to Life - URL: https://katusaresearch.com/the-1b-week-golds-acquisition-engine-just-roared-to-life/ - Type: article - Published: 2025-04-25 - Updated: 2025-04-24 - Author: Marin Katusa I’ve been warning you about this for months, and now it’s finally happening. The feeding frenzy we predicted just erupted. Over $1 billion in gold acquisitions announced in a single week. Premium takeovers surging as high as 71% above market price. Both companies were published in my premium research letter at much lower prices – [Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/). - (Full disclosure: My only regret is not holding them for longer for a bigger gain). But as I learned long ago, you can never lose by locking in a profit. **What I expect next is the most aggressive buying of top-tier assets in my 20+ years covering the sector. ** Gold-miner margins are at record highs. And it’s inevitable that bigger producers will buy out quality gold assets at an accelerating pace. And they’re not waiting for your permission. As one corporate insider just told me, *“When everyone realizes what’s happening, the best assets will already be gone.”* More importantly, gold is not viewed as a critical metal in Canada, so there shouldn’t be any government restrictions on the sales. Further proof, the Bank of Canada sold all its gold almost a decade ago, so the government of Canada shouldn’t have a say regardless from their own actions. ## Why This MATTERS Now With gold hovering above **$3,300 per ounce**, the acquisition math has fundamentally changed. Projects that struggled at $1,600 gold now generate extraordinary margins. And gold majors are on a buying spree… - **Triple Flag just announced they’re buying Orogen Royalties for C$421 million.** I first wrote about Orogen at C$0.85 per share. Triple Flag is paying C$2.00 per share – a 38% premium to market and a 135% gain from our original entry point. Why such a rich premium? Simple: Orogen’s 1% royalty on AngloGold Ashanti’s Expanded Silicon project in Nevada. With 16+ million ounces (and growing), it’s the largest new gold discovery in the United States in over a decade. It’s a world-class deposit, but only miners would come up with a name like “Expanded Silicon”. Ugh. ## And That’s Not All… - **China’s CMOC announced they’re acquiring Lumina Gold for C$581 million.** That deal happened at a 71% premium to Lumina’s 20-day average price. After 10+ years developing the *Cangrejos* project from nothing into one of the largest gold projects globally, Lumina’s management team cashed in big. And they’re not alone. We first discussed the potential of Lumina years ago with our subscribers. **Let me be crystal clear:** **This is exactly what the beginning of a sector-wide consolidation wave looks like.** With gold holding strong above $3,400, the economics of these projects are simply too compelling for major players to ignore. The math has fundamentally changed. Projects that barely made sense at $1,800 gold now generate cash flow that makes corporate treasuries salivate. And they’re not waiting around for prices to drop. **I’m seeing very specific patterns in these acquisitions:** - Premium valuations (38-71% above market price). - District-scale assets with significant exploration upside. - Safe jurisdictions (Nevada, Ecuador). - All-cash deals with no financing contingencies. Meanwhile, the mainstream financial media remains fixated on a handful of tech stocks while completely missing the wealth creation happening right now in the gold sector. As the chart below shows, the **NASDAQ-to-gold ratio** is falling fast, a clear sign that money is moving out of tech and into gold. - **A falling ratio shows money rotating out of tech and into gold** — a classic signal of sector reversal and defensive positioning. **Every acquisition removes another potential target from the board.** That’s why I’ve spent the last two months analyzing which gold companies match the exact acquisition criteria we’re seeing in these deals. Each controls district-scale assets in safe jurisdictions with strong economics at current gold prices. More importantly, they check all the boxes that major acquirers are looking for right now. ## Is Gold $3,400 Too Late to Get In? Money is pushing the majors to all-time highs right now. The next flow of capital will hit the mid-caps (already starting) and then the permitted developers. And near the end, the small caps and juniors could surge. If you’re serious about positioning yourself for what’s coming next in this gold bull market, the research I’m putting together in ***[Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/)*** is essential reading. **The window for asymmetric returns is closing FAST.** These are the types of markets where many stocks still trade near their lows–** and the slightest bit of buying can move them 100-300% quick**. It’s high-risk investing and speculation, and certainly not for anyone risk-averse. The moves are clear: Billions in acquisition capital are now hunting a shrinking pool of quality assets. This is a fundamental recalibration of asset values driven by sustained higher gold prices and diminishing discovery rates. ## Who’s Next? I think I have a pretty good idea… [And you can unlock the full takeover target list now](https://join.katusaresearch.com/subscribe/). In fact, I have personally purchased over $1 million worth in the open market at the same price as I stated in my KRO newsletter. I will be doing a full update on the company with a detailed analysis on why I think this company is taken out in 2025 at a significant premium to what it currently trades at in the open market. Regards, Marin Katusa ## Must See TV… **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Silver’s Historic Opportunity and the 100:1 Activation Point - URL: https://katusaresearch.com/silvers-historic-opportunity-and-the-1001-activation-point/ - Type: article - Published: 2025-04-18 - Updated: 2025-07-16 - Author: Marin Katusa *In this week’s Katusa’s Investment Insights…* - **Silver’s Biggest Breakouts Often Start Here:** Each time a 100:1 gold-to-silver ratio in the last 25 years, silver outperforms gold by up to 5x. - **Institutional “Stealth Accumulation” Underway:** Recent ETF outflows mask the real story—major players are locking in physical silver at alarming speed. - **A Tiny Market with Massive Potential:** The entire silver mining sector is just $27B – even small inflows could send prices soaring. | Few investors know about “The Silver Trade of 1980″… Perhaps the most brilliant wealth transfer in precious metals history. When silver hit its peak of $50/oz in 1980, the gold-to-silver ratio plummeted to a historic low of 17:1. That means it took just 17 ounces of silver to buy a single ounce of gold. The few investors who traded silver for gold at that ratio watched their holdings multiply when the ratio snapped back. **Today, we stand at the opposite extreme – a level that has only appeared twice in the past 25 years.** Each time, it signaled silver’s explosive outperformance was imminent. The data I’m about to share shows silver is nearing another turning point—one that could match today’s best opportunities. The most reliable signal in silver’s history has just appeared again. ## Silver’s 100 to 1 Activation Point Just Triggered - *In precious metals markets, an ‘activation point’ occurs when a specific technical level is reached—like history repeating itself with surprising accuracy.* The gold-to-silver ratio just hit 100:1, meaning one ounce of gold buys 100 ounces of silver. Again, this extreme imbalance has only happened twice in the past 25 years. **What followed each time was that silver outperformed gold by 3-5x during the subsequent precious metals’ rallies.** In 2010, when this ratio last peaked near 70:1, silver jumped from $15 to $48 in just 14 months—a 223% surge while gold gained 45%. **After the 2020 spike to 124:1, silver doubled while gold gained just 31%.** Silver is both a monetary metal like gold and an industrial metal critical to solar panels, EVs, and electronics. Big investors keep buying gold but still overlook silver. That gap sets silver up for larger gains as the metals rally builds. ## Silver’s Stealth Bull Market: Smart Money Moves First The next chart exposes a critical pattern most investors are completely missing in the silver market. While silver prices (gray line) have climbed from $20 to $30 over the past year, ETF fund flows tell the real story. Look at late 2023 through early 2024. **As silver began its upward move, we saw massive green spikes of money flowing into silver ETFs…** With over $700 million of net fund flow in the second half of 2024. But here’s what’s fascinating: Despite silver recently hitting new multi-year highs around $30, the latest fund flows show persistent outflows (red bars). This isn’t bearish – it’s wildly bullish. The smart money is bypassing paper ETFs and securing physical silver directly. The identical pattern emerged in gold months ago before its explosive move above $3,000. First came ETF buying, then physical accumulation as sophisticated investors recognized the supply shortage. Silver stockpiles are thin, and the ratio sits at 100:1. History shows these conditions often come right before silver’s biggest jumps. The public hasn’t even started buying silver yet – that’s still coming. ## Central Banks and Silver Holdings So, do central banks hoard silver like they do gold? In short, no. It’s neither stable nor valuable enough to hold in reserve. Silver also takes up far more vault space per dollar than gold, so it is an inefficient reserve metal. **But remember that’s advantageous for silver. **Because its market cap is tiny compared to gold, other industries, or even large companies. So, any marginal increase in silver buying or selling tends to send prices into a complete frenzy. *Scale is key for massive gains and here’s why…* ## The Silver Market’s Hidden Microverse This single chart reveals something so profound it should make every investor stop and think. The entire silver mining industry—the companies that produce one of history’s most important monetary and industrial metals is worth just $73 billion. Let me show you how small the silver market is. In 2023, $6.07B worth of silver produced went to investments in physical products or ETFs. That figure for gold was $62.7B. The following chart compares the silver market to other major asset classes and large companies. - **As you can see, *the entire silver market is a blip* relative to these other sectors.** That’s why, when gold pops, silver tends to rise far, far more. Let this sink in. The global silver mining sector is: - **1/12 the size** of the **oil & gas industry** - **1/4 the size** of **Tesla** alone - **1/10 the size **of **Nvidia** - **1/5 the size **of **Bitcoin** and other cryptocurrencies Even the gold mining industry, itself tremendously undervalued, dwarfs silver miners by 4.98x. This microscopic market cap means even modest capital inflows create explosive price movements. - **If just 1% of the money in oil & gas shifted to silver miners, it would triple the entire silver sector’s value overnight.** When silver begins its historical outperformance of gold at the 100:1 ratio, these miners typically deliver 5-7x the gains of the metal itself. During the 2010-2011 silver run, top miners returned 400-600% while silver gained 150%. ## The Silver Opportunity Ahead The smallest boat rises fastest in a rising tide. And silver miners represent the smallest vessel in the financial ocean, perfectly positioned for the incoming wave. History suggests we’re at the beginning of a significant move—not the end, so here’s what I’m doing personally: - **Building watchlists **of select silver miners with proven reserves and low production costs. - **Maintaining some dry powder **for additional opportunities as this silver cycle accelerates. - **Focusing on companies with leverage** to silver prices but strong enough balance sheets to weather volatility. Remember that timing the exact bottom is impossible, but positioning before the broader market recognizes this opportunity is essential. And I’m positioning myself to do just that… [You can see what I’m doing in my premium research service – ***Katusa’s Resource Opportunities***](https://join.katusaresearch.com/subscribe/). Congratulations to all subscribers reading this, where our latest pick is up over 45% in just the past three weeks. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Trigger Fingers: Are Stocks Cheap or Expensive Right Now? - URL: https://katusaresearch.com/trigger-fingers-are-stocks-cheap-or-expensive-right-now/ - Type: article - Published: 2025-04-11 - Updated: 2025-04-10 - Author: Marin Katusa Today, give yourself a pat on the back. You’ve just survived one of only FOUR times in 60 YEARS markets have swung this wildly. In one of the most volatile weeks in history, what you’re feeling ranks with the 1987 crash, 2008 crisis, and 2020 COVID panic. The next two weeks are key. If markets drop less than 2%, history shows a 40% gain ahead. If they fall more, we could face real trouble. So, it’s no secret we’ve been cautious. It’s no secret we’ve been cautious. **In fact,** [as my KRO subscribers know](https://join.katusaresearch.com/subscribe/?)**, I am sitting on the largest percentage of cash in my professional career.** As you expect, the alligator screens are crunching overtime trying to find the best balances sheets of the best assets of the best companies.** ****That means that the alligator is ready to start eating.** And when the alligator wants to feast, he looks for indicators that tell him a bottom is near… Or that valuations are coming back down to earth. So, rather than relying on gut feeling or headlines, we can turn to time-tested metrics that provide context about current valuations. Mathematics dear Watson, Mathematics! I’m going to zoom out from the daily noise, and show you what four classic indicators are telling me. ## The Buffett Indicator: Flashing Red Named after legendary investor Warren Buffett, this simple ratio compares the total value of the stock market to the size of the U.S. economy (GDP). Currently, this indicator stands at **1.50**, dramatically higher than its historical average of 1.02. The stock market is still currently valued at nearly twice the size of the entire U.S. economy. Even accounting for the increasingly global nature of American corporations, this level suggests significant overvaluation. The last time we saw readings this high was during the dot-com bubble of the late 1990s, which was followed by a painful market correction. ## Shiller CAPE: Approaching Bubble Territory The Cyclically Adjusted Price-to-Earnings ratio, developed by Nobel laureate Robert Shiller, smooths out short-term earnings fluctuations by using 10 years of inflation-adjusted earnings. - The current CAPE ratio stands at **34.97**, more than double its historical average of 17.58. - **By this measure (recent correction included), stocks are still historically expensive.** While still below the all-time high of 43.77 reached during the dot-com bubble, today’s level has only been exceeded twice in history: - During the aforementioned tech bubble and - Briefly before the 2008 financial crisis. *Note: For those who follow Shiller’s methodology, note that the trailing 10-year average includes the 2020 crash, which skews the data slightly…* High CAPE readings have historically been associated with lower future returns over the subsequent decade. ## Forward Valuation: ## Conclusion: While Europe and Japan Drink Tap Water, the U.S. Is Pounding Champagne There’s a fine line between a valuation premium and just being flat-out expensive. Even after the recent sell-off, the S&P 500 is still trading well above its long-term average forward P/E. Meanwhile, over in Europe, the Stoxx 600 is calmly cruising near its historical norms. The chart shows that the gap between U.S. and European stock valuations is growing. **Whenever this spread gets too wide, we usually see one of two outcomes:** - U.S. companies somehow deliver extraordinary earnings to justify the party (rare), or - U.S. valuations revert to earth—and fast. The *[Rise of America](https://www.amazon.com/Rise-America-Remaking-World-Order/dp/1544521448?)* deserves a premium, but perhaps that premium will be readjusted, and I think it will. Earnings growth is slowing, margins are shrinking, and macro risks loom on both sides of the Atlantic. Europe’s priced closer to reality, the U.S. – which attracts big capital more than others- is priced for fantasy. And let’s be honest, champagne hangovers always hit the hardest. ## Investor Sentiment: Sentiments in the Basement, But the Bill’s Still Sky-High AAII Bullish Readings Hit 2-Year Lows, So Where’s the Discount? The bulls have gone missing, and they didn’t leave a note. As per the chart, just around 20% of investors are feeling bullish, marking the lowest reading in two years. That’s typically the kind of washout that screams, “the bottom is near.” - **But here’s the problem: prices haven’t caught up with the fear.** Normally, when sentiment craters, it’s because stocks are already cheap and ugly. Today, they’re still expensive and investors are just starting to notice. That’s a dangerous mix: low conviction plus high valuation leaves the market with no cushion if things go wrong. If earnings miss, macro data slips or inflation rears up again, there’s no margin for error. ## The Bottom Line: Get Your Shopping List Ready The signs are clear… Whether it’s Buffett’s favourite indicator, the sky-high Shiller CAPE, the widening transatlantic valuation gap, or sentiment buried in the basement… Nothing in this market is screaming “cheap”. Yes, there’s been a pullback. But it’s more of a sneeze than a flush. This isn’t the time to go all-in, but it is the time to be building your watchlist. **Here’s what I’m doing personally:** - **Maintaining cash** for potential screaming buying opportunities - **Being selective about stock purchases**: focusing on companies with strong balance sheets and reasonable valuations - **Preparing for increased volatility** as markets eventually readjust to more sustainable valuations Remember that these indicators are most useful for setting long-term expectations rather than making short-term trading decisions. No valuation metric can predict exactly when markets might be correct… But they do provide valuable context about the potential risks and rewards of current investment opportunities. **We just released the April issue of **[Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/?), **detailing…** - **3 new gold buys were detailed after a deep dive into the gold sector.** You might not have heard of metrics and signals like *AISC* or *Owner’s Earnings*… but we break it down clear and simple. And reveal the best opportunities in the market right now. [Learn more about becoming a member](https://join.katusaresearch.com/subscribe/?). Sometimes, even the dullest signals lead to the most **spectacular** outcomes. And I’ve got my trigger finger ready. Regards, Marin Katusa ## Must See TV… **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Your Money, Your Call: Recession Red Alerts You Can’t Ignore - URL: https://katusaresearch.com/your-money-your-call-recession-red-alerts-you-cant-ignore/ - Type: article - Published: 2025-04-04 - Updated: 2025-04-03 - Author: Marin Katusa The first tariff hit like a cannon blast. During the “Tariff Tantrum” of 2018–2019—sparked by the U.S. slapping tariffs on steel, aluminum, and billions in Chinese goods—global markets braced for economic fallout. Equity indexes wobbled, supply chains scrambled, and headlines warned of gloom. But in chaos, there’s opportunity. Take Canadian steel giant **Stelco**—its share price exploded from $11 by the end of 2019 to $50 just under 2 years later. **And then an ultimate buyout at $68 for 518% gain.** In a short time, investors turned a “tariff tantrum” into a cash windfall. Critics called the surge a fluke; Stelco proved them all wrong. Now, as fresh tariff chatter resurfaces, the question is simple: Can lightning strike twice? Let’s look at the signals… ## The Yield Curve Tilt-a-Whirl When short-term rates surge above long-term rates, economists break out the “R-word.” And we saw that last year—**both curves dipped deeply into negative territory**. Nothing screams “economic trouble ahead” like the **2s10s and 5s30s yield curves** flipping negative—then bouncing back at breakneck speed. Last year, both curves plunged deeper into inversion territory than they had in decades, rattling top economists. When short-term rates surge above long-term rates, economists break out the “R-word.” Economists typically view yield-curve inversions as an almost sure-fire recession predictor. But here’s the twist: they’ve started popping back up just as fast, creating a “double steepening.” If you’re confused, you’re not alone. That violent snapback suggests the market can’t decide if a deep recession is imminent or if a so-called “soft landing” might emerge. **Why It Matters:** - A **sudden steepening** often hints at shifting investor sentiment—a potential slowdown or stagflation threat. - **Bond traders** are bracing for rate hikes, cuts, or maybe both in quick succession. ## Inflation’s Stubborn Streak Let’s ignore the market crashing and volatility for a moment… Most headlines tout that inflation is “cooling,” but **core prices** remain well above the Fed’s 2% target. After hitting levels above 5%, inflation rates are hovering around 3–4%—far from the relief many hoped for. If you think that’s good news, ask the small businesses forced to **slash margins** or households grappling with higher grocery bills. **Big Takeaway:** - **Stubborn inflation** means central banks may keep rates higher for longer, fueling fears of a 1970s-style stagflation scenario. - CEOs and policymakers alike worry that **service-sector prices** (like healthcare, hospitality) won’t budge, even as consumer confidence plummets. ## Emotional Tipping Point—The *Sentiment* Slump Below 60 It’s more than a sour mood when the Sentiment Index plunges under 60, it’s a red flag for **consumer-driven economies**. And since consumer spending accounts for about **70%** of U.S. GDP, every point in sentiment packs a punch. **Why It Matters:** - Nervous consumers mean **delayed big-ticket purchases** (homes, cars, appliances). - Delays lead to **weaker corporate earnings**, spooking investors further. When people lose faith in tomorrow, they tighten their wallets today. And that potentially speeds up the very recession they fear. **Gold’s $500 Speed Run** Some call gold the ultimate snooze-fest—a shiny relic with no yield. Unfortunately for those people, many others have made a fortune in gold and gold stocks in these exact bull market cycles. Myself included. In a world obsessed with the next big thing and the Mag 7, gold has quietly racked up its fastest (and quietest!) $500 gain in history. In less than a year, it’s done what once took entire market cycles. Past $500 moves dragged on for years—this time, it was just a matter of months. This is all because of fears of stagflation, banking stress, and shaky currency faith typically push gold prices higher. Investors, institutions, and central banks see gold as **“**crisis insurance**,”** and, apparently, they’re stocking up fast. ## The Path Forward I’ve seen cycles like this before. Each time, the panic-laden headlines overshadow the rare windows of opportunity. With yield curves whipsawing, inflation refusing to cool, and consumers in a funk, high-quality defensive assets often thrive. Pay close attention to these “boring” charts. They might just hold the keys to protecting—and potentially supercharging—your portfolio’s upside. **We just released the April issue of **[Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/?)… - **3 new gold buys**** were detailed after a deep dive into the gold sector.** You might not have heard of metrics and signals like *AISC* or *Owner’s Earnings*… but we break it down clear and simple. And revealing the best opportunities in the market right now. [Click here to learn more about becoming a member](https://join.katusaresearch.com/subscribe/?). Don’t wait—those who ignore these signals might look back, wishing they’d seized the chance. Sometimes, even the dullest signals lead to the most **spectacular** outcomes. Regards, Marin Katusa ## Must See TV… **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Thank You Page – Silver Playbook - URL: https://katusaresearch.com/thank-you-page-silver-playbook/ - Type: page - Published: 2025-04-01 - Author: Marin Katusa # **Thank You!** *You’ve been added to **Katusa’s Investment Insights** email list. (You can unsubscribe at any time)* **You're one step closer to the best investment opportunities and research on the planet.** THE ULTIMATE SILVER PLAYBOOK How to Profit from Silver’s Next Great Bull Market **[Click Here to Download](https://katusaresearch.com/wp-content/uploads/2025/02/THE-ULTIMATE-SILVER-PLAYBOOK-How-to-Profit-from-Silvers-Next-Great-Bull-Market-KR.pdf)** **[.NOTE: Please Read our Full Testimonial and Returns Disclosures](https://join.katusaresearch.com/kr-testimonial-and-returns-disclosures/)** Copyright © 2025 Katusa Research. All rights reserved. --- # The $5 Copper Shock: The 4 Forces Pushing Copper to Record Highs Right Now - URL: https://katusaresearch.com/the-5-copper-shock-the-4-forces-pushing-copper-to-record-highs-right-now/ - Type: article - Published: 2025-03-27 - Updated: 2025-03-26 - Author: Marin Katusa Here’s what you need to know right now… - **Copper’s price spike past $5**: Tariff threats, U.S. hoarding, and Chile’s slump fuel a fierce price surge. - **A frantic global scramble:** Asia ships out across the ocean, America pays a premium, and China restocks—squeezing supplies worldwide. - **Historic profit window**: Past squeezes triggered 100%+ rallies; this new wave could be even more explosive. Copper prices just surged to generational highs. And if you looked only at the usual suspects: inflation, interest rates, or global GDP, you’d probably scratch your head. But peel back the layers, and you’ll find a fiery mix of global supply shifts, consumer demand surprises, and political spice that’s driving this rally. Today we’ll break it down in simple terms… since copper is one of the most important metals of the economy and the future. And investors can make a lot of money in volatile copper stocks and discoveries. ## **U.S. Copper Prices BLOW Past $5** Let’s start with what everyone’s talking about: the price. Copper has been climbing steadily since the start of the year, but it’s the **spread between U.S. (Comex) and global (LME) prices** that’s really turning heads. - **The front-month Comex copper contract (*the U.S. benchmark*) has officially pulled ahead of the London Metal Exchange (*LME*) contract**. This divergence is loud and clear on the below chart. U.S. copper is trading well above $5/lb, while LME is hovering around $4.60/lb. Why the gap? Traders are spotting a price premium in the U.S. and sending copper there to cash in. ## **Copper is Flowing INTO America…** The Comex copper inventory tells a big part of the story. Inventories in CME warehouses have jumped to over 85,000 metric tons in recent weeks, more than doubling since September 2024. That means copper is arriving fast. The reason is that U.S. copper prices are high enough to attract metal from overseas. There’s money to be made shipping refined copper from Asia or Europe into the States. But this inflow isn’t just a trader trick, **there’s also real fear underneath**. ## **Enter: Tariff 2.0** The rally accelerated sharply after the President hinted at a new round of reciprocal tariffs on foreign metals. While copper has not been officially named, traders are pricing in the risk that it could be included. On April 2, 2025, the administration confirmed its intent to pursue these tariffs, though full details and scope remain pending. Markets love certainty and hate tariffs. The risk of added costs on imported copper has prompted U.S. buyers to build up stockpiles. Better to lock in inventory now than pay a premium later. That kind of proactive hoarding behavior adds pressure to an already tight market and sends prices soaring even faster. - Goldman Sachs analysts previously **expected a 25% copper tariff** between September and November, **but now say it may be imposed earlier**. As a result, they anticipate the current 17% gap between Comex and LME prices could widen even further. ## **Meanwhile, LME Inventories Are Shrinking…** The next chart highlights an interesting move… Its large requests to withdraw copper from LME warehouses in Asia have exploded to their highest level in years. - **These spikes signal a rapid movement of copper out of global storage** And it’s likely headed toward higher-priced destinations like the U.S., resulting in global supply tightness. ## **He Who Holds the Copper Makes the Rules…** Now flip the coin: while the U.S. is stockpiling, **global copper inventories are thinning out**. LME copper inventory has dropped below 250,000 metric tons. Asia in particular is seeing a dramatic spike in withdrawal requests. Traders are yanking copper out of LME warehouses because of the tariff threat. The large price gap between London and New York triggered a global rush to move copper to the U.S. for higher premiums, leaving other markets—especially top consumer China—short of supply. ## **China’s Surprise Consumer Comeback** China’s copper story is heating up from both ends— demand *and* supply. **On one hand**, Chinese consumers are bouncing back: After months of gloomy headlines, retail sales in China jumped sharply over the past two months. Add some seasonal restocking by manufacturers, and the world’s top copper consumer is stirring again. **On the other hand,** a surge in requests to pull copper out of LME warehouses in Asia is grabbing attention. This double whammy of rising Chinese demand and falling Asian inventory is tightening the global copper pool. And that’s putting even more heat under prices. ## Chilean Supply is Slipping On the supply side, Chile is to copper what Saudi Arabia is to oil and it’s seeing a bit of a stumble. Chile’s copper export has been declining since December 2024, suggesting less volume hitting global markets. Whether it’s due to lower ore grades, weather, labor unrest, or operational hiccups, the result is the same: the largest source of copper isn’t exporting like it used to. And when Chile sneezes, the copper market catches a cold. **Copper’s current surge isn’t built on hype—it’s backed by real movement.** Whether you’re a trader, policymaker, or just curious about where the world’s most important metal is heading, the story boils down to four main factors: 1. **Tariff Fear** – New U.S. tariffs could raise copper costs overnight, so buyers are stockpiling now. 2. **Surging U.S. Demand** – America’s market is offering a premium price, pulling copper inventories from abroad. 3. **Chile’s Declining Exports** – The largest copper producer isn’t meeting global needs, tightening supply even more. 4.** China’s Restock** – The world’s top copper consumer has snapped back, fueling new demand and pulling metal out of LME warehouses in Asia. These forces have combined to push copper prices to their highest level in almost a year—and this setup could keep driving them higher. But that’s only half the story. I’ve identified a critical copper region—one that hasn’t been this tight in years. - **The last time a similar situation played out in this region, shareholders saw gains of over 200% when a buyout was announced at $45 per share.** I’m betting with my own money that the major operator will move to consolidate its position before that window closes. **To get the name and ticker symbol of this opportunity, plus my detailed analysis, consider ****[signing up for my premium research service](https://join.katusaresearch.com/subscribe/?).** It’s called ***Katusa’s Resource Opportunities***, and the next issue is published on April 2nd. Regards, Marin Katusa ## **Did You See These****…?** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Gold’s Secret Panic - URL: https://katusaresearch.com/golds-secret-panic/ - Type: article - Published: 2025-03-21 - Updated: 2025-03-20 - Author: Marin Katusa Dear Reader, It happened QUICK. Gold miners are quietly panicking—and their actions are sending a clear warning. At the start of 2024, few investors believed gold could touch $3,000 per ounce. Yet this week, that barrier didn’t just break—it shattered. Rising inflation, global tensions, and central bank buying sparked a gold rush. In a record-setting year, over $19 billion poured into gold mergers and acquisitions in 2024. With massive profit margins on their backs, these companies had war chests full of cash. And they weren’t afraid to spend it. Big miners like **Northern Star** and **Gold Fields** stopped risky exploration and quickly bought proven mines in Australia and Canada. - **Beneath this billion-dollar frenzy lies an uncomfortable truth: miners believe gold’s record-breaking prices might never return to lower levels.** And could surge further still. ## Gold Dominates, But Copper Reignites Gold was the driving force behind mining M&A in 2024. As prices kept climbing, miners steered away from risky new projects and instead snapped up proven gold assets, securing reserves while market conditions were in their favor. **Of the 62 qualifying deals, 43 were gold-focused, confirming the metal’s continued allure amid geopolitical risks and elevated prices.** Australia, particularly Western Australia, saw multiple big-ticket acquisitions. The star was Northern Star Resources Ltd. snapping up De Grey Mining Ltd. for $3.26 billion, accounting for a sizable chunk of the year’s total gold M&A. At the same time, Canada caught the attention of heavyweight producers like Gold Fields Ltd., which bought Osisko Mining Inc. for $1.42 billion. It was another signal that seasoned miners prefer established assets over greenfield gambles. This trend wasn’t just happening in mining deals; it was playing out in the markets too. As gold prices kept climbing, big investors rushed into gold-backed funds, doubling down on the metal’s strength in 2024. The chart below shows how ETF demand surged across major regions, moving in step with gold’s rise. Gold wasn’t the only metal drawing attention, copper also saw increased deal-making. The standout? Lundin Mining and BHP’s $3.03 billion takeover of Filo Corp. ## War Chests Loaded: The $3,000 Gold Effect on Mining Deals One big catalyst behind gold’s continued dominance is the near $3,000-per-ounce price reached late in the year. Most gold mines have costs around $1,200–$1,400 per ounce. At current prices, miners earn profits of up to $1,800 per ounce. That’s huge. Such generous margins allow producers to reinvest heavily in operational expansions or acquisitions, thereby driving increased M&A activity. ## But Gold Miners Aren’t the Only Ones Stockpiling… Physical demand is surging, and COMEX inventories are running low. That’s a recipe for even higher prices and more urgency for miners to secure supply. The chart below tracks daily changes in COMEX gold stockpiles. - **After a brief buildup in late 2024, inventories started shrinking fast in early 2025, a clear sign that physical gold demand is surging.** ## Gold Miners, the New Margin Monsters Miners facing higher input costs (fuel, labor, consumables) still see solid profit margins at $3,000 gold, making it easier to justify large outlays for new projects or company takeovers. **In fact, several gold miners are open to acquisition as long as the margin between AISC and the spot price remains above $1,000 per ounce.** The next chart illustrates how AISC margins have expanded across different price levels, showcasing why miners are in a strong position to deploy capital into acquisitions. This margin cushion gives them an insurance policy against short-term price fluctuations. And allows them to engage in deals they might have shied away from when gold was below $2,000. **The result? Plenty of “war chests” for gold miners eager to snap up profitable, lower-cost mines in stable jurisdictions.** If these near-record margins stick around, analysts anticipate a string of “bolt-on” acquisitions. These are transactions that enhance existing portfolios with* near-producing or producing assets*. For buyers, it’s about locking in future cash flow while prices are high; for sellers, it’s an opportune moment to exit at a valuation that factors in gold’s extraordinary margins. - **In other words, $3,000 gold has made deal-making far less risky for both sides.** The margin cushion offsets potential cost overruns or operational hiccups. As long as AISC remains significantly below spot, expect gold M&A to remain robust heading into 2025. ## Glimpses of 2025: Rising Tensions, Rising Deals? There’s growing **geopolitical pressures**… A mix of lingering **European conflicts**, **shifting trade alliances**, and **supply chain jitters** which could elevate both gold and copper prices further in 2025. Many insiders foresee more safe-haven gold deals, while copper remains the metal of choice for those targeting the energy transition. Early signs include Equinox Gold Corp.’s $1.87 billion bid for Calibre Mining Inc., announced in February, reinforcing the idea that this M&A cycle is far from over. What does it all mean for investors? Without a single headline-grabbing megamerger, 2024’s data reveal an industry unafraid to seal smaller but numerous deals across multiple regions. Gold stayed center stage, but copper’s second-half surge suggests a rising appetite for critical minerals too. If tensions persist and commodity prices stay elevated, watch for another lively M&A season, one where gold and copper continue their tug-of-war for the top spot. **And if certain metals once deemed “quiet” roar back, it could make 2025 a year of unexpected pivots.** In mining, after all, the biggest surprises often emerge when no one is looking. Let my team and I do the hard work for you… And you get my best actionable ideas – where I invest millions of dollars of my own money – direct to your inbox. It all happens in my premium newsletter, ***Katusa’s Resource Opportunities***. **We’re now in uncharted territory with $3,000/oz gold. And I’m placing my bets.** **[Click here to learn more](https://join.katusaresearch.com/subscribe/?)**. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # This OPEC Move Could Spark a 2014-Style Meltdown—Are You Ready? - URL: https://katusaresearch.com/this-opec-move-could-spark-a-2014-style-meltdown-are-you-ready/ - Type: article - Published: 2025-03-15 - Updated: 2025-03-13 - Author: Marin Katusa Almost no one saw it coming. In 2014, **the oil market witnessed a brutal collapse**—from around $100 a barrel to half that price in mere months. Now, we’re seeing two critical data points that echo those “glut” signals from the past, yet oil prices aren’t tanking. ## **A Real Trigger: OPEC’s November 2014 Decision** In June 2014, Brent crude hovered around $115 and WTI near $107, with big banks still predicting steady prices. But by January 2015, oil had plunged more than 50%. **The Turning Point came on November 27, 2014, when OPEC—led by Saudi Arabia—chose *not* to cut production.** Ali Al-Naimi, Saudi’s oil minister, bluntly stated, “*It is not in the interest of OPEC producers to cut their production.*” Suddenly, defending a high-priced floor was out, and maintaining market share was in. With global demand already softening, that single decision supercharged the oversupply, fueling one of the sharpest crashes in recent memory. ## **Shale’s Sudden Flood & Cooling Demand** Around 2014, U.S. shale output soared from 5 to nearly 9 million barrels per day, thanks to fracking breakthroughs. Many shale wells had breakevens around $60, so even $80 oil was plenty profitable. This undercut OPEC’s role as the global swing producer, adding barrels into a market that was already well-supplied. Meanwhile, China’s growth cooled, Europe was flirting with deflation, and Japan slipped into recession. With demand faltering, Bank of America and Citi soon warned oil could tumble below $50 if OPEC stood by. Their warnings proved prophetic as the surplus swelled. - **The Result: A 50% Price Collapse in Six Months** Between that June peak and January 2015, both Brent and WTI lost more than half their value. The shift blindsided many. In a Bloomberg interview right after the OPEC meeting, one hedge fund manager lamented, *“We were all betting on a production cut; now we’ve got a tsunami of supply.”* U.S. shale firms scrambled to cut costs, lay down rigs, and renegotiate service contracts. OPEC members—particularly Venezuela and Nigeria—began feeling acute budget stress. Saudi Arabia, armed with vast reserves, weathered the storm but stuck to its guns, aiming to test the profitability of higher-cost U.S. shale. Doesn’t this all sound familiar? ## **What’s Changed? Stockpiles & OPEC Output Look Familiar—But Prices Aren’t Crashing** Today, the EIA shows **U.S. crude inventories at 7-month highs**, and **OPEC’s output has hit a 13-month peak**—both classic signals of oversupply. In 2014, that combination spelled disaster. Yet now, oil isn’t nose-diving. One factor could be refinery maintenance or short-term logistics inflating stockpiles. Another is that OPEC might be more agile, ready to cut supply if prices wobble. **Others think demand might be weaker than official data suggests.** So while inventories are piling up, the response from producers—and the global economy—doesn’t match 2014’s no-holds-barred price war. Conventional wisdom says rising inventories = oversupplied market = price drop. Indeed, in 2014, swelling U.S. stockpiles foreshadowed the crash. ## **OPEC’s Output Hits a 13-Month High—But Prices Don’t Collapse** The next chart shows **OPEC crude production** side by side with **WTI prices**. OPEC’s output just reached its highest level in over a year, normally enough to send bulls running for the exits. Yet the market hasn’t crumbled. OPEC’s output climbing should, in theory, hammer prices. But it hasn’t. Unlike 2014, OPEC has shown willingness to **cut production quickly** if prices dip too low. Saudi Arabia especially no longer wants an all-out price war—**they’re more flexible** now. ## **Global Oil Demand Forecast: Higher Than You Think** One more wildcard is **global demand**. Even if supply is rising, the third chart could show **the International Energy Agency (IEA) or EIA** projecting an uptick in overall oil consumption, especially in emerging economies. If global demand outpaces current supply estimates, today’s apparent glut could vanish overnight—and send prices surging. The big question: *Will that demand surge arrive in time to soak up the extra supply?* ## **Is Oil on its Way Down: ****A Flashback to 2014—or Something Else Entirely?** Back in 2014, a flood of U.S. shale and a hands-off OPEC strategy led to a historic price crash. Fast-forward to 2025, and we’re once again seeing rising output, ballooning inventories, and shaky global economic signals. History might suggest a replay—but the differences are striking: - **OPEC’s Flexibility**: Today’s OPEC seems more willing to cut production if prices slip too far. - **Geopolitical Tensions**: Sanctions on Russia, Middle East uncertainties, and shipping routes at risk can snap supply tight at a moment’s notice. - **Post-Pandemic Demand**: Many countries are still ramping up their industries and travel sectors, potentially absorbing more oil than anticipated. ## **Don’t Sleep on the Possibility of Whipsaw Action** If U.S. stockpiles keep climbing and OPEC production stays high, we could see a near-term downturn. But if a single catalyst—like a sudden OPEC cut, a jump in Chinese imports, or geopolitical disruption—hits, the market could whipsaw in the other direction, just as we’ve seen in past cycles. **I’m keeping a hit list of oil stocks I’d love to buy if a panic or capitulation strikes again.** **Because when these signals align, bargains can surface faster than the crowd can react.** In 2014, the market was blindsided by a wave of new supply. Today, we’re seeing similar warning lights—but the background music is different. With OPEC’s agility, recovering global demand, and ongoing geopolitical twists, the next move might catch even seasoned traders by surprise—just like last time. **And I’m going shopping if panic hits.** Regards, Marin Katusa ## **You might like…** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Company Taking Rolls Royce’s “Power by the Hour” Model - URL: https://katusaresearch.com/the-company-taking-rolls-royces-power-by-the-hour-model/ - Type: article - Published: 2025-03-11 - Updated: 2025-03-10 - Author: Marin Katusa **Disseminated on behalf of Solar Bank Corp (SUUN.NASDAQ)** Sixty years ago, Rolls-Royce bought out an airplane engine manufacturer called Bristol Siddeley. They soon found out they got *much* more than they bargained for. Instead of just making money off of selling airplanes, Bristol Siddeley wanted to make money *for every hour those planes were in flight.* **So, they’d been experimenting with a brand-new revenue model they called “Power by the Hour.”** With the new model, they offered service contracts to customers, charging them per hour of flight time. Customers wanted the peace of mind offered by the plan, and Bristol got to build stronger relationships with customers—a win-win. Revenue soared. But most importantly, Bristol gained long-term, recurring revenue. In fact… - **The Power by the Hour program now constitutes more than *half* of Rolls-Royce’s revenue.** The *Katusa Research Special Situations* team has identified a company bringing the Power by the Hour model to a new sector: solar. And like Rolls-Royce, it’s set to give them profit margins and revenue that make them a success in the solar industry. **This company has been working on their Power by the Hour roadmap for the past decade—and all the pieces are falling into place *right now*.** They’re on the verge of taking the last step in their journey to real profitability. As you’ll read below, this is the inflection point in their “overnight” solar success story. And investors paying close attention have an opportunity to consider. Already this year, this stock is up 114%. **SolarBank (SUUN:NASDAQ)** ***An “Overnight Success”, a Decade in the Making*** In October 2023, SolarBank began implementing the fourth and final phase of its roadmap: becoming an Independent Power Producer (IPP). Reaching the elusive IPP phase unlocks maximum value from a solar company by enabling it to own facilities that generate and sell electric power. **Without it**, solar companies are reliant on one-off revenue—and growth is limited. **With it**, SolarBank receives recurring revenue that can be used for long term strong growth. SolarBank already builds out all its own solar projects, then sells them. That gives it an advantage as it expands into the IPP space. They know which projects are the most likely to see strong profitability in the marketplace. - **So SolarBank can build the best projects… then keep them and make money off of them for decades.** That’s exactly what they did last year with Solar Flow-Through Funds. They had built many of the company’s projects and knew just how much revenue the contracts were generating. *SolarBank was actively involved in the construction of many of Solar Flow-Through’s projects and knows the assets well. They all have long term government power purchase agreements at favorable rates that continue into the next decade. **– SolarBank CEO Richard Lu* So they bought the whole company. Every time SolarBank completes another solar power plant, they have the option to just keep owning it and generating from it as an IPP. The company’s IPP portfolio has already grown to more than 30MW. **The over $100M in assets are expected to generate $15M in long term revenue.** And SolarBank is just getting started. ## Making It Rain From the Sun Already—in just Q1 2025—SolarBank has gone from almost nothing in ‘Power by the Hour’ revenue to $4M in revenue from solar and storage facilities it owns. The graph below depicts the entire SolarBank business plan—and the payoff in the pipeline. - From 2013-2017, they learned **development**. - From 2018-2023, they learned **engineering, procurement, and construction**. - Now, they’re moving strongly into **IPP**. Revenue doubled, from $10M to $19M, in 2023. Then it *more than doubled*, from $19M to $58M, in 2024. **That’s what a Bristol-Siddeley plane taking off looks like.** And management has an over 1 GW pipeline to continue to support growth for the next 3-4 years. It’s a virtuous cycle, with the model providing both immediate cash flow from projects that are sold and long-term recurring revenue from projects that are held as IPP assets. As SolarBank secures financing, it can bring new SolarBank IPP projects online, with a handful expected throughout 2025. SolarBank’s foray into the IPP market, alongside its vertically integrated approach, has set it up for huge growth in the next few years. And they’re intent on growing via both organic growth and strategic M&A—as seen in their Solar Flow-Through Funds acquisition. **As with Rolls-Royce, there is real value in the two-tier revenue model:** - **Fee-based income** from development, construction, operations and maintenance, and - **Asset-based income** from owned assets. While other solar companies hunt and beg for work, SolarBank has built out more than 100MW in projects so far. - **And they have a *large* 1GW+ pipeline of contracted projects they plan to execute in the next 3-5 years.** Look for SolarBank to become a player in the renewable energy sector based on stable, predictable long-term IPP contracts. Anyone paying attention to SolarBank just might find that they get much, much more than they bargained for. Of course, every project comes with challenges… SolarBank still has to navigate permits and interconnection approvals, secure financing, and manage potential battery and solar panel degradation over time. Shifting government policies on incentives could also pose risks. SolarBank has a 10+ year track record managing these risks and it is well positioned for the future. Regards, Marin Katusa **IMPORTANT DISCLAIMER & DISCLOSURES** **Investing in stocks is HIGH RISK. You could lose all of your investment.** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **SolarBank Corp. is a paid sponsor of this report.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. Katusa Research, its owners, directors, and employees are also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research partner company, New Era Publishing Inc. has received cash compensation in the amount of nine hundred thousand dollars from SolarBank Corp. for a 6 month marketing agreement starting January 1, 2025, and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained herein regarding SolarBank Corp. has been derived from its SEDAR+ and SEC filings, including scientific and technical information. Information regarding the projects underlying SolarBank Corp.’s interests has been derived from the publicly available disclosure of the underlying operators and owners, including where referenced herein. Katusa Research, and its directors, employees, and members of their households own shares of SolarBank Corp (SUUN) and stand to benefit from any increase in the stock price. However, Katusa Research is extremely biased since this is a sponsored editorial. **HIGH RISK: **The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. These statements are subject to known and unknown risks including those set forth in SolarBank Corp.’s most recent annual information form and other public filings available at www.sedarplus.ca and www.sec.gov. Neither Katusa Research nor SolarBank Corp. undertake any obligations to update the information presented or to ensure that such information remains current and accurate, except as required under applicable law. --- # From Pipelines to PowerLines: The Secret “Toll Booth” of Energy Returns - URL: https://katusaresearch.com/from-pipelines-to-powerlines-the-secret-toll-booth-of-energy-returns/ - Type: article - Published: 2025-03-10 - Author: Marin Katusa **Katusa Special Situations Company Alert:** **Disseminated on behalf of Solar Bank Corp (NASDAQ:SUUN)** Fossil fuels had their day. The profit wave has crested, and the future belongs elsewhere. But the blueprint that built those fortunes is still thriving—**and “The Professor” Dr. Richard Lu knows it**. In 2000, before moving to Toronto Hydro – Richard was an executive at Enbridge, the energy giant. The company launched a half-century earlier as a single 500-mile oil pipeline in a remote part of Canada. Plenty of companies at the time hoped to make it big off of new oil & gas discoveries. But Enbridge dove headlong into vertical integration, cutting off competitors at every pass. They grew into the largest pipeline network in North America, expanding into natural gas processing and storage—eventually earning billions in quarterly profits. **And in 2013, Richard Lu launched his own version of the energy giant for the 21st century—SolarBank (NASDAQ:SUUN).** Enbridge and Toronto Hydro built essential energy delivery infrastructure for industry. SolarBank is building critical power infrastructure to help support the digital economy. Enbridge is a behemoth—one whose legacy business can’t keep pace with the future that’s unfolding. **SolarBank is the new face of energy—and is on track to become a powerful and profitable company.** Of course, many companies are trying to build out solar projects. Very few of them will be successful in the long term. But SolarBank has an unbeatable advantage: the energy giant’s playbook. They’ve been executing on it for the past decade, and it’s on the verge of paying off. If Richard Lu has his way, SolarBank will be the energy giant of this century. **Katusa Special Situations Stock Alert:** **SolarBank (NASDAQ:SUUN)** ***A Renewable Energy Conglomerate for the 21st Century*** Most solar companies are just developers, just contractors, or just operators. From day one, SolarBank aimed higher— creating a business model that can provide profit from every part of the value chain. It has systemically developed expertise in all four complex phases of solar: The company started as the developer of a few small but profitable solar projects, learning the mechanics of buildouts. They learned how to secure sites, run economics on them, hold public meetings, get permits, and—crucially—secure interconnections. Instead of building in someone else’s direction, SolarBank takes full ownership. It’s an approach that ensures control over costs, engineering, and returns. Projects delivered on time and on budget. This allows SolarBank to: - Develop expertise in identifying the most profitable markets in North America. - Approach every project as if *they* are the owner—resulting in safety, reliability, and low costs. - Control engineering (SolarBank is a licensed engineering firm), procurement, and construction (SolarBank is the general contractor on their projects). **Once the project is complete— on time and within budget—they sell it. ** Of course, large companies don’t want to manage it, so they hire SolarBank to perform operations and maintenance (O&M). The end-to-end integration means that SolarBank has best-in-market quality control. And that’s what they sell to their clients: certainty at speed and scale. Fortune 500 clients find that irresistible. - **SolarBank has a 100% successful project completion rate, and 100% retention of their client base.** Most importantly, vertical integration means SolarBank makes money from before the first shovel-turn until the end of life for the solar panel. SolarBank isn’t quite done with full top-to-bottom vertical integration, though. And the last piece of the puzzle is the holy grail of solar companies. ## The Pipeline of the Future In March 2023, SolarBank IPO’d to *immediate* success. It was added to the CSE25 index—representing the 25 largest companies on the stock exchange. SolarBank was the only renewable energy company on the index. By contrast to the broader solar market, which has gone sideways in 2025, **SolarBank is up 76% already in 2025**. That’s the power of vertical integration in a strong company. But its IPO was not just to raise cash. It was to integrate the final phase of solar: becoming an independent power producer (IPP)—selling the power produced by new projects. Enbridge made its real money charging tolls for the oil that passed through its pipelines. SolarBank aims to do the same with electricity—owning and operating every solar asset. They’ve developed the expertise by developing solar for others. Now it’s time to build it for themselves, lease it out, and reap the high profit margins. To that end, SolarBank acquired one of the companies it had built many of the projects for—Solar Flow-Through Funds—in July 2024. **That immediately added approximately $10 million in *recurring* revenue through existing IPP contracts.** - **And it began SolarBank’s transformation from a solar competitor to a truly integrated clean energy major.** Starting with small, profitable ventures, they’ve since built hundreds of solar projects totaling $100M in value… And they have a massive, 1GW+ pipeline of projects in the works— And like Enbridge before it, SolarBank wants to control the entire value chain, from site selection to power generation. Enbridge rode the fossil-fuel boom to become a $100B empire. SolarBank’s wave is the $35 trillion clean energy transition—and it’s only just begun. Of course, every project comes with challenges. SolarBank still has to navigate permits and interconnection approvals, secure financing, and manage potential battery and solar panel degradation over time. Shifting government policies on incentives could also pose risks. SolarBank has a 10+ year track record managing these risks and it is well positioned for the future. Regards, Marin Katusa and the KR Special Situations Team **IMPORTANT DISCLAIMER & DISCLOSURES** **Investing in stocks is HIGH RISK. You could lose all of your investment.** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **SolarBank Corp. is a paid sponsor of this report.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. Katusa Research, its owners, directors, and employees are also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research partner company, New Era Publishing Inc. has received cash compensation in the amount of nine hundred thousand dollars from SolarBank Corp. for a 6 month marketing agreement starting January 1, 2025, and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained herein regarding SolarBank Corp. has been derived from its SEDAR+ and SEC filings, including scientific and technical information. Information regarding the projects underlying SolarBank Corp.’s interests has been derived from the publicly available disclosure of the underlying operators and owners, including where referenced herein. Katusa Research, and its directors, employees, and members of their households own shares of SolarBank Corp (SUUN) and stand to benefit from any increase in the stock price. However, Katusa Research is extremely biased since this is a sponsored editorial. **HIGH RISK: **The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. These statements are subject to known and unknown risks including those set forth in SolarBank Corp.’s most recent annual information form and other public filings available at www.sedarplus.ca and www.sec.gov. Neither Katusa Research nor SolarBank Corp. undertake any obligations to update the information presented or to ensure that such information remains current and accurate, except as required under applicable law. --- # Energy Crisis Averted: The ‘Boring’ Technology Quietly Beating Coal, Gas, and Wind - URL: https://katusaresearch.com/energy-crisis-averted-the-boring-technology-quietly-beating-coal-gas-and-wind/ - Type: article - Published: 2025-03-06 - Updated: 2025-03-05 - Author: Marin Katusa Get some sand and glass. Put them on a stick and stick it in the sun. Harvest free energy for the next quarter-century or so. That’s the value proposition offered by solar. And it’s why it has popped up *everywhere* in the world this past year: - **Cemeteries** in Europe are getting the solar panel treatment. - Solar panels are being used as **garden fences** in the Netherlands. - Germany created a new word (*balkonkraftwerk*, meaning “**balcony power plant**”) to describe the millions of Germans putting solar on their balconies. Like it or not, solar is becoming *the *dominant energy technology of the 21st century. Where even Elon Musk said just a few months ago, *“Solar power will be the vast majority of power generation in the future.”* From 2010 to 2023, U.S. solar growth handily beat every other renewable—including wind: But 2024 is when the industry *really* started heating up. And for those paying attention to the most boring energy technology on the planet, that’s creating a unique investment opportunity. ## **The Silicon Sand Trap** In the early 2000s, solar installation was priced at more than $4/watt. For a 1MW system (the size that might be used for a community solar project or a Walmart) that’s $1.2M *just for the panels*. But then China and the USA started a solar panel production contest. And both countries played to win. **The U.S. now has the capacity to produce 52GW of solar panels each year—up from 40 GW just a few months ago.** (For context, Solar Energy Industries Association’s goal was for the *global* solar supply chain to hit 50 GW by 2030.) That’s more domestic annual production of panels than the demand for the entire country, giving the U.S. the opportunity to be a net exporter of solar. That production has had a tremendous impact on the price. **Solar panels now cost less than $0.15/watt—a 96% decline in cost.** The 1MW system that powered a Walmart 20 years ago for $1.2 million now would cost just $48,000. All electricity generation sources costs are compared by using a metric called LCOE, which stands for levelized cost of energy (LCOE). Solar’s LCOE has dropped faster than every other electricity source. Between 2010–2023, the LCOE of solar fell by 70%. And the cost of a typical solar farm fell by *an additional *21% in 2024 alone. - **Solar has plummeted from one of the most expensive forms of renewable energy to inarguably the cheapest in 20 years.** And solar costs are expected to drop even more this year. By 2035, it’s expected to drop another 31%. *“Solar panels [are] getting so cheap that we’re just putting them everywhere.” * *– BloombergNEF Lead Solar Analyst Jenny Chase* But energy decisions are not made in a vacuum—it matters what other energy costs, too. And that’s where solar has really started to shine. ## **Natural Gas Gets the Solar Boot** Until now, the primary competition for low-priced energy has been natural gas. A Bloomberg New Energy Finance’s (BNEF) report indicated that new construction wind and solar farms are *already *undercutting new coal and gas plants on production cost around the world. But even with decarbonization commitments, it’s been hard for U.S. companies to tear away from the intoxicatingly low prices of U.S. LNG. BNEF’s 2024 annual *Levelized Cost of Electricity *report also indicated that will not be the case for long: “New solar plants, even without subsidies, are within touching distance of new U.S. gas plants.” Even more remarkable: That’s with U.S. natural gas prices at only a *quarter* of the prices in Europe and Asia. And as the graph below shows, the cost gap between natural gas and solar is only expected to get larger. **Solar has officially hit grid parity with natural gas—and there’s just no going back.** Which means most *new* energy that will be installed for the foreseeable future is solar. Already, 37GW of solar power capacity was added in 2024—double the additions in 2023. By comparison, natural gas added 1GW. In fact, two out of every three GW added in 2024 were solar: And it just keeps going up. - **In November 2024, solar was 98.6% of new energy additions in the U.S.** Solar has risen from .1% of U.S. energy production in 2010 to 6% in 2024. It’s expected to rise to 40% by 2035. Now, these were targets of the prior administration, so there is a risk of a change in policy. But the economics of solar should continue to support rising demand. That’s a lot of ground to cover. And it’s going to make a lot of money for a few companies. ## **A Shining Light in the Solar Sector** For solar companies, the cost of goods is rapidly falling, and leverage over customers clamoring for solar is increasing. That’s the recipe for profit. But the solar sector has been beaten to a pulp over the last few years. That’s not an accurate reflection of the reality of the industry’s growth story. But if it’s as simple as a piece of glass on a stick in the sun, turning electrons into money, you have to ask: - **Which companies will flounder, and which will make money hand over fist?** The answer is simple: preparation and execution. **The Katusa Research team has identified a company that has spent the last decade preparing for this moment in the solar industry.** **Their revenue has doubled for each of the past three fiscal years.** They have a huge pipeline of contracted work, and they’re working with some of the biggest companies in the world—names you’d recognize. It’s under the radar of most investors right now. Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Warren Buffett’s Billion-Dollar Silver Buy Signal is Back - URL: https://katusaresearch.com/warren-buffetts-billion-dollar-silver-buy-signal-is-back/ - Type: article - Published: 2025-02-28 - Updated: 2025-05-20 - Author: Marin Katusa While everyone is waiting to see if there’s any gold left in Ft. Knox, **another**, **more obscure vault is *hemorrhaging *silver**. And it’s happening right in plain sight. The last time this happened, Warren Buffett sank more than $650 million into silver and owned almost 1/3rd of the above-ground silver on the planet. So, believe me when I say it’s worth paying attention to. Because Buffett generally doesn’t move money around just for fun. The first time he invested in silver was in the late ‘60s. It took time, but the move paid off—with silver rising more than 1,000% in the following years. Thirty years later, Buffett saw the same buy indicators light up again. Only this time he had more funds at his disposal… - **He bought 129.7M ounces of silver—more than 25% of global annual production. ** That’s how convinced he was in the accuracy of his indicators. And as you can see from the chart below, silver started to go up—and up some more. By his own admission, Buffett botched the trade, buying and selling early. But he still made more than half a billion dollars. So what did he see that made him so confident in the investment—and made him so much money? Three simple things: Now here’s the interesting part: It’s been almost *exactly* thirty years once again. - **All three of Warren Buffett’s silver indicators are perfectly aligned—and a fourth one is in play no one saw coming.** Which means another billion-dollar opportunity is right in front of you, but not for long. Let me show you exactly how close we are to seeing silver skyrocket. ## **Silver’s “Third Turning” Is Unfolding…** In the early ‘90s, industrial demand for silver surpassed production. That ongoing deficit is the #1 reason Buffett decided to step in: *“The production and reclamation of silver [are] running **about 100M ounces less than consumption.” **– Warren Buffett* By 2001, the cumulative deficit stood at 1.2 billion ounces. It wasn’t until 2006, the year Buffett sold, when the market reached equilibrium. The silver surplus lasted until 2021 when the deficit returned with a fury. - **The combined deficits of 2021-2022 demolished the cumulative surpluses from the previous eleven years.** And it hasn’t let up. The three largest silver market deficits in recorded history have been in the last three years. The cliff has been *eerily *similar to when Buffett was watching in the mid-‘90s: Warren bought in at a cumulative 700M oz. deficit. The market zoomed right past that last year. And Sprott Asset Management predicts that the annual deficit will continue, averaging more than 200M ounces through 2030. ## **The Silver Vaults Are Getting Ransacked** Of course, Buffett considered secondary silver supply as a solution to the deficit. *“There [are] enormous quantities of silver above ground… that could conceivably add to supply.” – Warren Buffett* But he quickly observed that those inventories were “falling materially.” And once again, the major vaults have been quietly hemorrhaging silver *for years.* From 2021-2023, COMEX depositors withdrew a third of its silver—120M ounces. And from its peak in 2021, LBMA is down more than 400M ounces. - **It dropped 71M ounces, or nearly 10%, in January 2025 alone.** Based on LBMA movements from the past three years, the vault will be dry by 2028. Which brings us to the third part of Buffett’s thesis: silver supply cannot and will not be replaced very quickly. *“There [are] relatively few pure silver mines, so it [is] not easy to add production.” – Warren Buffett* Less than a fifth of silver production is from mines that primarily produce silver. So supply is stagnant. Despite rising industrial demand, silver supply in 2024 was less than it was in 2014. It’s expected to stay low—even though new demand from an unexpected source is accelerating. ## **Silver’s Day in the Sun** Solar has taken over from photography as the primary demand driver for silver, and demand is *skyrocketing*. Solar’s demand for silver *doubled* from 2022 to 2024, from 12% of the market to 25% of the market. Sprott estimates that by 2030, 370M ounces of silver will be needed for solar annually. Remember: All three of Buffett’s indicators are perfectly aligned. *And* there’s rising demand from solar. **That’s why Katusa Research believes we’re in the earliest stages of a long-term silver bull market.** Back when Buffett invested, other people made fortunes, too—like Tom Kaplan (billionaire today and largest collector of Rembrandts globally), and Ross Beaty, back when he was the CEO of Pan American Silver. Buffett’s move happened right while Ross was taking Pan American public, and it helped make Ross a billionaire. Now Tom sees the same thing happening again: *“Buffett took his position at $4.50, and silver ultimately went back to $50. You’re going to see something not dissimilar once again, in silver.” – *Tom Kaplan If investors are going to make billions from silver, Katusa Research readers should be among them. That’s why the Katusa Research team has prepared a special guide for you: [**Silver’s Perfect Storm: A Comprehensive Guide to 2025’s Most Undervalued Metal**](https://katusaresearch.com/wp-content/uploads/2025/02/THE-ULTIMATE-SILVER-PLAYBOOK-How-to-Profit-from-Silvers-Next-Great-Bull-Market-KR.pdf) Included in the guide: - How silver’s dual role, **SWAP** Line politics, and historical cycles are aligning for explosive gains. - A battle-tested framework for finding the best silver investments *before* Wall St. - How to use the Way of the Alligator to position yourself for the next mega-move in silver. Download [the guide](https://katusaresearch.com/wp-content/uploads/2025/02/THE-ULTIMATE-SILVER-PLAYBOOK-How-to-Profit-from-Silvers-Next-Great-Bull-Market-KR.pdf) and start reading it now. You won’t regret it. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Here’s What The “Media Blackout” on $2,900 Gold Means For You - URL: https://katusaresearch.com/heres-what-the-media-blackout-on-2900-gold-means-for-you/ - Type: article - Published: 2025-02-21 - Updated: 2025-02-20 - Author: Marin Katusa When Bridgewater’s Ray Dalio increased his gold allocation in Q4 2023, he noted something crucial: *“History shows that assets you might not want to own are typically the most undervalued.”* The current conflict between institutional positioning and public attention suggests we’re at a similar inflection point. **Consider Stanley Druckenmiller’s legendary 2003 gold trade…** He spotted the same pattern—institutional accumulation amid public indifference—and turned $200 million into $1.2 billion. ## **The Media’s Blindspot and “Brown’s Bottom” Moment** In 1999, Britain announced it was selling most of its gold reserves, when the price was $252 per ounce. This became known as “Brown’s Bottom,” after then-Chancellor Gordon Brown, and marked the start of a 12-year bull market. Today’s media silence on gold feels eerily similar to that moment. Every major shift in wealth happens when the public is focused elsewhere. The signs suggest we’re watching one unfold right now. While the media obsesses over AI and tech stocks, something unprecedented is happening in the gold market—and even veteran traders are missing it. There’s a puzzling disconnect in today’s market: Gold has surged past $2,900 per ounce, yet Bloomberg’s gold news coverage index shows media attention at pre-Covid levels. The last time we saw such a stark divergence was in March 2020, right before gold shot up 40% in six months. - **Things could be picking up, especially with a potential audit of the gold held at Fort Knox.** - **Friday Morning Update****: The *story count* has just made a sizeable spike up in the last 48 hours.** The media blackout could turn into a cover story very quick. And that’s not all… ## **The $241 Billion Secret: Wall Street’s Quiet Accumulation** Dig deeper, and you’ll find something even more remarkable. Global gold ETFs now hold a record-breaking $241 billion in bullion, surpassing the previous peaks of $233 billion last month and $223 billion set in 2020. For perspective, that’s more gold than the central banks of France and Italy combined. - **BlackRock’s data shows institutional investors have increased their gold allocations by an average of 12% in 2024 alone.** Morgan Stanley’s latest commodity report (January 2024) upgraded their gold price target to $3,000, citing “unprecedented institutional accumulation.” ## **The Dollar’s Warning Sign** Here’s where patterns from the past become impossible to ignore. The Dollar Index (DXY) is flashing the same warning signals we saw during the 2018 trade tensions. Back then, the dollar weakened by 8% in six months. Today, with similar policy shifts looming, we’re seeing an almost identical technical setup. ## **The Gold Borrow is Unprecedented** As one analyst said, “Gold is trading like someone robbed Fort Knox.” Gold loans have hit record costs in early 2025, forcing traders to pay 10% to borrow shares of the popular gold ETF, up from just 1% in late 2024. This substantial increase in the borrow fee rate could indicate: - Growing demand to borrow GLD shares, possibly for short-selling. - Reduced availability of GLD shares to borrow. This steep jump signals a major shift in the gold market. ## **Four Catalysts Aligning** 1.** Media Blackout**: Current news coverage is 40% below the 5-year average despite record prices. 2. **Institutional Positioning**: ETF holdings have grown by $40 billion in just 90 days. 3.** Dollar Vulnerability**: Technical patterns mirror the 2018 pre-rally setup. 4.** The Gold Borrow Rates**. And don’t forget the China factor. What many miss is China’s strategic gold accumulation. **The People’s Bank of China has added gold reserves for 16 consecutive months**, accumulating over 6.75 Million ounces of gold (225 tons of gold). The last time they went on such a buying spree? 2009, right before gold doubled. ## **Why 2024 Is Different Than 2011** During the 2011 gold peak, CNBC ran an average of 12.4 gold-related segments per day. Today? Less than 2. The *World Gold Council’s* latest report shows retail investment making up just 15% of total gold demand, the lowest level since 1973. Today’s gold market shows the exact setup that preceded the last three major rallies: - 2001-2002: Low media coverage, high institutional buying, 142% gain followed. - 2009-2010: Similar pattern, 185% rally ensued. - 2019-2020: Same signals, 43% surge in 6 months. ## **The Opportunity Hidden in Plain Sight** The World Gold Council’s latest flow data shows institutional buying accelerating. The last three times we saw similar institutional inflows combined with below-average media coverage (2002, 2010, 2019), gold averaged 75% gains in the following 24 months. Every major shift in wealth happens when the public is focused elsewhere. So how do we make money? Getting positioned… ## **“Doctor Q’s” $4 Billion Legend’s Secret Gold Play** **in America’s Richest Soil** A legendary mining CEO who sold his last company for nearly $4 billion just revealed his next move – and he’s working for free. Why? Because he owns 8.5 million shares of a company sitting on America’s next great gold producer. This past producing, multimillion ounce gold deposit on private-land gold project, next door to a +$200M cash generating mine, just doubled the amount of gold within one of its deposits. With $300M in financing on standby ready to go when Doctor Q says go, and gold at $2,900, Wall Street is about to notice what smart money already sees. [Click here to discover why I’ve invested 7 figures of my own money](https://subscribers.katusaresearch.com/25-going-vertical-golds-breakout-moment/) in what could be America’s next multi +100,000 oz/year producer. Yours truly, Marin Katusa P.S. A major catalyst hits in Q2 2025. [You’ll want to learn about this opportunity today](https://subscribers.katusaresearch.com/25-going-vertical-golds-breakout-moment/). ## You might like… ** ** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Great Oil Double-Cross: Behind China’s Emergency Stockpile Order - URL: https://katusaresearch.com/the-great-oil-double-cross-behind-chinas-emergency-stockpile-order/ - Type: article - Published: 2025-02-14 - Updated: 2025-09-18 - Author: Marin Katusa While America focused on the inauguration, Beijing quietly issued an order that sent shockwaves through energy markets. Chinese state companies must collect 60 million barrels of oil by March. Most traders will miss the significance of this move, fixated instead on oil’s daily dance between $78 and $80. But this order reveals something far more significant – a strategic power play that will reshape energy markets for decades to come. I’ve spent decades tracking energy markets, and I’ve never seen anything quite like this. Here’s why this matters to your money right now… ## **The Dragon’s Secret Playbook** On the surface, China’s economy appears to be struggling. Their energy consumption has plummeted, with official numbers showing a 1.9% drop in crude imports for 2024. Yet beneath these seemingly bearish headlines, Beijing executes a masterful strategy that most Western analysts completely misunderstand. Consider this: While China’s reported energy use fell 4.6% in 2022 and another 2% in 2023, they’ve quietly deepened their energy ties with Russia and Iran, securing massive supplies of discounted crude. This is strategic hoarding on an unprecedented scale. ## **America’s Energy Arsenal: The Secret Weapon China Fears Most** What makes this moment truly extraordinary is America’s position of strength. U.S. energy producers have achieved independence – and revolutionized global markets. The numbers tell an incredible story that’s still unfolding. America’s executing a masterful game of chess while Beijing is playing checkers with its oil stockpiles. The take-home message is clear, the USA is weaponizing energy independence. Let these numbers sink in: - 2020: America exported 630,000 barrels per day. - 2023: Exports surged to 1.64 million barrels. - 2024: In 2024, records projecting above 2 million barrels daily. very barrel America exports is a barrel that doesn’t come from Russia, Iran, or Saudi Arabia. American allies get it. Mexico depends on our gasoline and diesel. Europe craves our LNG. Even Canada, with its vast oil sands, needs our refined products. But here’s what keeps Chinese leaders up at night: While Beijing dumps cheap goods to weaken global markets, America’s energy dominance acts like a fortress wall. They can flood us with toasters and TVs, but they can’t touch our energy advantage. - **RELATED NEWS:** [Gevo and Axens Boost SAF with Innovative Ethanol-to-Jet Technology](https://carboncredits.com/gevo-and-axens-boost-saf-with-innovative-ethanol-to-jet-technology/) ## **Fund Flows: Smart Money on the Move** Look at the **Energy Select Sector SPDR Fund (XLE),** which controls $35 billion in energy assets including companies like Exxon, Chevron and ConocoPhillips. While the fund saw $2 billion in inflows during 2024, it also experienced $5.8 billion in outflows. Most analysts view this as bearish. They’re wrong. The real story? China. The world’s biggest energy consumer has stumbled hard: - Energy use crashed 4.6% in 2022 - Fell another 2% in 2023 - Barely bounced 2.9% in 2024 Now add looming trade war threats. Tariffs could hammer energy companies, disrupting supply chains and choking off export markets. Smart money isn’t waiting to find out. I’ve seen this pattern before. Smart investors don’t flee a sector – they reposition before the next big move. The big players see something coming. Here’s what they know: When China exports deflation, commodity markets shudder. But this time, America holds a trump card – energy dominance. The question isn’t if the market will recognize this, but when. ## **2025 is The Year of The Great Price War** China’s economic struggles have unleashed a deflationary wave across global markets. Everything from commodities to consumer goods feels this pressure. - **But here’s what most investors miss: This price war actually strengthens America’s strategic position.** When gold crosses $3,000 – and it will – you’ll understand why this matters. The same forces driving gold higher are reshaping energy markets in ways few understand. While copper holds steady around $4 per pound, supported by China’s strategic stockpiling, the real action unfolds in oil markets. A U.S.-China trade war is inevitable. But unlike previous economic conflicts, this one will play out differently. America’s energy dominance provides unprecedented leverage, fundamentally altering the balance of power. Think about this: While China hoards resources and builds strategic reserves, U.S. producers can influence global prices through export decisions. This dynamic creates opportunities most investors won’t see until it’s too late. **The playbook for this new era requires a different approach.** Instead of chasing short-term price movements, smart investors will: - Watch China’s strategic stockpiling for early warning signs. - Track America’s growing export influence. - Follow smart money flows through key ETFs like XLE. But knowing what to watch isn’t enough – you need to know how to position yourself ahead of the crowd. Remember: In markets like these, the obvious trade is usually wrong. The real money goes to those who see the bigger picture and act before the crowd. Stay vigilant and prepared. Regards, Marin Katusa **P.S. My number 1 energy pick is **[**up over 40% since I first recommended**](https://u5734527.ct.sendgrid.net/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdFPJP9UxZ5Nk2-2B-2BqnMJZN3dzwEH2NVWn8x9KDc14hq6e2ecvfOpcBHfH9dt46fwFmH7RpxrelbqGt4Mwy1BaN2Q-2BWcr5pDrW-2FmTL4MBXt5o2qyqyarzlPDM0dKzJuOfs9y-2BmiOzCH8b7W4KzvgqOYtY-3DWdeA_LegDzTFO0QQIRWK2-2Bk6gfGJCz9-2FSvu5CacxxzXzRn-2BKWCAUn4Gigvdg5MCFvFbrCQAA1gZm47W74sVcCPF35SY9xE5CCWq20KH7FjKuWDyPcWSqeoPqqfej6RC21ElqXLpnwBsWcdu-2FeambNjIEqPnma-2F70cDhcaFoyMGWHIG7SclcLy6DE8hR807tzVbv-2Bv6HJY-2BAwS0uTd1QYZnCGnMg-3D-3D)** it and reaching multi-year highs. Let our team bring you the analysis of the energy and metals markets every month in **[***Katusa’s Resource Opportunities***](https://u5734527.ct.sendgrid.net/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdFPJP9UxZ5Nk2-2B-2BqnMJZN3dzwEH2NVWn8x9KDc14hq6e2ecvfOpcBHfH9dt46fwFmH7RpxrelbqGt4Mwy1BaN2Q-2BWcr5pDrW-2FmTL4MBXt5o2qyqyarzlPDM0dKzJuOfs9y-2BmiOzCH8b7W4KzvgqOYtY-3DMsmD_LegDzTFO0QQIRWK2-2Bk6gfGJCz9-2FSvu5CacxxzXzRn-2BKWCAUn4Gigvdg5MCFvFbrCQAA1gZm47W74sVcCPF35SXACI6zwrubDRM-2FBD-2B5s-2FxY881FWABQDiVOus0HjM6lOlRcCLY74FFvNr0XEJo-2F-2B5VeuFMlD-2F8AZ3TKs9GshMSZLmdXyjD-2F0Fg2YuEI2C7s9fDCtfJ14CFva1vo6t6xKZg-3D-3D)**.** ## **You might like…** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # One metal just made 40 new all-time highs while America slept - URL: https://katusaresearch.com/one-metal-just-made-40-new-all-time-highs-while-america-slept/ - Type: article - Published: 2025-02-07 - Updated: 2025-02-06 - Author: Marin Katusa The gold market just delivered a December surprise that made veteran traders raise eyebrows. For the first time since 2019, December flows turned positive, pumping $778 million into gold ETFs globally. Let me show you why this divergence might be the most important gold story you’ll read this month. ## **The Numbers That Matter** Gold smashed all-time highs 40 times in 2024, pushing global ETF assets to a staggering $289.1 billion as of Jan 24, 2025. That was a screaming signal that something big is brewing in the gold market. China’s appetite for gold has turned voracious. Their ETF inflows hit $635 million in December alone, as Beijing grapples with plummeting bond yields and whispers of a potential trade war with the US. The Chinese are stockpiling a lot of gold. When Chinese funds move with this kind of coordination, smart investors pay attention. - **For example, the Huaan Yifu Gold ETF added $189.7 million, while Bosera Gold ETF piled in another $116.4 million.** But it’s not just China. The entire Asian region is gorging on gold, pulling in $751 million last month. India’s seen eight straight months of inflows, while Japan’s Physical Gold ETF quietly added $51.4 million in December. This is systematic accumulation. ## **America’s Gold Hangover** After a five-month buying spree, US investors pulled back $329.9 million in December. The SPDR Gold Shares ETF (GLD) led the exodus, shedding $496.5 million. Why? The Fed’s hawkish tone about 2025 rate cuts spooked the market. But here’s what analysts are missing… - **Despite December’s outflow, North American funds logged their first positive annual flow since 2020.** This indicates that the smart money isn’t leaving gold, it’s repositioning. And trading volumes tell an equally compelling story. While December saw a seasonal dip to $221 billion per day… - **2024’s overall trading volume skyrocketed 39% compared to 2023 – the highest on record.** More importantly, money manager net long positions averaged 555 tonnes in 2024, dwarfing 2023’s 289 tonnes. That’s the highest since 2011’s gold bull run. ## **The Technical Setup Is Equally Bullish…** Gold’s technical signals remain strong despite December dips. After three years stuck below $1,350, gold surged 50% in just 14 months to $2,038 – and now the technicals suggest this rally is just beginning. But the story doesn’t end there. From August 2020 to March 2024, gold faced another challenge, stuck below $2,050 for almost four years. When it finally broke this resistance, gold surged another 32%. Tariffs, bureaucratic changes, and economic uncertainty are here. Not to mention, more money flowing into gold investments. Gold buzz sawed through January on its way to setting even higher weekly and monthly records. The big question is: How high can it go? Another monthly close above this level could trigger a technical breakout that sends gold exploring new highs. ## **Three key factors are driving the gold price right now:** 1. Trump’s **Executive Orders/Tariffs.** 2.** Major central banks starting their easing cycles**, with the ECB likely to move first. 3. **Gold’s strongest price performance since 2010**, suggesting the dawn of a new bull cycle. But here’s the real opportunity: While Western investors debate the bull and bear cases in gold, Eastern buyers are quietly accumulating physical gold and ETFs. - **France’s Amundi Physical Gold ETC pulled in $374.3 million in December – the largest European inflow – while Switzerland’s gold ETFs saw outflows.** This rotation from traditional Western gold havens to Asian markets is a structural change in global gold demand. **Costco is selling gold in record quantities (and prices).** **And Amazon is selling ounces of gold (and even silver) too.** Remember, in the gold market, possession is nine-tenths of the profit. While the West debates, the East accumulates. And right now, the accumulation signals are flashing bright green. The question isn’t whether to be in gold, but how to position yourself for what could be the biggest gold bull market of the decade. ## **America’s “Sleeping Gold Giant” Just Woke Up** **$2,800 Gold could be your last chance…** One gold company we’ve identified on high alert in my premium newsletter – [Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/) – previously mined 45 million ounces from this 2-mile stretch since 1878. But the real monster lies in a million-ounce resource right next door to a producing mine spitting out $100M+ annual cash flow. Drill results are high-grade and lucrative. Now, we’re about to get news of a Q2 2025 cash flow study that could expose the next American +100,000 oz/year producer, backed by $300M from a major finance partner. In addition, this company owns this gold resource which happens to also be a past producer which is on 100% private land, which becomes much easier than permitting on federal lands. Oh, and the leader of this team sold his previous gold company…** for nearly $4 Billion.** He is a legend in the business and **working for free**—literally not taking a single penny in salary or options. He has 8.5 million reasons for doing this and is the largest individual shareholder of the company. [Are you paying attention](https://join.katusaresearch.com/subscribe/)? Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Silver - URL: https://katusaresearch.com/data/silver/ - Type: page - Published: 2025-02-03 - Updated: 2025-05-14 - Author: Marin Katusa ## Silver --- # Gold - URL: https://katusaresearch.com/data/gold/ - Type: page - Published: 2025-02-03 - Author: Marin Katusa ## Gold --- # Buffett Indicator - URL: https://katusaresearch.com/data/buffett-indicator/ - Type: page - Published: 2025-01-29 - Updated: 2025-05-14 - Author: Marin Katusa ## Buffett Indicator --- # China Data - URL: https://katusaresearch.com/data/china-data/ - Type: page - Published: 2025-01-28 - Updated: 2025-05-14 - Author: Marin Katusa ## China Data --- # The $44,000 Critical Mineral Fueling America’s Energy and Military Defence Future - URL: https://katusaresearch.com/the-44000-critical-mineral-fueling-americas-energy-and-military-defence-future/ - Type: article - Published: 2025-01-23 - Updated: 2025-01-22 - Author: Marin Katusa When U.S. military officials learned their night vision goggles relied on the same metal fueling Bill Gates’ newest clean energy bet, alarm bells rang in Washington. That metal is **Antimony**—and China just weaponized its control over the global supply. According to U.S. Army Major General (retired) James Marks, antimony, a critical metalloid, is a key element of the American war machine… It’s essential for communication equipment, night vision goggles, explosives, ammunition, nuclear weapons, submarines, warships, optics, laser sighting and more. **China’s calculated move blindsided Western markets…** Beijing announced sweeping export controls on antimony products starting September 2024, sending prices skyrocketing to $29,250 per metric ton – more than double last January’s levels. Today, prices hover near $44,000 per metric ton. The timing couldn’t be worse for the U.S. Antimony is now the linchpin of next-generation energy storage and vital defense technologies. - **America’s stockpile? Just 1,100 tons—covering barely 5% of annual demand.** Long overshadowed by better-known minerals, antimony has emerged as a critical component in the green energy revolution and defense technologies. ## **A Critical Mineral with a “Military Metal” History** Antimony has been used for centuries, but it became a true game-changer during World War II… At that time, up to 90% of U.S. antimony demand was met by domestic production. **Today, the U.S. doesn’t mine antimony at all… relying entirely on imports, primarily from China.** Despite this, antimony’s list of uses has expanded far beyond its wartime role. Antimony’s unique properties, especially its ability to harden and strengthen metals, make it a cornerstone of several industries. Its application in military technologies, from night vision goggles to explosive formulations, underscores its significance for national security. - **Antimony is crucial for flame retardants, lead-acid batteries, and radiation shielding.** But it’s not just in traditional industries where antimony is leaving its mark… The global economy is moving towards cleaner energy sources and advanced technologies, and that’s where antimony is becoming a pillar of emerging energy storage systems and green technologies. ## **Who Dominates the Antimony Supply Chain?** For the past 25 years, China has dominated the antimony market. - **2000-2010**: China dominated with 75–83% of global antimony supply. Global production averaged 140,000 MT annually. - **2010-2020**: Stricter regulations, illegal mining crackdowns, and Russian-Tajik competition cut China’s share to 50–60% by 2020. Global output ranged from 115,000 to 150,000 MT annually. - **No Russian antimony**: Sanctions on Russia have reduced Russian production by 82% from 2021 levels. Russia accounted for 20,000+ tonnes of annual antimony supply. **Recently**: As of 2023, China’s share had decreased to **48%**, and global production continued to fluctuate around **100,000-140,000 MT** annually, with **Tajikistan** increasing its production significantly. Dependence on Chinese processing poses severe disruption risks, similar to rare earth elements and cobalt. ## **Global Supply Constraints and the China Factor** Despite its growing importance, the global production and supply of antimony are highly concentrated, leading to significant market risks. - **Chinese companies own five of the 10 largest active mining properties with deposits of antimony****.** ## **The Case for U.S. Antimony Production** Because it’s so critical, the push to restart U.S. antimony production is gaining traction… Historically, deposits of antimony have been found in the Western U.S.—Idaho, Montana, Utah, Nevada and Arizona—though environmental challenges have limited production. - **The most famous site, the Sunshine Mine in Idaho, once the largest producer of antimony in the U.S., has long since closed.** Currently, foreign sources of Antimony account for 82% of US antimony requirements. Antimony sourced from China satisfies 63% of US antimony consumption. While domestic recycling accounts for 18%. And if you thought maybe the US had a big stockpile to lean on in case the Chinese really got angry, think again. The US stockpile of antimony is a paltry 1,100 tons, compared to the 23,000 tons consumed in 2023. *([Source](https://www.csis.org/analysis/chinas-antimony-export-restrictions-impact-us-national-security))* ## **BONUS: Solving Renewable Energy’s Biggest Challenge** Antimony is becoming essential to cutting-edge industries, from solar panels and defense systems to advanced batteries. As global supply chains falter and prices climb, securing reliable antimony resources has never been more critical. While renewable energy is the cheapest form of electricity to generate, its true challenge lies in storage—what happens when the wind stops or the sun sets? Antimony is poised to play a key role in addressing this crucial energy storage need. - One of the most promising developments in this space is the **Liquid Metal Battery (LMB)**—a next-generation battery technology that has the potential to revolutionize **grid-scale energy storage**. ## **From NATO to North America: A New Antimony Player Emerges** The global antimony crisis is unfolding, and one forward-thinking company is stepping up to fill the gap. With antimony prices skyrocketing 200% this year to $44,000 per ton—and China cutting off exports—the U.S. is scrambling to secure reliable supplies of this critical mineral. **A little-known player has quietly secured high-grade antimony deposits in NATO territory, far from the geopolitical risks of China.** This company is poised for a breakthrough with its promising antimony and gold project. With grades exceeding the global average, the company is taking significant steps to modernize its resource estimates and position itself as a leader in addressing the critical mineral supply chain crisis. **This company has just secured a property in a past producer in Nevada, a site with a history of antimony and gold deposits.** Just 12 kilometers from Kinross’s Round Mountain gold mine, the property shows signs of untapped resource potential. **Antimony is indispensable for defense technologies, renewable energy, and critical infrastructure.** American manufacturers use more than 50 million pounds of antimony each year for fireproofing compounds, batteries, ammunition, electronics, specialty glass, and other products, according to MetalTech. **With zero U.S. production, only 17 days of strategic reserves, and China controlling 48% of global supply, the market is desperate for new players.** The story is just beginning… **Prices just hit $44,000 per ton**, making this one sector to pay attention to. Tomorrow, we’ll reveal a company in this niche market… Stay tuned, Anthony Ford Publisher, Katusa Research Sources: 1. [https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/metals/082324-interview-china-antimony-export-restrictions-exacerbate-global-supply-fears-usac](https://u5734527.ct.sendgrid.net/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdLy2j4ZT8z-2BDTpUGVlgL6bLESdYHZZZQG4fIynYPFIjb6AkfZVdhALMP5wBPRAhYfBZ0-2FkP-2BZx4YKx1laebbGMKG5tIj0x4fLtTfvZiSHfU3Ckl7osGSCrligbrZybDho15AXFTt7mIiKG7Gz5O5j0cnni7J7GrYDdXBNFXnp8JQNPosKUQtkFMVMRbBOslSGrlGIp9pynbPCVeXS421YuSowwmJmYAqSjtJx7abJ4xDfQwl8x9Clt28dgqfSQyhQ8vIo4XHbiGNRZsG-2Bng3llMyjzn0hecNqzIHiFaUZjL3NAXb_AU8oF2B84393VN4NqZh-2B46xLoDJA1idYNWqHZbZCvaEPC8Q1crYaD-2FbbmQIAiXIFe8aY78DQKwTeIabd15CFY1pe6AxaaPgeT5aN9AlWgp3EP92dI-2FdvmVtmMGI6DamWp-2BL4eGpGKRNOnecqTZQZeuQKbehQNXuIqWjPwUsi5aqDr6gBFbjo5EneNiU8NN1N2QsR2jkGTg139DlQIXe9TQ-3D-3D) 2. [https://www.csis.org/analysis/chinas-antimony-export-restrictions-impact-us-national-security](https://u5734527.ct.sendgrid.net/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdJYCghYnufVezi-2Fypn3XFLHH4-2Fu5wJiwZ6ohiNqgfzoc11uNUwbxkhhtpiQsGccw0nN3ccaiuiQJSM3-2BpSZ612it8-2BwSQ8NLz7Z6nitqXWdmDHXIAZRHXgqX21WpbN-2BozgLlgXxWIqMxsHXQvSYhw23ZaRDD4y6grLUgqJD-2BG8NZ-2BbJ4ivPSNABog59LBBa9fsX7zfl6L7kpjTMReI-2FxsKE-3DgEZD_AU8oF2B84393VN4NqZh-2B46xLoDJA1idYNWqHZbZCvaEPC8Q1crYaD-2FbbmQIAiXIFe8aY78DQKwTeIabd15CFY3V9-2FH8bLBasNfD0CNgYnh-2BU-2BJNXaJKxhrZQX5DS3k-2B7nbg7Jfa4lVvIURoOEbqTrHq0Tr3ut4rUtFdUuerSLVAnfEoJ-2FI-2BpkYSCrNEhdbbGXIRBGiT7WrvBFaokbuEYWg-3D-3D) **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Copper’s Wild Ride… Poised for a Breakout? - URL: https://katusaresearch.com/coppers-wild-ride-poised-for-a-breakout/ - Type: article - Published: 2025-01-17 - Updated: 2025-01-16 - Author: Marin Katusa *The “Trifecta of Influence” is leaving investors on the edge of their seats.* Copper is the lifeblood of industrial growth and a bellwether for the global economy. That’s why it’s often called *Dr. Copper.* But lately, this “doctor” has been in the emergency room, with price swings that mirror an erratic heartbeat. Still, it closed out 2024 up about 6% year over year, signaling some underlying resilience. ## **Copper’s Price Drivers: China, the Fed, and Inventory Woes** To understand where copper might be headed in the near term, let’s break down the three biggest forces shaping its price: **1. China’s Struggles**: China’s economy hit the brakes in 2024, with weak real estate demand, sluggish manufacturing, and rising geopolitical tensions. Copper imports—a key gauge of industrial health—softened, sending ripples through global markets. Though Beijing may introduce new stimulus, its timing and impact remain uncertain. **2. The Fed’s Slow Moves**: While the Federal Reserve has hinted at cutting rates in 2025 to stimulate the economy, it’s proceeding with caution. Historically, lower interest rates propel growth and boost copper demand, but a slower pace of cuts could delay any upward price momentum. **3. Rising Inventories**: Stockpiles of copper have climbed on both the London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE). Elevated inventories can act as a drag on prices until the market absorbs excess supply. ## **The Bigger Picture: Energy Transition Still Needs Copper** Despite short-term headwinds, the long-term outlook remains robust. Renewable energy infrastructure—electric vehicles, wind turbines, solar panels—relies on copper’s conductive properties. - **By 2025, China’s smelting capacity alone is expected to reach 35 billion pounds, highlighting global ambitions for cleaner energy systems**. In 2024, China’s copper supply grew sharply due to a 6.5% increase in domestic production (13 billion pounds) and higher imports of refined copper (+16%, 4.19 billion pounds) and scrap (+18%, 2.65 billion pounds). Chinese imports from the DRC surged 91% to 1.54 billion pounds, creating an oversupply. While the long-term case for copper remains strong, the near-term supply challenges are shaping the market in ways investors can’t ignore. ## **Current Copper Concentrate Market Update** The tightness in the supply of copper concentrate is due to several important factors. **1. Cobre Panama being shut down**: A shutdown at Cobre Panama removed 660–770 million pounds (about 2% of global supply) from the market. Now, Panama’s new administration suggests the mine will soon restart. Once it’s back online, it’ll be among the world’s top 12 copper producers. **2. SWAP Line Issues balancing out**: Chile projected +4% growth in 2024, but this did not happen. Chilean production was weak throughout the year, state miner CODELCO’s output was the lowest in 25 years. CODELCO’s production fell 8.3% to 3.13 billion pounds. ([*To understand how important SWAP Lines are – click here*](https://katusaresearch.com/swap-lines-are-one-of-the-most-important-things-youve-never-heard-of/)) Social issues in Peru plagued Anglo-American and MMG this past year, and this could continue in 2025. Here’s how this affects the concentrate balance… The gap between production and consumption shows an 880-million-pound deficit expected in 2025, growing to 1.3 billion pounds in 2026. The problem with such data and charts is that there seems always to be supply “waiting” to be delivered that has already been “hedged out” from new mine expansion production that satisfies this demand. Also, if Russia and Ukraine conflict resolves itself in 2025, expect a flood of Russian copper to “meet any such deficits”. ## **How to Play a Tight Copper Market** Want to know exactly where to look to play a volatile copper market? In our recent January issue of [**Katusa’s Resource Opportunities**](https://join.katusaresearch.com/subscribe/), we’ve identified the key players poised to benefit from this perfect storm. **One tiny player**** in a politically risky region has just scored a major legal win against a corporate giant.** With arbitration now behind them, all signs point to a massive buyout offer, and investors holding shares could see triple-digit returns. - **This company is up as much as 35% in the last month.** **The second company****, a thinly traded small cap is led by one of the most connected management teams in the industry… **quietly building its portfolio in a region ripe for growth. The market isn’t paying attention yet, but this explorer could deliver explosive gains once the news hits. **Third, there’s a global heavyweight****—a pure-play copper powerhouse with world-class assets.** The share price is getting right into my target area for a buy. The copper market is tightening, and these opportunities won’t stay under the radar forever. [Click here to get the full details](https://join.katusaresearch.com/subscribe/) and gain your edge in the copper market in just a few clicks. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Oil’s 2025 Surge: Echoes of 1973 or the Calm Before the Storm? - URL: https://katusaresearch.com/oils-2025-surge-echoes-of-1973-or-the-calm-before-the-storm/ - Type: article - Published: 2025-01-10 - Updated: 2025-01-09 - Author: Marin Katusa In 1973, the oil embargo caught the world by surprise. Drivers faced long lines at gas stations and panic spread. The events showed how fast oil markets can flip from calm to crisis. Fast-forward to 2025, and many fear history could repeat itself. This time, the stakes are even higher. Investors are watching every tick in oil prices, eager to know if this year’s surge will last—or if we’re on the brink of something bigger. ## The Early Spike: Can It Last? At the start of January, oil soared. U.S. WTI crossed $74 per barrel, and Brent crude neared $76.55. That’s the highest since October 2024. Two triggers lit the fuse: a sharp drop in U.S. inventories and a vow from Chinese President Xi to keep economic growth alive. On the surface, those headlines hint at a bull market for crude. Yet look closer, and you’ll see reasons to stay cautious. ## Recession Watch: Why Job Openings Matter If you want an early glimpse of trouble, watch job openings. When new job openings drop, a recession often follows. History proves it. Over the last 25 years, falling openings have spelled doom for the economy more than once. - **Recent data shows job openings have slipped by 8.2% since Q3 2024—the steepest drop in nearly five years.** Right now, the data hints that we could be teetering on the edge again. The Fed hoped to wrap up its fight against inflation by late 2024. Instead, inflation dug in around 2.5%–2.7%. Surging public spending and talk of tariffs forced Jerome Powell to change course. In December 2024, he slashed his plan for four rate cuts down to two. That’s a clear sign the Fed isn’t confident. They see storm clouds ahead… When businesses stop hiring, consumer spending slips. That’s a red flag for oil demand because less consumer spending means fewer goods shipped and fewer trips made. To make things more complicated, there’s talk of potential tax breaks and new trade tariffs from the Trump administration. That forced Fed Chair Jerome Powell to revise his plans. Instead of four rate cuts in 2025, he announced only two. Less stimulus can throttle economic growth—and oil demand. ## Trade Tariffs: A Boomerang in the Making? Add in the looming possibility of tariffs, and you have an even bigger puzzle. The Trump administration wants stiff tariffs on Chinese goods. The idea is to bolster U.S. manufacturing—but at what cost? Slapping tariffs on Chinese imports risks sparking a global trade brawl. That would send the U.S. dollar even higher. Before diving into how these forces collide, let’s look at another worrying sign: shrinking manufacturing. The U.S. Purchasing Managers’ Index (PMI) has stayed under 50 for over two years, pointing to a contracting factory sector. A stronger dollar makes U.S. exports more expensive, from cars to crude oil. With the U.S. PMI stuck below 50, our manufacturing sector is already contracting. A stronger dollar drives up the cost of U.S. goods and oil overseas. That curbs demand, enlarges stockpiles, and pressures prices. Already, U.S. inventories aren’t shrinking as forecast, raising fears of a glut that could break oil’s delicate stability. Cheaper alternatives appear more attractive to foreign buyers. You’d think shrinking stockpiles would support higher prices, yet the recent inventory declines have underwhelmed analysts. When stockpiles don’t drop as projected, it signals demand isn’t as robust as expected—or that supply is outpacing consumption. Then there’s the China factor… ## China’s Tightrope Walk China was supposed to save the day. For years, China’s roaring economy propped up global oil demand. But its problems run deeper now. An $18 trillion property crisis rocked consumer confidence. Local government debt exploded, accounting for nearly half of the country’s GDP. Analysts worry about a wave of bankruptcies and abandoned projects if the pressure grows. To top it off, the Trump administration just hinted at a 60% tariff on Chinese goods. If those tariffs materialize, manufacturing could shift away from China to lower-cost hubs in Southeast Asia. That means fewer factories in China, less industrial output, and—most important for oil bulls—slumping demand. - **China’s economic slowdown could drag global demand down with it.** When the world’s top oil importer stumbles, prices usually respond. China was the main engine of demand growth for more than a decade. A major slowdown there ripples through the entire market, pressuring oil prices in a way not seen since the 2014 crash. ## OPEC is Also in the Mix… You’d think OPEC would prop up prices by cutting production. But their moves tell a different story. Historically, the cartel adjusted production to keep prices stable… Instead, they just delayed a planned boost in output of 180,000 barrels per day until April. Yet OPEC’s total production still rose in November, hitting 27 million barrels per day. With China’s demand faltering, the stage is set for an oversupply that could pummel prices. If China’s hiccups become a crisis and the U.S. economy slows, the extra oil supply could flood the market. Prices might tumble, turning today’s rally into tomorrow’s retreat. **It’s About to Get Interesting…** So, what’s the upshot for all 195,000 of you tuning in? It’s a classic tug-of-war. Prices keep climbing, driven by inventory dips and China’s pledge for fresh stimulus. Yet signs of fragility are everywhere: a cooling U.S. job market, slowing manufacturing, volatile export data, and looming trade disputes. If tariffs spike or if China’s property woes intensify, oil could follow the script of 1973—or 2014—and plunge faster than most imagine. Could we see a true revival instead? Sure, if the Fed surprises everyone by cutting rates more aggressively, or if China floods its economy with stimulus. But that’s a risky bet in a landscape full of political uncertainties. Any single factor, from a sudden tariff to a new COVID variant, could twist the narrative. In 1973, the world learned how a single event can turn oil markets on their head. In 2025, it might be a combination of factors—from recession fears in the U.S. to debt overload in China, from OPEC’s cautious maneuvers to a surging dollar—that signals the next tipping point. Nobody can say with certainty which way it’ll break. But we do know the stage is set for fireworks. - **Subscribers to my premium newsletter – [*Katusa’s Resource Opportunities*](https://join.katusaresearch.com/subscribe/) – are up over 30% (and getting paid handsomely while holding) on my favorite oil play.** - **And we just profiled another major energy company that’s up 128% in the last year.** We’re keeping a close eye on job openings, U.S. exports, and China’s property sector. Looking for any shift in OPEC policy or a sudden currency swing. If all these signals start blinking red at once, look out. But if even one bright spot—like a major Fed pivot—takes the reins, we might see oil hold strong. Until then, the memory of 1973 should remind us that oil markets don’t just drift along. They lurch, spike, and crash—often when we least expect it. And that’s where we’ll be waiting, like alligator investors. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Trade & Transport - URL: https://katusaresearch.com/data/trade-transport/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Trade & Transport --- # Sentiment - URL: https://katusaresearch.com/data/sentiment/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Sentiment --- # Retail & Consumption - URL: https://katusaresearch.com/data/retail-consumption/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Retail & Consumption --- # Monetary & Debt - URL: https://katusaresearch.com/data/monetary-debt/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Monetary & Debt --- # Manufacturing - URL: https://katusaresearch.com/data/manufacturing/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Manufacturing --- # Inventory - URL: https://katusaresearch.com/data/inventory/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Inventory --- # Housing - URL: https://katusaresearch.com/data/housing/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Housing --- # Fixed Investments - URL: https://katusaresearch.com/data/fixed-investments/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Fixed Investments --- # Employment - URL: https://katusaresearch.com/data/employment/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Employment --- # Economy - URL: https://katusaresearch.com/data/economy/ - Type: page - Published: 2025-01-07 - Updated: 2025-05-14 - Author: Marin Katusa ## Economy --- # Data - URL: https://katusaresearch.com/data/ - Type: page - Published: 2025-01-06 - Updated: 2025-04-23 - Author: Marin Katusa Click on a category to access financial data. --- # Tariff Shockwaves: Are You Prepared for the Fallout? - URL: https://katusaresearch.com/tariff-shockwaves-are-you-prepared-for-the-fallout/ - Type: article - Published: 2025-01-03 - Updated: 2025-01-02 - Author: Marin Katusa *“It… is a beautiful word. One of the most beautiful words I’ve ever heard. It’s music to my ears.”* – Donald Trump Donald Trump’s favorite word could spell chaos for the global financial order. He used it frequently on the campaign trail, calling it “the greatest thing ever invented.” That word? **Tariff**. Trump’s fondness for it has only grown deeper since the election. In a series of tweets over the past month, he’s threatened a half dozen historic tariffs, including: Pundits reacted with their usual alarm. They feared hyperinflation, isolationism, and a collapse of global trade. But that’s a fundamental misunderstanding of how Trump operates. And if you want to execute the Trump Trade well, you must understand *exactly* how he works. ## **Trump Rule #1: Trump makes huge threats for easy wins** It’s always been his MO. During his first term, Trump threatened to pull out of NAFTA—then settled for a renegotiation of the agreement. In 2018, he threatened Europe with tariffs. The European Commission promised to import more American soybeans and LNG. In return, Trump said he would “hold off on further tariffs.” A year later, Trump announced a 5% tariff on Mexican imports, increasing by 5% every month until the border problem was fixed. Results took exactly one week. Trump announced that Mexico had agreed to take strong measures, including a National Guard deployment, to curb illegal immigration to the U.S. This method of issuing an ultimate threat to force total surrender is so common that the current nominee for Treasury Secretary calls it “de-escalation through escalation.” It’s the art of making extreme threats to get small concessions. And it only works if the threat is real. ## **Trump Rule #2: Trump’s tariffs are *not *empty threats** Trump has often used tariffs as a weapon. So, many now see them as just bargaining chips and initial offers to negotiate new trade deals. But it would be dangerous to believe that Trump will not follow through if necessary. Time and again, he has proven that he is willing to make conflicts extremely costly for his opponents. Which is why world leaders believe him: *“Donald Trump, when he makes statements [about tariffs], he plans on carrying them out. There’s no question about it.” – Canadian Prime Minister Justin Trudeau* Because they’re afraid of losing access to an extremely valuable asset. ## **Trump Rule #3: Trump never gives something for nothing** The United States possesses what other economies desperately need: a massive consumer market with persistent excess demand. And its largest trade partners, Mexico, Canada, and China, are selling into that excess demand, keeping their economies from entering a deflationary spiral. That’s why each of those countries are hitting historically high trade deficits with the U.S. Meanwhile, the United States gets almost nothing in return. In one of his books, Trump refers to his love of “crushing the other side and taking the benefits.” But right now, he sees the other side crushing the U.S.—and taking the benefits. So, his tariff threats simply work to get something for the U.S. in return for providing the world with the service of consumption. Fortunately for them, Trump makes clear demands. ## **Trump Rule #4: Trump states exactly what he wants** What Trump wants often has very little to do with trade. For the recently announced tariffs, his demands included slowing illegal immigration and halting drug trafficking. But his speeches and platform indicate that what he really wants is: - Highly favorable trade agreements - Reviving domestic manufacturing - Raising government revenue - Forcing other countries to pay for their own defense There are already indications that world leaders are giving in to Trump’s demand. ## **Trump Rule #5: Trump threats get immediate results** Canadian Prime Minister Justin Trudeau has already flown to Florida to have dinner with Trump, promising to deploy more helicopters and drones to secure the northern border. Mexican President Claudia Sheinbaum called Trump to discuss the tariff threats but took a more brazen tack. “There will not be a potential tariff war,” she said. European Commission president Ursula von der Leyen says that’s the wrong response. Following her directive, and without even being threatened, the EU has already entered negotiations by (again) suggesting they will buy more American LNG. ## **Trump Rule #6: Trump tariffs mean The Rise of America** Trump’s threatened tariffs quickly secured commitments from neighboring countries. They are also reshaping global trade in real-time, giving the U.S. a notable advantage. Even before new trade deals are made. Faced by the uncertainty of tariffs, global companies have begun shifting supply chains away from China and toward U.S. and U.S.-allied countries. Of course, there’s always a chance that Trump will need to make good on his word and enact real tariffs. If that occurs, it stands to make the U.S. even stronger. Regards, Katusa Research **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # 2025 is the Year of the “Silent Surge” Assets - URL: https://katusaresearch.com/2025-is-the-year-of-the-silent-surge-assets/ - Type: article - Published: 2024-12-27 - Updated: 2025-02-24 - Author: Marin Katusa While the financial media was busy debating whether the Fed would pivot in 2024… Four sectors have been quietly building what I call “Silent Surge Assets” of 2025. If you understand how these pieces fit together, we could stand to make some good money by this time next year. And it starts with a metal that 99% of investors can’t even pronounce correctly… ## The $34,000 Metal the Pentagon Can’t Live Without When China announced antimony export controls in September 2024, most investors barely noticed. Big mistake. Right now, **antimony** is trading at $34,000 per ton – and it’s become the linchpin of America’s military and energy future. Here’s what everyone missed: - **Every night vision goggle needs it, every grid-scale battery requires Antimony and the Pentagon’s stockpile covers just 5% of annual demand.** With Russia’s supply cut off by sanctions (down 82% from 2021), we’re looking at a supply squeeze that *could* send prices parabolic in 2025. No here’s where it gets interesting… The U.S. Department of Defense just classified antimony as a “critical strategic metal” in November 2024. And they’re about to announce a major stockpiling initiative that could send prices soaring. The last time antimony had this kind of supply squeeze? **The price jumped 4x in less than 18 months.** And now… Antimony prices soared in 2024, climbing from $13,000 to $38,000 per tonne, sparking significant investor interest in this top-performing commodity. Action Step #1: Look for North American antimony producers with grades above 4%. There are only three that qualify, and one is still flying under the radar. ## The Medical AI Revolution Nobody Saw Coming While everyone’s obsessing over ChatGPT and Quantum Computing, a $187 billion medical revolution is quietly unfolding. The numbers are staggering: - 600 million people need better diagnostics annually - Healthcare AI solutions could save $360 billion yearly - Smartphone-based diagnostics are seeing 94%+ accuracy rates But here’s what caught my attention… The big healthcare players aren’t just investing – they’re restructuring their entire business models around AI diagnostics. - **Johnson & Johnson just committed $2.8 billion to AI diagnostics. Elevance Health is restructuring its entire diagnostic division.** When companies like *Johnson & Johnson* and* Elevance Health* start moving this aggressively, you know something big is coming. **In October 2024, a health tech AI system diagnosed a rare form of cancer faster and more accurately than a team of specialist doctors.** The market barely noticed. But major healthcare providers did. According to Bain Capital, more healthcare groups are using AI… With 15% of providers and 25% of payers now having AI plans to make decisions and work better, and many are excited about generative AI. And this means a surge of money going into the sector. As of December 2024, five of the largest hospital networks in America are quietly piloting AI diagnostic systems. So, it’s time to focus on companies with FDA approval pathways and existing partnerships with major healthcare providers. And with Trump and Musk ascending to power with the Dept of Government Efficiency (DOGE) – the regulatory barriers are about to come crashing down. Action Step #2: Focus on companies with FDA approval pathways and existing partnerships with major healthcare providers. ## Trump, Musk, and the Solar Surge Now, here’s where things get interesting… The market’s completely misreading what’s about to happen in solar. They think a potential Trump presidency would hurt renewable energy. They’re dead wrong. What they’re missing: - Solar installation costs dropped 40% in 2024 - Grid storage capacity is set to triple by 2026 - U.S. manufacturing capacity is at just 20% of projected 2025 demand And with Musk’s recent hints about a revolutionary new solar storage technology, we could be looking at a perfect storm for [U.S. solar manufacturers](https://carboncredits.com/top-4-solar-stocks-to-watch-in-2025-and-why-they-matter-suun/). Action Step #3: Look for North American-based manufacturers with strong balance sheets and existing contracts with utility companies. ## Silver: The Silent Multiplier Silver has always played second fiddle to gold. It’s been called “poor man’s gold,” an inflation hedge, or just another shiny object. But I’m here to tell you—those days could be over, fast. Silver isn’t just precious; it’s essential. It’s the quiet backbone of the biggest revolutions in energy, technology, and defense. And yet, almost no one is paying attention to what’s happening right now. Let me paint you a picture… Every solar panel relies on silver. Every AI server depends on it. Every advanced military application—from radar systems to weaponry—needs it. And demand continues to rise. - **Global silver consumption is on track to hit an all-time high in 2024, and guess what? Industrial applications are driving over 60% of that demand.** Supply is not just tight—it’s disappearing. Mining output can’t keep up and we’re staring down the largest supply deficit in over a decade. When money moves to silver – silver stocks can move fast. ## The Last Word of the Year As we close out 2024, remember this: The biggest gains don’t come from following the herd. They come from seeing how seemingly unrelated pieces fit together before everyone else does. These are just four sectors – antimony, health tech AI, solar, and silver – that are setting up for what I call a “Silent Surge” in 2025. There are many more we are following in the premium monthly newsletter, [Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/) – and investment ideas on how to benefit from the Silent Surge. They’re interconnected plays in what I believe will be the biggest industrial transformation of the next decade. And on that note, we at Katusa Research wish all of you a healthy and prosperous 2025. Regards, Marin Katusa the Katusa Research Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Five Alarm Chart Fire: Some Wall Street Money Is Quietly Heading for the Exit - URL: https://katusaresearch.com/five-alarm-chart-fire-some-wall-street-money-is-quietly-heading-for-the-exit/ - Type: article - Published: 2024-12-20 - Updated: 2024-12-19 - Author: Marin Katusa The contrast couldn’t be more stark – or more alarming. The champagne is flowing on Wall Street as markets hit record highs, but behind the scenes, some of the savviest players in finance are quietly packing their bags. ## **The Retail Stampede: Everyone’s a Genius in a Bull Market Retail** Investors are pouring money into the market at a dizzying pace, with 2024 seeing an unprecedented $448 billion flowing into U.S. equity funds. It’s reminiscent of the late 1990s, when taxi drivers were giving stock tips and every dinner party turned into an investment seminar. The difference? Today’s investors are armed with leveraged ETFs and commission-free trading apps. Our [“Brother-in-Law” indicator](https://katusaresearch.com/beware-the-bbq-pitch-counter-indicators-to-avoid-losing-money/) is beeping faster and faster. ## **Corporate Executives Are Cashing Out While Main Street Buys** Corporate America’s top brass is selling – and selling big. Corporate executive stock sales have hit all-time highs, creating a seller-to-buyer ratio that should make any investor pause. When the people running the companies are rushing to cash in their chips, it might be time to ask why. ## **Leverage Fever: The Return of Financial Heroin** Remember those warnings about not using leverage in an unstable market? Investors apparently don’t. Trading in leveraged ETF products has exploded to $80 billion weekly, turning the market into a high-stakes casino where every bet is doubled down. It’s financial heroin – thrilling until it isn’t. ## **The Oracle’s Warning: Buffett’s $160 Billion Message** Warren Buffett, the legendary investor who made his fortune being “fearful when others are greedy,” is sitting on his largest cash pile since the 2008 financial crisis. Berkshire Hathaway’s cash position has swelled to historic levels, suggesting the Oracle of Omaha sees storm clouds where others see clear skies. In the December issue of ***[Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/)***, we discussed Marin Katusa’s personal cash percentage weighting, and talked about the merits of being an [alligator investor](https://katusaresearch.com/the-way-of-the-alligator/): waiting before we buy our targeted resource companies. We have our list of great companies to buy, but just as important as buying great companies is “what price” you pay for that great company. ## **The Smart Money’s Last Dance? Professional Traders Hit New Records** Professional traders have pushed their bullish positions in S&P 500 futures to unprecedented levels. But here’s the twist – historically, when everyone’s positioned the same way, the market has a nasty habit of proving the majority wrong. ## **Is Slowing Steel Production a Warning Sign for the Economy?** History tells us that reduced steel output coincided with major economic downturns, like the dot-com crash and the global financial crisis. As we observe a similar trend today, could this be a red flag for the current stock market boom? Is the extended bull run nearing its end? A steep decline might be just around the corner. Look at the chart below to see how steel production trends have aligned with economic shifts over time. ## **The Irony is Intense…** As retail investors embrace ever-riskier bets and leverage their positions to the hilt, the smart money is quietly building defensive positions and raising cash. It’s a tale as old as Wall Street itself – the question is, which side of history will you be on when the music stops? The current euphoria might continue – markets have a way of defying logic longer than anyone expects. But when the smartest players in the room start heading for the exits while smiling and telling everyone what a great party it is, it might be wise to at least know where your coat is. After all, as one veteran trader once quipped, “*The problem with bubbles isn’t spotting them – it’s knowing when to stop dancing*.” Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Privacy Policy - URL: https://katusaresearch.com/privacy-policy/ - Type: page - Published: 2024-12-19 - Updated: 2026-10-02 - Author: Marin Katusa At Katusa Research, we are committed to protecting your privacy and ensuring the security of your personal data. This Privacy Policy outlines how we collect, use, disclose, and protect your information. 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It’s your money and your responsibility. ## **Contact Us** **Phone Number:** +1-778-737-7381 **Email:** [subscribers@katusaresearch.com](mailto:subscribers@katusaresearch.com) *Office hours are Monday to Friday 8am to 4pm Pacific Time excluding stat holidays.* **Mailing Address:** Katusa Research 530 – 800 West Pender Street Vancouver, British Columbia, Canada V6C 2V6 **Last Updated: **May 2025 --- # China Hits the Panic Button - URL: https://katusaresearch.com/china-hits-the-panic-button/ - Type: article - Published: 2024-12-13 - Updated: 2024-12-11 - Author: Marin Katusa China just hit the panic button. Beijing has unleashed a fiscal stimulus package that’s less a gentle nudge and more a full-throttle economic intervention. After watching its economy spiral into a dangerous deflationary trap, Beijing has launched its biggest economic rescue mission since 2008. Think of it as turning on all the monetary and fiscal faucets at once – and hoping something starts growing. Imagine a store that keeps cutting prices because nobody’s buying. Then other stores follow suit. Soon, customers stop buying completely, thinking “why buy today when it’ll be cheaper tomorrow?” That’s China’s nightmare right now. For the first time since the 1990s, China faces a rare and dangerous economic condition: Nominal GDP (the actual dollar amount of all goods and services) has dropped below real GDP (the value adjusted for inflation). **In plain English? The economy is shrinking in actual money terms.** The *GDP deflator* is a crucial metric in understanding this dynamic. It reflects the relationship between nominal GDP and real GDP by measuring the changes in price levels across the economy. - **A negative GDP deflator,** as seen in China’s current case, suggests that the prices of goods and services are falling over time, which can be detrimental to economic growth. The chart below shows China’s GDP deflator since the early 1990s. ** ** Think about that. The world’s second-largest economy – a country that’s been growing non-stop for decades – is now watching prices fall across the board. Local governments are so strapped for cash they’re paying teachers with IOUs. Bus services are being cut. Shopping malls stand empty. It’s gotten so bad that Beijing is doing something it hates: admitting there’s a problem by unleashing a massive stimulus package. They’re: - Ordering banks to lend more money - Pumping billions into infrastructure projects - Throwing lifelines to failing real estate developers The “*knee jerk reaction*” to the policy announcements has been positive as shown below by the Goldman Sachs China Real Estate Index. ** ** ## **The Real Estate Nightmare Beijing Can’t Wake Up From** China’s real estate market is in freefall, and there’s no quick fix in sight. Local governments bet everything on endless property growth, borrowing heavily against land they assumed would only appreciate. Now that the bubble has burst, they’re drowning in debt. Beijing knows what needs to be done: buy excess housing, ease mortgage requirements, stabilize rents, and prevent another bubble. But promising 5% economic growth while trying to fix a broken property market is like promising clear skies in a hurricane. The government’s greatest fear isn’t just economic collapse – it’s the social unrest that comes with it. When prices keep falling, people stop buying, businesses stop investing, and the whole system risks spinning into a deflationary death spiral. The stock market’s recent bounce shows investors like Beijing’s intervention, but the battle is far from over. The chart below shows the recent price action in the Shanghai Composite, the largest Chinese stock index. ## **China’s Economic Bazooka Could Shake Global Markets** Here’s China’s desperate plan to hit 5% growth: flood the world with cheap goods. With their domestic economy struggling, they’re betting big on exports to save the day. The strategy is simple but risky. Ramp up factories, slash prices, and sell everything overseas. This would prop up their currency and help fix their deflation problem. But there’s a catch – who’s buying? The challenge is, in a “reshoring environment” who is there to trade with? The US is not going to play ball, unless Trump creates a substantial favorable trade deal or at least the illusion of one. The most likely candidates would be India, Russia and the Middle East. Russia and the Middle East can swap oil for goods, circumventing sanctions and dollars, or even work with China to reroute Trump’s tariffs through different nations. This matters because China is the world’s biggest oil customer after America. They burn through 17 million barrels daily – about one-sixth of global demand. Their appetite for oil drives global prices. OPEC is betting China’s oil thirst will grow even stronger, predicting they’ll need an extra 653,000 barrels daily in 2024 and 410,000 more in 2025. But the International Energy Agency isn’t so sure, forecasting less than half that growth. Meanwhile, America keeps pumping oil but at a slower pace, while OPEC and Russia work together to control prices. The wild card? Whether China’s economic gamble pays off. If it fails, oil markets could look very different very soon. ** ** ## **While Others Panic, We’re Up 38% On Our Latest Energy Pick** Here’s what most investors get wrong about oil: They’re all focused on geopolitics – Russia, Ukraine, Israel, Iran. But they’re missing the bigger picture. The truth? We’ve got plenty of oil. The Permian Basin is pumping record volumes, and OPEC’s sitting on millions of barrels of spare capacity. That’s why oil prices will likely stay between $55-75 per barrel – high enough for profits, low enough to keep the economy running. And that’s exactly why our subscribers are up 38% (and much more factoring in dividends). But here’s the exciting part: Last week, I shared an even better opportunity. **It is a company that can grow in a weak oil price environment or in a strong one.** Best of all? It owns irreplaceable assets in America’s most profitable energy region, run by one of the smartest management teams I’ve ever analyzed. Get the name and details in my premium research letter, *[Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/)*. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Bitcoin Hits $100K While Your Dollar Silently Dies: The Fed’s Game - URL: https://katusaresearch.com/bitcoin-hits-100k-while-your-dollar-silently-dies-the-feds-game/ - Type: article - Published: 2024-12-06 - Updated: 2024-12-05 - Author: Marin Katusa Look, something doesn’t add up. Bitcoin just smashed through $100,000, tech stocks are partying like it’s 1999, and yet… your morning coffee still costs more than a gallon of gas did in 2020. The Federal Reserve keeps telling us inflation is cooling, but your wallet knows better. If you’re wondering why a “comfortable” six-figure salary doesn’t feel so comfortable anymore – even as the official numbers paint a rosy picture – you’re not alone. And you’re not crazy. What I’m about to share might make you angry. Not at the prices (though those are infuriating enough), but at how our official inflation measurements have more holes than a slice of Swiss cheese. Welcome to 2024, where everything’s expensive and the numbers don’t seem to matter. And now, inflation is staging an unexpected resurgence. Key metrics like Core CPI, PCE, and PPI are climbing again—a trend not seen since February 2022. - **In October 2024, Core PCE inflation rose to 2.8%, while CPI reached 2.6%, snapping a seven-month streak of declines.** Shelter costs, a significant driver, held steady at 4.9%. Meanwhile, energy prices, once a source of relief, have stopped falling dramatically. This poses a **serious dilemma** for the Federal Reserve. After months of cautious optimism about taming inflation, Fed Chair Jerome Powell recently warned that victory over inflation is far from assured. The bond market is already bracing for potential shifts in monetary policy, leaving investors and policymakers on edge. But here’s the real kicker: These renewed inflation concerns reveal only part of the story. Why? Because the way inflation is measured—using the *Consumer Price Index* (CPI)—has glaring blind spots that don’t reflect the true financial burden on households. Let’s unpack why official inflation data feels out of touch and what it means for you. ## **The Flaws in Inflation Measurement: What’s Missing from the CPI?** Over time, the CPI has been tweaked in ways that leave out or downplay expenses that hit many of us hard, making the official inflation rate feel out of touch with reality. Let’s break it down… **1. Actual Home Prices**: The CPI doesn’t track actual home prices. Instead, it uses “Owners’ Equivalent Rent,” which estimates what homeowners might pay to rent their homes. This method glosses over the real costs that new homebuyers face. Guessing isn’t working! **2. Income and Property Taxes**: While sales taxes are included, the CPI ignores property taxes and income taxes—major drains on household budgets. With rising tax rates in many areas, these omissions understate the real cost of living. **3. Retirement and Investment Fees**: Managing your 401(k) or brokerage account often comes with fees that seem to creep up every year. These costs chip away at your savings but aren’t fully reflected in the CPI. **4. Out-of-Pocket Healthcare Costs**: Co-pays, deductibles, and uncovered medical expenses continue to rise. Yet, the CPI significantly underrepresents these growing burdens, even as healthcare costs eat up more of family budgets. **5. Student Loan Interest and Fees**: While tuition costs are accounted for, the CPI overlooks ballooning student loan interest payments and the extra fees tied to higher education. These are long-term financial anchors for many graduates. **6. Food and Gas Prices in Core CPI**: The “core” CPI, used for policy decisions, excludes food and energy costs because they’re considered volatile. But for most people, these essentials are unavoidable—and rising prices hit immediately. **7. Rising Insurance Premiums**: Whether it’s health, auto, or home insurance, premiums have been climbing. Due to adjustments in how these are measured, their increases aren’t fully shown in the CPI. ## **Why Should You Care?** The gaps in the official inflation rate aren’t just numbers on a government report—they have real and immediate consequences for your everyday life. Think about your paycheck. Cost-of-living adjustments are often tied to the official inflation rate, but when that rate understates the true rise in expenses, it’s as if you’re taking a silent pay cut. Your paycheck may stay the same, but your bills, groceries, and rent keep climbing. Even personal budgeting takes a hit. If you’re basing your financial plans on official inflation data, you might be underestimating just how much prices will rise. Savings goals, investment retirement strategies, even your day-to-day spending habits—everything risks falling out of sync with reality. ## **What This Means for the Fed—and You** The resurgence of inflation is complicating an already tricky environment for the Federal Reserve. With inflation indicators rising, flawed CPI data makes it even harder for policymakers to gauge the true financial strain on households. This disconnect could result in mismatched monetary policies that either overshoot or undershoot the economy’s needs. - **As inflation lingers—and potentially accelerates—real assets like gold, commodities, and real estate may become more attractive as hedges.** Bonds and other fixed-income instruments, on the other hand, could face turbulence if the Fed raises rates again. It’s a critical moment for you to reassess strategies, ensuring portfolios are positioned for a shifting inflation landscape. The hidden winners of this inflationary surge aren’t what you’d expect—but they’re tied to two of the most critical metals driving the global economy. Discover how gold and copper could transform portfolios in the months ahead with **[Katusa’s Resource Opportunities](https://join.katusaresearch.com/subscribe/?)**… And you can see where I’m putting my own money for what’s coming next. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Biggest Crypto Bluff Ever Made - URL: https://katusaresearch.com/the-biggest-crypto-bluff-ever-made/ - Type: article - Published: 2024-11-29 - Updated: 2024-11-28 - Author: Marin Katusa Corporate money in politics isn’t new. But in the runup to the 2024 election, it came from a surprising source. No, it’s not Michael Saylor, the man who turned MicroStrategy into a Bitcoin juggernaut. With over 386,700 BTC under its belt, his company isn’t just a tech firm anymore—it’s practically a Bitcoin bank. Saylor may have put Bitcoin on corporate boardroom agendas, **But the real story of 2024 is how the cryptocurrency industry used its power to rewrite the political *influence* playbook…** This relatively new sector managed to outspend titans of lobbying like oil and gas, Wall Street, the Koch brothers, and even George Soros. **In fact, crypto PACs raised a jaw-dropping $248 million—nearly half of all corporate donations aimed at shaping federal elections.** And a single, little-known PAC called Fairshake raised 80% of that total. All of that money was to be spent on a single purpose: electing pro-crypto officials. So Fairshake and the other PACs developed a brilliant strategy for promoting crypto-friendly candidates. Fairshake’s winning strategy had three key elements: - **Candidate grading:** Evaluated every candidate’s stance on crypto. - **Targeted ad spending:** Backed the pro-crypto candidate with aggressive ad campaigns, often without mentioning crypto directly. - **Bipartisan approach:** Endorsed equal numbers of Democrats and Republicans, focusing solely on crypto policy. **The only thing that mattered was a favorable attitude toward crypto.** And that’s how Fairshake decided to make an extremely risky, extremely calculated move: taking down the biggest obstacle to crypto going mainstream. ## **Fairshake Shakes Down Mr. Brown** That obstacle was the chairman of the powerful Senate Banking Committee, Sherrod Brown. Mr. Brown has been an influential voice on financial regulation since he was first elected sixteen years ago. And he’s been a critic of crypto for nearly as long, constantly warning of the risks it poses for consumers and calling for more regulation of the industry. He also has the final say on whether pro-crypto legislation is considered in the Senate. In December 2023, asked whether he was concerned about the crypto industry funding his opponent, Mr. Brown said: “I don’t care if they do… I mean, bring ‘em on.” Fairshake took him up on the challenge, spending more than $40 million to back Bernie Moreno, a cryptocurrency advocate and blockchain company founder, against Mr. Brown. It was an *insane* bluff. If they won, it could seal the future of crypto as a mainstream currency and send it soaring. If they lost—well, Mr. Brown could make things “really painful” for the industry for a very long time. But here’s what happens to cavalier incumbents when they go up against the crypto industry: Sherrod Brown, three-time Senator, lost decisively to a former car dealer who had never held elected office. It wasn’t luck. ## **Fairshake Is the New Kingpin of Crypto** Because Fairshake did the same thing with Democratic Representative Katie Porter, spending $10 million to successfully ensure she lost the primary. In fact, in 85% of the primary races with crypto-PAC intervention, the crypto-backed candidate won. The strategy has proven so effective that the incoming government will have about 60 percent pro-crypto members. Fairshake and the other pro-crypto PACs achieved something they might not have even bargained for. Just the *fear* of pro-crypto money is now enough to make politicians vote and speak favorably. **“Attacking crypto means risking your seat.”** *– former Coinbase CTO Balaji Srinivasan* Soon after big crypto pledged to spend in his race, Montana Senator Jon Tester, who has been skeptical of crypto, voted in favor of pro-crypto legislation. Fairshake’s efforts have finally created a Congress that is pro-crypto. And with the Republicans taking the Senate, it means one thing… “*This will be the most crypto-friendly legislature ever.”* – Consumer Federation of America director Adam Rust ## **Brace Yourself for the Crypto Super-Majority** Already, the idea of a Crypto Congress has upended the sentiment surrounding Bitcoin. It has shot up more than 40% since Election Day, repeatedly breaking to new record highs and coming within spitting distance of the $100,000 mark. It’s all based on a brand-new sentiment for Bitcoin—that regulators will no longer restrain its price. Marc Andreessen, a major Fairshake benefactor, said the election outcome felt like “a boot off the throat” for cryptocurrency. What kind of progress will the Crypto Congress make? An early indicator came in July 2024. U.S. Senator Cynthia Lummis, appearing on stage with Donald Trump, introduced the Bitcoin Act, which would create a strategic Bitcoin reserve—starting with the 213,000 Bitcoins the U.S. government already owns. **A few other ideas have been floated for legislation, including:** - Rolling back regulations that are burdensome for crypto exchanges. - Exempting capital gains taxes on U.S.-issued cryptocurrencies. - Shifting federal crypto oversight from the SEC to the Commodities Futures Trading Commission. If Bitcoin begins to be considered a commodity, it will completely change how investors approach it. The sentiment will switch from seeing it as a risk-based speculation to a value-based commodity, and the price is likely to reflect that. **Fairshake’s influence shows no signs of slowing down.** **With $78 million already raised for 2026, crypto PACs are poised to further solidify their grip on Congress.** As pro-crypto sentiment grows, the industry’s ability to shape policy—and markets—is virtually unmatched. We’ll continue to track this unprecedented shift. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Shocking Truth About AI’s Thirst for Water - URL: https://katusaresearch.com/the-shocking-truth-about-ais-thirst-for-water/ - Type: article - Published: 2024-11-22 - Updated: 2024-11-21 - Author: Marin Katusa “Don’t be evil” used to be their slogan. But times have changed. And now it takes a lengthy lawsuit to find out what’s really going on at Google. The Dalles, a small city in the center of northern Oregon, found that out the hard way. “The Dalles” comes from a French term referencing the flow of water through a narrow channel—and the usage of that water is *exactly* what Google wants to keep secret. They even paid more than $100,000 in attorney’s fees to keep it under wraps, designating it a “trade secret.” But finally, in a settlement with the local newspaper, Google relented. It turns out that Google’s data centers in the Dalles use copious amounts of water, and their water usage has tripled in the past five years. Google now uses nearly one-third of the city’s water, or enough to flood the entire city three inches deep, every year. That’s going to continue to rise, as Google is building two more data centers in the Dalles. The experience in Oregon is typical across the U.S.: Google generally forces cities to sign NDAs regarding their water usage. ## **Keep Cool and A.I. On** Most investors know that data centers must be kept cool to preserve the equipment and increase efficiency. But they might not know that there’s a basic tradeoff for cooling data centers: Operators have to use either electricity or water. In the past two years, there has been heavy public scrutiny around the lack of power available for data centers. But *water* usage hasn’t had that same level of scrutiny. So Google is substituting high-emissions electricity with low-cost water. Take it directly from Google’s 2024 environmental report: *While it will take more time for electricity grids to decarbonize, we’ll continue using water cooling to improve our energy efficiency.* *[We] recognize that this tradeoff will increase our data center water footprint. . .* It’s not just Google. **All of the big tech companies are using water to artificially decrease their carbon emissions.** How much water, exactly? In 2023, Google data centers used 20.8 *billion* liters of water—up 28% from 2021. That’s the amount of water required to produce 11.4 million Teslas (including the batteries), or twice as many as Tesla has produced since it began production. It’s not hard to see why water usage is skyrocketing. The tech giants are now creating what Nvidia CEO Jensen Huang calls “AI factories.” These new data centers require extremely powerful chips in extremely dense arrays—which require an extreme amount of water for cooling. AI factories have kept tech companies from reducing water used for cooling, no matter how hard they try. In 2021, Microsoft announced they would be cutting data center water usage by 95% by 2024. But here’s what Microsoft’s water usage actually looks like for the last four years: So now they have a new target: 40% water *intensity* reduction… by 2030. Microsoft’s performance in water usage is so bad that its Manager of Data Center Sustainability *resigned* in protest. **The extent of tech companies’ high water usage isn’t widely known.** *“The reason there’s not a lot of transparency… is [because] most companies don’t have a good story here.”* – CyrusOne Vice President Kyle Myers The story is not going to get better, because AI factories are just the beginning. OpenAI wants to build several 5GW data centers—each one as big as Microsoft’s entire data center capacity currently. That means a single data center would use 13 billion liters of water a year. UC Riverside researchers have estimated that by 2027, global AI data centers could use 6.4 trillion liters of fresh water. In a cruel, ironic twist, data centers are being built out where power is cheap and carbon-free—places with abundant wind and solar, like California, Arizona, and Texas. Those are places where water is already scarce. In those states, data centers are competing with agriculture and residential water use. ## **The Water Competition** The reliance on water and competition against humans—poses a high risk for data center developers and tech companies. In the future… *“Water is going to be king.” – CyrusOne VP Kyle Myers* Everyone knows that AI data centers are power-hungry. Few people know they’re water-desperate—and getting worse. In 2023, 42% of Microsoft’s water consumption came from areas already experiencing water stress. Which is why Microsoft and others have started looking for alternate sources of water. Water rights holders in key regions like Texas and California—where the data centers are being developed—have an incredible opportunity right beneath them. And because there is very little transparency or comprehensive data on the water footprint of the largest data centers, very few investors are aware of this opportunity yet. **But it’s NOT just about water competition but Heated Water Effects on the environment.** There are environmental impacts of the “heated” water because its released back into the environment after the water is used to cool the data center. Few are talking about this and there will be more data and research about these impacts. But I have my eye on a few companies full of liquid gold. Regards, Marin Katusa P.S. [Click here to learn more about my premium research service](https://join.katusaresearch.com/subscribe/) – ***Katusa’s Resource Opportunities***. You’ll get a front-row seat to my analysis, AND where I’m putting my own money in the markets. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Trump Effect: How America’s Second Chance Could Make You Rich - URL: https://katusaresearch.com/the-trump-effect-how-americas-second-chance-could-make-you-rich/ - Type: article - Published: 2024-11-15 - Updated: 2024-11-14 - Author: Marin Katusa | *In this week’s **Investment Insights**…* **America’s Comeback: **Trump’s re-election drives energy independence, manufacturing growth, and pro-business deregulation for a new economic boom. **Strong Dollar, Strong Future: **Trump’s policies keep the U.S. dollar dominant, outpacing China and Europe with unmatched resilience and innovation. **Energy & Market Surge: **A bold hybrid energy strategy and predictable policies unleash opportunities—betting against America is a mistake. | America just made a **massive** statement. And the markets responded with vengeance. Donald Trump’s re-election marks a monumental shift poised to reshape the nation’s future. Forget the talking heads who claim the country is doomed. They’re not looking at the hard facts that spell out a comeback story for the ages. I know what you’re thinking: How could anyone believe in America’s “rise” amidst chaos, division, and global uncertainty? In 2021, I spelled it all out in my book – [The Rise of America](https://www.amazon.com/Rise-America-Remaking-World-Order/dp/154452143X). It’s easy to be cynical, but here’s what most people are missing. ## **Chaos Breeds Opportunity** You can’t have meaningful change without a bit of chaos. Trump thrives on that chaos. Critics say he’s dangerous. Unpredictable. Reckless, even. But that unpredictability? It’s exactly why America is on the verge of another historic rise. - **Under Trump, America leans hard into energy independence.** Trump backs the kind of deregulation that cuts through bureaucratic red tape faster than anyone in D.C. wants to admit. You can’t overlook the jobs that come from oil and gas, and you can bet that a second Trump term means serious muscle behind domestic energy. This administration isn’t waiting for permission from foreign allies or appeasing international bureaucrats. America is putting itself first. And if you think that’s bad news for the rest of the world, think again. **The world needs a strong America**. If the U.S. falters, global markets tremble. When America wins, everybody else benefits. ## **The Dollar’s Surprising Strength** Despite dire predictions, the U.S. dollar remains the world’s reserve currency, and it’s not going anywhere. - **In fact, as of 2024, the U.S. dollar still accounts for approximately 58% of global currency reserves, according to the IMF.** Fiat *this*, money printing *that*… Experts have spent years warning about the dollar’s collapse. Yet, here we are. The truth? **A Trump presidency means confidence in the dollar.** Trump has already started making significant nominations and appointments that will move the America First agenda forward. Investors know that Trump won’t let the Fed bow to international pressure. His policies may seem radical, but remember: currencies are always relative. Trump’s bold moves are set to strengthen the U.S. dollar against global competitors, solidifying its dominance. Look at the alternative. Compare America to China, a nation facing demographic and economic crises. Or Europe, where bureaucratic overreach smothers innovation. Despite its challenges, the U.S. remains the world’s most adaptable, resilient, and future-proof economy. With red tape slashed, America’s capitalistic spirit will drive innovation across technology, industry, education, and defense. That’s why Trump’s election isn’t just a political move – it’s a catalyst for a stronger, more dominant dollar. One that retains its status as the backbone of international finance. ## **Big Moves in Manufacturing** Remember how they said American manufacturing was dead? During Trump’s first term, factories saw a revival. His policies incentivized companies to bring jobs back home. Sure, it wasn’t perfect. But no one can deny that he reignited a manufacturing mindset in America. - **During Trump’s first term, America added over 450,000 manufacturing jobs, according to the Bureau of Labor Statistics.** Now, he’s back. And this time, he’s doubling down. Expect new incentives for domestic production, more tax breaks, and a massive focus on “Made in the USA.” Forget cheap imports. Trump’s America means high-tech manufacturing centers that create quality jobs. - **America becomes the place where innovation meets execution.** And don’t forget: tariffs aren’t just taxes. They’re bargaining chips. When Trump plays hardball with foreign competitors, he’s doing so to secure better deals for American workers. That’s not just strategy. It’s leverage. ## **The New Energy Revolution** Love him or hate him, Trump isn’t afraid of bold ideas. While Biden focused heavily on renewables, Trump’s return brings a hybrid model. He knows oil and gas aren’t disappearing overnight, and neither are renewables. Under his administration, you’ll see a nuanced energy policy—one that uses America’s natural resources while investing in cutting-edge technology. Yes, that means more drilling. But it also means using that energy wealth to invest in emerging sectors. - Think infrastructure upgrades, - Advanced nuclear technology, and maybe even - A space-energy race that makes today’s innovations look like child’s play. UAPs? Watch how fast the technology gets incorporated into the American arsenal. America isn’t just keeping the lights on under Trump’s leadership, it’s paving the way for energy dominance. ## **The Return of Confidence** Think back to the markets during Trump’s first term. They surged. Investors had confidence. The administration understood that markets thrive on certainty and tax incentives that boost innovation. Expect that again. Markets like predictability in policy, and with Trump, you know what you’re getting. It might be controversial, but it’s a known playbook. For small businesses, this means less paperwork and more opportunities. For large corporations, it’s about tax structures that reward risk-taking. Everyone benefits when the barriers to entry are lower, and Trump knows how to lower them. ## **NEVER, EVER Bet Against America** So, what does this mean for you? The re-election of Trump is a wake-up call. If you’ve been betting against America, it’s time to reconsider. There’s more at play than the culture wars and divisive rhetoric. **Beneath the noise lies an economic strategy laser-focused on American growth.** Sure, challenges remain. Debt. Income inequality. A divided nation. These aren’t small issues. But America has always been the land of reinvention. And right now, we’re on the cusp of the next great reinvention. So, ask yourself: Are you prepared? Because this isn’t just a moment in history. It’s a once-in-a-lifetime chance to position yourself and your investments. I’ve tailored my portfolio in specific markets to prepare for what’s coming for the rest of this decade. The opportunity in the country’s “Golden Age” is right here for the taking and America is about to rise again. Are you ready to rise with it? Regards, Marin Katusa **P.S. Don’t miss your chance to get ahead of the biggest market moves.** Join Marin’s [*Katusa Resource Opportunities*](https://join.katusaresearch.com/subscribe/) for exclusive insights, cutting-edge research, and high-impact investment opportunities you won’t find anywhere else. **Subscribe now and position yourself to profit from America’s next great rise**. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Presidential Effect: Never Bet Against America - URL: https://katusaresearch.com/the-presidential-effect-never-bet-against-america/ - Type: article - Published: 2024-11-08 - Author: Marin Katusa It’s over. Welcome to The Rise of America. The votes are in, and the people have spoken: Donald Trump will be the 47th U.S. President. So far, the markets have reacted positively to this news, as they usually do… Historically, **U.S. stock markets have rallied during the two months before and after presidential elections.** In contrast, gold typically retreats from September to January in election years. But there have been **two notable exceptions**: - **George W. Bush’s first term** began just as the dot-com bubble burst in March of the election year. - **Barack Obama’s first term** kicked off shortly after **the **Global Financial Crisis, with Lehman Brothers’ colossal bankruptcy occurring mere weeks before the election. Here’s the bottom line: **Presidents usually have minimal direct impact on stock market performance**. It’s the **Federal Reserve’s policies** and **Congressional fiscal legislation** that hold significant sway over the economy and markets. Take Bush Jr., for example. He wasn’t directly responsible for the subprime mortgage crisis that triggered the Great Recession—even if a congressional committee later deemed it avoidable. Yet, it’s human nature to blame the person in the Oval Office when markets tank and credit them when markets soar. They’re the face of the nation, after all. So, let’s dive into how the markets—and key commodities—have actually performed under the last few presidents. ## **The Buck Stops with the President** Let’s start by seeing how the S&P 500 has performed through each series of administrations. Over the years, the relentless growth of the markets has largely ignored who’s in the Oval Office. Recessions have typically been driven by prevailing economic factors, not presidential policies. **An exception was the 1980s**, when **Reaganomics**—national economic policies led by President Reagan—took center stage. This direct presidential influence on economic policy was rare; the last time we saw something similar was with FDR’s New Deal. While the benefits and drawbacks of Reaganomics are still debated, the economy did recover strongly from stagflation and moved forward until the Black Monday crash of 1987. The response to that crash was largely credited to the Federal Reserve, not the president. The early 1990s recession under Bush Sr. was triggered by the oil price shock from Iraq’s invasion of Kuwait, compounded by tight Fed policy and a weak economy. This downturn directly contributed to Clinton’s 1992 election win. Clinton had the good fortune of taking office as the tech boom began—quite the contrast to his successor, Bush Jr., whose two terms both started and ended with recessions caused by bursting bubbles. Despite these challenges, growth was steady between those recessions. Markets have largely carried on through the Obama, Trump, and Biden administrations, even in the face of the COVID-19 pandemic and the 2022 bear market. ## **Now Let’s Look at Gold…** Gold’s journey has been rockier than the stock market’s, mainly due to geopolitics and inflation. In the early ’80s, the 1979 energy crisis from the Iranian Revolution and tight fiscal policy led to double-digit inflation, pushing investors into gold as a safe haven. Gold remained quiet for years until after 9/11, when prices began climbing, reaching new highs post-Global Financial Crisis. A new price floor emerged in the mid-2010s, but COVID-19 and escalating Middle East tensions propelled gold even higher. The historical inverse relationship between gold and real yields highlights geopolitics’ significant impact on gold prices. However, over the past year, this well-known inverse relationship between gold and real yields has broken down. The main culprit? Geopolitical uncertainty from the Iran-Israel conflict, along with doubts about the U.S. election outcome. ## **Let’s take a look at oil next…** Oil is the commodity most tied to geopolitical risk, thanks to OPEC’s grip on global supply. Events like the 1979 oil crisis, Gulf War spikes, the COVID-19 demand shock, and Russia’s invasion of Ukraine have dramatically reshaped oil’s supply-demand balance. Given these factors, it’s tough for any president to control oil prices—unless they start wars in the Middle East. ## **Now, let’s look at silver…** Silver’s chart mirrors gold’s, with two major peaks: 1980’s Silver Thursday caused by the Hunt brothers and the 2011 U.S. debt ceiling crisis. Recently, COVID-19 pushed prices higher, and both metals have maintained momentum through 2024. ## Keep Calm and Invest On - **Bottom line:**** In the long run, who’s in the White House rarely impacts commodity prices and markets.** Some sectors might feel the administration’s influence—think of Trump’s vs. Harris’s stances on crypto regulation and the energy transition—but overall, things balance out. Remember, if the U.S. lags, the rest of the world may not. EV adoption is slow in the U.S., but with 60% of new EV sales in 2023 from China and 25% from Europe, global EV growth remains strong. In the end, even with a familiar face returning to the White House, nothing has changed for investors. Fundamentals are the same: the energy transition and net-zero goals are coming. [Click here to see what I’m doing with my own money in my premium research letter](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?) – ***Katusa’s Resource Opportunities.*** Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Election Shockwaves, Markets and the Aftermath - URL: https://katusaresearch.com/election-shockwaves-markets-and-the-aftermath/ - Type: article - Published: 2024-11-01 - Updated: 2024-10-31 - Author: Marin Katusa | In this week’s *Investment Insights*… - **Election Volatility on Hold?** October’s usual market swings are missing—could a shakeup be imminent? - **Trump’s Lead Fuels Gold and Stock Market Optimism **With Trump’s odds at 66%, pro-business policies and rate cuts are boosting gold and stocks. - **Positioning for a Bull Market Regardless of Outcome **With strategic plays in place, investors have a chance to capitalize on potential market momentum. (Check the report at the end) | With the election countdown on, markets are bracing for a seismic shift. **Betting markets put Trump’s chances at 66%,** sparking expectations of GOP-driven, pro-business policies that could shake stocks, commodities, and send gold soaring again. The chart below shows the odds of Trump and Harris winning the US Presidential election. Views of a “red sweep” have taken hold, with odds of the GOP holding the Presidency, senate and house increasing to 48% over the past month. ## **Election Hype Is At An All-Time High, But Where’s The Volatility?** October, notorious for shaking up markets—think 1929, 1987, and 2008—has historically been a month of major crashes. - **In fact, 9 of the Dow’s 20 biggest single-day drops happened in October.** - **Since the 1950s, the S&P 500 has seen over 400 wild 1% swings in this month alone.** Yet this year, it’s been eerily calm… is this the calm before the storm? ## **This October has been eerily calm…** With 23 consecutive days without a 1% move in the S&P 500—a first in an election year since 1968. Why the calm amidst the election buzz? It might just be the ‘buy the dip’ mentality that’s taken hold of today’s investors, coupled with the Fed’s steady hand on interest rates. With rate cuts on the horizon, market players are looking past immediate risks, betting on brighter days ahead. ## **Could Trump Make Gold Portfolios Great Again?** With odds shifting, many investors are preparing portfolios for a GOP-led market environment, triggering substantial moves in U.S. Treasury and currency markets. The logic is GOP policies are typically more pro-business, while a Trump victory would likely mean new tariffs and potential economic uncertainty, with implications across every portfolio. For gold investors, this election matters. Under Trump’s previous term, both gold and the U.S. economy surged, even as the Fed hiked rates from 0.50% to 2.5%. Gold shot up over 50%, while GDP growth outpaced the 20-year average. What about Gold Miners? They were on fire, soaring nearly 90% during Trump’s time in office. Trump is taking a commanding lead in the polls with the backdrop of a loosening monetary policy and lower interest rates. Combined with economic uncertainty from new tariffs, the stock market, gold, and the USD – all have strengthened in anticipation. The chart below shows the return comparison since October 1, when Trump began to break away and gold again is leading the pack higher. Trump’s pro-business agenda will look to extend the corporate tax rate he enacted back in 2017, while simultaneously pressing tariffs on nations who won’t play ball with the US. Trump has no agenda to balance the budget, and current projections indicate his fiscal policy stance will lead to a deficit of $500 billion. If Trump wins and inflation kicks back into the economy, expect gold to go a lot higher. ## **Rocket Fuel for Stock Markets** Adding fuel to the stock and gold markets is the massive amount of capital parked in U.S. money market funds. Currently, nearly $6.5 trillion sits in these accounts, collecting interest at rates over 4.5%. As the Fed begins easing the Fed Funds rate, [a flood of capital sitting in money markets could soon seek new opportunities](https://subscribers.katusaresearch.com/gold-going-vertical-freedom/?)… **Potentially creating a powerful tailwind for equities.** Back in 2016, when Trump first took office, I coined the term ‘quantum economics’ to describe an unusual phenomenon: gold and the U.S. dollar both rallying together All the gold bugs laughed at my thesis at the time that both gold and the USD will rise. This theory has held up remarkably well, and with the current rate environment and economic backdrop, I see no reason to change course. No matter who wins the Presidential election in November, I’ve positioned myself and my subscribers to capitalize on the bull market ahead. [Click here to access my full Gold Preparation Report](https://subscribers.katusaresearch.com/gold-going-vertical-freedom/?). If you missed the explosive returns during Trump’s first term, now’s the time to get on board. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Uranium’s Bull Market Is Here—This Is Just the Beginning - URL: https://katusaresearch.com/uraniums-bull-market-is-here-this-is-just-the-beginning/ - Type: article - Published: 2024-10-25 - Updated: 2024-10-24 - Author: Marin Katusa ***Disseminated on behalf of Uranium Royalty Corp*** If you think nuclear power is old news, think again. In a new, exclusive interview, **Marin Katusa** sits down with **Scott Melbye**, **CEO of Uranium Royalty Corp (UROY)**. They reveal why uranium is about to experience an unprecedented surge on the back of major nuclear energy demand—and how you can capitalize on it. [**Click here to watch the interview now**](https://youtu.be/e7y2VYns3lc) **In this must-see conversation, Marin and Scott discuss:** - **AI’s Insatiable Power Demand** – Tech giants like Google, Amazon, and Microsoft are driving uranium demand to new heights to fuel their data centers. There are no signs of slowing down to secure power and electricity. - **Geopolitical Supply Squeeze** – With Russia and China securing most of Kazakhstan’s uranium, the West is scrambling for stable, long-term supplies. - **Cash Flow Incoming: Major Mines Coming Online** The imminent cash flow from world-class uranium mines like McArthur River and Cigar Lake makes UROY attractive. These aren’t speculative projects—cash flow is expected soon, giving investors confidence that the company’s growth is tangible and not just theoretical. If you’re serious about investing in the future of energy—and capitalizing on the rise of AI—this interview is essential viewing. Scott’s insights in the industry come with deep knowledge and contacts, and gives you the edge you need to make an informed position. Including… - **Physical Uranium Supply Is Drying Up ****– **There isn’t enough physical uranium available, even with $400 million in hand—it’s already locked in. UROY secured its supply when uranium was just $25 per pound, and today it’s worth much more. With demand soaring and supply tight, it’s a seller’s market. - **Geopolitical Tensions: Uranium Prices Could Rally Higher ****– **Cheap uranium from Kazakhstan is a thing of the past. Rising costs, shrinking supplies, and geopolitical tensions between the West and BRICS countries are pushing prices up. Uranium Royalty Corp is perfectly positioned with assets in North America and Africa to fill this gap. - **UROY’s Irreplaceable Portfolio ****– **UROY’s portfolio is one-of-a-kind, with royalties on top-tier assets like Roughrider and McArthur River. No competitor can replicate what they’ve built. This gives UROY a moat that positions it as a future leader in the uranium space. ** ** If you’ve been waiting to catch up on Nuclear Power and Uranium, this isn’t an interview you want to miss. Best, Anthony Ford Publisher, Katusa Research **IMPORTANT DISCLAIMER & DISCLOSURES** **Investing in stocks is HIGH RISK. You could lose All of your investment.** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Uranium Royalty Corp is a paid sponsor of this report.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. Katusa Research, its owners, directors, and employees are also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research partner company, New Era Publishing Inc. has received cash compensation in the amount of $1.25M from Uranium Royalty Corp and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained herein regarding Uranium Royalty Corp. has been derived from its SEDAR+ and SEC filings, including scientific and technical information regarding its royalty assets which has been reviewed and approved by Darcy Hirsekorn, its Chief Technical Officer and is a professional geoscientist in Saskatchewan and a qualified person as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects and is registered as a professional geoscientist in Saskatchewan. Information regarding the projects underlying Uranium Royalty Corp.’s interests has been derived from the publicly available disclosure of the underlying operators and owners, including where referenced herein. Katusa Research, and its directors, employees, and members of their households directly own or may own shares of Uranium Royalty Corp (UROY/UROY.TSX). Therefore, Katusa Research is extremely biased. Measures are in place such that no shares will be sold during the active awareness campaign. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. These statements are subject to known and unknown risks including those set forth in Uranium Royalty Corp.’s most recent annual information form and other public filings available at www.sedarplus.ca and www.sec.gov. Neither Katusa Research nor Uranium Royalty Corp. undertake any obligations to update the information presented or to ensure that such information remains current and accurate, except as required under applicable law. --- # BLASTOFF: US Data Center Construction Reaches Record Highs - URL: https://katusaresearch.com/blastoff-us-data-center-construction-reaches-record-highs/ - Type: article - Published: 2024-10-21 - Author: Marin Katusa ******Disseminated on behalf of Uranium Royalty Corp****** The race to power the AI-driven future is going crazy right now. And the world’s tech giants are throwing billions into securing the one thing they can’t grow without: energy. - **Microsoft Strikes Deal to Reopen Three Mile Island Nuclear Plant** Microsoft signed a 20-year carbon-free power deal with the revived Three Mile Island nuclear plant, supplying enough energy to power 700,000 homes and fuel its AI data center. The message is clear: nuclear energy is the future of tech. - **Larry Ellison’s $100 Billion Bet on Nuclear Power for Oracle’s AI** Larry Ellison isn’t waiting around. He’s all-in on nuclear power, pumping billions in SMRs to power Oracle’s next-gen AI data centers with scalable, reliable energy for the future tech boom. - **UK Shortlists Major Nuclear Players for SMR Program** Across the Atlantic, the UK has shortlisted major players like Rolls-Royce and Westinghouse for its Great British Nuclear program. Contracts are expected by year-end. ## **The Battle for Power is Getting FIERCE** With data centers consuming more electricity than entire countries… Tech giants like Microsoft, Oracle, Apple and now even Google are scrambling to lock down energy deals. The future of AI and cloud computing hinges on one critical factor—power. And nuclear energy, with its unmatched ability to deliver consistent, large-scale power, is emerging as the only real solution. ## Apple’s Quiet Nuclear Power Play Tucked away in Apple’s recent sustainability report shows the power sources they’re considering. With more data flowing through their servers than ever before, Apple is looking for clean energy and recognizes nuclear energy as one potential source. As Mike Tyson famously said, *“Everyone has a plan until they get punched in the mouth.”* Apple’s plan could be a punch to the mouth of every other tech giant and set the energy industry scrambling. It has the clout, the connections and most importantly – the funds. They’re looking to secure a large share of the global energy supply, and there’s one important metal that’s going to benefit. ## The Uranium Boom Nuclear power is fueled by one resource: uranium. And here’s the kicker—**the U.S. currently produces just above 1% of the uranium it consumes**. As nuclear energy demand surges, the global uranium supply chain is poised for a major disruption. And with demand currently far outpacing supply, uranium could become one of the hottest commodities of the decade. **But there’s one American company positioned to help solve America’s nuclear problem.** Enter **Uranium Royalty Corp. (UROY: NASDAQ)**, a company that’s perfectly positioned for a uranium boom. ## ## Why Uranium Royalty Corp. (UROY) is Our Go-To Energy Play UROY’s unique business model gives it leverage on rising uranium prices, all while minimizing the operational risks that come with mining. **1. Tactical Leverage on Uranium Prices** UROY has made bold moves, years before the Russia invasion of February 2022 in Ukraine and the Hyperscaling looking to lock down all the nuclear power by buying 3.5 million pounds of uranium from its inception and currently hold 2.4 million as of the last financial statements of September 12, 2024. As uranium prices rise to meet demand, UROY is positioned well to benefit. This is calculated positioning in a market that we think has potential for a breakout. **2. Positioned to Profit from Rising US Uranium Demand** Made in America uranium is expected to become critical. As the US government pushes for greater energy independence, domestic uranium production will have to catch up. UROY has 22 interests in 19 development, advanced, permitted and producing uranium projects in multiple jurisdictions, including royalties on the world class McArthur River and Cigar Lake mines which are the two highest grade and largest uranium producing mines in the world according to their owners. The company has strategically placed itself at the heart of America’s uranium revival. **3. Undervalued and Ready for a Uranium Price Surge** Despite its strong balance sheet, over 2 million pounds of uranium above ground in storage and interests in the highest grade operating uranium mines in the world, UROY trades at a fraction of analyst consensus PNAV seen values seen below. *Note: Cash, marketable securities, and physical holdings at spot price of US$80.00/lb U3O8 on September 12, 2024, at CAD:USD $0.74.* This company has a market cap of $340M, liquid assets and cash of over $225M, no debt and 22 interests on 19 development, advanced, permitted and producing uranium projects in multiple jurisdictions. That includes royalties on the world-class **McArthur River** and **Cigar Lake mines** which are the two highest-grade and largest uranium-producing mines in the world… This stock offers rare upside potential in an industry that’s about to explode in demand. Here’s why… ## Data Centers Are Power-Hungry—and Nuclear is a key solution The demand for data center power is growing at a breakneck pace. With giants like Microsoft, Oracle, and Apple leading the charge, nuclear energy is rapidly becoming one key long-term solution. And UROY is at the forefront of this revolution, poised to capture value as uranium becomes a critical commodity in the tech-fueled energy race. Don’t wait until the uranium supply crunch hits. **You should refer to Uranium Royalty’s annual information form and other public filings for further information regarding this opportunity. ****They are available under UROY’s profile at [www.sec.gov](https://www.sec.gov/) and [www.sedarplus.ca](https://www.sedarplus.ca/landingpage/).** Regards, Marin Katusa **IMPORTANT DISCLAIMER & DISCLOSURES** **Investing in stocks is HIGH RISK. You could lose All of your investment.** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Uranium Royalty Corp is a paid sponsor of this report.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. Katusa Research, its owners, directors, and employees are also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research partner company, New Era Publishing Inc. has received cash compensation in the amount of $1.25M from Uranium Royalty Corp and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained herein regarding Uranium Royalty Corp. has been derived from its SEDAR+ and SEC filings, including scientific and technical information regarding its royalty assets which has been reviewed and approved by Darcy Hirsekorn, its Chief Technical Officer and is a professional geoscientist in Saskatchewan and a qualified person as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects and is registered as a professional geoscientist in Saskatchewan. Information regarding the projects underlying Uranium Royalty Corp.’s interests has been derived from the publicly available disclosure of the underlying operators and owners, including where referenced herein. Katusa Research, and its directors, employees, and members of their households directly own or may own shares of Uranium Royalty Corp (UROY/UROY.TSX). Therefore, Katusa Research is extremely biased. Measures are in place such that no shares will be sold during the active awareness campaign. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. These statements are subject to known and unknown risks including those set forth in Uranium Royalty Corp.’s most recent annual information form and other public filings available at www.sedarplus.ca and www.sec.gov. Neither Katusa Research nor Uranium Royalty Corp. undertake any obligations to update the information presented or to ensure that such information remains current and accurate, except as required under applicable law. --- # Sanctions Gone Wrong: How Punishing Russia Put China In Power - URL: https://katusaresearch.com/sanctions-gone-wrong-how-punishing-russia-put-china-in-power/ - Type: article - Published: 2024-10-18 - Author: Marin Katusa | - **China Now Controls U.S. Nuclear Supply**: Sanctions on Russia shifted uranium to China, threatening U.S. energy security. - **85% of Kazakhstan’s Uranium Goes East: **Sidelining the U.S. - **America’s Energy at Risk: **U.S. utilities face higher costs and growing Eastern dependence. Immediate domestic action needed. - **Special Situations Stock Alert Coming:** A U.S.-based uranium company is uniquely positioned to benefit from this geopolitical shift—details to follow. | What I’m about to reveal has never been published before, and in just weeks, it will be the focus of U.S. Senate hearings. This issue is so critical, both Democrats and Republicans will be forced to rally behind it. The sanctions against Russian uranium were supposed to cripple Russia’s influence over America’s nuclear energy supply. On the surface, they worked—but there’s a much darker story unfolding beneath the headlines. While one U.S. company was granted a government exemption to continue importing Russian enriched nuclear fuel, something far more troubling happened… **America’s energy future is now in the hands of China… thanks to sanctions meant to cripple Russia.** The fallout has completely reshaped the global nuclear fuel supply chain. And the consequences for America’s energy security are severe. **The Fallout of U.S. Sanctions** Before sanctions, the nuclear fuel cycle was predictable and looked like this: But the U.S. crackdown on Russian uranium set off a chain reaction that no one saw coming. **1. Kazakhstan’s Uranium Is Now Flowing East**: Since the sanctions, the amount of uranium from Kazakhstan flowing to Russia and China has surged from **under 50% to a staggering 85%.** **2. China Is Now Supplying U.S. Utilities**: As Russia faced sanctions, **China** quietly stepped in, becoming a major supplier of enriched uranium products (EUP) to U.S. nuclear power utilities like Constellation Energy. The very fuel America needs is now flowing through China’s hands. As a result of the sanctions against Russia, the flow of EUP became: **How Much Has China Benefited?** It’s worse than most people realize. The U.S. Energy Information Administration (EIA) has **withheld critical data** on just how much enriched uranium is being imported from China. Meanwhile, the U.S. government has slapped a **7% tariff** on all EUP (enriched uranium products) coming from China. But even with the tariffs, the damage is done—China is now a key player in U.S. energy, and it’s leveraging this position for maximum gain. Russia and China are playing the long game… They aren’t sitting idly by, they’ve signed long-term agreements with Kazakhstan for uranium supplies, locking in control over the global uranium market. Here’s the cold reality: - **Cheap uranium is gone**—what was once affordable is now a premium commodity. - **Russia and China are tightening their grip**, securing long-term contracts that U.S. utilities simply can’t compete with. - **They offer more than just uranium**—government benefits and additional perks that American utilities can’t match, further driving up competition. **America’s Energy Security Is Entering “Code Red”** When Russia unexpectedly halted shipments of enriched uranium to U.S. utilities, it caught the American nuclear sector off guard. But here’s where it gets worse: Russia doesn’t need to ship directly to the U.S. anymore… China has stepped in, willing to pay more and continue the flow of Russian-enriched material. The result? **U.S. utilities will be forced to pay a much higher price for the enriched uranium they need.** This increases their dependency on China—a situation that poses a direct threat to national security. Without immediate action, America’s energy future hangs in the balance. The solution? The U.S. must urgently expand its domestic uranium production and reduce dependency on Russian and Chinese imports. Companies that have existing U.S.-based operations, are uniquely positioned to meet the rising demand and benefit from the shifting geopolitical landscape. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Hostile Takeover of America Right Under Your Nose - URL: https://katusaresearch.com/the-hostile-takeover-of-america-right-under-your-nose/ - Type: article - Published: 2024-10-15 - Author: Marin Katusa Five companies have quietly entered the nuclear power race. Microsoft, Amazon, Google, Oracle and Meta and their allies aren’t just dominating the digital world anymore. They’re locking down control over the future of energy in America. **And they’re paying a premium to secure it.** These tech giants, known as “Hyperscalers,” are no longer just about data centers and cloud storage. They’re securing every piece of the U.S. nuclear fuel cycle—and they’re moving fast. Why? Because they’ve recognized something that most haven’t: the future of their industry depends on stable, clean, and uninterrupted power, and nuclear energy is the only solution. ## Microsoft’s Bold Takeover You probably heard about Microsoft’s deal to revive the infamous Three Mile Island (TMI) nuclear reactor. What you didn’t hear is that **they agreed to pay a 50% premium** on the cost of that electricity—just to lock it down. Why would one of the world’s largest companies be willing to pay that much more for nuclear power? Because they know what’s coming. Three Mile Island will be fully operational by 2029, and 100% of its output is going straight to Microsoft’s data centers. That’s how critical reliable energy is to the Hyperscalers. And they’re not the only ones preparing for what’s ahead… ## A Nuclear Resurgence Is Unfolding Before Your Eyes Holtec International, backed by **$1.5 billion from the U.S. Department of Energy** and another **$300 million from the state of Michigan**, is on track to bring the Palisades nuclear reactor back online. And it doesn’t stop there—decommissioned plants like Duane Arnold in Iowa are being eyed by Hyperscalers for future nuclear-powered operations. Why? Because Silicon Valley’s growth—and profits—depend on electricity that’s not only abundant but clean and reliable. And no other energy source can meet those demands like nuclear. With political resistance and funding hurdles rapidly dissolving, the landscape for nuclear energy has never been more favorable. Hyperscalers know it, and they’re not waiting around. They need this power, and they need it fast. That means they’re not just reviving old plants—they’re also planning for Small Modular Reactors (SMRs) to be built on existing nuclear sites. But here’s the kicker—they know that securing the energy itself is only part of the equation. ## The Real Bottleneck? Nuclear Fuel The U.S. Department of Energy just released a report that should make every investor sit up… **92% of the uranium powering American reactors is imported.** And to meet future demand? - **U.S. uranium production needs to expand by 34X over the next three decades.** That’s not a typo. Thirty-four times more uranium than we currently produce. But here’s the catch—it takes **years** to bring new uranium mines online, even with the Hyperscalers backing it. And while they’re busy securing long-term power contracts, there’s only one near-term solution: above-ground uranium. ## Hyperscalers Are Ready to Pay WHATEVER It Takes The race for nuclear and hostile takeovers for reactors and power have already started. Just like Microsoft didn’t blink at paying 50% over market rates for nuclear power… **These companies are ready to pay whatever it takes to secure American uranium.** The implications are massive. Next, the Hyperscalers will set their sights on locking in long-term supply deals from fully operational, permitted mines across the U.S. The nuclear renaissance isn’t a far-off dream—it’s happening right now, and the demand for uranium (and the price) is set to skyrocket. The future of this nation relies on affordable, reliable, low-carbon electricity, and without nuclear, it’s simply impossible. Even Silicon Valley knows it—they’re securing every part of the nuclear fuel cycle because their growth, and the digital economy itself, depend on it. The race is on, and the stakes couldn’t be higher. **Investors will have a small window to get grab a piece of the action.** As the Hyperscalers scramble for control, companies with uranium stockpiles, in the USA, hold the real power. It’s time to make some serious, long-term money. Regards, Marin Katusa and the KR Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Mining’s Dangerous Gamble - URL: https://katusaresearch.com/minings-dangerous-gamble/ - Type: article - Published: 2024-10-11 - Updated: 2024-10-10 - Author: Marin Katusa The mining industry is in a dangerous position. For years, miners have scaled back on exploration and new projects, while showering shareholders with cash. It’s short-term gain over long-term sustainability, setting the stage for skyrocketing metal prices and critical material shortages. The only question is, will you be ready? ## **Big Mining is Paying Big Fat Dividends** Miners are sitting on massive cash reserves. And instead of using this capital to secure their future, they’re throwing it at shareholders. It‘s the same playbook the oil and gas players used to attract capital to the sector nearly a decade ago. The chart below shows the annual dividends paid to shareholders of companies in the metals and mining sector listed in North America, Europe and Australia. In 2022, mining dividends peaked at a staggering $75 billion. So far this year, over $50 billion has been paid to shareholders. The message is clear: Investors are calling the shots, and they want fast returns. But here’s the problem—while shareholders are raking in cash, miners are pulling back on crucial investments. By 2027, spending on new projects and expansions is projected to drop 24.6% to just $77.6 billion, down from $102.9 billion in 2024. This is a crisis in the making. For an industry already starved of long-term investment, this trend is nothing short of disastrous. - **Mining dividends hit a peak of $75 billion in 2022.** - **Capex is set to fall by 24.6% by 2027.** By focusing on shareholder payouts, miners are selling off their future—bit by bit. ## **The Supply Squeeze is Inevitable** The consequences of underinvestment are starting to surface, and when the dam breaks, it’s going to be ugly. When supply can’t meet demand, prices explode. Just look at copper—essential for the energy transition and critical to everything from electric vehicles to infrastructure. Yet, miners aren’t moving fast enough to meet the looming supply crunch. **Copper demand is set to outstrip supply by 2028, creating massive deficits.** And it’s not just copper. Metals that have flown under the radar for years, like **zinc**, will face similar supply crises within the next decade. And let’s not forget **lithium**, the backbone of the EV revolution. Supply gaps for this critical metal are expected to emerge by 2028, as surpluses turn into deficits. - **RELATED: [See our profile on LiFT Power Corp (LIFFF.USOTC)](https://katusaresearch.com/critical-8-reasons-this-has-our-full-attention/?)** When that happens, prices will shoot through the roof, and investors with stakes in lithium and copper companies are poised to profit. The chart below shows the current and projected supply-demand scenario in lithium. And here is the same supply-demand scenario for copper: Both metals have the opportunity to see above-average growth rates for the next decade. While the market may reward miners with higher prices in the short term, they’re playing a dangerous game by not preparing for the inevitable. Underinvestment in these metals is going to have catastrophic consequences, not just for the mining industry but for the global economy. We’re talking about everything from electrification to infrastructure projects grinding to a halt. The supply squeeze isn’t a question of if, but when. And when it hits, the smart money will already be positioned to take full advantage. ## **A Perfect Storm for Metal Prices** The industry’s refusal to invest in new projects will create a vicious cycle of higher prices and fewer available resources. Here’s the kicker: instead of pouring money into new mines, miners are doubling down on consolidation. - **We’ve already seen it with BHP and Lundin Mining acquiring Filo Corp. **(A nice recent double-digit win for *Katusa’s Resource Opportunities* subscribers). While these deals make sense in a risk-averse environment, they do absolutely nothing to address the real issue—dwindling reserves. The truth is, big miners are swallowing up smaller players without creating any real new supply. Sure, it looks good on paper, but it’s not solving the underlying problem. And building new mines isn’t just expensive; it’s time-consuming. **Even if miners started ramping up spending tomorrow, it wouldn’t make a dent in the supply-demand gap for years.** The industry is running out of time, and the more they delay, the more painful the consequences will be. Some argue that shortages could actually benefit miners by driving up prices. But that’s a short-sighted view. When materials become too expensive, downstream industries innovate to reduce their reliance on them. Just look at **cobalt**—once a star of the EV battery market, now increasingly being phased out due to skyrocketing prices. The same fate could await copper, lithium, or zinc if miners don’t act. ## **A Bull Market for Metals** The mining industry’s obsession with shareholder payouts has set the stage for a massive supply squeeze, and when it happens, it will reshape the market. Metals like **copper** and **lithium** will see massive price surges as demand outstrips supply. And while miners scramble to meet this growing demand, smart investors will already be cashing in. - **Mining capex is projected to fall 24.6% by 2027.** - **Critical materials like copper and lithium will face shortages by 2028.** - **Zinc, though often overlooked, will also face a supply crisis in the coming decade.** The writing is on the wall. The global energy transition, urbanization, and infrastructure development aren’t slowing down. [The only question left is whether the mining industry will be able to keep up](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/?). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Disclaimer - URL: https://katusaresearch.com/disclaimer/ - Type: page - Published: 2024-10-09 - Updated: 2025-09-10 - Author: Marin Katusa Last updated: October 09, 2024 ## Interpretation and Definitions ### Interpretation The words of which the initial letter is capitalized have meanings defined under the following conditions. 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The Company does not endorse the products or services shown in those ads, nor is the Company responsible for the content of the ads. - For more information about how Google uses data when you use websites or apps that utilize their services, please visit **Google’s Privacy & Terms**. ## Contact Us If you have any questions about this Disclaimer, You can contact Us: - By email: subscribers@katusaresearch.com - By visiting this page on our website: https://katusaresearch.com/contact-us/ --- # Gold’s Unstoppable Rise in a World on the Brink - URL: https://katusaresearch.com/golds-unstoppable-rise-in-a-world-on-the-brink/ - Type: article - Published: 2024-10-04 - Updated: 2024-10-03 - Author: Marin Katusa Right now, the headlines are clear: wars are raging, inflation is creeping, and central banks are scrambling. The world’s most seasoned investors are quietly moving their chips to the safest table in the casino. And gold is winning hand after hand. ## **Geopolitical Quakes Fuel the Gold Rush…** Conflict in Israel and Ukraine has sent shockwaves through markets. Nervous investors are fleeing from volatile assets, looking for something—anything—that won’t lose value overnight. At the same time, the U.S. Federal Reserve and European Central Bank are signaling monetary policy shifts, with interest rate cuts weakening confidence in traditional currencies. The result? Gold, priced in U.S. dollars, has shattered records, hitting an astonishing 35 all-time highs this year. Record high weekly, monthly and quarterly closes printed on Sept. 30, 2024. Gold is doing what it does best: providing certainty in a world full of chaos. But this time, the story goes deeper than that. ## **The Perfect Storm for Gold** It’s not just about fear anymore. Central banks aren’t just watching from the sidelines—they’re buying. And buying big. Around the world, these institutions are snapping up gold, tightening supply and driving demand higher. Meanwhile, ETFs are quietly rebalancing their portfolios, not dumping gold but consolidating it. As you can see, the actual dollar amount held by investors is over $10B higher than the previous record set back in 2020 during the pandemic. The message is clear: gold isn’t going anywhere—it’s entrenched. ## **Gold Miner ETFs – A Thing of the Past** Despite the big move in gold bullion, miner ETFs are taking it on the chin. The two heavyweights, GDX and GDXJ, are showing the kind of underperformance that would make any investor cringe. Dollar volume traded through these ETFs is half of what it was at the peak, with fund flows stagnating or even heading into negative territory. - **Yes, you heard that right:**** While gold hits new highs, the funds that are supposed to capture the upside are getting sold off.** It’s counterintuitive, but here’s where it gets interesting… You’ll see in the chart below, volumes were regularly $40B+ per month. But now, volumes are lucky to hit $20B, while gold is hitting all time highs. On the surface, it looks like miner ETFs are a broken asset class. Fund Flows into the GDX and GDXJ have been stagnant for years. And if you can believe it, fund flows into the GDX & GDXJ are negative on the year! - **KEY POINT:**** While gold is at all-time highs, there has been net *selling* of gold miner ETFs.** But here’s the twist—money isn’t fleeing the sector; it’s finding a new home. ## **Gold Miners: Broken or Just Shifting?** But if you dig deeper, you’ll see something different—money isn’t leaving the gold mining space; it’s moving to the big boys. Large-cap gold stocks are seeing more volume and outperformance, not just versus the miner ETFs, but even against gold itself. The reason? Large-cap miners have what ETFs don’t: cash flow, liquidity, and the leverage to make big moves. - **These companies are sitting on piles of capital, ready to scoop up smaller, undervalued competitors in safe, mining-friendly jurisdictions.** We’re already seeing acquisitions happen, and it’s only the beginning. For the gold bugs and miner enthusiasts this is a good sign that volumes have been increasing. And this has translated to outperformance of the large caps versus gold bullion and the GDX which is supposed to track large cap miners. ## **Follow the Money: Large Caps Are the Payoff Bet Right Now** It should come as no surprise that the large caps are beginning to outperform in this part of the gold bull market cycle. If you want to know where the smart money is going, just look at the large caps. They’re outperforming because they offer something no ETF can—a way to tap into rising gold prices, with the added kicker of significant liquidity and cash flow via the NYSE or Nasdaq. **A Buyout Frenzy?** I expect large-cap miners to keep acquiring undervalued companies, especially those in safe, mining-friendly regions. With a focus on locking in growth assets, this rotation of expensive to cheap capital will be key in the next bull market. As global uncertainties—like U.S. elections, Middle East tensions, and China’s economic instability—loom, the buyout spree is just getting started. **Subscribers and I are fresh off a nice win in Filo Mining Corp which is being acquired by BHP and Lundin Mining.** In my latest October report to subscribers just days ago, I **outlined 2 new ideas** that I think could be acquisition targets in this cycle. [Click here to get the 2 company names in Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Senior Investment Analyst - URL: https://katusaresearch.com/senior-investment-analyst/ - Type: page - Published: 2024-10-03 - Updated: 2024-10-04 - Author: Marin Katusa **Elevate Your Financial Career at Katusa Research** Are you a financial wizard with a knack for turning data into actionable insights? Do you thrive in a fast-paced environment where your analysis impacts investors worldwide? If so, Katusa Research has a spot for you! **About Us** At **Katusa Research**, we’re not just another investment firm—we’re a trailblazing team reshaping the world of public equities. Specializing in in-depth analysis, we empower over **190,000 investors** every week with insights that drive informed decisions in global markets. With us, you’ll find ample opportunities for growth, innovation, and making a real impact. **Why You’ll Love Working Here** - **Global Reach:** Your work will influence a vast and engaged audience hungry for top-tier investment advice. - **Dynamic Team:** Join a group of passionate professionals who live and breathe market trends. - **Growth Opportunities:** As we expand, so do your chances for professional development and career advancement. - **Vibrant Location:** Our office is nestled in the heart of Vancouver, offering an inspiring blend of natural beauty and urban excitement. **Your Role** As our **Senior Investment Analyst**, you won’t just crunch numbers—you’ll be a key player in shaping investment strategies and uncovering market opportunities. **What You’ll Do** - **Sector Analysis:** Dive deep into sectors, commodities, and market trends to compare companies on all metrics and identify the next big thing. - **Financial Modeling Guru:** Craft and maintain complex financial models using Excel and the Bloomberg Terminal to forecast performance and valuations. - **Opportunity Hunter:** Spot and evaluate investment opportunities, providing clear and actionable recommendations that matter. - **Insightful Reporting:** Prepare detailed reports, presentations, and investment memos that inform and captivate both our team and our clients. - **Collaborative Innovator:** Work closely with our research team, sharing insights and pushing collective goals to new heights. - **Market Trendsetter:** Stay ahead of industry developments, regulatory changes, and geopolitical events that could impact investments. **What You Bring** - **Education:** CFA designation or MBA preferred—your solid educational foundation sets you apart. - **Experience:** Minimum of 5 years in financial analysis—you’re seasoned and ready to hit the ground running. You know where to find the data and how to interpret it. - **Technical Skills:** Advanced Excel skills and proficiency with financial analysis software—you’re an expert with data. - **Bloomberg Proficiency:** Hands-on experience with the Bloomberg Terminal—you know how to extract and leverage data like a pro. Bonus if you know other major data sources - **Analytical Mindset:** Exceptional quantitative and analytical abilities—you see patterns others miss. - **Communication Savvy:** Excellent written and verbal skills—you can make complex information accessible and engaging. - **Detail-Oriented:** High level of accuracy—you believe the devil is in the details. - **Self-Motivated:** Ability to work independently and juggle multiple projects—you take initiative and deliver results. - **Team Player:** Strong collaborative skills—you lift others up and contribute to a positive team dynamic. **Ready to Join?** If you’re excited about leveraging your skills to make a significant impact in the investment world, we’d love to hear from you! **How to Apply** Send your resume and a cover letter detailing your relevant experience to **[subscribers @ kausaresearch.com]**. Please include **“Senior Investment Analyst Application”** in the subject line. **Katusa Research is an equal opportunity employer. We appreciate all applicants, but only those selected for an interview will be contacted.** *Join us at Katusa Research and be part of a team that’s changing the game in investment analysis. Your next big career move starts here!* --- # America’s Energy Future Hinges on Nuclear Power - URL: https://katusaresearch.com/americas-energy-future-hinges-on-nuclear-power/ - Type: article - Published: 2024-09-27 - Updated: 2025-01-21 - Author: Marin Katusa | In this week’s *Investment Insights*… 1.** Nuclear’s Comeback**: It’s emerging as the go-to solution for reliable, low-emission power, with tech giants and even environmentalists jumping on board. 2. **Unstoppable Energy Demand**: The surge in AI, EVs, and crypto is straining energy grids to their breaking point, making nuclear critical for long-term stability. 3.** Huge Investment Opportunity**: With strong government backing and soaring uranium demand, the nuclear sector presents a rare, long-term chance for significant investment gains. | We stand on the brink of an unprecedented energy revolution. The 21st century has ushered in technological advancements at a pace we’ve never seen before. Over the past century, energy use has surged, starting with electricity in the late 19th century. Innovations like radio, household appliances, and computers further increased demand, allowing us time to build a reliable energy infrastructure. *Source: IEA* Now, we’re facing a similar energy demand surge, but in a much shorter time. Electric vehicles are hitting the roads in record numbers, cryptocurrencies are reshaping finance, and artificial intelligence is becoming integral to businesses and daily life. Last year, the U.S. invested over $300 billion in clean power and electrified transport, a record for the clean economy and a $50 billion increase from the previous year. To put that chart into perspective, it shows: - 22% Year over Year growth in overall US energy transition investment. - A 2:1 ratio of energy transition financing relative to fossil fuel financing. - Yet from 2024 through 2030, investment must grow by over 3.5x to be in line with Net Nero scenarios. **Globally, investment in renewable energy hit $623 billion.** But to be on track for COP28 and Net Zero goals, investment needs to be $1 trillion a year. *Where is all this explosive growth coming from?* ## **A Tsunami of Energy Demand** 1. Artificial Intelligence: The New Energy Guzzler Artificial intelligence (AI) is transforming industries—from healthcare to finance, from manufacturing to entertainment. But AI’s impressive capabilities come with a hefty energy bill. - **U.S. data centers, the backbone of AI, consume about 4% of the nation’s electricity.** To put it in perspective, all U.S. consumer electronics—computers, smartphones, tablets—use about **5%**. And this is just the beginning. Since the launch of ChatGPT in November 2022, the demand for AI services has exploded. Cities are feeling the strain: - **Oregon** has doubled its energy forecast for the next five years due to new data centers. - **Chicago** reports a **900% increase** in energy demand from data center expansion. - **Georgia** anticipates a **16-fold increase** in electricity demand over the next decade. 2. The Electric Vehicle Surge Electric vehicles (EVs) are no longer a novelty—they’re the future of transportation. Since 2018, EV sales have skyrocketed sixfold. In the last year alone, there’s been a 35% surge in new EV registrations. States like California have set ambitious targets: by 2035, all new cars sold must be electric. But here’s the challenge. California’s energy providers anticipate needing over 70% more electricity to power these vehicles. - **If the entire U.S. fleet goes electric, we would need to produce 20-50% more electricity nationwide.** Our current grid isn’t built for this. Rolling blackouts and energy shortages could become the new normal unless we act fast. 3. Cryptocurrency’s Energy Appetite Beyond the financial headlines, there’s an often-overlooked aspect: the immense energy required for crypto mining. - In 2023, Bitcoin mining consumed **121 terawatt-hours** of electricity. That’s equivalent to the entire energy consumption of the **Netherlands**. Cryptocurrencies now use more energy than all the world’s data centers **combined**. As crypto adoption grows, so does its carbon footprint, unless we find cleaner energy sources. ## **Renewable Energy: Close, but Insufficient to meet Demand** Tech companies’ power needs are skyrocketing. Efficiency gains in computing have reduced per-unit energy use, but more units are being produced. Leading to larger, more efficient data centers with increasing power demands. From 2020 to 2023, Amazon, Meta, Microsoft, and Google saw an 81% rise in electricity consumption. ## **The Power Source** Renewable energy sources like wind and solar are essential for a net zero world, but they’re not scaling up quickly enough to meet this surging demand. - **Currently, renewables provide only 13% of the United States’ energy consumption.** Despite $4.1 trillion invested in renewables over the past 20 years, fossil fuel consumption has outpaced renewable energy growth. The intermittency of solar and wind-solar panels don’t work at night, and wind turbines need wind—means they can’t provide a stable, always-on power grid. While crucial to go net zero, renewables are not scaling quickly enough to meet the growing energy demand. ## **The Nuclear Age is Here** Nuclear energy, often misunderstood and underestimated, is a high-capacity, low-emission solution to today’s energy challenges. It provides steady, weather-independent power and is undergoing a renaissance in the U.S. thanks to safer, more efficient modern reactors. **That’s why major banks and tech companies are going all-in on nuclear power.** In fact, Microsoft just signed the largest carbon free Power Purchase Agreement for single project, locking up enough electricity for 20 years to power 700,000 homes. These types of headlines even 12 months ago would be unfathomable. And Microsoft isn’t alone. Earlier this year, Amazon structured a $650 million deal to power a data center adjacent to a nuclear reactor. ## **So Many Investment Opportunities…** Government incentives and streamlined regulations are fueling a nuclear energy resurgence, even winning support from environmental groups. For investors, this means a golden opportunity. Uranium demand is set to soar, driving growth across the entire nuclear supply chain. Our Special Situations team will guide you through key investment strategies and emerging technologies to capitalize on the nuclear comeback. Regards, Marin Katusa **P.S.** This Wednesday, Oct 2nd, we’re releasing a double issue of ***Katusa’s Resource Opportunities*** with multiple resource sector buyout targets. [Click here to discover the names](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/?). Our last pick, Filo Mining, landed a buyout, making some subscribers and I very happy. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Rate Cuts Are Here - URL: https://katusaresearch.com/rate-cuts-are-here/ - Type: article - Published: 2024-09-20 - Updated: 2024-09-19 - Author: Marin Katusa This week’s Investment Insights is action packed: - **Rate Cuts are Here and Money is on the Move** – With over $6 trillion sitting in money market funds, lower returns are coming fast. What does this mean for your cash? - **What Big Investors Do When Rates Drop** – Warren Buffett and other market giants shift strategies to capitalize on the changing landscape. Find out where they’re putting their money. - **Why Oil Majors and Gold Are Poised for Growth** – As borrowing costs fall, companies are gearing up for expansion, while gold could see a surge. A 50 basis point cut was no surprise. But that means a big change in thinking and sentiment that will affect everyone, from the small traders to the US Government. Over the past few years, **the “T-Bill and chill” approach** to cash management triggered assets under management of money market funds to soar to all-time highs. However, this time around, because rates went above 5% it triggered a slew of investors attracted by yields at decade highs, not because of economic uncertainty. You’re reading the chart correctly. There is over $6 trillion sitting in money market funds, that are now going to start to see lower rates of return moving forward, for the first time in several years. It’s no joke, I personally have a lot of my holdings in cash or near-cash funds that paid me just over 5% for nearly 2 years. Those days are over. Now, after years of 5%+ returns on cash, is it time to rotate out? **When Rates Come Down, What Do Big Investors Like Buffett and Paulson Do?** When interest rates decline, investors like Warren Buffett and others often reassess their investment strategies to capitalize on the changing economic environment. Buffett does have a mega war chest of $578 billion in cash, equity and fixed income holdings. Lower interest rates can have several effects: - **Shift Toward Equities:** Reduced rates make borrowing cheaper for companies, potentially boosting corporate profits and making stocks more attractive. Investors might increase their equity holdings, focusing on companies poised to benefit from the lower *cost of capital*. - **Seek Higher Yields Elsewhere:** With bond yields decreasing, investors may look for alternative investments offering better returns, such as dividend-paying stocks, real estate, or high-quality corporate bonds. Now for some words that are turn-ons for analysts and investment bankers… **What Do Lower Rates Mean for Valuations of Companies…** Generally, when interest rates come down, the valuations of companies tend to go up. Here’s why: - **Lower Discount Rates:** In valuation models like the discounted cash flow (DCF) analysis, future cash flows are discounted back to their present value using a discount rate often influenced by prevailing interest rates. A lower discount rate increases the present value of these future cash flows, leading to higher valuations. - **Cheaper Borrowing Costs:** Companies can borrow money at lower rates, reducing their interest expenses and potentially increasing net profits. This improvement in profitability can make a company more valuable. - **Investor Behavior:** Lower interest rates often make fixed-income investments like bonds less attractive due to reduced yields. Investors might shift their funds into stocks in search of better returns, driving up stock prices and company valuations. **Mega-Majors: It’s Time to Spend** When interest rates drop, big-spending companies like oil majors and copper producers benefit significantly. Cheaper borrowing costs mean they can finance expensive projects—like drilling new wells or expanding mines—at a lower expense. This makes it easier to invest in growth and expansion. For the last many years, capital expenditures for major energy and mining companies have gone down, as shown below. But that could now reverse course. As you can see in the chart below… - **Capex peaked when Fed Funds were effectively at zero back in 2012-2014.** This incentivized significant production increases to fuel globalization and Chinese demand. You can see above as rates soared over the past 2 years, capex has stayed well below previous highs. Lower rates also boost the present value of future earnings, making these companies more attractive to investors. - **Rates coming down makes borrowing more affordable, and these companies might see their stock valuations rise.** Additionally, reduced rates can stimulate the economy, increasing demand for commodities like oil and copper. However, there’s a catch. If these companies ramp up production too much, it could lead to an oversupply, driving commodity prices down. So, while the environment is ripe for investment, these companies need to plan carefully. We have seen this happen first hand in the oil market, copper and iron ore. **Rate Cuts and Gold: A Golden Connection** When the Federal Reserve cuts interest rates, gold often rises. Historically, this relationship is evident. The chart below shows the Fed Funds Effective Rate and the gold price from 2000, which reflects the “modern era” for gold and its relationship with interest rates. As you can see, during and after the rate cutting cycle, gold performed strongly. The billion-dollar question that remains is, will this time be any different or will it be like the past 2 cutting cycles where gold was a strong performer? Gold and gold equities are in a unique environment today. The sector has not attracted new capital in many years, and those who have been stalwarts of the sector just continue to rotate their capital from one name to another. Money will flow into the sector when it sees the opportunity for substantial shareholder wealth creation. Generalist funds aren’t really buying gold stocks yet, but if gold pops it will get harder and harder to avoid exposure. **Katusa Research is fresh off a big M&A win, when BHP Group and Lundin Mining acquired our holding Filo Corp.** **I am rotating that capital to work into new ideas.** **One of which I’ve just put another big 7 figure check into.** You can find out the name in minutes by subscribing to my monthly premium research letter – *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)*. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Critical: 8 Reasons this has our FULL ATTENTION - URL: https://katusaresearch.com/critical-8-reasons-this-has-our-full-attention/ - Type: article - Published: 2024-09-16 - Updated: 2025-09-18 - Author: Marin Katusa This “electric metal” has ignited a major trade war. The United States is locked in a high-stakes battle with China for control over the global lithium supply chain. Recognizing the critical importance of this mineral for the future of clean energy and national security… The U.S. is making bold moves to secure its own lithium resources and reduce reliance on Chinese imports. One of the top Lithium research services, Benchmark Intelligence said… ## **“The U.S. realized, recently, that it lost control of the lithium supply chain to China… Washington is now trying to “get back on track.”** The International Energy Agency is sounding the alarm too… Citing Lithium as its highest supply and geopolitical risk. ## **China’s supremacy over lithium is no accident…** The country has promoted, subsidized and engineered “insidious control” over global lithium supply, according to *The Atlantic Council*. The USA is countering with aggressive measures in the *Inflation Reduction Act*. **It tackles China’s critical minerals dominance with EV tax incentives, requiring North American sourcing.** The aggressive timeline may prove challenging for U.S. and European companies to meet while adhering to strict regulations. But it also means that North American companies will be looking for easy-access to domestic sources of lithium. **That’s where LiFT Power Corp (LIFT: TSXV and LIFFF: US OTC) makes a STRONG case…** If you’re interested in the lithium markets, pay attention. *****DISSEMINATED FOR COMMERCIAL PURPOSES ON BEHALF OF LIFT POWER CORP***** **Li-FT Power Corp.** **(US OTC: LIFFF | TSVX: LIFT)** _______________________________ **PLEASE READ FULL DISCLOSURES/DISCLAIMER** **FULL DISCLOSURE: I (Marin Katusa) and other members of Katusa Research have bought Li-FT Power shares in the open market (I purchased over $1,000,000 worth of stock). I may increase my position in the future.** This is a highly speculative stock that comes with significant investment risk. If this bothers you, do not invest. Let’s get right into it… Right now, the global lithium supply chain is effectively controlled by just two countries: China and Chile. They’re both extremely unpredictable. One country nationalized any new lithium supply last year, and the other (China) is actively threatening to cut it off for geopolitical leverage. And China is winning the Resource Wars right now. ## **The United States is On Notice** It must either procure domestic lithium and domestic lithium processing, or it will not be able to produce EVs and decarbonize its economy. The U.S. effort to bring lithium production back to North America has created an *incredible* investment opportunity. Allies can both help fix the lithium deficit it is barreling toward—and make a mint in the meantime. And Canada, with a few giant lithium deposits, is in first position to provide billions of dollars of lithium to the United States. We’ve identified what we believe is **one of the best deposits in North America**. And the company that owns this project has a *lot* going for it. ## **8 Reasons and Catalysts** **to Put Li-FT Power on Your Radar** **#1: Potential for a *Massive* & High Grade Lithium Resource** Li-FT Power’s Yellowknife project is expected to exceed 50 tonnes of lithium bearing ore. That would make it one of the largest development-stage lithium projects in North America. A resource above 100 million tonnes of lithium-bearing ore would put it solidly on the radar of mainstream investors and majors, and could trade at a premium to its peers. ## **#2: Highly Attractive Valuation vs. Peers** Few analysts cover Li-FT Power, and no resource estimate has been completed—so this company just isn’t on the radar of most investors. As a result, our analysis indicates that it is currently trading at a significant discount to its peers. ***Rick Disclosure:**** This chart is based on internal Katusa Research analysis ONLY.* Its massive size and development potential are likely to draw attention from major producers, EV manufacturers, and even foreign governments. The immediate M&A potential could drive a significant stock re-rating. ## **#3: The Right Entry Point:** The Way of the *Alligator requires patiently waiting while prices come to you. After a* huge run-up in 2022, lithium prices corrected nearly 80% in 2023/24—and with them, so did lithium company valuations. **It’s taken a year of waiting, but Li-FT Power has finally entered my buy range.** The long-term case for lithium is obvious. If you are following EVs, or renewable energy, or decarbonization, you know we are going to need a *lot *more lithium production. A year ago, this company was financed by some of the largest lithium investors in the world at $14 per share before a single drill hole turned (because of the historical information on the project). Today, the company has drilled over $25 million worth of drilling hitting high-grade lithium and the stock is trading at an attractive valuation. This is a classic example of a high-value, beaten-down stock that is ready to run at the slightest pickup in lithium prices or good news. ## **#4: Ultra-High Profit Margin Production** Our internal analysis projects production costs of $600/tonne. At current depressed lithium prices, that yields profit margins comparable to open-pit gold mines (53% spodumene vs. 55% gold, using today’s prices). Using the 2023 average spodumene price, Li-FT could generate margins of 80%+. Every major mining CEO in the world would want to get in on that action. ## **#5: Lots of Skin in the Game** Founders, management, and directors own 55% of shares. They are extremely incentivized to bring this project to profitable development. Outside of the founders, the cost base of major investors is 100-300% *above* current prices. Meanwhile a selloff has continued—even despite excellent drill results, and a pending resource estimate any week now. The tight share structure and low price makes this a very tightly wound spring. ## Li-FT Power Has Major Catalysts on the Horizon **Major Catalyst #1:** **Resource Estimate Release** Completion and release of the upcoming resource estimate set to indicate a resource with the potential to get to over 50 million tonnes of lithium-bearing ore. That would likely provide a *substantial* boost to Li-FT’s valuation. **Major Catalyst #2:** **Lithium Price Recovery** Falling interest rates in ’24 should incentivize new EV manufacturing, fanning the flames of lithium. A rebound in lithium prices would likely increase the value of lithium in the ground, while also incentivizing M&A. **Major Catalyst #3:** **M&A Accelerating in Safe Jurisdictions** High prices and the prospect of a long-term shortage have fueled an international race to control lithium resources. In the past 12 months, there has been a frenzy of successful (and unsuccessful) investments and takeover attempts of developers by major lithium producers: - **Pilbara Minerals** just acquired **Latin Resources** for over $500 million - **ExxonMobil **announced it intended to become a major lithium supplier. - **Gina Rinehart,** Wealthiest person in Australian and an Australian iron ore and steel tycoon worth more than $20B, dove headfirst into lithium with major M&A activity. - A **$4.2B takeover** of a lithium miner was shut down because the premium wasn’t high enough. - In total, there have been **150 different M&A transactions globally in lithium,** valued at over $10B. I believe we will see more of these big power moves in the coming years as lithium deposits in safe jurisdictions become increasingly critical power sources for the free world. I wouldn’t have Li-FT Power in my portfolio unless I thought it was an excellent M&A target. Keep in mind, all of the M&A above happened while the price of lithium was falling off a cliff. What’s going to happen when prices start to rise? [**CLICK HERE TO VIEW THE FULL LI-FT POWER REPORT**](https://join.katusaresearch.com/liftpower-lift/) Regards, Marin Katusa and the KR Special Situations Team **P.S.** We want you to be one of the first to know about this special opportunity—especially before any of the catalysts bump the stock higher. [Click here](https://join.katusaresearch.com/liftpower-lift/) to read the report now. ### **DISCLOSURES/DISCLAIMER** **IMPORTANT DISCLAIMER:**** **Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. Li-FT Power Corp has reviewed and sponsored this article. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from Li-FT Power Corp in the amount of one million two hundred fifty thousand dollars as reported in LiFT’s May 28, 2024 news [release](https://u5734527.ct.sendgrid.net/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdK7J6tpdEObgrQ8Mmf2AXRPvHRJObP4YYQ8pAxhaywcOgVb8v5YAGLxUMnSqvM269uvlWTV51-2B-2BCCYUL26hfgFgSyF7wri4-2F-2F0QxwfEb4BhYBCTltCrgtuRYhE52Gg4U-2BCDwASOhl3EnIyfj4RrKl3Wf0z2Uk-2FqgOc-2Fe2DfrIZYqxgl4Q1b0iNA9c0QHzxlts3TtiU8WABihpmb9q421jiyXG-2BybK186LWS-2F-2FSQn11coe7Lf_AU8oF2B84393VN4NqZh-2B46xLoDJA1idYNWqHZbZCvaHd61-2FhEn0g9ns3g7uuQWQrEyG4HFizzuw63WNuzQMT7MApSz7GDcz0rDvuzQ16-2BevyrQ7Ei2hYTEtf2j2c916toXz4GHTtDXwcTa0LYf-2BGqq2wUCw3WTgOIkMPzk8VsD9o5Z6IIdtHqc6Rs8SvrzNyruolAOfP951zf2s5v8DkyQ-3D-3D) and is thus extremely biased. Members of Katusa Research also own shares in Li-FT Power and stand to benefit with changes in the share price. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the company, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. Katusa Research does not undertake any obligations to update information presented, or to ensure that such information remains current and accurate. --- # [Alert] LiFT Power (LIFFF.US / LIFT.TSXV) on the Verge of a Significant Lithium Announcement - URL: https://katusaresearch.com/alert-lift-power-lifff-us-lift-tsxv-on-the-verge-of-a-significant-lithium-announcement/ - Type: article - Published: 2024-09-16 - Author: Marin Katusa **In this email:** - **The Vast Hidden Value **of “Project Yellowknife” and the resource estimate I’ve been waiting for is coming any week now - **I OWN a BIG position** in this stock - **We’re issuing a Special Situations Alert on LiFT Power Corp [LIFFF.US / LIFT.TSXV]** ***DISCLAIMER: Disseminated for commercial purposes on behalf of Lift Power Corp*** Dear Reader, I made a big bet on what I believe is a big potential lithium stock. And today, I’m going to reveal it to you now before anyone else in our network gets this report. This company is sitting in a big, high-grade deposit that has millions of tonnes of lithium above the ground. **Just how big is this project?** **Look at the picture below taken at site.** That tiny red spec in the circle is a helicopter, and beside that are two smaller black dots. If you look closely and have eagle eye vision, you’ll see me and the CEO of the company, Francis MacDonald. **To illustrate just how remarkable this lithium deposit is, I’m going to frame it in terms of gold…** Something everyone understands as a universal store of value: - First, we calculate the total value by multiplying the current price per tonne of lithium carbonate equivalent by the deposit size. - Then, we convert this value into an equivalent amount of gold by dividing it by the current gold price. This Katusa Research calculated comparison shows just how valuable this opportunity really is. *IMPORTANT: The ‘estimated resource number’ has not been prepared by a qualified person nor is it compliant with NI 43-101. It is presented for illustrative purposes only and not to be relied upon. It is purely speculative based on KR calculations internally, and no current resource estimate exists for the property.* **Answer: This deposit *could* hold, in equivalent terms, the same value as an estimated 6.4 million ounces of gold.** To put this into perspective… If we used the price of lithium *last year*, the gold equivalent value would be over 11M ounces. **Out of 2,500+ gold deposits globally, only 109 host a resource greater than 11 million ounces.** Now let’s fine-tune this calculation for all the mathletes reading this. If spreadsheets make you dizzy, just skip to the bullet below. We can use global averages for open-pit gold mining grades and recovery rates, to identify the number of ounces required to generate a similar in-situ value of a spodumene resource. *IMPORTANT: The ‘estimated resource number’ has not been prepared by a qualified person nor is it compliant with NI 43-101. It is presented for illustrative purposes only and not to be relied upon. It is purely speculative based on KR calculations internally, and no current resource estimate exists for the property.* This refined calculation demonstrates the incredible significance and potential scale of this deposit. - **A gold deposit of 5M+ ounces in Canada would be highly sought after by any mid-tier or major gold producer.** - **The upside case shows an equivalent value to a 10M+-ounce gold deposit.** Almost as important, this deposit would come in at almost 2.5g/t gold. That would be about 3 TIMES the global average for open pit gold mines of this size. If the price of lithium goes back to where it was just a year and a half ago… The grades would be equivalent to almost 5g/t gold, which for an open pit gold mine is unheard of. AND higher than the average grade underground gold mines. ## No Question, This is a Special Deposit Again, this is shown for comparison purposes only, based on our internal calculations. **The market cap of Li-FT today is around USD$90M**—a steal (in our biased opinion) for a major or mid-tier mining company. Simply put, it will be a cash cow for whoever puts it into production. But that’s not the only reason this company could quickly attract M&A attention… I’d expect the required capex to build a spodumene operation at this kind of deposit would be *substantially less* than for a 5M-ounce gold mine. And our internal analysis projects production costs of $600/tonne. The 3-year spodumene average price is $2,975 – even using a 50% discount to that price, profit margins are comparable to open pit gold mines. Let’s recap: - Cheaper to build than gold. - More profitable to operate than gold. [Every major mining CEO in the world will want to get in on that action](https://join.katusaresearch.com/liftpower-lift/). **I have bet big, investing over $1,000,000 personally in the open market.** And that’s why I’m issuing this rare Katusa Special Situations stock alert. **KATUSA SPECIAL SITUATIONS ALERT** **Li-FT Power Corp.** **(US OTC: LIFFF | TSVX: LIFT)** Besides the deposit, Li-FT has a world-class team: - The president and director of Li-FT formerly led Millennial Lithium, which sold for $490M. - **CEO Francis MacDonald is a workhorse**—he’s the kind of guy who answers every call and returns emails at all hours of the night. He’s going to do what it takes. The founding team has access to capital to bring the project to production, having invested over $50 Million Dollars (CAD) into the project to date. And they’ve done that while keeping an *extraordinarily* tight share structure: founders, management, and institutions still own about 75% of shares. That means the stock is thinly traded on the TSX-Venture and the U.S. OTC markets. **So when the bids come in, it’s ready to move.** Now… In the world of resource mining, a discovery of this magnitude happens once in a generation. That’s the staggering potential of our Li-FT discovery. Now, there’s a lot to prove in terms of economics and feasibility to get there. **And therein comes the BIG ANNOUNCEMENT…** We’ll find out very shortly in the coming weeks, when the company releases the *maiden resource estimate*. And that’s the risk I’m willing to take, with my own money on the line. To help you profit from this opportunity, the Katusa Special Situations team has put together a comprehensive, in-depth report on Li-FT Power Corp. **[Click here to read the full Li-FT Power report](https://join.katusaresearch.com/liftpower-lift/)** To get a monster payback from all of this, you need to find a monster deposit. And Li-FT Power wants to make a killing off proving one. Do you? Regards, Marin Katusa and the KR Special Situations Team **P.S. **This developing opportunity could accelerate as news from the company rolls out. Take a moment to [read the report](https://join.katusaresearch.com/liftpower-lift/) now. ### **DISCLOSURES/DISCLAIMER** **IMPORTANT DISCLAIMER:**** **Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. Li-FT Power Corp has reviewed and sponsored this article. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from Li-FT Power Corp in the amount of one million two hundred fifty thousand dollars as reported in LiFT’s May 28, 2024 news [release](https://u5734527.ct.sendgrid.net/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdK7J6tpdEObgrQ8Mmf2AXRPvHRJObP4YYQ8pAxhaywcOgVb8v5YAGLxUMnSqvM269uvlWTV51-2B-2BCCYUL26hfgFgSyF7wri4-2F-2F0QxwfEb4BhYBCTltCrgtuRYhE52Gg4U-2BCDwASOhl3EnIyfj4RrKl3Wf0z2Uk-2FqgOc-2Fe2DfrIZYqxgl4Q1b0iNA9c0QHzxlts3TtiU8WABihpmb9q421jiyXG-2BybK186LWS-2F-2FSQn11coe7Lf_AU8oF2B84393VN4NqZh-2B46xLoDJA1idYNWqHZbZCvaHd61-2FhEn0g9ns3g7uuQWQrEyG4HFizzuw63WNuzQMT7MApSz7GDcz0rDvuzQ16-2BevyrQ7Ei2hYTEtf2j2c916toXz4GHTtDXwcTa0LYf-2BGqq2wUCw3WTgOIkMPzk8VsD9o5Z6IIdtHqc6Rs8SvrzNyruolAOfP951zf2s5v8DkyQ-3D-3D) and is thus extremely biased. Members of Katusa Research also own shares in Li-FT Power and stand to benefit with changes in the share price. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the company, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. Katusa Research does not undertake any obligations to update information presented, or to ensure that such information remains current and accurate. --- # Critical Metal Wars and What’s Coming - URL: https://katusaresearch.com/critical-metal-wars-and-whats-coming/ - Type: article - Published: 2024-09-13 - Updated: 2024-09-12 - Author: Marin Katusa Dread from it… run from it… The net-zero transition will arrive all the same. Whether you personally agree with it or not, the race to reduce emissions is now well underway globally. Led by government initiatives and new regulatory frameworks, decarbonization is on every country’s agenda. - Airport bathrooms have dimming lights and faucets that barely trickle. - Italian hotels are under law not to blast air conditioners even in the dead of summer. Yes, Italy is one of a handful of EU countries that regulate temperatures in public buildings, including hotels. **But the monster fundamental building blocks of net zero will create serious demand…** These are the materials needed to construct the new power plants, battery systems, and other technologies of our carbon-free future: mineral resources. *Source: IEA* According to the IEA, total mineral demand from clean energy technologies will double by 2040 in the conservative case. And quadruple instead if the push for sustainable development continues to accelerate. **One critical mineral in particular is expected to see demand growth of over 40x in the latter scenario.** By now you know that mineral is **lithium**. And it’s projected to see the fastest increase in demand out of all the critical minerals needed for the green revolution. ## **The Lithium Delirium** If you were going solely by the table above, you would probably be surprised to find out that lithium is forecast to be the most highly sought-after critical mineral to power the net zero transition. After all, it’s seemingly only important when it comes to electric vehicles (EVs) and battery storage technologies, unlike other minerals like copper or aluminum. However, there’s two things you need to take into account: Number 1: Much of the future mineral demand growth in cleantech is projected to come from the EV and battery storage segment, more so than any of the other segments: Number 2: Batteries need **a lot** of lithium. Each Tesla Model S requires 138 pounds (62.6 kilograms) of lithium. Batteries made for energy storage purposes need far more than that. Multiply these two factors together, and it should come as no surprise that it’s **lithium**, more than copper or nickel or any other mineral, that’s going to see the most explosive growth in the coming decades. ## **Critical Mineral List: The Future Gold Mine** Every G7 nation maintains their own “critical minerals list” as part of their national strategies… and lithium is on every single one of those lists. What’s still not very well-known, however, is that **not all lithium is created equally**. The thing is, many of these “critical minerals lists” were created so that each country could identify, and focus on, securing an uninterrupted supply of these important resources for their own future needs. And the supply chain for many of these critical minerals is dominated by one country… China. **But not only is China often the top producer of many critical mineral commodities like refined lithium and copper…** It’s also usually one of the top consumers as well. So, if there are any hiccups in the supply chain, you can certainly expect China to ensure its own needs are taken of first before it starts exporting its leftovers to other countries. ## **Your Direct Supply: Premium Lithium is Coming** That’s why politicians around the world are taking steps to ensure their supply chains are safely located in “friendly” countries, minimizing any risk of interruptions down the line. And that’s exactly what the US government did with their Inflation Reduction Act of 2022. - According to the act, auto manufacturers can only qualify for lucrative EV tax credits if the lithium used in their vehicles was not mined, processed, or owned by a “foreign entity of concern”… **which includes China**. **To put it another way, there will soon be two different classes of lithium:** The first, your regular, plain old “global” lithium… And the second, “premium” lithium mined and processed in the United States, or other Free Trade Agreement countries. In other words, not only is lithium demand ready to skyrocket… **Lithium sourced from the US and other US-friendly countries is set to benefit the most.** And just this week, Canada announced proposed tariffs on importing Lithium from China. ## **For This Company, All Lights Are Green** One lithium stock I’m buying holds a massive land package located in Canada. As America’s neighbor to the north and largest trade partner, it doesn’t get much friendlier than Canada, putting its assets squarely into the “premium lithium” category. In terms of the project itself, the lithium pegmatites contained within are so large and near-surface that they’re **visible from the sky.** On top of that, this historic project had extensive exploration work done on it before the current team acquired the property in 2022. And spent tens of millions of dollars to drill out the project. This helped the company push quickly into drilling, and 50,000 meters worth was completed just earlier this year. **Now, the company is in the process of establishing its maiden resource estimate…** **Or how much lithium is there, and what it could be worth.** And all the drill results leading up to this point have been significant in the industry. And this resource estimate is only one move of many for this experienced management team. Because at the same time, they’re also conducting environmental and economic studies… metallurgical testing… and local community outreach. This team knows that by the time the surge in lithium demand arrives, it’ll already be too late to start building a mine. Instead, they want a producing mine up and running as soon as possible – and they’re taking every step necessary to make it happen. **On Monday morning September 16th, just before the market opens…** **I’m going to give you the name, the ticker and the full story of this lithium company.** That’s why you don’t want to miss out on this one. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Ferrari’s Next Big Move - URL: https://katusaresearch.com/ferraris-next-big-move/ - Type: article - Published: 2024-09-11 - Updated: 2024-09-10 - Author: Marin Katusa Electric cars are often bought for practical reasons. The “fuel” is cheaper. There is less mechanical maintenance. They’re quieter. But people that buy a Ferrari sports car don’t drop a fortune for practical reasons. The company is notorious for building the most expensive sports cars. And they’ve been active in the biggest car races in the world for decades. Also, their cars are horrible gas guzzlers. Many Ferrari models barely get 16 miles on the gallon even on a highway. But now, even climate-conscious consumers can add one to their car collection. Because Ferrari just announced they’re adding their first all-electric sports car to their offering. The price tag: A cool 500,000 euros ($535,000). For Ferrari, a low price is not the point. It’s about the prestige. ## **Ferrari’s Mainstream Move** Ferrari might produce excellent sports cars. But those that buy them aren’t just looking for quality. They want to be looked at. They want to be admired for having the means to afford an expensive car like that. And they know how to move their market cap and drive revenues… Not everyone can have a Ferrari and for good reason. The company knows its customers and the market – not to mention how to make money for their shareholders. So, this pivot is no surprise. And for electric cars, this move means a further step into the mainstream and a step towards fully replacing gas-powered vehicles. The lithium price has dropped significantly from its 2022 high of $80,000. But that is by no means the end of the lithium bull market. In fact, this correction will most likely turn out to be the biggest opportunity for new lithium buyers to get in on the best lithium explorers on the cheap. Here are just a few reasons why lithium will dominate headlines in the coming years… ### **Lithium Accelerator #1:** **Rising EV sales worldwide** Even though the media hype has slowed down, electric cars are still quietly taking over the market: - Companies have sold more EVs in 2024 than ever. - EV sales went up 60% from 2022 to 2023. - In China, 45% of all cars sold this year are electric. Current sales numbers are on track to reach 50% of all new car sales by 2035 in the entire world. And this will be further accelerated by global EV production and seller mandates… ### **Lithium Accelerator #2:** **Governments are forcing the gas → EV conversion** Whether you agree with their methods or not, governments around the world are helping speed up the electric vehicle conversion: - The UK was the first major economy to announce a ban on gas cars by 2030. - 12 U.S. states are working on legislation to ban new gas cars by 2035. - Canada also wants to phase out gas cars by 2035. - The European Union passed a ban on new gas cars for all European countries by 2035. Case in point, Ferrari and other car makers know what’s happening in Europe… - **Europe’s ultra-fast EV charger network has exploded, growing 7x in just 3 years.** With 89,000 fast chargers now making up 15% of the public network, EV drivers enjoy unprecedented charging convenience. ### Lithium Accelerator #3: Low lithium prices will create a production bottleneck that will drive up prices – again For most of the past few decades, the lithium price remained relatively stable at around $6,000. And then came 2022, when the entire world started talking about electric cars. The spike in demand led to an all-time high in the lithium price of $80,000 per metric ton. Today, the price hovers around $12,500 per metric ton. Does that mean the lithium hype is over? Not at all. In fact, a new study using data from the International Energy Agency says that prices could soar 1,500% by 2050. That’s a long way away, but even a fraction of that price rise gives a BIG boost to lithium stocks. ## **What fueled the shortage panic of 2022 was a lack of production capacity, not a lack of lithium deposits** The acceleration of the EV trend took many by surprise. Especially because it was fueled by world governments eager to offer incentives for buying an EV to satisfy their green energy agendas. Lithium producers simply couldn’t keep up with this extremely high demand. **It takes years to set up a new lithium mining operation.** Even if you extract lithium using the other popular method, called “brining,” this process will still take you 12-18 months until the lithium ready to use. Lithium production is starting to pick up again, and that has contributed to lower prices. But as you’ve seen above, EV sales are still growing every year. The energy transition is happening. And no one can stop it. The low lithium price might force some lithium producers out of the market. And that will create another bottleneck that will drive up prices again. This is the nature of the resource price cycle. ## **At that point, anyone who is already invested in promising lithium explorers will be printing money** That’s why we’re glad we found a lithium company that meets our expectations of a successful small cap exploration company. That could be sitting on something big (and we’ll find out very soon). **I’m putting together the final touches in a report on this company and will share it with you very soon.** Sincerely, Marin Katusa and the KR Special Situations Team --- # The Price is Right: How a Market Is Made - URL: https://katusaresearch.com/the-price-is-right-how-a-market-is-made/ - Type: article - Published: 2024-09-09 - Updated: 2024-09-06 - Author: Marin Katusa | One market sector is making big headlines catching our attention. In this special bulletin today: - **3-year price lows + opportunity building:** Lithium market maturing with transparent pricing, potentially rewarding patient investors. - **IRA splits lithium in two**: Global (Chinese) vs. Premium (American), U.S. faces premium shortfalls for EV credits. - **Profit Potential:** Unknown developer expanding, nearing estimate to capitalize on premium market. | Dear Reader, Sometimes, even industry experts are very, *very* wrong. Even *the premiere *agency in lithium research, Benchmark Minerals Intelligence (BMI). In 2022, BMI predicted rising lithium prices, but the market fell sharply instead. Despite this, BMI still forecasts a lithium shortage by 2025. Within six months, lithium was in freefall. But a year after the initial prediction, BMI doubled down… **Predicting a worldwide lithium shortage—coming “as soon as 2025.”** Lithium spent the next six months dropping some more, and the industry fell apart. It was so bad that by January 2024, *half* of the Australian stock market’s top ten shorts were lithium companies and the #1 metals shorted stock on the US exchange is a lithium producer. So, in July 2024, BMI relented to reality, and then some. Now, there would be no return to “the giddy heights of 2022” for lithium *within the next* decade. Here’s the unfortunate truth BMI’s inaccurate predictions reveal: No one knows what lithium is worth**.** But that’s to be expected. Because lithium is still a developing market, there’s very little available in terms of accurate pricing. *(Note: You can follow the main [lithium prices here](https://carboncredits.com/lithium-prices-today/?)).* The only certainty right now—as BMI found out the hard way—is *volatility*. **So, we’re not going to predict that the price of lithium is making a huge comeback tomorrow—or even this year.** **Instead, I’ll tell you that the short-term price of lithium doesn’t matter.** What matters is that the lithium market is growing up fast. And the next few years hold two *huge* developments for the lithium market. As with any maturing market, patient investors could profit immensely as that unfolds. **The Price Is (Now) Right** There’s a reason no one really knows the true market price of lithium. It’s because the lithium “price” is based on sporadic spot price references and a handful of fledgling futures markets. Together, they’re the equivalent of only being able to see the road every ten minutes while driving. And that’s what’s driven the wild volatility in lithium over the past few years. Here’s a secret… Most lithium sales are based on long-term contracts, so ongoing supply decreases in lithium may not be reflected for *years*. That further leads to the whipsaw effect on pricing. Combined, this gives suppliers very little flexibility, miners very little power, and the sales price very little transparency. ***“Lithium is early in its life cycle. ******Frequent, high-quality ******data points are key to supporting transparent, reliable, and robust price indices.” *** ***– Albemarle*** **Just like uranium and iron ore, lithium is undergoing a transformation. ** Transparent pricing is emerging through experimental auctions, bringing greater visibility to the market. In early 2024, one of the top lithium suppliers in the world held a series of experimental auctions. Based on their success, Albemarle now plans more—expanding into other types and grades of lithium and to a biweekly frequency. Visibility into the market is already rapidly improving, and lithium has entered its price discovery era. In March 2024, Pilbara Minerals accepted an offer ahead of a scheduled auction—taking all of the company’s offtake through *December*. Given a few more years, however, that may become a thing of the past for lithium. But all of that pale in comparison to the biggest development in lithium: a potential split of the entire market. **Free Trade Lithium ** The Inflation Reduction Act requires 50% of lithium in EVs to come from U.S. or free-trade countries, excluding China, which processes 65% of the world’s lithium. This creates a two-tiered market: global (Chinese) and premium (American). China also *owns* mines all across Africa, Australia, and South America. And it *processed* more than 65% of the world’s lithium—including 98% of Australia’s. **Which means that if you want the tax credit, none of that Chinese lithium can be used in EV batteries sold in the U.S.** Put simply… **The IRA has effectively set up two tiers of lithium: Global (Chinese price) and Premium (the American price).** And premium lithium is in extremely short supply. The United States’ sole lithium mine produces about 1% of the global total. Yet the annual lithium demand in 2030 for *announced gigafactories* alone is *forty times* current U.S. lithium production. By 2033, the U.S. is expected to contribute 5% of global lithium supply—and 23% of demand. So, while there might be no global lithium shortfall anytime soon, massive *premium* lithium shortfalls are coming. Even foreign manufacturers trying to sell in the U.S. are afraid they will get shut out of supplying the lucrative U.S. market if they can’t find premium lithium. It is still to be seen what the price will be for premium lithium—but this isn’t about the price. - **Long-term chart of lithium pricing, especially as spot pricing kicks in, should be up and to the right. ** This is about *the source*. Miners in the right location—which are exceedingly rare—will have far more competing buyers than which they can supply. And as the price of lithium finds equilibrium, those miners could find surprising amounts of profit. One lithium developer has been quietly expanding its resources during market volatility. With spodumene deposits highly profitable at $20,000+/tonne, this company is positioned to capitalize on the premium lithium market. **They’re just weeks away from publishing their initial resource estimate. This team has an all-in, “go big or go home” mentality**. And I’ve put my money where my mouth is. More than 70% of the world’s lithium comes from just* ten mines*. Nothing is guaranteed or certain – and fraught with risk. But this company has a shot at being another one of those. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Bigger Short: America’s Power Is About to Flicker Out - URL: https://katusaresearch.com/the-bigger-short-americas-power-is-about-to-flicker-out/ - Type: article - Published: 2024-09-06 - Updated: 2024-09-05 - Author: Marin Katusa You’ve probably seen, or at least heard of, the movie *The Big Short*. It tells the story of the global financial system collapse in 2008—and of the people who made hundreds of millions predicting it would happen. Right now, we’re on the verge of another Big Short. This one’s in an entirely different industry. But the playbook is *exactly* the same: **Reduce the margins of safety, and hope nothing goes wrong. Just like in ‘08, most people think nothing will ever happen.** But eventually, someone reduces the margin a little too much—and something goes *very* wrong. For the few people that are paying attention this time around, it could be 10x more profitable than the last time around. This story begins with something called: **PJM Interconnection.** This is a giant organization that coordinates the electricity transmission across thirteen states, including Virginia. If PJM runs out of power, it’s lights out for the Northeastern U.S. ## **Power Warnings** Last year, PJM issued a warning that dense construction of power-thirsty data centers in its region was driving unsustainable growth in energy demand. The warning was mainly the result of one thing: exponential, unexpected data center growth in Northern Virginia. PJM’s 2022 projections showed little peak load growth in that region. But in its updated 2023 projections, the organization *tripled* its peak load growth forecast based on a projected doubling in the data center capacity in the region. That added 10GW of power to its 2030 forecast—like adding another New York City to an already-overloaded, “unsustainable” system. It’s a significant amount of power to get online in a short amount of time. But surely PJM is planning to get new power generation and transmission capacity online, right? Wrong. And it gets worse. ## **Margin of Error** Because while it’s tripling its peak load forecast, PJM also plans to *retire* 20% of its power generation. Look at PJM’s balance sheet summary through 2030: PJM projects 24GW of new power generation by 2030, but with 40GW of retiring capacity and 13GW of added demand, the region faces a 29GW deficit. **That’s equivalent to 30 nuclear reactors—nearly impossible to add within six years.** Further compounding the issue is the intermittent generation of renewables, relative to the baseload coal that is being retired. Like it or hate it, coal and natural gas-fired facilities are always on, solar only works if the sun shines or you have utility-scale battery storage. What PJM really needs to consider is whether the newbuild megawatt hours (meaning actual generation) will meet the required consumption of the region. ## **Pay close attention to PJM’s reaction to the power deficit…** For a utility company, what matters is whether power is available when demand is at its highest—hence “peak load demand” forecasts. So organizations like PJM maintain an “*installed reserve margin*”. That’s a fancy way of saying power generation capacity in excess of the projected peak load. Right now, that margin is set to ensure no more than one day of power outages per ten years. **But for the first time in decades, PJM is letting that reserve margin drop—a lot.** Just like the banks did in 2008. Let me show you what I mean. Including new installations, PJM’s installed capacity is projected to drop from 195 GW in 2023 to 186 GW in 2028. Meanwhile, demand is projected to rise from 173 GW to 182 GW. PJM’s reserve margin, the buffer against outages, is set to drop from 12% in 2023 to just 3% by 2028—a 75% reduction. ## **And that’s the best-case scenario…** If all the power generation it projects comes online at exactly the right time*.* According to PJM and independent sources, however, it’s likely to be much lower. Just like banks in 2008, PJM is one major event away from failure. This power crisis isn’t just in PJM; it’s a nationwide issue. The U.S. is on the verge of widespread power shortages, driven by surging data center demand and shrinking energy reserves. It’s setting the stage for a prolonged period of the worst blackouts in U.S. history. ## **It’s Coming Earlier than Expected** The number of major power disruptions annually has risen 750% since the turn of the century. And it stands to be the greatest threat to AI and data center developers yet. So utilities, grid operators, tech companies, and governments are all working urgently to solve the problem. Mark my words: Those that identify and implement a solution first will make billions, just like the Big Short. **I believe that solution has already been identified, and it’s well on its way to being implemented.** [I hope you’ll join me](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)—before the lights go out. Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Celebrity Crypto Stings: Beware the Hype - URL: https://katusaresearch.com/celebrity-crypto-stings-beware-the-hype/ - Type: article - Published: 2024-09-02 - Updated: 2024-08-30 - Author: Marin Katusa | **Editor’s Note**: This week, Katusa Research Senior Analyst Mike C. presents a special public service announcement for Investment Insights readers. | Dear Reader, Do you know DJ Khaled? How about Logan Paul? Maybe Lindsay Lohan or Kim Kardashian? If you’re wondering what any of these names have to do with each other, there’s a simple answer: Each of these celebrities has had their names used in a cryptocurrency scam. Now it might be tempting to think of these as standalone occurrences, but the list goes on. 50 Cent… Metallica… Lionel Messi… - **Celebrity crypto “launches” have totaled well over half a billion dollars in losses to date** for those investors who were too eager and willing to blindly follow their favorite idols. Celebrities looking to cash in on their fame with endorsement deals is a tale as old as time, but the association with crypto is more recent and noteworthy. And it’s the symptom of a larger trend in the scam “industry”. ## **From Call Centers to Instagram** Ever since the COVID-19 pandemic outbreak first hit the economy, causing a recession with far-reaching aftershocks, scammers have been on the rise. As the chart shows, reported losses to scams in the US more than quadrupled year-on-year through 2021. Losses continued to grow at a breakneck pace, slowing somewhat around the end of 2022 before picking back up through 2024. Outside the U.S., criminals exploited the coronavirus outbreak to target victims online. - **In the UK, impersonation scams doubled, and investment scams rose by 32% during the pandemic.** - **In Canada, money reported lost to investment scams has gone up 20x from 2019 to 2023.** What began as a nascent industry has matured, with scammers refining their methods and targets to adapt to a rapidly evolving world. ## **Social Media Stickup** And nowhere is this more evident than in the below chart depicting the methods utilized by scammers to contact their victims: While all the different contact methods used by scammers to steal money from their victims have seen growth… None have ballooned so drastically as **social media**, which stole the top spot from phone scams in early 2021. - 31% of all money lost by US scam victims so far this year has been through social media – up from 13% just prior to the COVID-19 outbreak. Now of course, there are all sorts of reasons people use social media, but it’s also the top method for celebrities to interact with their fans these days. ## **George Crypto Parker: He’s Got a Bridge NFT to Sell You** The shift towards social media as the preferred medium for scamming is just half the picture. The other half, of course, has to do with the growth of crypto scams. Even though the token and meme coin crazes are well past their heydays, new NFT projects and ICOs are still getting pumped out behind the scenes. Take a look at the chart below: - **Just a year after the corona outbreak, investment scams skyrocketed to become the #1 source of money lost to scams in the US.** Nowadays, over 40% of all money lost to scammers is due to some type of investment scam. Of course, “regular” pump-and-dumps still exist. And yes, plenty of celebrities use their status as social media influencers to manipulate stocks as well, despite the SEC’s best efforts. But according to a report released earlier this year by the Canadian Anti-Fraud Centre, **over half of investment fraud reports and money losses are attributed to fraudulent crypto investment platforms.** Meanwhile, at the same time: Usage of crypto as scammers’ preferred method of payment has also shot to the moon in recent years, briefly taking the top spot before settling comfortably in second place, behind bank transfers. ## **Think You’re a Crypto Wiz? Think Again** Long story short: if you come across an investment opportunity that’s crypto-related, or involves payment through cryptocurrency, approach with a healthy dose of skepticism. - Direct investments into Bitcoin itself, other major altcoins like Ethereum, and stablecoins like USDT are, generally speaking, fair game—but for anything beyond that, you should automatically assume there’s a good chance you’ll lose your entire investment. And if you found it on social media, it’s probably best to go ahead and write it off entirely. Doubly so if it came from an influencer or celebrity. Now, there might be some of you young bucks out there reading this who think that it’s only the boomers getting scammed by all this new fancy crypto tech they don’t quite understand. Sorry to break it to you, but the data disagrees. As it turns out, all that life experience does count for something… The older you are, the less likely your chances of actually losing money when you encounter a scam. Unfortunately, older folks generally also have more money available to them, often in the form of retirement savings. So when they do fall for a scam, they lose more on average. If you’re going to take anything away from this article, let it be these three rules - Stay away from unconventional crypto investments, and anything that requires you to pay in crypto. - Don’t trust investment ideas on social media. - Any celebrity or influencer offering investment advice should be ignored. It’s hard enough getting by these days as it is. Don’t let some two-bit scammer, or worse—some vein celebrity who wants to add a couple million more dollars to their pile of cash make life harder for you. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Why the World’s Most Crucial Metal Is Poised for a Major Rally - URL: https://katusaresearch.com/why-the-worlds-most-crucial-metal-is-poised-for-a-major-rally/ - Type: article - Published: 2024-08-30 - Updated: 2024-08-29 - Author: Marin Katusa Demand for this “red gold” is set to skyrocket. But here’s the twist—supply can’t keep up. Copper isn’t just another commodity; it’s the backbone of the green energy transition. Every electric vehicle, solar panel, and wind turbine demands more of this versatile metal. Ditto the electric grid. Yet, while demand soars, supply chains are struggling to keep up, ongoing labor strikes and mine nationalizations further hurt long-term supply visibility. **The latest data reveals a tightening market that could lead to a significant price surge.** Investors, take note: the train could leave the station with copper stocks, any day now. ## **Copper’s Unstoppable Demand: The Engine of the Green Economy** Copper has become indispensable. From electric vehicles to renewable energy systems, its role in the global economy is critical. The ongoing electrification of the world depends heavily on copper, and this dependence is only set to grow. However, while demand climbs, supply remains constrained. The mismatch between supply and demand is setting the stage for a perfect storm in the copper market. Let’s get into some of the latest data that reveals some eye-opening trends that suggest a bullish future for copper. ## **First Sign: Days of Forward Consumption Plummeting** One of the most striking indicators of copper’s looming supply crunch is the rapid decline in days of forward consumption. In 2019, global inventories covered 20 days of forward consumption. - **Fast forward to 2025, and that number shrinks to just 4 days and by 2026 it could be down to just a single day.** This drastic reduction highlights how fragile the supply chain has become. With inventories falling, prices are bound to rise as industries scramble to secure their copper needs. This chart illustrates the dramatic drop in days of forward consumption, underscoring the tightening market conditions. As the world demands more copper, the available supply diminishes. The result? A market ripe for significant price increases. ## **Second Sign: Long-Term Global Market Balance Slipping into Deficit** The global market balance for copper is another key indicator signaling a bullish future. In recent years, copper has swung from deficits to small surpluses. This deficit isn’t just a number; it’s a warning sign for industries relying on copper. The deficit reflects the gap between supply and demand that will drive prices upward. When demand outpaces supply, prices have only one way to go—up. This chart illustrates the ongoing battle between production and consumption, making it clear why copper is poised for a price surge. With a growing deficit in the coming years, the squeeze on supply will become more pronounced, pushing prices higher. ## **Third Sign: Global Mine Production Growth** Global mine production growth is struggling to keep pace with demand. Over the past few years, growth rates have averaged a paltry 2.5%. These figures reflect the challenges faced by miners, from geopolitical risks to operational constraints. Not to mention, that on average, a copper mine will take 16 years to go from exploration to production. This means that as current and new production growth slows, the pressure will build. As production struggles to keep up, the market balance tips further into deficit, setting the stage for a bullish run on copper prices. One thing… **That assumes that everything between now and 2028 comes online on time and on budget, which is a rarity.** Even with a projected 7% growth by 2028, the metal could still be in deficit. ## **Copper’s Future Is Here** With no major copper discoveries over the past few years, access to long-term safe and stable supply is in serious doubt. - **From 2015 to 2023, only 18 million tonnes of copper were discovered, compared to 28 million tonnes in 2014 alone.** The data paints a clear picture: copper could be on the verge of a major price rally. With declining days of forward consumption, a looming market deficit, and the potential for sluggish mine production growth, the fundamentals are in place for a bullish future. For investors, this isn’t just an opportunity—it’s a call to action. As industries transition to greener technologies, copper will be the lifeblood. And those who invest wisely will be well-positioned to capitalize on this copper revolution. The copper market is tightening, and the window of opportunity is here. Regards, Marin Katusa **P.S. In next week’s publication of my premium research** – *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/?)* – **I identify several gold and copper buyout targets**. **…And one company in the copper markets that could move 300-500% in the next 12 months.** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Brace Yourself: Gold’s Seasonal Surge Is Coming - URL: https://katusaresearch.com/brace-yourself-golds-seasonal-surge-is-coming/ - Type: article - Published: 2024-08-23 - Updated: 2024-08-22 - Author: Marin Katusa | ***Here’s what you need to know this week:*** - **Gold smashes records, soaring past $2,500 **– and it’s just getting started. - **Election chaos and Fed cuts **could supercharge gold’s epic rise. - **Discover the 5 gold stock buyout candidates **on the cusp for big gains this fall. | Dear Reader, While the world’s been captivated by Olympic gold, another type of gold has been making history. After a powerful spring surge that saw gold prices break $2,400 for the first time, the precious metal remained steady through early summer. But this month, gold made a stunning move… shattering the $2,500 barrier to reach an all-time high. ## **Catalysts Driving Gold Higher** While Middle East tensions initially sparked gold’s price surge last year, new drivers have emerged. The Federal Reserve’s potential rate cuts and the looming US election are now propelling gold’s ascent. Despite its impressive heights, gold’s growth story is far from over. Major players are betting big on the precious metal: - **UBS**: $2,600 gold by year-end - **Morgan Stanley**: $2,650 gold in Q4 2024 - **Goldman Sachs**: $2,700 gold by December (base case) Remarkably, these big banks and investment firms have already had to raise their gold price targets in recent months. With gold knocking on the door of the lower-end estimates, further upward revisions may be on the horizon. Let’s dive into the charts to uncover what they reveal about gold’s current position and future potential… ## **What Golds Around Comes Around** First off, let’s check out what the seasonal trend looks like in gold. ## **Strong Gold Seasons** Going back as far as 1970, on average towards the middle of the year, gold prices tend to quiet down until the end of summer. This does somewhat match what we’ve seen so far this year, with price activity cooling off after March’s explosive rally. **More to the point, two of gold’s historically strongest months in terms of price performance****—September and December****—are still ahead of us**. However, in-between those two months lies the US election season: Shown above is a table of gold’s return during the period from two months before to two months after past US presidential elections—September through January, alongside the same for the S&P 500. As you can see, despite gold’s traditionally strongest months of September, December, and January all falling within this period, election cycles have historically not been beneficial to the price of gold. Stock markets, on the other hand, have generally flourished in the wake of a new presidency. **The 2008 election, which coincided with the Global Financial Crisis, stands as the sole exception.** - As Obama took office, the S&P 500 plummeted while gold prices soared, proving that extraordinary circumstances can override the usual election cycle trend. ## **The Fed Rate Cut Wild Card** The market now expects 6 rate cuts from the US FED by March 2025, and traders are pricing in a 63% chance of an upcoming Federal Reserve rate cut in September. For a quick reminder: traditionally, rate cuts have been said to have a positive impact on gold prices. In theory, lower interest rates means lower yields on fixed-income investments like bonds, which makes gold more attractive as an investment. In this chart of gold prices vs. interest rates, periods of Fed rate cuts have been highlighted in red. - Through each of the previous rate cut periods going back to 1990, the average gold price performance during the rate cuts was a 3.11% gain. So, it should come as no surprise that gold prices have been steadily creeping up as the chances of a September rate cut continue to increase. ## **The Man with the Golden Gab** By the time you read this piece, Fed Chairman Powell will have made the announcement. **Between this and gold’s seasonal trend, there’s plenty of energy to push prices even higher before year’s end.** But don’t forget: it takes 15.7 years, on average, for a gold project to go from prospect to producing mine. If you think gold’s going to hit $3,000 at any point in the next decade and a half, the best time to build a gold mine was yesterday. Luckily for you, I’ve already identified which gold companies have a head start on their competition—the ones most likely to be buyout targets when the next big gold rush hits. - **In fact, one of the companies on my watchlist was already acquired at a generous premium just last month.** But don’t worry, there’s still five more left that I’m keeping my eyes on. To see which five gold companies I think are next on the mining majors’ shopping lists, consider purchasing a subscription to [my premium newsletter service, Katusa’s Resource Opportunities, here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?). You might be waiting another four years for more gold medals. But another rally in gold could be coming a lot sooner than that, and I want to be prepared. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Three Lithium Lies - URL: https://katusaresearch.com/the-three-lithium-lies/ - Type: article - Published: 2024-08-16 - Updated: 2024-08-15 - Author: Marin Katusa Dear Reader, It’s not a secret… In just 19 months, lithium has plummeted by more than 85%. Mines are shutting down. Investor cash is drying up. And the market still can’t seem to find a bottom. But for a select few lithium companies and their investors, this is the best news ever… For one, Australian-based mining giant Pilbara Minerals just acquired Lithium small cap Latin Resources for $370M, **and shares soared over 50% on the news.** And second, because this is a real blood-in-the-streets moment for lithium and the companies that mine it. Which means it’s time, as Buffett said, to be greedy when others are fearful. In the case of lithium, that’s especially great advice. **Because the current fear in the lithium market is based on three bald-faced lies**. And determining what’s actually true could be the fast-track to a fortune. According to the big banks, the collapse of lithium has been caused by several factors, such as falling EV sales, a shift towards less lithium-hungry hybrid EVs, and mine over-production. Only, none of those matches up well with reality. ## **The Death of EVs Is Greatly Exaggerated** Supposedly, the falling demand for lithium stems from a reduction in EV subsidies and a slowdown in mainland China’s EV sales. - **Fact check: Chinese EV sales are stronger than ever, with 2024 being the best year yet by far. For example, in 2024 EV sales represented 41.9% of all vehicle sales in China.** The chart below shows the monthly EV sales in China. EV demand has also continued to rise around the world. In 2023, sales volume increased by 35%. One of the only places short-term EV demand forecasts have shrunk is the U.S.: *because it won’t be able to produce enough.* **Analysts are slowly catching on to the truth that the EV market never slowed:** *“The reports say underlying demand for electric vehicles has disappointed, but to us, it still looks to be very strong.” – Auscap* *Media reporting that EV adoption is in reverse is not evident… – 2024 J.D. Power report* In a November 2023 lithium report, S&P actually *raised* its EV forecasts through 2027. There’s another hidden reason provided for the alleged lithium demand drop, though: the hybrid EV (PHEV) vs. battery EV (BEV) war. Due to their smaller batteries, hybrids require less lithium than battery-powered EVs. And last year, for the first time since 2020, plug in hybrid sales grew faster than battery car sales. But that’s already quickly reversing. PHEVs are simply bridge cars—lower-cost EVs that help consumers overcome range anxiety and wait until charging infrastructure is built out. In China, PHEVs rose from 18% market share in 2021 to 30% in 2023. But the trend is already over, with predictions that they will decline from 2025 on. **And in the U.S., Battery EVs have already soundly won.** **They will be 81% of the market this year… 85% in 2025… and 93% by 2029.** In other words, the EV market is quickly becoming *far more* lithium-intense. The longer miners believe that EV sales are slowing and that new EVs will use less lithium, the worse the industry will be prepared to provide adequate supply. And to make things even worse… the supposed “over-production” of lithium is in an extremely precarious position—and much of it has already shut down completely. ## **Last Mine Standing** The rapid rise in lithium prices—1,380% from Nov. 2020 to Nov. 2022—warped the market, causing a surge in production that cannot and will not last. (Note: You can follow [Lithium Prices here](https://carboncredits.com/lithium-prices-today/)) - **Africa, for example, saw a rise in “artisanal mining.”** It’s estimated that two-thirds of African lithium supply in 2023 was mined *by hand*—and that’s almost exactly the global market surplus in 2023. But mining by hand is price sensitive. It certainly cannot be sustained under an 85% drop in lithium prices. At current prices, much of the “*marginal*” or high-cost production is almost certainly losing money every day they operate. High lithium prices also encouraged low-grade spodumene and lepidolite producers to begin mining—and many have already stopped. In January 2024, Core Lithium completely halted mining at its operation in Australia. In March, Arcadium Lithium announced that it will reduce lithium output. Morgan Stanley anticipated production at Greenbushes, the largest hard-rock lithium mine in the world and a low-cost producer, to push the globe into long-term oversupply. **But instead of ramping up production, Greenbushes announced they were *cutting* lithium production in mid-2024.** And in China, two major lithium units were taken offline in July 2024 and we suspect many others are on the verge of unprofitability. **Altogether, double-digit lithium mining capacity has already been removed, more than the 2023 surplus.** And high-cost and pureplay lithium producers continue to exit the market, postpone projects, and slash investment. But remember: Demand hasn’t gone anywhere. **This is great news for a few disciplined miners and developers with enough cash on hand to play the long game.** They’re pouring cash in while there’s still blood in the streets. Even Warren Buffett announced his own lithium project in mid-2024—when lithium was at its lowest. While lithium won’t necessarily skyrocket again any time soon, it should recover to an above-historical level. And when it does, miners and developers that make it to the other side with low-cost production are likely to be sitting on gold mines. **The Katusa Research Special Situations Team has identified a special company…** **Sitting on a massive, low-production-cost lithium asset in a great jurisdiction.** **They’re doing the hard legwork now while the price is low and competition is capital-deprived.** As you saw in the news, Australian Mining giant Pilbara just made the first big $500M splash in the market. Lithium blood is in the streets… Are you prepared? Regards, Marin Katusa and the KR Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Companies Building Billion-Dollar Power Sheds - URL: https://katusaresearch.com/the-companies-building-billion-dollar-power-sheds/ - Type: article - Published: 2024-08-09 - Updated: 2024-08-08 - Author: Marin Katusa The data center industry used to be a relatively small, niche sector. But in 2023, it was thrust into the limelight—and it’s been growing at an unprecedented pace ever since. The overall number and sheer magnitude of the data centers being built defies imagination. Bill Vass, vice president of engineering at Amazon Web Services, said that the world is now adding a new data center every three days. A data center’s capacity is typically measured in megawatts (MW) or gigawatts (GW): how much power its servers require to run. - **In just two years, the MW of data centers under construction has risen by 700%.** Imagine what would happen to real estate if, two years from now, the number of houses under construction rose 700%. Odds are good that demand would drop and prices would plummet. But that’s just not happening for data centers. Even as construction spikes, lease prices are *skyrocketing*. The average asking rate for data center leases increased by 15% from 2021-2022, then another 19% last year. In primary markets, prices are rising as much as 30% a year. And 2024 is expected to see another year of double-digit growth in lease prices. At the same time, data center demand continues to rise. U.S. companies leased **1 GW** of data center capacity in 2021 . . . **2.3 GW** in 2022 . . . and **3.8 GW** in 2023. In other words, this is the start of an exponential growth curve. It couldn’t be better news for data center developers—or worse news for tech companies. ## **NO Vacancy** Data center demand is so high that as soon as a new project is announced, it’s taken. There’s no time for a tour; the lease has to be signed before shovels are even in the ground. Historically, less than half of data centers have been preleased. Now, more than 80% are. Northern Virginia data centers have a vacancy rate of less than 1%. Take it from the market experts: “*Every [data center] that gets built gets leased. **There is no vacancy***.” – KLNB principal Ryan Goeller *“The industry is continuing to experience explosive growth in demand which is leading to **completely sold-out primary markets**.”* – JLL Managing Director Andy Cvengros Data centers simply *cannot be built fast enough* to meet demand. So the prelease window is getting longer. Hyperscalers like Meta and Microsoft are now preleasing two to three years before a facility is finished—up from a one-year lead time in 2022. And the picture is expected to get even uglier for tech companies. *“If you want a new data center within [three to five years], start planning for it now, as we don’t see any sign of this demand slowing or the power situation getting any better.”* – JLL Managing Director Andy Cvengros But tech companies don’t need data centers in three to five years. They need them *now*. It begs the question: If some of the most powerful companies in the world have been pouring hundreds of billions into the buildout . . . what’s the holdup? The answer is something even Blackstone admittedly didn’t consider in its original investment thesis. It’s something that will *severely* handicap the growth of any data center company that does not find a solution. And it has the potential to be a far greater investment than data centers themselves. ## **Got Power?** Re-read the end of Andy’s quote above. He knows something crucial: Data centers aren’t just storage units. They’re storage units filled with massive numbers of computers—computers that suck massive amounts of power. E. Cermak, the data center in downtown Chicago, hosts more than 100 MW of mission-critical power infrastructure. It’s so big that it has surpassed O’Hare Airport as Commonwealth Edison’s single largest customer in Illinois—all housed in a single building. - **A single data center like E. Cermak can use as much power as 200,000 people.** Let that sink in. *Hundreds* of E. Cermaks are cropping up all across the U.S. Consider the five-building campus recently pre-leased in Northern Virginia. Its 430 MW of servers would require an entire full-sized nuclear reactor to run. - **QTS estimates that completing its data center projects alone will require the same amount of electricity as five million homes.** But utilities, many of which have already been struggling to keep the lights on, don’t know where that surge in power availability is going to come from. So they’ve begun implementing strict quotas on new data center construction. Virginia’s utility, Dominion Energy, for example, has both delayed and flat-out rejected new construction due to its inability to meet power demand. In Ireland, data centers are expected to consume 1/3 of its electricity by 2026. And Ireland’s electricity system already emitted an alert last year that electricity supply was at risk of shortfall. So EirGrid, Ireland’s power company, has placed a moratorium on new data center construction in Dublin through 2028. Data center construction timelines have been extended by as much as six years due to power constraints. Data centers won’t be Blackstone’s “best investment ever” if they can’t get any power. Fortunately, their properties currently under development have already contracted for access to power. But other data center developers have been less fortunate—and have been forced to identify alternative solutions, like building their own expensive power plants. Without luck in that endeavor, they will be the proud owners of multibillion-dollar sheds. Without a fix to the power dilemma, the data center industry will never catch up to demand. But it’s going to get worse before it gets better. Because the current race to catch up on the data center backlog is only prologue. It’s mostly just cloud providers catching up from the pandemic-era data boom. There’s now a new, rising source of demand for data centers. It requires *significantly* more power than the ones currently being built. How much more? It could use as much power as 100 million people—*in the U.S. alone*. The data center market has and will continue to explode over the coming years. Get all of my latest ideas [**here**](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Copper’s Turning Point: China’s Economic Shake-Up and Global Impact - URL: https://katusaresearch.com/coppers-turning-point-chinas-economic-shake-up-and-global-impact/ - Type: article - Published: 2024-08-02 - Author: Marin Katusa | **In This Week’s Investment Insights:** - **BHP’s acquisition of Filo Corp signifies a strategic move against declining ore grades, and is a big win for KRO Subscribers.** - **Amid significant reforms, China’s economic strategies could revitalize or further strain the copper market, reflecting deep uncertainties.** - **Labor strikes and production cuts in Chile threaten global copper supply, highlighting the critical need for stable outputs.** | The copper market is buzzing. China, the world’s largest consumer of the metal, made yet another bold attempt to steer their economic ship back in the right direction. At the same time, fanning the flames further is yet another bad quarter of production from Chilean state producer CODELCO and a potential labour strike at Escondida, the world’s largest copper mine. These massive shifts, happening in real-time, are going to impact both the supply and demand sides of the global copper equation. ## **China: Economic Outlook** The Chinese Third Plenum is a twice-a-decade conclave of Communist Party officials held just last week. And the outcome indicates that there’s serious work to do if China wants to regain its economic footing. The challenge is that the Plenum is a long-term economic planning event, rather than one catering to short-run issues like what China’s facing today. However, you could argue that these current issues could become long-term structural problems if not rectified. Key outcomes from the Plenum include: - China’s ruling Communist Party pledged to accelerate a new housing model that emphasizes renting and ramps up affordable homes, following a record property slump. - President Xi Jinping unveiled sweeping plans to bolster the finances of China’s indebted local governments. The primary mechanism will increase municipal government’s share of consumption taxes while reducing the central government’s take. This represents a major benefit to municipal governments, who ran a 14.93 trillion-yuan deficit in 2023. This is particularly noteworthy because in total, Chinese municipal government deficit is 66 trillion yuan ($9.1 trillion). The chart below shows cumulative deficit at the municipal level since 2008. This type of continuous deficit is not healthy at the municipal level. In addition, The People’s Bank of China cut a key short-term policy rate for the first time in almost a year. This steps up support for the economy after growth disappointed and steering a shift toward a new policy benchmark. ## **China Economic Health Checkup** There are a couple of ways to gauge China’s economic health. The most reliable way is to look at the consumption of input materials like copper and iron ore. Boom times are associated with higher periods of strong demand for these industrial metals, which makes sense as there’s a lot of building going on. - **One of the major clues that China isn’t operating at full health is a look at copper exports.** Typically, China imports substantial quantities of refined and unwrought (not in finished form) copper, while exporting very little. On average, over the past decade, China has only exported 25,000 tonnes of refined copper per month. However, recently exports of refined copper have soared… May 2024 exports were 74,000 tonnes, 196% higher than the average, while June was over 150,000 tonnes, 500% higher than the 10-year export average. The chart below shows Chinese refined copper exports at all-time highs: This massive spike in exports shows that smelters aren’t slowing down domestic production of refined copper, and instead are choosing to sell the surplus on the open market. Now the trillion-dollar question is whether this is a single monthly blip, or if a new monthly export trend of 100,000+ tonnes is emerging. The Chinese state policies aimed at spurring economic investment in infrastructure and real estate should boost demand, but it may take some time for the trickle down to take effect. ## **The Copper Price is Making Noise** Over the past few weeks, copper prices have tumbled… Down 14% on skepticism of Chinese economic conditions. However, over the past 5 years prices have still performed very strongly, up 58%. This incentivizes producers to transact and develop new assets. **Prices aren’t the only thing that’s falling…** State-owned Chilean copper miner **CODELCO** continues to overpromise and underdeliver. The company just announced this past week that production figures would be dropping again. First half of 2024 copper production was 579,785 tonnes which is 8.4% lower than the same period last year. The full-year projection now calls for roughly 1.3 million tonnes of copper production, which would be 8.7% lower than 2023. Current production levels represent a nearly 500,000 tonne (1.1 billion pounds of copper) decline relative to company production a decade ago. At the same time, production costs have also skyrocketed, with cash costs up over 50% in just the past two years alone. - This poses a serious issue for the market and a potential opportunity for higher prices if CODELCO production continues to lag expectations. ## **The Copper Market is Beginning to Rumble** BHP Group after being thwarted by Anglo American in a recent takeover attempt is going after **Filo Corp**. BHP and Lundin Mining will each acquire a 50% stake in **Filo Corp**, valuing the company at over CAD$4.5 billion, working out to CAD$33/share for Filo. **Filo Corp** was a company that was a buy-out candidate and recommendation in my premium service – ***Katusa Resource Opportunities***. It’s a terrific win for all that jumped on board. I, Marin Katusa directly own a substantial position in Filo (in the $millions) and believe the deal will close as scheduled. I am not selling Filo shares into the market at the current price which is below the buy out price. - **For open disclosure**, I have also added to my position after the news of the buy out as I believe the arbitrage opportunity ($33 take out vs. where the shares are trading) for such a short close and strong counterparties in BHP and Lundin Mining is too tempting for this alligator. I know the Lundin family, and I know Lukas and his father Adolf are looking down at Jack and Adam with a proud smile—well done boys! ## **Why did BHP go after Anglo and then Filo Corp?** Other than the fact that Filo has the best copper deposit discovered in the last 20 years, BHP has a very dirty secret many people don’t know about, which the deal with Lundin Mining for Filo solves, and I have written extensively about this in the KRO [**(here’s a link to learn more and subscribe)**](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). BHP’s dirty secret is that it too, like CODELCO, is facing declining ore grades. - **It’s forecast that BHP may lose up to 300,000 tonnes (661 million pounds) of copper production by 2027. ** To put it into perspective, this type of production loss is equal to the output of a top 15 global copper mine. Escondida is the world’s largest copper mine. It’s been in production for decades; it’s 2.4 miles long by 1.6 miles wide and 2,100 feet deep (645 meters). It’s a joint venture between BHP (57.5%), Rio Tinto (30%), Mitsubishi (9.5%), and JX Advanced Metals (3%). Escondida was discovered by the late David J. Lowell. ## **My Trip with the Legendary David J Lowell** *Here is a picture of me with David Lowell on a small plane during a site visit we coinvested on together in 2016.* One of the greatest honors of my career was after spending a week with David in the field, on the flight back, by complete serendipity in 2016, we were seated beside one another on a commercial flight back to Vancouver. Midway through the flight, I was incredibly honored when David told me I reminded him of his partner (who passed away from a heart attack—if you get the irony here you’ve been with me for a while), and said I was a ‘ball of fire’, have incredible energy and integrity. Then he said to me “Let’s do a deal together.” Long story short and four mergers later, the end result was Equinox Gold. RIP JDL. It’s been in operation since 1990, but over the past decade, it’s seen its copper reserve grades decline by nearly a third. - 1 tonne of copper-bearing ore today has a lot less copper in it than was mined a decade ago. - Furthermore, as the mining goes deeper, impurity levels of deleterious elements go up. Higher impurity levels lead to higher treatment and refining costs. As you can see in the chart below, Chilean copper assets in general have seen grades decline over time. In order to fight its ore grade declines, BHP needed to go after elephant-sized, high-grade copper assets. Anglo’s Collahuasi asset is a world-class mine that made a lot of sense to go after, but when BHP’s takeover attempt got rebuffed, Filo Corp’s high-grade copper porphyry in Argentina became BHP’s ideal target. I believe Filo will ultimately produce more copper than Escondida, and I have a feeling BHP also believes this. **Congratulations to the Lundins and all their long-term supporters, all my subscribers and investors that have been investors in Filo Corp. Knowing Lukas and the boys, I have no doubt Lukas is looking down at his boys with a giant smile. Well done Adam and Jack!** [For all my research and other investment ideas, sign up here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Boom, Bust, and Echo: Mastering the Lithium Market - URL: https://katusaresearch.com/boom-bust-and-echo-mastering-the-lithium-market/ - Type: article - Published: 2024-07-26 - Updated: 2024-07-25 - Author: Marin Katusa Imagine riding a roller coaster that takes you to thrilling heights and then drops you into stomach-churning lows—that’s the lithium market. This essential metal is still in its early years of market development. Yet, it plays vital roles in powering our electric cars and storing electricity generated from renewable energy facilities. However, for such a vital commodity, it’s anything but stable. For investors, this wild ride means potential big gains and gut-wrenching losses. ## **Booms and Busts in Lithium Prices** Like most commodities, lithium prices are very cyclical. In periods when demand is expected to outstrip supply, prices rise rapidly. Contrarily, when demand slows or supply increases, prices fall. In the chart below you can see the enormous run lithium went on from 2021 through 2022. Lithium carbonate prices in China soared over 1,200%, and then over the past year collapsed, falling 86%. In new markets, volatility is heightened which is what we are seeing here. This is because new participants are rapidly entering and exiting the market. As an investor in this market, you must have testicular fortitude and the ability to ride out big swings and take profits when you see them. For example: - Investing in **Altura Mining** early would have been rewarding as it was once a Cinderella story with a market cap over a billion dollars. However, it collapsed under the weight of debt and low prices and ended up filing for bankruptcy just before the market ripped in 2021. **Pilbara Minerals** acquired the assets in a fire sale for $200M. Imagine being an investor here, seeing the opportunity in lithium but coming up just short because the company was over-levered. - Or investing in **Patriot Battery Metals** which became a market darling in 2021-2023 as it began putting out major news flow and drill results. These culminated in a big resource estimate and billion-dollar project economics. Share prices went from CAD$0.35 to over CAD$17 per share. This is why I love to build positions during the “*echo*” phase, which comes after the boom and bust. The FOMO money that chased prices up during the boom is gone, and all the sellers have become tired, leaving the company in a rangebound state, dependent upon tangible catalysts of the company and sector. I think lithium is in the process of setting itself up for a moment like this. The key is figuring out what’s *next*, and what the major catalysts are for the sector and the stock. Because in the echo phase, a rising tide doesn’t lift all boats. ## **Lithium Market Growth Potential** In lithium, future demand is all about electric vehicles and battery storage. Here are a few key points that set the stage for future market growth: - Currently, all major EV battery forms require lithium, averaging 1.55 lbs per kWh of battery capacity. - Global battery cell manufacturing capacity is forecast to reach 7.2 TWh in 2030. This is over three times the 2023 total and well above the projected demand of 4.0 TWh. - Battery capacities in the US and Europe could grow more rapidly than China, supported by rising incentives for establishing localized capacities. - China and South Korea-headquartered battery-makers will remain indispensable partners in the capacity buildouts in the US and Europe, given their tier-1 expertise on scaling up capacity and as reliable partners to automakers. - A truly localized supply needs to solve key questions, including whether and how to gain technical know-how from current sector lead China, where to obtain cathode supply, and regarding the sourcing of cost-competitive, regionally made lithium, iron, and phosphate inputs. The chart below shows the projected growth in lithium carbonate, derived from EV-related sales forecasts. As you’ll see, demand for lithium is poised to rise by 270% over the coming decade. ## **The White House’s New Economic Weapon: Foreign Entity of Concern (FEOC)** The FEOC has become the new favorite economic weapon of US politicians. It allows the government to specifically target foreign companies in industries that it believes to be damaging to its own domestic industries. It’s a bold, powerful move by the White House which aims to bolster US and US-friendly supply of EV components and critical metals. An entity is an FEOC if it’s owned by, controlled by or subject to the jurisdiction of a government of a foreign country that’s a covered nation — and currently the list consists of China, North Korea, Russia and Iran. Through this FEOC policy, an EV becomes ineligible for the EV tax credit if an FEOC entity supplied any of the vehicle’s battery components from 2024 onwards and any of the applicable critical minerals from 2025. This means that the US EV tax credit will not be applicable to EVs that use the relevant inputs from Chinese-based production, regardless of the location of the producing company’s headquarters. This move to create FEOCs should act as a major catalyst for the US-friendly lithium sector. And the best part is, I think US-friendly lithium assets currently in development or production can be a winner regardless of the US Presidential election to come later this year. If you missed the last big lithium rush, don’t panic. I think the data speaks for itself that there’s more growth and opportunity on the horizon. Equip yourself with the knowledge to make informed investment decisions. Consider signing up for my newsletter, [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) here to get access to exclusive reports and expert analysis on lithium and all the other important battery metal dynamics. Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Now is the Time to Nickel and Dime - URL: https://katusaresearch.com/now-is-the-time-to-nickel-and-dime/ - Type: article - Published: 2024-07-19 - Updated: 2024-07-18 - Author: Marin Katusa It’s the home of the kagu, a bird that cannot fly. A strange national symbol and unique to the small country of New Caledonia. And recently, news about nickel hit front pages around the world due to the brief spurt of political unrest in the French overseas territory. Now, you might be wondering – why does this picturesque island territory have anything to do with the [price of nickel](https://carboncredits.com/nickel-prices-today/)? As it turns out, this unassuming patch of Pacific islands… - **Produced 6.4% of the world’s Nickel last year – an outsized contribution from a tiny territory just 7,200 square miles in area.** That’s only 12% bigger than the Hawaiian Islands! While the buzz has settled down, this incident put Nickel into the spotlight. Now with all of the recent furor over copper, a mineral similarly essential to the net zero transition, you might be wondering… **Why wasn’t Nickel *already* in the spotlight?** After all, it’s a critical mineral on many countries’ lists, including every member of the G7. It’s a key component in batteries, stainless steel, and several other industrial usages. Nickel plays a crucial role in both stainless steel production and electric vehicle (EV) batteries, where it’s a key component despite the batteries being named for lithium. - **Each EV sold last year contained an average of 25.3 kilograms of nickel, reflecting an 8% increase from the previous year.** The stainless-steel market uses nickel extensively, may not be rapidly expanding. But it still anticipates steady annual growth of 4-6% across various sectors like appliances, medical equipment, and construction. Despite its growing usage, nickel hasn’t garnered as much spotlight as other base metals. ## **EV Sales Are Only Part of the Equation** In two words: supply and demand. Despite the strong growth in EV sales pushing nickel demand up, this has been offset by two major factors: - A slowdown in stainless steel production, and - An endless stream of new mines coming online in Indonesia. Stainless steel production turned down in 2022 due to another resurgence of COVID-19 in China. And the global energy crisis that resulted from Russia’s invasion of Ukraine. Even in 2023, production had only barely recovered to 2021 levels, and so stainless steel production has effectively stayed flat for the past two years. Since stainless steel accounts for the bulk of global nickel consumption… **The slump there has impacted the marketplace far more than the growth in EV sales can make up.** Following this, in the meantime, global nickel production has been steadily on the rise led by low-cost, high-emissions Indonesian mines funded by Chinese capital. - **Thanks to this, Indonesia now accounts for over half of total global production, even though 10 years ago it made up less than 10%:** Combined, these two factors have led to nickel inventories staying high, and a supply glut that shows no sign of falling. According to consensus estimates from analysts polled by Reuters, nickel supply will continue to outpace demand through 2025 and see a corresponding price slump. Though if the International Energy Agency’s net zero scenario plays out, demand will turn around and outstrip supply by roughly 25% at the end of the decade. ## **The Energy Transition is Coming – But Not Fast Enough for Nickel** With how the current supply and demand environment for nickel looks, there’s no sugarcoating it. Expect prices to go nowhere in the near term as stainless steel production finally gets back to where it should’ve been 2 years ago, and Indonesia moderates their nickel output à la OPEC to ensure they can keep prices at a healthy sustainable level. Despite its critical role in achieving net zero emissions, nickel lacks the media buzz surrounding copper and lithium. Hidden beneath the market’s radar, nickel presents ripe opportunities for those prepared to dig deeper. ## **Nickel’s Next Big Break?** Decades after a significant nickel deal in a modern African country turned industry heads with a $6.8 billion sale, a similar opportunity looms with a company revitalizing long-dormant mines. Leveraging historical assets and modern technology… **This firm aims to tap into significant nickel and copper reserves, echoing past lucrative ventures.** With global nickel demand soaring, especially for electric vehicles, this could be an under-the-radar opportunity poised for substantial growth. Our team is publishing the details on a potential monster nickel project – one that I’ve had my eye on for a long time. **If you want to know the name of this company…** Consider a subscription to my premium newsletter service, [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). If you want to know exactly how I’m pulling the trigger – [click here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Kill Switch that Derailed OpenAI’s “Master Plan” - URL: https://katusaresearch.com/the-kill-switch-that-derailed-openais-master-plan/ - Type: article - Published: 2024-07-12 - Updated: 2024-09-10 - Author: Marin Katusa “*My basic model of the world is cost of **intelligence, **cost of** energy”*** – OpenAI founder Sam Altman Dear Reader, The “intelligence curve” has already led to the creation of the third-most-valuable company in the world: Nvidia. The company achieved that position through decades of hard work—and by accidentally being the only solution for the current AI bottleneck. It started a quarter-century ago, when Nvidia invented the GPU, or graphics processing unit. A GPU does exactly what Nvidia’s name says: “n” (a math term) + “vidia” (Latin root for “see”). GPUs use complex math to render images and video that can be seen on a screen. For two decades, Nvidia churned out ever-more-advanced GPUs—mostly for video gamers. Then along came Bitcoin. Mining the cryptocurrency requires a powerful processor to efficiently perform difficult calculations. It was a perfect fit for GPUs. And Nvidia started to take off. ## **Then Came A.I.** Training and using its trillion-parameter models required powerful chips—and GPUs, with their 100 billion transistors, were once again a perfect fit. Sometime in 2023, we reached a tipping point for AI. “*A new computing era has begun*.” – Nvidia CEO Jensen Huang Demand for Nvidia’s GPUs skyrocketed. And seemingly overnight, Nvidia transformed into an extremely powerful, extremely profitable company. - AI GPU demand more than *doubled* Nvidia’s 2023 income. - Revenue in Q1 2024 *tripled* year over year. Per-share earnings rose more than 700%. - It’s added $1.2 trillion to its market cap—as much as Canada’s entire GDP—in the last twelve months. Even Nvidia did not anticipate this level of success—and its unpreparedness is jeopardizing the future of AI. ## **GPU Wars: Harder to Get Than Drugs** In 2023, Sam Altman sat for an interview with HumanLoop. - **Nearly immediately after the synopsis was published, Sam made them take it down. ***(Note: We can’t even link to it because it doesn’t exist online anymore!)* The first item in the synopsis was this dead giveaway: “OpenAI is heavily GPU-limited.” Not even OpenAI—with the power of almighty Microsoft behind it—cannot get enough GPUs to deploy its new models. And that’s severely delaying OpenAI’s AI master plan: - No multimodal models (e.g., images and sound) - No longer-sequence models - No finetuning of results Just how many do they need? A single one of OpenAI’s next training supercomputers is expected to take more than 75,000 Nvidia GPUs. And they’re just not available. *“GPUs are harder to get than drugs.”* – Elon Musk ## **That shortage has triggered a massive run on GPUs…** Bytedance, the company behind TikTok, ordered $1 billion worth of Nvidia GPUs to begin building its own AI. Meta didn’t want to be left behind. So they decided to order “*enough* GPUs,” according to Zuckerberg—and then “double that.” They’re buying the equivalent of 600,000 more Nvidia H100 chips, which can run $30,000 each, this year alone. Microsoft is buying more than 400,000 GPUs for AI training and inference in 2024. - **And Nvidia can’t manufacture enough GPUs to let these companies pursue their AI ambitions.** Its highest-end GPU, the H100, remained sold out for most of 2023, even while Nvidia worked feverishly to increase production. They’re ramping up to ship more than 400,000 of their top GPUs per quarter. Yet it’s estimated that demand currently exceeds supply by at least 50%. ## **Nvidia’s Plan to Save the World** Fortunately, Nvidia’s efforts have started to alleviate the GPU shortage. **Jensen Huang plans to quadruple production by the end of 2025, which should enable the company to fully meet demand.** GPU delivery lead times are softening, from 8-11 months to just 3-4 months. And the major tech companies are beginning to make their own: - **Microsoft’s** Stargate project, for example, will use custom-designed computing chips. - **Meta** has produced its own advanced AI chip, Artemis, to reduce its reliance on Nvidia. - Even **Tesla** is making its own chip, which is far more powerful than Nvidia’s. The intelligence curve may finally be slowing. But the *power* curve is just getting started. And mark my words: it will create the most powerful company in the world. ## **The One World Currency: The Electrodollar** This is the dawn of what I call the Electrodollar ™ The sheer scale of AI GPU growth is staggering: - **The computing power coming online is now increasing 10x every nine months.** And every one of those GPUs requires power. *But* *power* *generation is not growing 10x every nine months**.* Even the semiconductor manufacturers are sounding the alarm: ***“The growth in AI is far outstripping the ability to produce clean power for it.”*** – Nvidia CEO Jensen Huang Sales numbers make total AI GPU energy consumption simple to calculate. Nvidia shipped 100,000 units in 2023. Those units will consume 7.3 TWh annually. By 2027, Nvidia is expected to ship 1.5 million AI server units—consuming more than 85 TWh annually. But that’s only if the power draw per unit remains the same. Instead, successive GPU models have taken more and more power. In just two years, Nvidia has *quadrupled* the amount of power used by a single chip. **Its newest chip – *Blackwell* – uses 1,200 watts of power. That’s the same as the average U.S. household.** And developing the next generation of AI models requires *millions* of ever-more powerful chips, all taking ever-more power. The primary roadblock to the future of AI is no longer technology. It’s power. But don’t take my word for it. Mark Zuckerberg was asked if there’s anything Meta doesn’t have the resources for—something that’s 10x bigger than Meta’s budget. His response: “Energy.” In other words, the same fervor and funds that were poured into GPUs are now coming for power. Intelligence made Nvidia a multitrillion-dollar company—seemingly overnight. - **Energy will make another multitrillion-dollar company, equally quickly.** And it’s coming sooner than you think. “*The chip shortage may be behind us, but… the world will face supply crunches * *in electricity and transformers next year*.” — Elon Musk Musk, Altman, Bezos, and a handful of other powerful world leaders have quietly been working on the technology that will break AI free from its power constraints. ## **It’s the A.I. Kill Switch.** [And it’s time for you to learn all about it – and how to profit](https://subscribers.katusaresearch.com/kr-the-ai-kill-switch/). Regards, Marin Katusa Chairman, Katusa Research **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Chinese Emissions. German Cost. And the Reliability of Baghdad. - URL: https://katusaresearch.com/chinese-emissions-german-cost-and-the-reliability-of-baghdad/ - Type: article - Published: 2024-07-05 - Updated: 2024-07-04 - Author: Marin Katusa | **Publisher’s Note:** - Last week’s *Investment Insight*s featured a major risk to the power grid at the hands of AI and Tech – **The Electric Pandemic**. - **On Tuesday, July 9th we will publish a special presentation** on this big theme – that you don’t want to miss. | Dear Reader, In early 2024, Amazon made an astonishing breakthrough on a near-impossible problem. Its solution signaled a critical change in the future of both technology companies and energy companies. Amazon wanted to acquire a data center campus in Pennsylvania and scale it up to nearly 1GW of capacity—a nuclear power plant worth of electricity. **The crux issue Amazon faces, is faced by every other tech and AI giant**. And it’s not getting enough chips like you may think. **The crux issue is actually electricity.** **Electricity must be:** - **Carbon-free,** - **Low-cost and ****reliable.** **Low-cost and reliable power are still relatively easy. Carbon-free is not.** As power demand ramps up, utilities have responded by turning up the dial on dirty energy. Their response to rising power demand has been to keep high-emissions plants open far past their intended closing dates: - In **Virginia**, the epicenter of data centers, utilities have requested extensions on the lifespan of gas and coal plants. - **Wisconsin** is delaying coal plant retirements—just for a new Microsoft data center. - When** Kansas City** utility Evergy announced that Panasonic would be building a factory and Meta a data center, they also announced they’d be keeping a coal plant open to power the facilities. Altogether, **nearly two dozen coal plants** across the U.S. that were slated for retirement are being kept open. And utilities are *building* new gas plants. Across just the Southeast United States, they’ve proposed more than 33 GW of new gas projects. Gas plants are one of the only ways for utilities to meet the magnitude of power required by data centers. But knowing even *that* won’t be enough energy to power their operations, tech companies have begun taking matters into their own hands. ## **Tech Companies are Cleaning and Powering Up** For example, Microsoft is building its own $100M gas plant in Ireland to supplement power usage of a data center there. - **You read that correctly: AI companies are so desperate for energy they’re building their own $100M power plants.** All so you can get Copilot in Microsoft Word. And Amazon is working to deploy natural gas fuel cells at its Oregon data centers to mitigate problems with grid capacity. Altogether, TD Cowen estimates that more than 75% of the new data center’s electricity demand will be supported by natural gas, while Goldman Sachs predicts at least 60% of new data centers will be powered by natural gas. Just one problem. Tech companies need *clean, carbon-free* energy. ***“It’s going to be a challenge… to see carbon reduction at the same time *** ***we’ve got this unprecedented growth.”*** – Duke Energy North Carolina operations president Kendal Bowman All the big tech giants, including Meta, Google, and Microsoft, have committed to 100% carbon-free operations by 2030. So their billion-dollar energy grid buildouts are only good for the next five years. Not only that but countries and states are cracking down on data center emissions. ## **A Net Zero Warning Shot to Corporations** In Loudoun County, more than 4,000 diesel generators have been permitted for data centers. But that runs completely counter to the Virginia Clean Economy Act. So… - **Virginia has proposed a bill that would require data centers to eliminate diesel fuel use and procure all carbon-free energy to qualify for tax exemption credits.** Earlier this year, a bill was introduced in Congress that would require the federal government to develop a system for reporting the impact of AI on the environment. And the EU’s AI Act, which goes into effect in 2025, will require the reporting of energy consumption, resource use, and emissions from AI systems through their life cycle. So data centers and their utilities will soon be limited to building out renewables: solar and wind. ## **Power Plant Not Included** Wind and solar yields energy only on sunny or windy days. But data centers require always-on, instantly available energy. *“The world is going to be short power. To power these data companies, you cannot have intermittent power like wind and solar… because you cannot turn off and on these data centers.”* *– BlackRock CEO Larry Fink* That intermittence increases grid operators’ concerns that they will not be able to balance demand—and could increase shortages. **One major landlord of A.I. has a plan calling for a 13-fold increase in renewable energy sources…** **And it will still need six nuclear reactors and a handful of natural gas plants.** The massive data center Amazon bought in Pennsylvania would take 42 square miles of solar—twice the size of the largest solar installation in the world. In Mississippi, a power company is investing $2 billion to $3 billion in building out solar farms to supply just *two* data centers. To confront the energy trilemma, tech companies are increasingly signing power purchase agreements (PPAs) with renewable energy suppliers. PPAs let companies buy guaranteed power—usually a combination of wind, solar, and storage—at a set price for a set duration. It’s been a great idea, while it’s lasted. Because the price of PPAs won’t stop going up. In fact, they’re now the highest they’ve been since tracking started in 2018—and they’re showing no signs of slowing down according to LevelTen Energy, the largest aggregator of PPA transactional data worldwide. And when you add in battery storage, the levelized cost of electricity for renewable PPAs can exceed $200/MWh. There’s only one option left for tech companies. ## **If They Can’t Buy it, They’ll Build it Themselves** So they’re transforming into **AI Energy companies**. Aside from the inability to get sufficient power, it’s a cost issue: about 90% of ongoing data center costs comes from power. Getting energy doesn’t just make AI possible—it makes it profitable. - **A green-powered data center infrastructure is the greatest AI moat on earth.** Amazon has a strong lead over every other tech company. Its portfolio has more than 500 wind and solar projects, with enough power for more than seven million homes. Meanwhile, Meta is betting big on batteries, and Google is going for geothermal. But Amazon’s solution for its Pennsylvania data center reveals where the entire tech industry is headed. Amazon needed a nuclear power plant worth of energy. So it didn’t go to the state utility or renewables or diesel generators. It simply bought all the energy from a nearby nuclear power plant. ## **We’ve Needed an Energy Breakthrough for AI** And nuclear is the beginning of that breakthrough. The crucial part is what these new AI Energy companies are just now discovering. It’s a new form of reliable, cost-effective, carbon-free energy. And it’s finally here. - **On Tuesday, July 9th, our team will release a special presentation on the “A.I. Kill Switch” that you don’t want to miss.** We’ve been talking about this and hinting of more to come behind the paywall of Katusa’s Resource Opportunities. **There are 3 major catalysts at play in the Electric Pandemic that we’ll get you prepared for.** And you’ll see why you need to get up to speed right away. This is one of the biggest changes of the decade, and it’s just getting started. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Electric Pandemic Dawns - URL: https://katusaresearch.com/the-electric-pandemic-dawns/ - Type: article - Published: 2024-06-28 - Updated: 2024-06-27 - Author: Marin Katusa | In this week’s insights, we get into… - **Virginia’s Power Crunch:** Northern Virginia’s data centers are depleting the power supply, outpacing even London’s consumption. - **Growth Effect:** These data centers handle one-third of internet traffic and are rapidly expanding. - **National Impact:** Data centers are driving up land values and causing power shortages across the U.S. | Dear Reader, Everyone wants the internet. Most people want AI. But people in Virginia are getting extremely sick of both. The reason why is tucked inside a walled-off portion of an underground parking garage in a nondescript office tower in Northern Virginia. This structure was created in 1992 to house the first central internet access point, MAE-East. Soon after, America Online’s move to Loudoun County capitalized on affordable land, cheap energy, and minimal natural disaster threats. Loudoun County was the perfect location for other reasons, to affordable land (then…), cheap energy (then!), and little threat of natural disasters. ## The Epicenter of Power and Data In 2009, when Virginia became the first state to offer data centers a major tax exemption, its fate as the epicenter of data centers was sealed. Known as *“Data Center Alley”* Northern Virginia is home to more than 275 data centers. Shown below is a map, with each blue dot representing a data center. **These data centers handle one-third of internet traffic—and the industry is growing faster than ever.** Between 2018 and 2022, the capacity of data centers in Northern Virginia doubled. But 2023 hit an inflection point. **In a single year, the data center capacity in Northern Virginia increased by an incredible 33%.** The bulk of that growth is happening in the same county AOL moved its headquarters to more than thirty years ago. Just thirty square miles within Loudoun County contains about 80% of the data center industry in Virginia, making it bigger than the next six largest U.S. markets combined. And there has not been a single day without data center construction in Loudoun County since 2010*.* Altogether, it now has more than 160 data center buildings with a combined 31 million sq. ft. of floor space—roughly equal to Central Park. - **As a result of the growth, this single county—population 432,000—uses more electricity than the city of London—population 8,980,000.** Dominion Energy is the major regulated utility in Northern Virginia. In the chart below, it projects that 20GW of additional capacity could come online by 2040. Even after accounting for newer more efficient chips, these new data centers will be even more power-intensive. The *Power Usage Effectiveness* ratio or ‘PUE’ is one of the most important metrics when it comes to analyzing power efficiency for data centers. - A PUE of 2.0 means that for every watt of IT power, an additional watt is consumed to cool and distribute power to the IT equipment. - A PUE closer to 1.0 means nearly all of the energy is used for computing. The chart below is Google’s PUE worldwide. As you can see, the PUE dropped in early years but over the past 5 it has begun to flat line. This supports the thesis that even after accounting for new high-efficiency chips, total capacity required is still going to increase. This is why utilities now regularly field requests from developers asking for as much power as several nuclear reactors can generate. ## **Out of Power and No Place to Go** In 2022—before the data center industry really took off—a major firm found that it was unequipped to power all the data centers Loudoun County was building. So it warned that it might not be able to meet future power needs. At first, it began delaying data center connections, warning its large data center customers about a “pinch point” that might keep it from hooking up new projects until 2026. Then it began turning them away altogether. But there’s still a huge pipeline of these massive developments just waiting to be built. - **Approved, but unbuilt, data centers in Loudoun County are equivalent to 5.8 million homes of power usage.** In other words, power is going to be a large-scale, out-of-control problem in Loudoun for the foreseeable future. AI data centers are most efficient when densely packed. **Data center developers will build as much capacity as they can in a specific region—until the grid is overloaded—then move on to the next.** Digital Gateway, a single campus under construction in neighboring Prince William County, would require 2-3 GW of power. **That single data center could power two million homes—twelve times as many as are in the whole county.** The reality is that Prince William County is already running out of power itself. So massive developments have spilled over into the rest of Virginia, causing power demand to surge across the state. If all current data center applications in Virginia were approved, they would require as much power as 14.6 million homes—four times as many homes as there are in the state. So data center developers have begun spreading the electric pandemic to the rest of the United States. ## **Everyone is Now Chasing Power** 85% of all new data centers built in the next three years will be *outside* Virginia. The transition has happened so quickly that the primary markets across the U.S. already have significant power constraints—which has led to the rise of what TD calls the “anywhere” deal. “*Everyone is now chasing power. They are willing to look everywhere for it.*” – JLL Managing Director Andy Cvengros That’s why land values in Columbus, Ohio have quadrupled. Parts of Chicago have tripled just because the land has access to *power*. All across the nation, data centers are springing up in new secondary markets: - **Meta** is building a giant data center in Kansas City, Missouri, fueling what its utility is calling “the most robust electricity demand growth in *decades*.” - **AWS** recently announced plans to invest $10 billion in data centers in Mississippi—the largest capital investment in state history. - Even **energy providers** in Rust Belt states like Pennsylvania and Kentucky are seeing data centers with large load requirements cropping up. As quickly as this has happened, states are realizing the predicament they’ve put themselves in. In Arizona—one of the new primary markets for data centers—the number and size of new hookup requests just kept increasing. So the state’s largest utility put a temporary ban on new data center hookups. Initially, Atlanta was excited to become a new hub for data centers. But now, Georgia Power is warning of power limitations. ## **A Challenge “Like we have never seen before”** The North American Energy Reliability Council estimates: - **65% of North America’s interconnection areas are at risk of a power shortfall… *this summer*.** Power instability is coming, and it stands to wreck the U.S.—and AI with it. But right now, there’s one utility that’s worried more than all the rest. It’s at ground zero for data center growth. “*This has created a challenge like we have never seen before*.” – Georgia Public Service Commission chairman Jason Shaw Unprecedented challenges present unprecedented investment opportunities. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Berkshire Hathway Looking at Canada? - URL: https://katusaresearch.com/berkshire-hathway-looking-at-canada/ - Type: article - Published: 2024-06-21 - Author: Marin Katusa Dear Reader, When the ‘Oracle of Omaha’ offers investment advice, it’s time to pay attention. Buffett mentioned that Canada looks appealing, which means there is value for his potential investments. So let’s put our Berkshire hat on… The ***Buffet Indicator*** is the ratio of the total value of the stock market, relative to GDP. This indicator can be applied to any country. Below is an example. The Buffett Indicator posits that the stock market’s value should align with the country’s GDP. However, take note that the US stock market (the numerator) is forward-looking, reflecting future earnings. In contrast, GDP (the denominator) is backward-looking, measuring past economic performance. This makes the comparison somewhat mismatched, like apples to oranges. **That said, let’s put Warren’s *indicator* to work, since 1970.** What we can infer from this chart is that the value of the US stock market has grown in value *faster* than US GDP. This emphasizes the point that the stock market is more forward looking today than it was previously. **It is betting on growth well in advance of GDP growth.** An interesting tidbit of information came out of his mouth at the recent AGM in Omaha. *“**We do not feel uncomfortable in any shape or form putting our money into Canada**. In fact, we are actually looking at one thing right now.”* *“There are things we actually can do fairly well that Canada could benefit from Berkshire’s participation.”* **OK so let’s dissect this, the oracle has given us a big hint.** Let’s start with Warren’s indicator and apply it to Canada, total stock market value relative to GDP. Now in the next chart, you can see up until 2015, the economies have trended similarly. However, since 2015, the United States has begun to pull away and this was magnified in the post-pandemic recovery. Ironically, 2015 is also when Justin Trudeau was elected Prime Minister of Canada, and the Federal government has been run by the Liberal Party since. Today, US valuations remain steeply higher relative to Canadian valuations according to the Buffet Indicator. **Does that Mean Opportunity? Let’s Find Out** As we can see, using the Buffett Indicator, Canada is much cheaper relative to the United States. - The United States is trading at 187% of GDP, whereas Canada is trading at 112% of GDP. From a value proposition, this ticks the box. Now, looking just at the valuation of companies excluding the impact of GDP, we can see that US stocks have consistently seen valuations increase relative to Canadian equities. The chart below shows the Price to Earnings ratio of S&P 500 companies relative to the TSX. - If the ratio is less than 1, US equities are trading at a premium to Canadian equities. - If the ratio is greater than 1, Canadian equities are trading at a premium to US equities. Currently, Canadian valuations are hovering near the steepest discount since at least 2007. **Berkshire 2.0** Warren Buffet is 94 years old, and for the first time, he was up on stage without his most trusted business partner and friend Charlie Munger who passed away last year. Instead, he had his disciples up there, Greg Abel and Ajit Jain. Warren is still actively involved in the decision-making process, but at 94 years old, the succession plan has been laid. - **The cash war chest that Warren and Charlie built over time has reached $189 billion at the end of March 2024.** - **Combined with a $300 billion investment portfolio of public securities that represents nearly half a trillion dollars.** Buffet has long said he doesn’t want to do small deals and wants to focus on needle moving investments. Given the portfolio size and cash position, this should indicate a position of at least $5B with the ability to scale to $25-$30B over time. Complicating the situation further, is that when you own too much of something, it can be interpreted as having a monopoly on a sector. This becomes subject of significant anti-trust issues and could lead to forced retreat from an acquisition. It’s a difficult problem for Buffet because frankly not that many businesses require that much capital. Especially so in Canada. **What Warren Likes / Doesn’t Like** We know that Warren loves businesses he can understand. His rule is, if the investment thesis cannot be explained in a single page, it’s too complicated. - He wants **simple businesses** with strong margins and organic growth potential. - He always has a **long-term vision** and rarely takes positions for quick trades. - He is looking for **generational cash flowing assets** and wants to put large sums of capital to work. In addition, we know that Warren isn’t a big fan of gold and is well positioned in the oil and gas space through investments in** Chevron** (which he has been reducing) and **Occidental Petroleum** and has owned companies like **Kinder Morgan** in the past. In his 2023 annual letter to shareholders, Warren spent over a page on Berkshire Energy and the utility sector in general. He cited concern over the staggering capex that lay ahead for the industry and the potential break from a regulatory system that created a stable fixed return environment. *“When the dust settles, America’s power needs and the consequent capital expenditure will be staggering.* *I did not anticipate or even consider the adverse developments in regulatory returns and, along with Berkshire’s two partners at BHE, I made a costly mistake in not doing so.”* Looking at the Canadian electricity landscape, I am sure Warren would love to get his hands-on large-scale hydro in eastern Canada, but there simply is nothing available for sale at a decent price. **What is for sale in Canada that is in his wheelhouse?** Buffett’s interest in Canada is rooted in solid value propositions identified using the Buffett Indicator. While US valuations are high, Canada offers an attractive discount, making it a prime market for future investments. **We believe there’s a clue right at the top of Berkshire that indicates where Buffett’s money could flow next.** And we shared it with subscribers in this past month’s edition of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Ultimate Free Ride - URL: https://katusaresearch.com/the-ultimate-free-ride/ - Type: article - Published: 2024-06-14 - Updated: 2025-09-10 - Author: Marin Katusa **This editorial contains material disseminated on behalf of GoldMining Inc (GLDG:NYSE).** Dear Reader, In 2013, they accidentally **threw away** a scratch-off lottery ticket. Joanne and Joseph Zagami of North Attleborough, Massachusetts, had inadvertently thrown the ticket away with their groceries. Luckily, they found it in the trash the next day just in time before the garbage was collected. When they scratched it, they discovered it was a $1 million winner. Sometimes you just want to hold on to the ticket… ## **A Nuclear Lottery Ticket Owned by a… Gold Company?** The uranium market was one of the hottest stories in late 2023 on the back of 15-year high uranium prices. Nuclear restarts in Japan, surging numbers of nuclear power projects in China, United Kingdom, and around the world… This is expended to be a trend over the next decade – along with commodities. Gold and copper, in particular. **“*We view it as critical… we are serious. We need to deploy now.*****”** That’s from Michael Goff, acting assistant secretary of the US Energy Department’s Office of Nuclear Energy. The completion of two new reactors at the Vogtle Nuclear Plant is a major move forward, elevating nuclear energy’s role in the U.S. power grid. With power demand soaring, especially from data centers and manufacturing sectors, the push for more carbon-free solutions like nuclear has never been more urgent. - **The U.S. Energy Department’s bold plan to triple nuclear capacity by 2050 underscores this urgency.** Despite the substantial incentives under the Inflation Reduction Act, industry leaders argue it’s not enough to kickstart the next wave of nuclear projects. What many investors don’t appreciate fully is that **GoldMining** **Inc.** **(GLDG: NYSE)** actually holds a uranium project inside its diverse portfolio of gold and gold-copper projects. That’s right… ## **Back in 2013, near the very BOTTOM of the uranium market…** GoldMining acquired 75% ownership of the Rea Project. Yet, that’s not even the most interesting part. The Rea Project is located in the Athabasca Basin in Alberta, Canada. - **The exciting piece for investors is the Athabasca Basin is home to some of the highest-grade uranium deposits *in the world.*** Cameco — one of the largest uranium providers on earth has their Millennium Uranium project there. Cameco is a C$30B company. And… ## **Their stock has doubled during the recent uranium bull market.** Unappreciated by a lot of investors is that **GoldMining (GLDG: NYSE)** owns 75% of the Rea uranium project and the world’s third-largest uranium miner owns 25%. Just yesterday came a major news release… GoldMining used advanced techniques to study old survey data and **identified over 70 km of promising zones** in three separate areas. This research suggests there could be significant uranium deposits in this region, known for its high-quality uranium. This discovery places GoldMining Inc. in a strong position in the expanding market for nuclear energy, which is crucial for advancing clean energy solutions. Let that sink in for a moment because it is going to get more interesting… ## **Orano is the third largest uranium producer in the world. ****And owns 25% of Rea.** Rea uranium project is a large project of contiguous mining claims exceeding 300,000 acres in size – that’s more than 20 times than all of Manhattan Island! Most importantly though, it surrounds the high-grade Maybelle River deposit… Which is majority-owned by Orano and previously owned by Cameco (the world’s second-largest producer). **The Rea project has over 16,000 feet of drilling across 30+ drill holes.** While third-party project results are not indicative of potential for the project, this is interesting to me. **There are approximately 20 uranium exploration companies today which have zero uranium reserves or resources.** GoldMining’s global aggregate resource base across all projects includes 13.4 million ounces of gold equivalent Measured and Indicated and 9.9 million ounces of gold equivalent in the Inferred resource category. *(See the breakdown and GoldMining’s Annual Information Form and project technical reports for important information regarding its projects.)* In the investment business, everyone talks about being a contrarian, meaning buying quality assets when they are out of favor. But very few do it. We think the GoldMining team is one of the few companies in the sector who went out and bought quality assets and was able to finance the acquisitions when commodity prices were in the dumps. ## **When GoldMining acquired Rea, uranium spot price was a fraction of what it is today – below $40 per pound.** **Uranium prices are now 130% HIGHER.** Because **GoldMining (GLDG: NYSE)** is a gold company… Few in both the gold sector and uranium sector are even aware they have a 75% interest in Rea… And completely surrounding **a high-grade deposit **whose 25% owner is Orano, the world’s third-largest uranium producer. **Inside a gold-focused company, owning a uranium asset is a bonus.** A uranium asset that GoldMining Inc. can seek to unlock value from in a rising gold environment AND now uranium bull market. [**Click Here to Access the Full GoldMining Report**](https://katusaresearch.com/gold-mining-gldg/) Regards, Marin Katusa and the KR Special Situations Team **DISCLOSURES/DISCLAIMER ** **IMPORTANT DISCLAIMER:** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **GoldMining Inc. has reviewed and sponsored this article**. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED**: In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from GoldMining Inc. in the amount of $1.25M Dollars for a multi-month marketing campaign, and is thus extremely biased. Members of Katusa Research may also own shares in GoldMining Inc. and benefit from any volume, activity or share price change. It is crucial that you conduct your own research prior to investing. This includes reading the company’s SEDAR and SEC filings, press releases, and disclosures including ‘risk factors’ as outlined in the Company’s Annual Information Form. **HIGH RISK: **The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain of the information contained herein and in the Company’s disclosures referenced herein constitutes “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and U.S. securities laws (“forward-looking statements”), which involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance and achievements to be materially different from the results, performance or achievements expressed or implied therein. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements respecting the Company’s strategies, expectations regarding gold markets, expectations regarding the operations and results of the operators of the projects underlying the Company’s interests and expectations regarding future production and revenues from the Company’s royalties. Forward-looking statements are based upon certain assumptions and other important factors, including assumptions relating to commodities prices and the business of the Company. Forward-looking statements are subject to a number of risks, uncertainties and other factors which may cause the actual results to be materially different from those expressed or implied by such forward-looking statements, including those set forth in the Company’s Annual Report on Form 20-F and its other publicly filed documents under its profiles at www.sedarplus.ca and www.sec.gov. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should review the GoldMining Inc public disclosures at www.sedarplus.ca and www.sec.gov for important information regarding it and its assets. --- # Three Billionaires and the Fight over 1 Billion pounds of Copper - URL: https://katusaresearch.com/three-billionaires-and-the-fight-over-1-billion-pounds-of-copper/ - Type: article - Published: 2024-06-07 - Updated: 2024-10-09 - Author: Marin Katusa **This editorial contains material disseminated on behalf of GoldMining Inc (GLDG:NYSE).** Dear Reader, I’m going to share today a story that has never been told until today. In early 2009, I received a late-night phone call from a former colleague who was able to secure the rights to an incredible project that contained a billion pounds of copper. Long story short… I was secured an allocation because I was the first to put my hand up for the financing. And it was lucky I did, because right after the meeting with me (I did breakfast at 7am with the team before their 8am with the key financier), the other investors were completely cut out of the financing. Mega-Mining financiers Robert Friedland and Lukas Lundin invested millions and took as much of the financing for themselves. - **The share price of that company went up 10-fold within 15 months of the financing.** Lukas and Robert took the majority by investing millions because of the quality and size of that copper project. Even more amazing and shortly after, another mining legend and billionaire, Tom Kaplan got involved and invested even more millions because of the size and quality of the copper deposit. **Fast forward over a decade and that same copper deposit is now owned 100% by GoldMining Inc. (GLDG.NYSE).** Not even the CEO of the company knew the story when I shared with him. But you’ll find out why he left a cushy job at one of the world’s largest mining companies because of the assets… This is an interview you do not want to miss and see why the CEO’s greed (aligned with shareholders) is good for shareholders in this case… skin in the game and more… ## **But here’s where it gets truly exciting…** Alastair’s vision isn’t just about holding assets; it’s about strategically unlocking their value through spin-offs and sales. In just three years, he has spearheaded two successful IPOs and a highly profitable project sale, showcasing his acumen in maximizing shareholder value. **We’ve conducted an exclusive interview with Alastair Still, where he reveals:** - A project the company owns 100% of that previously was invested in by Billionaires, Robert Friedland, Lukas Lundin and Tom Kaplan and contains over 1 Billion pounds of copper. - The strategies that will propel GoldMining to new heights in 2024. - Insights into the gold and copper markets and their future. - The roadmap for leveraging their diverse portfolio of assets. Including how they made 14x on the sale of Nutmeg, and what’s next. - How the company’s leverage on uranium could unlock value (yes – more on this angle shortly). **This is your chance to get a front-row seat to boardroom-level insights from Alastair himself.** **And more on the copper story you’ve never heard of…** Best Regards, Marin Katusa P.S. Opportunities like this are rare. Watch the exclusive interview to discover more, then conduct your own research, especially reviewing GoldMining’s public filings. **DISCLOSURES/DISCLAIMER ** **IMPORTANT DISCLAIMER:** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **GoldMining Inc. has reviewed and sponsored this article**. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED**: In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from GoldMining Inc. in the amount of $1.25M Dollars for a multi-month marketing campaign, and is thus extremely biased. Members of Katusa Research may also own shares in GoldMining Inc. and benefit from any volume, activity or share price change. It is crucial that you conduct your own research prior to investing. This includes reading the company’s SEDAR and SEC filings, press releases, and disclosures including ‘risk factors’ as outlined in the Company’s Annual Information Form. **HIGH RISK: **The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain of the information contained herein and in the Company’s disclosures referenced herein constitutes “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and U.S. securities laws (“forward-looking statements”), which involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance and achievements to be materially different from the results, performance or achievements expressed or implied therein. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements respecting the Company’s strategies, expectations regarding gold markets, expectations regarding the operations and results of the operators of the projects underlying the Company’s interests and expectations regarding future production and revenues from the Company’s royalties. Forward-looking statements are based upon certain assumptions and other important factors, including assumptions relating to commodities prices and the business of the Company. Forward-looking statements are subject to a number of risks, uncertainties and other factors which may cause the actual results to be materially different from those expressed or implied by such forward-looking statements, including those set forth in the Company’s Annual Report on Form 20-F and its other publicly filed documents under its profiles at www.sedarplus.ca and www.sec.gov. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should review the GoldMining Inc public disclosures at www.sedarplus.ca and www.sec.gov for important information regarding it and its assets. --- # Every “Failsafe” Rule in this Sector is Broken - URL: https://katusaresearch.com/every-failsafe-rule-in-this-sector-is-broken/ - Type: article - Published: 2024-06-04 - Author: Marin Katusa **This editorial contains material disseminated on behalf of GoldMining Inc (GLDG:NYSE).** Dear Reader, Gold is *supposed* to have a few ironclad correlations—rules that it has followed almost without fail for decades. But none of those are safe any longer. Every golden rule has been broken. And investors who don’t understand why—or the *new* rules for gold—stand to miss out on a completely new, exploding market. Let me give you an example. Traditionally, gold has been tracked with the total ETF holdings of gold bullion. But in late 2022, the two decided to part ways. ETFs saw the largest net outflows of gold in a decade—and **gold continued to rise**. ## The Broken Treasury Rule The higher real yields are, the higher the opportunity cost is for owning gold. So, there has long been a near-perfect inverse correlation between gold and real interest rates. Last time real rates were this high, gold was under $1,000. **Gold should be at death’s door.** But again, starting in mid-2022, the “rule” broke. Or consider the USD-gold correlation. The USD is the strongest it has been since 2002, which should mean extraordinarily weak gold. As you can see from the chart above, that ended in 2023. But surely investors are using gold as the traditional safe haven from a highly volatile stock market, right? Wrong: Gold ETF VIX is sitting near its long-term low. Ten years ago, the Chairman of the Shanghai Gold Exchange explained, *“When China has the right to speak in the international gold market, the true price of gold will be revealed.”* The new correlation with gold is with China, not the U.S.A. *or EU*. And China is speaking—starting with the Chinese people. ## Longjiang Bridge Is Falling Down Chinese investors who accumulated savings during the pandemic have limited options where to put that cash: - Housing prices are in crisis, having dropped for ten months in a row; - Saving accounts pay little, with the government urging banks to *further* cut rates; - Money can’t be offshored due to strict government control; and - Equities lose money, with the Chinese stock market down nearly $5 trillion in the last three years. In that environment—complemented by disinflation and income uncertainty—gold is one of the few good options. But it’s not just about finding a place to deposit savings. In April 2022—right when the golden rules started to break—the Chinese Consumer Confidence Index *plummeted*. It was a far bigger drop even than when COVID hit. And it marked the beginning of the Chinese gold rush: Chinese people started to funnel their wealth outside the fiat system. While Western investors are profit-taking and ETFs are shedding gold, Easterners are buying *into* the surge: *“Chinese speculators have really grabbed gold by the throat.”* – World Gold Council chief market strategist John Read It’s not just retail Chinese investors. Traders and speculators are getting in on the action, too—in far greater numbers than their Western counterparts. - **Gold positions held on the Shanghai Futures Exchange hit an all-time high in April 2024.** And that 175-tonne (5.6 million ounces) rise is almost *exactly* the same as the dip in U.S.-based ETFs. Are you following this yet? Speculative money in an emerging market like China can now dramatically move the price of gold. And that’s just retail investors. The real heavyweight, and the place Chinese investors are taking their cues from, is the Central Bank of China. ## China Is the Captain Now It’s no secret that central banks in developing markets are buying up gold at a record pace—more than 1,000 tonnes (32 Million ounces) per year. But the leader in those purchases by far is the Central Bank of the People’s Republic of China. China added 225 tonnes (7.2 Million ounces) of gold, worth over $16 billion, to its reserves in 2023. It’s the highest annual increase in China’s gold holdings in the last half-century. And it means that the Chinese government is buying ~8% of gold production every year. China’s total gold reserves stand at 2,235 tonnes (71,520,000 ounces of gold)—or 40% more than all gold ETFs *combined*. That is over $164 Billion worth at today’s gold prices. Let me be clear: This isn’t an investment play. **This is China shifting away from USD assets and into gold.** The uptick in buying began shortly after the United States weaponized the USD against Russia. The use of the USD as a geopolitical instrument stunned China—and they are reacting decisively to reduce their vulnerability. This is China fighting back. And China’s weapon against the USD is gold. Gold is not subject to sanctions or confiscation risk. And it’s in high demand by any developed country. It’s the ultimate asset. The move has created a brand new golden rule: **China now has pricing power over gold.** And they’re exercising it as we speak. In fact, there’s a near-perfect correlation between one of the most important Chinese financial instruments – and gold. Understanding the new gold market requires throwing out every rule you’ve heard. *Because this time is different.* ****KR SPECIAL SITUATIONS ALERT** GoldMining Inc (GOLD:NYSE)** *LEGAL NOTE: Please read important disclaimers at the end of this email.* CEO Alastair Still says *“It’s Harvesting Time…”* GoldMining Inc. (GLDG: NYSE) has quietly spent more than 10 years acquiring over a dozen Gold assets with opportunistic timing… ✔ Two IPO’s launched from the portfolio in the last 3 years. ✔** Sold another project for equity consideration and contingent payments totaling 1,400% what it paid based on share prices at the time of closing.** ✔ Holds around USD$119M in cash and equity holdings. No debt. ✔ Contain a cumulative total of 12.5 million gold-equivalent ounces measured and indicated and 9.7 million gold-equivalent ounces inferred. Here’s why all this is important: Just ONE of these projects – La Mina in Colombia – has a Preliminary Economic Assessment (PEA), that included an estimate of pre-tax net present value (NPV) of $447.3 Million using a 5% discount rate using a $1,750 gold price. (based on a 2023 technical report). The gold price today is above $2,300 per ounce. La Mina is just 1 of 12 projects, at varying stages of exploration, owned by GoldMining. [Full Alert and Analysis in this report](https://katusaresearch.com/gold-mining-gldg/). Regards, The KR Special Situations Team **DISCLOSURES/DISCLAIMER ** **IMPORTANT DISCLAIMER:** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **GoldMining Inc. has reviewed and sponsored this article**. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED**: In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from GoldMining Inc. in the amount of $1.25M Dollars for a multi-month marketing campaign, and is thus extremely biased. Members of Katusa Research may also own shares in GoldMining Inc. and benefit from any volume, activity or share price change. It is crucial that you conduct your own research prior to investing. This includes reading the company’s SEDAR and SEC filings, press releases, and disclosures including ‘risk factors’ as outlined in the Company’s Annual Information Form. **HIGH RISK: **The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain of the information contained herein and in the Company’s disclosures referenced herein constitutes “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and U.S. securities laws (“forward-looking statements”), which involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance and achievements to be materially different from the results, performance or achievements expressed or implied therein. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements respecting the Company’s strategies, expectations regarding gold markets, expectations regarding the operations and results of the operators of the projects underlying the Company’s interests and expectations regarding future production and revenues from the Company’s royalties. Forward-looking statements are based upon certain assumptions and other important factors, including assumptions relating to commodities prices and the business of the Company. Forward-looking statements are subject to a number of risks, uncertainties and other factors which may cause the actual results to be materially different from those expressed or implied by such forward-looking statements, including those set forth in the Company’s Annual Report on Form 20-F and its other publicly filed documents under its profiles at www.sedarplus.ca and www.sec.gov. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should review the GoldMining Inc public disclosures at www.sedarplus.ca and www.sec.gov for important information regarding it and its assets. --- # The Space Race That Could Send Gold Soaring - URL: https://katusaresearch.com/the-space-race-that-could-send-gold-soaring/ - Type: article - Published: 2024-05-31 - Updated: 2025-09-10 - Author: Marin Katusa Dear Reader, When Elon Musk tweets, the market listens. For one, he’s now the owner of the social media platform X, formerly Twitter. Naturally, that amplifies his voice. As one of the world’s richest person and owner of two of the most influential companies in the world, Tesla and SpaceX, Musk has long been a market mover. - Like in 2021, when he added the hashtag #bitcoin to his profile. Just hours later, bitcoin went up 19%. - Or when he tweeted that “Silver is the new GameStop,” which pushed interest in silver so quickly that the price rose 10% in just a few days. Not to mention the time he infamously announced that he was taking Tesla private, and then he didn’t. Nonetheless, TSLA stock closed 11% higher that day. But when it comes to gold, he’s been rather shy. Over the past few years, he’s made vague claims about the value of precious metals compared to other investments. **But despite his strong opinions on many other issues, he’s never made a direct statement on gold.** Until now. ## And the timing isn’t surprising… Gold has been on a tear lately. The bullion price has gone up 15% since the beginning of the year. This has certainly been fueled by the highest inflation rate in four decades, and it’s still not gone down to its pre-pandemic levels. But some argue that other trends have helped shake up the gold market, like Costco’s decision to start selling gold bars to its members. - **Since it launched its gold business, Costco has sold up to $200 million worth of gold bars every month, despite its 2% markup on the spot price.** Without a doubt, gold is back in a bull market. But here’s why Elon Musk should pay close attention to the bullion price… ## Gold is a Crucial Material for Rockets and Satellites We’re looking at you, SpaceX. Aerospace engineers use gold to protect sensitive electronics from rust, corrosion and damage. Yes, gold’s incredible properties on earth, hold true in space also. Its high conductivity allows information to be transmitted through large distances in space, which is crucial for satellites and space stations. - **The Columbia Space Shuttle used about 41kg of gold, or about 1,446 ounces.** At today’s gold price, it would cost about $3.4 million just to buy the raw material for a space shuttle. Because gold reflects up to 99.4% of light particles7, it is used to not only harness solar energy on satellites, but also to protect spacecraft from the damaging effects of the sun’s heat. That’s also why the visors of space helmets are covered with a thin layer of gold. When I say thin, I’m talking about 0.000002 inches. If it was any thicker, an astronaut wouldn’t be able to see through it. It acts like high-powered UV protection for astronauts veering outside of their space stations. - **At a price tag of approximately $3 million per helmet, it’s one of the most expensive headgears on the planet.** With the $5 billion contract SpaceX received from NASA through 2030, the company should be able to afford it. And with the global space industry set to double by 2030, we can expect demand for gold to rise. But would Elon Musk invest in the precious metal with his own personal funds? ## Is Elon Musk Playing Four-Dimensional Chess With Gold? Here’s the thing about Elon Musk… He’s not seen as a financial expert, but he is. He’s an entrepreneur, an engineer and a financial genius. As the owner of SpaceX, which uses a lot of gold to get rockets to space, it’s not in his interest to help *raise* the price of gold. After all, he’s not a gold producer. He’s a gold *buyer*. The lower the price is, the more money he can keep. And Elon Musk has a history of trying to lower the price of the production of his rockets. **In Walter’s Isaacson biography of him, he describes how Musk was able to lower the price of an important valve from $250,000 to just $5,000 by forcing a young engineer to make it himself.** If he encouraged investors to buy gold and potentially raise the price of the resource he needs, he would shoot himself in the foot. Now, it would be difficult for one person to change the price of gold. But he’s proven to influence the price of both bitcoin and silver, two assets that are just as well-known. So, it’s entirely possible that Elon is trying to play his own version of four-dimensional chess in the resource markets. ## I think Gold just may have just entered the biggest bull market in 100 years What I do know for sure is that gold has entered the biggest bull market of the last 100 years. Not even one of the richest men in the world will be able to stop that. That’s why I’m on the hunt for new gold opportunities right now. The gold price is high, but mining stocks are still cheap. It’s the perfect time to get a list of gold stocks on your radar right now. I’m looking at one exploration company in particular. It owns properties with more than 10 million ounces of measured and indicated gold equivalent resources and zero debt.10 I’ll keep you posted as soon as I’m making a move to publish an alert on this opportunity to you here, on the Investment Insights email list. Regards, Marin Katusa and the KR Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Beware the Precious Metals “Boiling Water” Advisory - URL: https://katusaresearch.com/beware-the-precious-metals-boiling-water-advisory/ - Type: article - Published: 2024-05-26 - Updated: 2024-09-10 - Author: Marin Katusa Dear Reader, At 211 °F, water is merely hot. Steaming as it simmers quietly, on the cusp of transformation. Yet, at 212 °F, a mere one-degree difference ushers in an intense transformation. Water begins to boil, releasing powerful steam capable of powering a freight train. It’s that one single degree that makes all the difference, a tiny shift that marks a powerful change. There are many reasons we are at that one degree uptick transition moment in the gold market… we could be at the cusp of a historic and monumental rally. **Ignore this at your peril because right now…** **Gold isn’t just climbing—it’s boiling over.** And it’s those who act, not those who hesitate, who reap the rewards. Now if you’re ready to take the heat, read on. **There’s no Going Back, Gold is Hitting the *Boiling Point*** Gold just hit $2,400 per ounce, marking yet another record high for the metal this year. It is up nearly 15% year to date, and since January 2023, it is up 30%. Yet contrary to gold, companies with leveraged exposure to gold have not fared nearly as well. You’d think gold producers, developers, and explorers should all be up at least as much as gold. But as you’ll see in the chart below, neither the NYSE Gold Bugs Index nor the Van Eck Gold Miners ETF have come close to gold bullion’s returns. Companies operating in the gold development space have fared even tougher sledding. - **The median return for a gold developer since 2021 is -52% based on the data generated from 90 North American listed gold developers dating back to 2014.** ## It’s Time to Get Selective and “Picky” It really is a bewildering time for gold investors. You would think record highs in gold would lead to immediate records for share prices but that has not been the case so far. - **Investors (like me) avoid *moose pasture* assets worth nothing.** - **AVOID management teams that deliver returns only to themselves.** Compounding the issue for the sector, over the past few years, capital-raising activities by gold companies have steadily declined. Below is a chart that shows the equity raised through financings by gold companies since 2014. Weak share prices and reduced access to capital creates an opportunity for the bold investor… or company. Beneath the headlines of share price underperformance and capital raising, the market fundamentals are functioning well. **One way to look at this is through mergers and acquisitions activity in the sector.** In dark times, there’s no cash flow generated or ability to raise capital to do deals, we saw this in 2016 and 2017. Today is much different. ## Gold M&A is Heating Up… Even though financings and share prices are down, players in the sector continue to gobble each other up. Over the past few years, the gold market has seen big growth in the transaction value of mergers and acquisitions. - **In fact, 30 deals were completed in 2023 totaling $21 billion, a level not seen since 2010.** But even with the recent frenzy of M&A activity, **valuations for companies are still low**, especially for those in the development stage. For now. Especially if you don’t own any gold stocks backed by people who know M&A or how to make lucrative win-win deals… And how to acquire valuable assets that nobody’s heard about (or with the know-how and access). ## Lucrative “Takeover Engineering” Gold developers are the companies with assets that have completed engineering studies on projects not yet in production. I’ve always liked this sector because it provides valuable upside through development or acquisition… But less downside than pure play exploration carriers where you are at the whims of a geologist and his maps. The chart below shows the Enterprise Value per Ounce ratio for the gold developer space utilizing the data from 90 North American listed gold developers since 2014. Enterprise Value is calculated as the Market Capitalization of the company plus debt minus cash, it reflects the true “take out” value of the company. Dividing Enterprise Value by gold reserves and resources provides an apples-to-apples valuation comparison. - **A higher ratio** indicates a premium valuation - **A lower ratio** indicates a discounted valuation Today the development stage group is still below its 10-year average, which is surprising given the recent record highs in the gold price. - **Gold prices above $2,000 per ounce unlock considerable value for projects that were deemed marginal at previous levels…** And supercharge the returns of ones that were already economic in the past cycle. **If gold hangs in above $2,200 per ounce, it could be a major inflection point for the sector and for valuations going forward.** ## Pin This to Your Fridge: My 4/64 Rule You’ve probably heard of the 80/20 rule. For example, in mining, 20% of the management teams generate 80% of the shareholder wealth. Let’s take that formula (Pareto’s Law) one step further: the 4/64 rule. And when it comes to wealth creation: - **4% of the teams generate 64% of the shareholder wealth.** In today’s high-stakes world of record gold prices, tensions in the Middle East and Ukraine, and inflationary measures, there is no room for error when it comes to investing. It’s why in times like this, I go to the best of the best. Focus on the BEST management teams with a track record of being in the selective best 4% of management teams who deliver 64% of the wealth to shareholders. - **I have identified a company that is trading at a discount to the gold explorer and developer peer group** - **With multiple assets located in the Americas** **This is a sign that there may be value here.** But most importantly, led by a management team in place who are large shareholders of the company themselves, that have a historical track record of generating strong shareholder returns in previous ventures. **What happens when a gold stock is one degree away from the boiling point…** When the market that previously sat on the fence starts jumping in… Things can escalate from hot to boiling pretty quickly. On Monday, June 3, you’re going to get the name of this stock. Regards, Marin Katusa and the KR Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Endless Rally: Why This Commodity Isn’t Slowing Down Anytime Soon - URL: https://katusaresearch.com/the-endless-rally-why-this-commodity-isnt-slowing-down-anytime-soon/ - Type: article - Published: 2024-05-24 - Updated: 2024-05-23 - Author: Marin Katusa Coal stocks have been on fire the last 3 years. Companies like **Teck**, **Consol Energy** and **Warrior Met Coal** have seen their stock rise, big time… Coal stocks are rocking, despite the fact that coal is the single largest source of carbon dioxide (CO2) emissions, and nearly every western country wants to phase out coal. But demand keeps climbing and is expected to reach a fresh demand record in 2024 according to several forecasts. All despite the anti-coal coalition. Let’s get into what you need to know… **Countries Against Coal Fire** At the end of April, ministers from the G7 nations – Canada, France, Germany, Italy, Japan, the UK, and the U.S. – came to an agreement to ban coal power by 2035. While an exception to the phase-out does exist in that “abated” coal plants, such as those utilizing carbon capture technology to remove their emissions, will be allowed to continue operating past the target date, the net result is still the same: Coal, long the dirtiest of all our power generation options, is finally on its way out… … or is it? **Not All G7 Members Are Starting from the Same Line** In the ongoing fight against climate change, coal is one of the targets that usually gets the most flak – but rightly so. For instance, in 2022 coal accounted for over half of all CO2 emissions from electric power generation in the U.S., yet only produced just under 20% of its electricity. As recently as the turn of the millennium, **coal still accounted for over half of the U.S. power mix**. A concentrated effort to transition away from coal power has seen that proportion drop by nearly 70% in just two decades. That’s a clear sign of what America’s industrial complex can achieve if the willpower, and the funding, is there. - **If the U.S. can sustain that same pace of replacing coal plants for the next decade, they’ll be right on track to eliminate coal from the power generation mix by 2035.** Of course, the U.S. is just one of the G7 members. How does coal power stack up amongst the other nations? It turns out that there’s actually quite a spread across the G7 members… While some like **France** and the **UK** are basically already there (the UK’s last coal plant, Ratcliffe-on-Soar, is scheduled to close in September), you have **Japan** and **Germany** on the other end of the spectrum. - It’s particularly worth noting that Japan and Germany were the two countries that reacted most harshly to the 2011 Fukushima incident, with both seeing marked shifts in energy policy away from nuclear power immediately following the disaster. Germany has successfully reduced its coal dependency, pivoting sharply towards renewables post-Fukushima. In stark contrast, Japan remains entangled in its fossil fuel reliance, with energy production from these sources soaring from 81.1% to 93.5% after the disaster. Today, coal’s role in Japan’s energy mix is not just persisting but **increasing**. Japan is so entrenched in coal that instead of phasing it out, it’s doubling down with carbon capture initiatives and co-firing green ammonia. While Germany leads the G7 in renewable energy, producing over half its power sustainably, Japan appears stalled, likely to continue coal imports well beyond the 2035 deadline. **Forget the G7, What About the G188?** Unfortunately, while the G7 agreement is undoubtedly a step forward towards net zero, it’s just that – a single step. There are still 188 other countries in the world to worry about, after all: The G7 accounts for less than a quarter of global CO2 emissions, dwarfed by China’s output… - **This exceeds the combined emissions of the entire G7 plus India.** - **China alone consumes one-fourth of the world’s coal for power.** Western nations, having built their economies on affordable coal, have transitioned more easily to clean energy. Meanwhile, developing countries face challenges as they’re urged to avoid similar paths. Focusing on coal’s immediate future, note this: Despite China’s rapid construction of coal plants, their operational use is declining. Last year, while China added 96% of new global coal capacity, these plants were active only half the time. This trend hints at a paradox where China might continue expanding its coal infrastructure yet reduce its coal consumption annually. **From Peaker Plants to Peak Coal** Long story short, while the G7’s agreement to phase out coal might not actually cover as much of the world’s emissions as you might think, things might be turning around for coal anyway. For instance… - **Wood Mackenzie, a leading energy research firm, believes that peak coal will happen this year.** - **The International Energy Agency thinks we’ve already seen peak coal – last year, in fact – and that demand will be falling annually from here on out.** Whatever the case, though, it’s not as if demand for coal is going to suddenly vanish overnight. In fact, it won’t even vanish by 2035. It’ll be a long and slow decline as countries like China continue to build out cleaner sources of power. All the while keeping coal as the emergency option in their back pocket – just as Germany had to do in 2022 following the Russian invasion of Ukraine. But coal still accounts for roughly 36% of total global power generation. So there’s still billions of dollars of investment that needs to be made in renewables, nuclear, and even natural gas… before we can finally do away with coal for good. And **that means there’s plenty of opportunities left to make money on coal**. **Even if it’s from the transition away from it, and not directly off coal itself.** Regards, Marin Katusa **P.S.** Our **KR Special Situations Team** is working on uncovering an interesting and fast-moving opportunity in the precious metals sector. With Gold touching record highs again early this week – this is an emerging story worth monitoring. **More on this next week**. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The ONLY Government-Sponsored Mineral Rush in American History - URL: https://katusaresearch.com/the-only-government-sponsored-mineral-rush-in-american-history/ - Type: article - Published: 2024-05-17 - Updated: 2024-05-15 - Author: Marin Katusa In this week’s *Investment Insights*: - **Unveiling Uravan:** From secret Manhattan Project mine to modern ghost town. - **Resilient and Radiant:** How Uravan’s past fuels America’s Nuclear future. - **Investment Alert Coming:** How rising uranium prices are pushing a new era of mining opportunities. Dear reader, The people of Paradox don’t want your pity. This small town in Western Colorado is home to former uranium mining and mill workers and their children. They’re dying of cancer and lung disease. They buried many loved ones over the years. Some of them can barely breathe and depend on oxygen tanks. It’s a common story in rural America today. But when a public hearing was held on whether a former uranium mine was allowed to reopen near Paradox, **the only critics were activists from outside of town**. The people of Paradox want to get back to work. And after an 8-year ban on uranium mining in Colorado, a judge finally lifted the ban in 2019, which opened up 31 former mines. Colorado was once the epicenter of the uranium mining industry. And the most infamous mine was dug out around the town of Uravan, Colorado. It was here that the Manhattan Project set up a secret uranium mine to help them create the atomic bombs that were dropped on Hiroshima and Nagasaki. The miners of Uravan didn’t find out about the role they played in history until much later. They had stable jobs, and they were proud to produce what was needed. After the Manhattan Project ended, and the nuclear arms race began, Uravan turned into one of the biggest uranium mines in the country. Federal agencies built backcountry roads and set up towns for the miners and their families to live in. The Atomic Energy Commission set a guaranteed price for uranium to incentivize companies to keep digging for the ore. ## **It was the first (and last) government-sponsored minerals rush in history.** Today, Uravan is a ghost town. Following the Cold War and nuclear incidents worldwide, uranium from down blended Russian nukes caused demand for US-produced uranium to plummet, leading to the closure of its mine. Displaced residents received compensation for unsafe working conditions, using these funds for new homes and medical bills. Yet, despite health challenges, former miners carry no regrets, understanding their risks and discussing uranium with expert-level knowledge. They recognize that poor mine safety, not uranium itself, led to their illnesses. Today, many still display uranium and yellow cake in their homes, a nod to their proud, complex legacy. ## After decades of research, it turns out the Uravan residents were right… As public sentiment and laws evolve, a 2020 Department of Energy report introduced initiatives to bolster U.S. nuclear capabilities, including establishing a Uranium Reserve and a Nuclear Industrial Base. While U.S. nuclear development has stalled, nations like China, India, and Saudi Arabia are expanding their nuclear activities. Despite global growth in nuclear energy, valued at $36 billion, the U.S. still imports over 95% of its uranium due to earlier mine closures, including Uravan’s. ## Uranium is Trending UP… Just like the U.S. ramped up domestic production of oil and natural gas in the early 2000s, which made America truly gas-independent… The government is starting to feel the pressure of geopolitical tensions that could threaten the supply of uranium to meet our energy needs. The Democratic push towards renewable energies and away from fossil fuels will only add to this pressure. However, only 21% of energy comes from renewables compared to 60% from fossil fuels, despite billions of dollars in investment. It’s clear that it won’t replace fossil fuels anytime soon. Right now, the only viable alternative to dirty coal isn’t clean coal or the hope of renewables overnight. It’s nuclear energy. Which is why the industry is expected to grow to almost $50 billion by next year. ## **This could turn into a tailwind for a “Twin Engine” company I’m looking at right now…** In fact, its partner is one of the largest producers of uranium in the world. They are well-connected uranium professionals, who government officials ask *their* opinion on nuclear matters. **The uranium price recently hit a 16-year high.** This high uranium price is throwing jet fuel into an already accelerating mining industry. And the company I’m looking at is positioned to capitalize from this trend. I’ll admit, I’ve invested in quite a few resource opportunities in my life… Single-asset companies typically carry a lot of risk. If the asset in question doesn’t work out, or the government strongarms itself into a free interest, company valuations can diminish overnight. With multiple projects that were selected during the depths of the bear market by a management team that knows what they are doing, investors get optionality, with less risk through diversification. **Right now, I see exactly that…** A company, that I believe, is positioned to profit from the current demand for resources in the ground the company currently holds. Regards, Marin Katusa and the KR Special Situations Team **P.S. We just published on a nuclear sector company that saw its stock jump 13% [in the days after we published it](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk).** If you want to be first to the story, [consider becoming a member](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) of ***Katusa’s Resource Opportunities*** – my premium research service, today. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Blackstone’s “Best Investment Ever” - URL: https://katusaresearch.com/blackstones-best-investment-ever/ - Type: article - Published: 2024-05-10 - Updated: 2024-05-08 - Author: Marin Katusa Making 150% on $10 billion in three years… that kind of opportunity comes around once in a lifetime. But for Blackstone, it wasn’t a one-and-done. **This is a story about three buildings:** - **The power in them,** - **The power they consume, and** - **Their power over your future.** Few people know that any of these buildings exist. Even fewer know what happens inside them. But it’s *extremely* important that you do. Because like it or not, it’s going to affect your life in untold ways in the years to come. ## From Printing Press to Windowless *Moneymaker*…. The first of these buildings lies in Chicago’s Southside. It’s a regal historic building, with ornate exterior architecture. But there’s one peculiar feature that passersby might immediately notice… Every one of its hundreds of windows has been covered up—from the inside. **Someone doesn’t want people to know what goes on at 350 E. Cermak.** Now its history is no mystery… It was built a century ago to house massive mechanical printing presses for the Yellow Pages (remember those?) and the Sears Catalog (remember *that*?). The value and weight of the building’s use forced its owners to construct it like a tank: It’s fireproof and capable of carrying heavy, concentrated loads on each floor. That makes it perfect for its modern use—one that is extremely crucial to our daily lives. Today, E. Cermak is home to ChicagoORD10, a 1.1 million sq. ft. **data center**. Each floor of the data center is packed to the gills with thousands of powerful, screenless computers called “servers.” These servers run the operations of seventy financial firms in Chicago—making ChicagoORD10 the beating heart of Chicago’s multibillion-dollar commodity markets. ## But Data Centers Don’t Just Run The Stock Market ***All* internet-accessible information is either housed in or processed on a server sitting in a data center.** And the amount of internet-accessible information is exploding far faster than most people realize. - **From 2010 to 2024, the amount of data increased by 73x.** **In fact, more data has been created since 2020 than in the rest of human history *combined*.** A research consortium for all the major semiconductors found that if data continues to scale at the current rate, we will run out of silicon to store it on. That unexpectedly runaway data growth has created what alternative investment management company Blackstone is calling their “best investment ever.” ## The Monster Investing Fund Betting the Farm on Data Centers Three years ago, Blackstone started laying the groundwork for a data center empire. To jumpstart their entry into the industry, Blackstone acquired QTS for $10 billion. When an investment fund with $1 trillion in assets under management starts to move heavy firepower in a particular direction, it’s best to pay attention. **Especially when, just three years later, that initial investment has become worth more than $25 billion.** Achieving a 150% return in three years is world-class. They saw the future of buildings like E. Cermak—and decided to go all-in. In 2021, Blackstone had $1 billion in data centers under development. Three years later, it has more than *$15 billion* under development. Other private equity firms have followed suit, snatching up data centers at historically high multiples just to get a piece of the action: - **EQT** is planning to purchase **Global Switch Holdings** for $6 billion—a 20x EBITDA multiple. - **KKR** and **GIP** bought **CyrusOne** in 2022 for $15 billion, a 23x multiple. - **DigitalBridge** bought Switch for $11 billion in 2022, a 31x multiple. All told, $43 billion in U.S. data center deals closed between 2021–2023—more than *five times* the previous three years. At the same time, pure data center plays, like Digital Realty—which owns the E. Cermak building—and Equinix are building out their own data center real estate empires. **It’s still not enough for the big tech companies.** So, they are investing hundreds of billions in building out their own data center infrastructure. ## Hyperscale at Warp Speed Four companies—referred to as “hyperscalers”—require the bulk of cloud computing needs: **Amazon**, **Google**, **Meta**, and **Microsoft**.* - Google has enterprise and consumer cloud services, as well as Maps, Gmail, and YouTube. - Amazon’s AWS hosts everything from Netflix to the BBC. - Meta and Microsoft both host their own apps, as well as offer giant cloud computing environments like Azure. These operations are extremely profitable for the tech companies. In fact, AWS accounts for only 14% of Amazon’s revenue—but 53% of its profit. So, they’re willing to spend nearly anything to retain that profit. For example, Amazon has announced that it will invest $35 billion in expanding its data center presence in Virginia alone. As well as $10 billion in just two new data centers in Mississippi. It’s going to expand server farm hubs in Oregon, Saudi Arabia, and Malaysia. To understand just how much money will get poured into data centers: The four hyperscalers started spending more than the oil majors on capex in 2019—and they’ve nearly doubled annual capex since then. *Apple does not publicly report data center capex. Together, the big four are expected to spend nearly $200 billion on data centers in 2025. Between private equity firms, colocation companies, and hyperscalers, the overall number and sheer magnitude of data centers being built is nearly unimaginable. - **The U.S. is expected to *triple* its entire data center capacity in the next six years.** And the profit possible right now is incredible. *“We’re in a once-in-a-generation investment cycle* *for data centers.”* – Brookfield Infrastructure Partners But Blackstone and the hyperscalers aren’t doubling down with hundreds of billions for an investment cycle. They know that data center demand isn’t rising linearly. It’s rising *exponentially*. They’re seeing that no matter how many data centers are built, it’s not enough. In fact, the more data centers that get built—the higher demand rises. Which has set the stage for a handful of the best investment opportunities ever seen, starting with data centers themselves. Regards, Marin Katusa P.S. One of the momentum sectors our team is excited about is the massive energy demand of A.I., Tech and Data Centers. You can find all the premium research in [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The U.S. Government’s Top-Secret “A.R.M’s Race” - URL: https://katusaresearch.com/the-u-s-governments-top-secret-a-r-ms-race/ - Type: article - Published: 2024-05-03 - Updated: 2024-05-02 - Author: Marin Katusa In the future, there will be only two types of countries: Hyper-developed and third world. There will be nothing in between. And each country’s standing will be determined by its access to “**At-Risk Metals**” (ARMs). Not only that, but ARMs stockpiles will give any country that holds them leverage over the rest of the world. Let me give you three reasons why . . . ## **Reason #1: Without ARMs, there is no digital revolution.** Two of the three most-used materials for semiconductors are ARMs (highlighted in orange above). Cut off access to those metals and there are no more smartphones, computers, TVs, or any other system that depends on a chip to operate. Even AI—with its insatiable hunger for more chips—would become untrainable and unusable. Not only that, but AI’s energy use becomes untenable, because… ## **Reason #2****: Without these metals, there is also no green revolution.** Lithium, nickel, cobalt, manganese, and graphite are on the U.S. Department of Energy’s ARMs list, and they are all crucial for batteries. Others on the list are key inputs for EVs, wind turbines, and solar panels. In the UK, *seven* of the points in their government’s Ten Point Plan for a green industrial revolution require a stable supply of ARMs into the country. Without these key minerals to power grids and infrastructure, the citizens of countries without ARMs won’t be able to easily communicate, travel, or work. That alone is enough to knock a country back into the 19th century. ## **But then there’s reason #3: ARMs are *crucial* to national defense.** Everything from modern firearms and missile guidance systems to F-35s and nuclear submarines is reliant on these materials. - **As the UK government puts it with usual understatement, “Sustained disruption [to ARMs supply] would… reduce the UK’s freedom of action.”** Or as the U.S. government puts it with usual bluntness, “*Without these materials, history shows that industrialized nations have been . . . [defeated] on the battlefield*. In short, no country on earth will remain developed or sovereign without access to ARMs. ## **The U.S. Government’s Powerful A.R.M.ed Forces** Fortunately for the United States, it has a powerful, covert arm that will ensure it remains a superpower in the twenty-first century. Just before the U.S.’s entry into World War II, several government officials saw that access to the materials required to win the war was at risk of being cut off. Almost overnight, two clandestine government agencies sprang to life to procure ARMs for the United States: - The **Metals Reserve Company** (MRC), which spent *billions* to procure and subsidize the “strategic and critical metals and minerals” necessary to win the war. - The **National Defense Stockpile** (NDS), which purchased and held forty-two raw at-risk materials relevant to national defense. Both organizations were decisive forces in helping to win the war. But over time, the apparent necessity of supporting domestic ARMs production and holding a stockpile waned. The Iron Curtain fell. Massive sources of critical metals and minerals became available to Western manufacturers. The U.S. government sold off its massive ARMs stockpiles to reap “peace dividends,” and it defunded the National Defense Stockpile. U.S. production of at-risk materials decreased, and reliance on imports increased. And that presents a *huge* problem. Because the government uses two proxies to determine the risk of supply disruption for an ARM: - **Production concentration **(how many countries can provide it), and - **Import dependence **(how much the U.S. has to import from other countries). And for decades, for nearly every ARM on the list, both of these have been headed in precisely the wrong direction. ## **The Mineral Most-Wanted List** In 1954, the United States was 25 percent or more reliant on another country for 21 mineral commodities. Now, that number is 58. And it’s 75 percent or more reliant on other countries for 39 elements. The biggest problem is that the production of those commodities is extremely concentrated—in all the wrong countries. For example, Russia is the top producer of palladium in the world. It’s also the second-largest producer of nickel, the third-largest of cobalt, and the fifth-largest of graphite—all of which are necessary for battery production. When the Russia/Ukraine conflict began in 2022, it suddenly became clear how much leverage its ARMs had over the rest of the world. The price of metals Russia dominates immediately skyrocketed. Some of them *doubled* in price. For several decades, China has also been using state intervention and subsidies to establish control of several ARMs markets—including cobalt, lithium, and rare earth elements. To give a sense of just how dominant Chinese production has become, consider this: The United Kingdom has a list of eighteen ARMs. China is the largest producer of twelve of those. China has also established a vice-grip on the U.S., being its largest source of imports for several ARMs like the semiconductor metals in the first table of this article. China has already begun flexing its muscle… In just the last year, it has enacted major export restrictions for germanium and gallium—both on the list above—as well as graphite and rare earth extraction technologies. The message is clear: The ARMs race is on, and it’s winner takes all. ## **A Task for the Nation** With the stakes getting higher, in 2022, a White House assessment found that this “posed national and economic security threats.” As a result, the U.S. has begun to re-deploy the same strategy used in World War II to gain access to ARMs by any means necessary, including: - Removing all roadblocks to domestic mining, - Increasing ARMs diplomacy with allies, and - Rebuilding massive ARMs stockpiles. **The magnitude of each of these will be much greater than you might imagine.** Over the course of World War II, the Metals Reserve Company spent $43 billion (in 2024 dollars) to purchase fifty different metals and minerals from more than fifty countries. Expenditures for this round will be much, much higher. So, the price and the profitability of at-risk metals is likely to rise dramatically in the coming years. The last time this story played out, the U.S. won. It both procured the necessary materials, and *won the entire war.* The stakes are higher this time. The minerals are far more crucial—and they’re located in fewer, more powerful countries. But make no mistake: This is just another step in the [Rise of America](https://www.riseofamerica.com/?). It *will* win. **And a few companies will profit tremendously.** To find out which ones those are before anyone else, you’ll want to catch up on my premium research service – ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)***. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Are you Smarter than Stanley Druckenmiller? - URL: https://katusaresearch.com/are-you-smarter-than-stanley-druckenmiller/ - Type: article - Published: 2024-04-26 - Updated: 2024-04-25 - Author: Marin Katusa A commodity supercycle is on the horizon. It has legendary investors and MAJOR market players buying gold and gold stocks, [staking their bets in a BIG way](https://subscribers.katusaresearch.com/4-24-goldrush-100-years-in-the-making/). **Stanley Druckenmiller** is a renowned investor and hedge fund manager, known for his long tenure as the lead portfolio manager for George Soros’ Quantum Fund. That’s where he executed the famous trade that “broke the Bank of England” in 1992. Druckenmiller’s investment style emphasizes long-term capital preservation and strategic bets on macroeconomic trends. And now, according to his 13-F filings… - **Stanley Druckenmiller bought 1.76m shares of Barrick Gold and 474k shares of Newmont Mining**. Then there’s **Ray Dalio, founder of Bridgewater Associates**… He created the “risk parity” strategy, which aligns portfolio risks with economic conditions, propelling Bridgewater to become one of the world’s largest hedge funds. And now… ## **Major Investors are Making their Bets With or Without You** These are some of the smartest brains in the markets, making big plays into gold. And the recent breather in gold is the best thing that could happen to recharge for further springboard moves. [It could happen in the next few months, or even in the next few weeks](https://subscribers.katusaresearch.com/4-24-goldrush-100-years-in-the-making/). But wait, there’s more… Hedge funds are adding to their gold exposure too… I’m personally burning the midnight oil looking for the best gold stocks for 50-500% gains – or more. You’ll want to be prepared if a “**roaring 20s**” stock mania comes — especially in gold because the move is now decisive. When the gold price rises just $50-100 per ounce… in a single day… The right gold stocks can soar to blistering heights, offering you gains that could eclipse the most speculative tech investment. I’ve shown my subscribers opportunities to make huge gains in gold stocks over the years. And we’ve profiled a gold stock that’s risen over 50% from just a few months ago. But one of my best (and favorite) winners was Kirkland Lake. - **Back in 2015—the middle of the last gold bear market—I recommended Kirkland Lake at $3 a share.** The company eventually **went to over $60 per share for over 20X gains** and was bought out by the world’s 3rd largest gold producer, Agnico Eagle. **[The price action is pointing to a truly unprecedented gold bull market](https://subscribers.katusaresearch.com/4-24-goldrush-100-years-in-the-making/).** It’s the type of High-Risk / High-Reward setup that I absolutely love. Regards, Marin Katusa Chairman, Katusa Research **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Central Bank Gold Stampede - URL: https://katusaresearch.com/the-central-bank-gold-stampede/ - Type: article - Published: 2024-04-22 - Updated: 2024-04-17 - Author: Marin Katusa The mainstream media has no clue as to why the gold market is surging… ** ** **But I do.** Over the last few months, **I’ve gotten multiple calls from high net-worth investors (HNWI) and funds in the Eastern markets** – all wanting to buy large quantities of PHYSICAL GOLD. I’m talking 8 figures in dollar amounts, per week, directly from mines. While your average retail investor is hesitant to jump on the gold bull bandwagon, the tide is turning… by those with DEEP pockets. ****URGENT GOLD BRIEFING**** Marin Katusa just recorded **an emergency gold market update** and will release it on **Wednesday, April 24 at 9am PST.** The **multi-year Gold breakout is confirmed,** and this is not a briefing you want to miss. | ## Hedge Fund Gold Appetite Investment managers and hedge funds are really going all in on gold, pushing their positive bets to the highest level in four years. In early April, hedge fund investments in U.S. gold futures and options went up by 13%, the highest since 2020. Emerging markets and central banks are leading the charge, favouring physical gold over digital assets, signaling a massive shift. **China has quietly accumulated large quantities of gold for 17 straight months – to the tune of 72.7 MILLION ounces (about 2,250 tonnes).** China’s economic strategy involves diversifying away from the US dollar, which dominates global trade and commodity pricing. Despite its rise as an economic power, China’s vast reserves are predominantly in US dollars, an exposure it aims to minimize. To reduce this reliance, the People’s Bank of China is diversifying by increasing its gold holdings. Since 2011, China has decreased its dollar reserves by a third, down to approximately $800 billion. Meanwhile, China’s gold reserves have skyrocketed. Even individual investors are buying up ETFs in China at an alarming rate. - **In fact, on April 8th, 2024, there was SO MUCH demand in the Chinese gold ETF that it pushed premiums to 30%, and regulators had to halt trading!** But that’s not all… ## China’s Youth Revolution: Gen Z is Buying Up Gold *BEADS* This next bit is stunning… Young folks in China are all about gold beads these days. Using them as a cool way to stash their cash amidst shaky economic times. These little nuggets are a big hit as a safe saving option, especially when other investment choices look a bit risky. It’s not just about the money; gold beads are also a fashion statement among the younger crowd. **In fact, gold is so popular right now that sales are booming, making it a hot commodity in China.** And “gold beads” is one of the most searched items in that demographic on Weibo (the Chinese version of X). A whole new generation is waking up to gold in China. So you have… Major high net worth (HNW) investors and funds buying up physical gold from China… The Chinese Central Bank accumulating mammoth amounts… And a whole new generation – among the largest demographics in the world – waking up to a brand new investment thesis. ## It’s All Leading to One Thing I hope you’re ready to find out what can happen in a major gold breakout. As of right now, gold stocks have not caught up to the physical demand — and that’s the next stage of the cycle. **You’re about to see how crazy precious metals stocks can go in a gold bull market, when even just a small amount of capital starts pouring.** That’s why I’m preparing an urgent gold market briefing on **April 24th** for you at **9am PST**. **In my Gold Breakout Briefing, you’ll learn:** - Why Gold is rising in the East and setting in the West (for now)… and when they’ll rise together - **8 flashing signals** that show why gold is set to soar higher - A** HUGE secret of the gold market **the mainstream financial media has no idea about (Hint: these are the gold stocks you must avoid buying at all costs)… - **The best gold stocks** to begin accumulating right now Regards, Marin Katusa Chairman, Katusa Research **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Buckle Up, The Commodities Bull Market is Here - URL: https://katusaresearch.com/buckle-up-the-commodities-bull-market-is-here/ - Type: article - Published: 2024-04-18 - Updated: 2024-04-17 - Author: Marin Katusa Dear Reader, What’s about to unfold in the global financial markets will be referred to as, ## **“The golden bull market of the century”** You’ll be bombarded with headlines about how economic instability and soaring inflation are propelling the price of gold to unprecedented heights. As a result, countless investors and funds will turn to gold, pushing its value to unparalleled levels. Central banks and individuals alike will seek gold as a safeguard against diminishing currency value. **This is all happening, right now.** You, however, will be one step ahead, understanding that this gold surge is long-anticipated and a result of years of groundwork. This shift signifies a major transfer of global wealth, offering substantial gains for those who act early. Forget waiting for insights from the media, financial advisors, or governments. It’s crucial for you to understand and prepare for this shift. - **But, it’s also important to remember that a massive bull market like this is going to make a lot of money for those who position themselves right.** Some of the world’s most successful investors and financial experts have already begun positioning themselves for this historic gold event – and you can join them. In the wealthiest nations in the world, markets don’t experience historic bull runs by accident… **INFLATION, HIGH RATES AND THE FED BETWEEN THE LINES** Let me just start with this, so you’ll know how serious I am about these predictions… As you may know, inflation has been steadily rising for years now, eroding the purchasing power of currencies across the globe. Central banks have continued to print money at unprecedented rates, leading to a dangerous devaluation of fiat currencies. **But what most people don’t realize is that this is just the tip of the iceberg.** Behind the scenes, there’s a much more sinister force at work – one that has the potential to trigger a worldwide financial re-structuring. And when that day comes, there is one time-tested safe haven that the financial institutions and investors will flock to, Gold. For centuries, gold has been considered the ultimate store of value. It’s been used as a form of currency, a hedge against inflation, and a safe haven during times of economic uncertainty. And now, as the world teeters on the brink of a financial catastrophe, gold has confirmed a new bull market. And we’re in the early innings. **SILENT MADNESS: PREPARE FOR A GOLD MELT UP** Don’t just take my word for it. Some of the world’s most successful investors and financial experts are already positioning themselves for the great gold rush of 2024 – and most importantly – beyond. **Gold hit unprecedented closing highs on most trading days in March.** Unlike previous spikes, gold’s value was consistently higher six months afterward. According to backtests at SentimentTrader… - **5 of the last 6 times this type of gold spike has triggered, the mean rally was almost 39% higher** - **That implies a gold price around $3,000 less than 12 months from now** So, what’s driving this? **SURGING DEMAND FROM EMERGING MARKETS** As economies in countries like China, India, and Brazil continue to grow, so too does their appetite for gold. In many of these nations, gold is not just an investment – it’s a cultural symbol of wealth and prosperity. And its not just the boomers of those nations, but the younger generations prefer gold to crypto in countries like China and India. This insatiable appetite for gold among emerging markets will only serve to fuel the bull market in gold, as central banks and private investors alike scramble to secure their share of the world’s limited supply of the yellow metal. - **In the coming days, we’ll explain how significant this is, and why it’s the fuel that’s ignited this new bull market breakout.** **FX ON THE BRINK** The decline of traditional currencies is just the beginning. The world is in for an economic storm, and many investors will be caught off-guard. But for those who are well-informed, opportunities to thrive in the chaos are abundant. Take Gold for example, it has broken out in **ALL currencies** – and now decisively in the USD. This golden bull market will be fueled by a combination of factors, including central banks’ reckless monetary policies, geopolitical tensions, and dwindling gold reserves. It’s not a matter of if, but when this bull market will take off. You’re already seeing this in real-time. As an investor, you must act to position yourself for the surge in gold prices. **THE TIME TO ACT IS NOW** Don’t let this chance to protect and grow your wealth in these uncertain times slip through your fingers. I certainly am not. I’m positioning my portfolio with a specific focus on commodity and resource stocks – with a heavy weighting towards gold equities. **Stay tuned this week for a series that will further explore the market chaos we’re in, and the immense potential of the gold sector**. We’ll dive deeper into this historic trend and reveal how you can make the most of this opportunity. And… **Mark your calendars for Wednesday, April 24th, for my** **Emergency Gold Breakout Webinar** This decisive gold breakout is a big move. In this webinar, I will be providing **the signals**, **the data**, the **behind-the-scenes material** you likely **won’t find anywhere else**. Prepare yourself for what could be a monster golden bull market by keeping an eye out for our next emails. Regards, Marin Katusa Chairman, Katusa Research **P.S. As a member of *Katusa’s Investment Insights*, you don’t need to sign up for the free webinar. In the days leading up you’ll get the exact time and a link to view it.** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Do You Have a Traumatic Gold Injury? - URL: https://katusaresearch.com/do-you-have-a-traumatic-gold-injury/ - Type: article - Published: 2024-04-16 - Updated: 2024-04-19 - Author: Marin Katusa I’ll let you in on a market secret… A few years ago, there was an entire generation of investors who placed their trust in precious metals stocks—and got decimated. But the greatest toll it took wasn’t financial. It was the foundational trauma to their investing psyche. The unfulfilled promises and brutal bear market they endured left a lasting scar. It’s not unlike childhood trauma, where the investors are unaware of its effect on their decision-making—and they couldn’t “fix” it even if they were. So as gold starts to take off again, they’re running the opposite direction; freezing in fear; or fighting the investment thesis altogether. “A gold breakout to all-time highs? That’ll never lead to anything good.” “A gold breakout to all-time highs? Only a matter of time before it goes sideways and everyone loses money.” No matter what data they see, or what they *know* to be true about gold, they won’t budge. Here’s why. Profits were *easy* in 2020-2021—and Katusa Research subscribers were among the many who had several double – and triple-digit gains. And they faithfully adhered to the rules and followed the wisdom passed down for centuries. Then the gold market betrayed them. When the storm hit—a bear market that ravaged portfolios and obliterated fortunes—precious metals investors’ faith was shattered. They were forsaken by the very asset that was supposed to be their safe haven. And the severity of that negative experience severed the connection between ration and action. So now, as gold reaches unprecedented heights, these once-bitten, forever-shy investors are staying on the sidelines. Their anxiety of missing out is overpowered by permanent memory of the traumatic experience. **And it could cost them a fortune from missing out on the coming bull run in gold stocks.** **URGENT GOLD BRIEFING COMING…** Marin Katusa will be **recording an emergency gold market update** and will release it **NEXT WEEK.** The **multi-year Gold breakout is confirmed,** and this is not a briefing you want to miss. | You might ask: How do we know that’s what’s happening? **We have front row seat data that others don’t have…** Katusa Research knows the number of research letters people subscribe to, as well as how they fluctuate based on what’s popular. We see the sentiment levels in forums and are in contact with customer service teams. And we now how much money is raised every month in the private and public sectors. - **As a rule, subscriptions, financings, and raises *all* go to all-time highs when a market is at its peak.** But the current market is breaking that rule. Here’s firsthand information you won’t find on Bloomberg or in the *Wall Street Journal*… **We are nowhere near the levels earlier this decade in the previous commodities bull market.** Traumatized investors no longer see new highs in gold as a strong indicator that gold stocks are ready to run. Instead, they see it as another prelude to a painful letdown. Here’s more evidence, from the granddaddy of data itself: As you can see, gold stocks aren’t anywhere close to the interest levels they held in 2020-2021—the last bull market. Meanwhile gold itself has broken through – decisively – through its mid-2020 high. But gold (and silver) stocks have yet to turn around—which means the runway this time is *long*. **Gold stocks could report record-high earnings in the next few quarters. And it could send stock prices *soaring*.** As one of our lead analysts was researching a stock pick recently, he turned to me and said: **“This company prints money at $2,100 gold. At $2,300 it’s bananas. And if it goes higher… well, that would break my model.”** And that’s a company that our subscribers saw published at the tail end of the last bear market in gold stocks when gold started moving higher. It’s risen 895% since early 2020. Yet many investors will miss out on opportunities like these, all because of their past negative experiences. Left unchecked, that trauma can lead to even more severe consequences. Because here’s the reality… **Your Wallet Keeps the Score** Avoiding the market because of the past will keep investors from experiencing profit in the present. Now, as the market buzzes with excitement over gold’s surge, these investors face a difficult problem. And fixing it is not just a matter of willpower. Because this group of investors isn’t merely cautious. They have a deep-seated fear—a psychological barrier formed from the memory of past trauma. Fortunately, therapy also happens to show the way out of this deep-rooted trauma and anxiety. And it happens to be the same alligator investing formula I’ve used for two decades, to get to where I am now. In a clinical setting, it’s called “exposure therapy.” To practice exposure therapy, a patient repeatedly: - engages with the “threat” - in small ways - and in a safe environment. Here’s what that looks like in investing. **Buy into a position using tranches.** Take a very small position at first. Then another. Then another. Never put all of your allocated capital in immediately. If the stock takes off after your first tranche, score! If it drops further (and no one can time it perfectly—I’m notoriously early on the buy… and on the sell) you have another buying opportunity. **Put a max of 5% of your portfolio into any one position.** This helps avoid a catastrophic loss, just like some investors experienced with gold stocks. It doesn’t matter how much other people are convinced the position is a home run. Only put in 100% if you’re willing to lose. **Take a *Katusa Free Ride*.** If you get a quick 50% or 100% return, take your initial capital off the table following the [*Katusa Free Ride* formula](https://katusaresearch.b-cdn.net/wp-content/uploads/2018/03/pic3.jpg?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). That will create the safest position for you to be in if there’s a market crash. Is this gold market for real? Only time will tell. But all signs point to a massive, multiyear breakout that has yet to catch the attention of many investors. This is a contrarian investor’s dream. And once again, by the time everyone is talking about gold stocks, we’ll be selling our profitable positions. That’s how you will win long-term. Regards, Marin Katusa Chairman, Katusa Research **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Copper’s Big Moment - URL: https://katusaresearch.com/coppers-big-moment/ - Type: article - Published: 2024-04-12 - Author: Marin Katusa The US Federal Reserve’s March policy meeting set the tone. The Federal Open Market Committee (FOMC) announced plans for three rate cuts by the end of 2024, aligning with investor expectations. Right now, markets are pricing in a 17% chance of a rate cut at the June FOMC meeting. Despite this, there’s still uncertainty regarding the economy’s direction and the potential for these rate cuts to be revised. - **Historically, commodities, as tracked by the Bloomberg commodities index, tend to perform well during rate-cutting cycles. ** The chart below shows the Bloomberg commodities index in blue, and Fed rate cutting cycles in red. But with a few exceptions: - The Asian Financial Crisis of 1997-98, - Dot-Com Bubble burst of 2001, - The Global Financial Crisis of 2008. Outside of those three cases where major external events played a significant role… **The commodities index returned upwards of 15% on average in the months following the beginning of each easing cycle.** In addition, the commodities index also usually made significant gains within a few months following the end of an easing cycle, outside of the Gulf War Recession of 1990-91. Of all the commodities, however, one that’s particularly important to focus on is copper. Dubbed “Doctor Copper” for its ability to gauge economic health… As one of the key building blocks of our modern society, if there’s any commodity you’d expect to lead the way in a commodity rally, it’d be copper. **Paging Doctor Copper: A Health Checkup** Let’s take a closer look at how copper specifically has been doing recently. **Since the beginning of 2001, copper has outperformed the S&P 500…** Though it’s also seen several years-long periods of sustained price declines in-between its peaks. With a correlation of 0.54, copper prices and stock markets aren’t perfectly aligned, but copper remains a reliable barometer for economic trends. Also overlaid on the chart are the last few rate cuts by the Fed. As you can see, many of the easing cycles overlapped or were directly followed by strong copper price gains. **Now with the recent confirmation from the Feds of their plans for 2024, how has the copper market been reacting to the news?** In a word: strongly. Copper prices have shot to 16-month highs over the past couple of weeks, breaking through its downtrend. Speculators have begun to pile in as evidenced by positioning in the LME and CME exchanges. **Copper Contracts Making Noise** At the London Metals Exchange, the world’s largest marketplace for copper contracts… The net long position (total longs and shorts combined) taken by investment funds in copper jumped 41% following the news. Total investment fund long positions set a new all-time high of 70,293 contracts. - **70,293 contracts is the biggest shared bet ever made by funds on copper prices going higher since the LME started publishing their Commitment of Traders report in 2018.** Things were similar at the Chicago Mercantile Exchange, where net non-commercial positions (contracts not bought for hedging production) rocked up to nearly 32,000 contracts long. That’s a big reversal from the previous month, where net investment positions were actually *short* by roughly the same amount. - **Gross long positions in copper contracts from managed money on the CME also saw a 43% bump in the wake of the FOMC meeting, hitting highs not seen since May 2021.** And while China doesn’t publish any equivalent data for their Shanghai Futures Exchange, it’s worth noting that open interest (the total number of outstanding contracts) in copper futures in Shanghai surged 46% immediately following the news. **Copper Demand is Coming** Of course, even without the prospect of the next Fed easing cycle on the horizon, the forecast for copper is very bullish based solely on its strong fundamentals. It’s forecast that copper demand could grow by nearly 10 million tonnes, representing roughly 35% growth. This is due to its importance in everything from power grids to batteries, demand for copper is expected to see between 4-6% annual growth over the next 8 years. To put things into perspective the average annual growth in copper demand between 2010 and now is just 2.5%. In other words: - **From here on out global demand for copper is expected to grow at twice the rate it has in the past decade and a half.** **Copper is Instrumental in the Commodities Supercycle** If we consider the potential of a FOMC easing cycle added on top, things could look even better for copper. Recall, the purpose of an easing cycle is to stimulate economic growth. Lowering rates incentivizes people and companies to borrow and grow. This is why markets have historically tended to rally when rate cuts are announced by the Fed. In the USA, massive investments in clean energy and power infrastructure upgrades need to be made, all of which will require vast quantities of copper. The Biden administration recently allocated $3.5 billion for electric grid upgrades, signaling potential future investments. This all comes at a time when some of the world’s largest copper mines are faltering. Chile, once the Saudi Arabia of the copper world, hit a 25 year low in copper production in 2023. High debt and low copper grades combined with a socialist stance have created a firestorm of challenges within the state run Chilean copper miner. **As I wrote several years ago, the world needs a lot more copper, but it’s not going to get it for $3 a pound. ** A rate cutting cycle and a decline in Chilean production could be the key catalysts to drive copper prices higher. Regards, Marin Katusa and the Katusa Research Team **P.S.** We just published a full analysis of the copper market in the recent April issue of ***Katusa’s Resource Opportunities*** – [including one copper company Marin is targeting](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Echoes of Empires: Silver’s Moment - URL: https://katusaresearch.com/echoes-of-empires-silvers-moment/ - Type: article - Published: 2024-04-04 - Author: Marin Katusa **In this week’s missive:** - **Silver demand expectations and production** - **Volatility: Silver’s head to head matchup with gold** - **Preparing for mammoth bull market spikes** - **The Lightning Rod: What’s next for silver** While it was too brittle for making swords, silver’s shine and scarcity made it a top choice for trading long ago. Empires from Rome to Spain were all over silver, mining it whenever they could. It even became the backbone of many major currencies like the Greek Drachma and the Spanish dólar. - **Here’s a fun fact for silver enthusiasts:**** the Spanish Dólar influenced Alexander Hamilton to establish the US Dollar when America was just starting.** Today, silver stands out for its practicality and affordability compared to gold. It’s not just for show; over 50% of silver serves industrial needs, powering sectors from electronics to metalworking. So, while silver might seem like it’s in the luxury league, it’s a hardworking metal with a crucial role in our daily lives and industries. ## **Here’s Where Silver Comes From** Nearly half of primary silver production comes from Latin America, or the Silver CAMP: Chile, Argentina, Mexico and Peru. (And let’s not forget Guatemala will become a major producer once my buddy Ross Beaty starts up the Escobal silver mine. It’s one of the world’s most attractive primary silver mines.) All these countries eventually came around to classifying mining as an essential service. But a serious outbreak or accident on a mine site could still result in closures. Below is a chart showing the estimated global silver production for this year. - **Mexico is the largest producer of silver in the world by a comfortable margin, thanks to its generous healthy reserves and low costs of production.** China is also a major player in this space, having maintained steady production of roughly 3,500 tonnes a year for the past decade. In terms of reserves, however, the largest in the world belong to Peru, with Australia and Russia not far behind. You can likely count on these three countries to spearhead silver production in the decades to come. ## **Silver and Gold Volatility, Head-to-Head** But there’s another reason why most portfolio managers won’t put ‘silver’ in the same breath as US Treasuries, Japanese Government Bonds, US Dollars and Gold… **That’s because it’s simply too volatile to act as a hedge.** In the following chart, look at the volatility comparison… Showing that silver’s daily price fluctuations, including gains and losses, have been significantly higher than gold’s over the past decade.. Silver’s price fluctuations have been remarkably dramatic in recent decades, testing the resilience of even the most dedicated investors. Remember, many of silver’s significant price movements have stemmed from extraordinary market conditions. For example, the Hunt brothers’ attempt to monopolize the silver market in the early 1980s caused a record-setting price spike. Similarly, silver reached another peak in 2011 amid the US Debt Ceiling Crisis as investors sought refuge in precious metals, fearing a potential government financial shortfall. Now, the reason that silver can make such massive moves so quickly when compared to gold is because the global market cap is *tiny*. Thus, any marginal increase in silver buying or selling tends to send prices into a *frenzy*. Putting this into perspective, take a look at this chart comparing the silver market to other major asset classes and well-known companies. - **As you can see,* the entire silver market is a blip *relative to these other sectors.** And this creates *massive* leverage for silver because of its small scale. Remember how violent the rise in the once-tiny cryptocurrency sector was when the capital first started flowing in? It’s exactly the same case for silver – scale is key for massive gains. ## **“A Lightning Rod”: What’s Next for Silver?** Keep in mind that silver is useful both as an industrial metal *and* as a store of value. **This has the potential to be a double whammy for prices when things heat up.** Hence why the hyper-aggressive easing policies global central bankers have used since 2008 are positive for silver’s industrial use *and* monetary use. Take a look at how the price ratio of gold to silver has varied over the past decade: Currently, the gold to silver ratio is moving higher away from its 10-year historical average. - In other words, right now **silver is undervalued relative to gold**, according to the historical trend. With gold leading the precious metals peloton, silver is going unnoticed drafting behind its gilded race partner. Gold may be up 4.9% so far this year – but silver isn’t far behind at 4.3%. Given how silver is currently the cheaper of the two, it’s not far-fetched to think that silver could catch a bid. And sprint past gold to the finish line. Remember – it has in the past*.* Regards, Marin Katusa P.S. if you want to get first in line on all resource-related stocks I’m looking at, consider a subscription to my monthly newsletter – *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)*. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Gas Wars… Exposing the Secrets of a Silent Giant - URL: https://katusaresearch.com/gas-wars-exposing-the-secrets-of-a-silent-giant/ - Type: article - Published: 2024-03-29 - Updated: 2024-04-04 - Author: Marin Katusa The numbers are staggering, and the industry is not going away. The U.S. possesses the most extensive gas pipeline delivery network in the world. More than 189 million Americans and 5.6 million American businesses use natural gas. And America’s natural gas utilities invest $33 billion every year in capital and maintenance projects for distribution and transmission systems. So, to understand and profit, follow the money. Let’s dig in… ## **Could Trump Kickstart a Sleepy LNG Sector** Liquefied Natural Gas (LNG) is likely to benefit the most under a second Trump administration compared to a Biden continuation. Biden’s stricter environmental regulations have halted new LNG projects due to environmental concerns, a shift following the recent classification of natural gas as a transitional fuel at the COP Summit. **Under a Trump Administration for example, these LNG projects could quickly gain approval for several reasons:** - They create many jobs, reducing unemployment. - These positions offer high wages in both construction and operation. - Once operational, they provide significant, stable corporate tax revenue. - They align with Trump’s goal of energy dominance. The U.S., currently the top LNG exporter worldwide, owes much of this status to Trump’s 2016 energy policies. These policies, coupled with low-interest rates, enabled companies like Cheniere, Sempra, and Energy Transfer Partners to start building LNG infrastructure. The chart below illustrates the sharp rise in U.S. LNG exports. The challenge for Trump is if he hits China with tariffs, naturally, China is going to retaliate. One of the ways China may do that is by refusing to buy US LNG. However, currently, China is not one of the USA’s largest consumers of US LNG. The chart below shows total American LNG exports from Jan 2022 through to October 2023. As you can see, the US has directed the vast share of its LNG to Europe and the UK. This means that tariffs or bans on US LNG cargo would not be catastrophic for the US LNG industry. It is likely that cargoes could be rerouted. But regardless of who wins the election… ## **The Pacific Gas Wars are Here** Asia is the true growth engine for LNG for the next 15+ years and China will be a key demand driver. It’s expected that China could represent up to 40% of future LNG demand out to 2035. - **The challenge for China is that domestic gas producers currently provide ~55% of total natural gas consumption.** By 2035, domestic gas production is expected to be in the 40% range. Russia, Australia, and the US are expected to be large suppliers of natural gas to China. Trump’s term can only last 4 years, but damaging an already delicate relationship with China could present a challenge later in the decade. The LNG sector is incredibly complex with many moving pieces. Here is an example of a real scenario that could occur. - A company sources natural gas in Canada. - Transports the gas across North America. - Compresses the gas in Texas. - Ships the gas to Asia. - De-compress the super-chilled natural gas for the user, who then… - Transports it via pipeline to its final destination. You’re likely thinking, jeez that sounds complex, lots of moving parts and expensive. Frankly, you’re not wrong. Leasing a boat will cost upwards of $50,000/day! Pipeline costs vary considerably depending on whether the contract is spot or part of a long-term arrangement but could easily fetch $1/MMbtu. And insurance for the LNG (once it’s on the water) also costs money. Below is the cost curve to ship LNG to Asia, as you can see in blue, much of the U.S. LNG is in the bottom half of the cost curve. For reference, the current selling price of LNG in Japan is $9.57/MMbtu. Meaning almost all American LNG is profitable. I believe Biden’s actions could create selling pressure on U.S. LNG names. This could create a solid trading opportunity to buy on negative news and then use Trump’s reinstatement of projects as a positive catalyst for the sector. ## **Spotlight on a Mysterious Energy Giant…** We’re tracking a major player in the liquefied natural gas (LNG) market right now. This U.S. leader, also a global frontrunner, is set to dominate over 50% of America’s LNG exports in 2024, and becoming Europe’s top supplier… The real winner of Europe’s anti-Russian stance in many ways… Dominating as the top LNG supplier to Europe, which makes up 10% of Europe’s total natural gas imports. Founded in the 1990’s as an oil and gas firm, it pivoted from LNG importing to exporting after 2008, aligning with the shale gas boom. However, the shale gas revolution spurred a dramatic pivot, transforming it from an importer to a leading exporter of LNG. By 2010, this company was making bold moves, initiating LNG export infrastructure development at its flagship facility. - **By 2023, it completed 3000 shipments, investing over $34 billion in LNG infrastructure.** Expansion has been a key theme for this company. **And now with two major ports, it can export up to 45 million tonnes of LNG yearly, driving significant revenue.** The identity of this LNG giant? That remains our little secret for now for our subscribers to [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). Keep a keen eye on this one. Regards, Marin Katusa and Rob Fuhrman **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Infinite Money Glitch - URL: https://katusaresearch.com/the-infinite-money-glitch/ - Type: article - Published: 2024-03-22 - Updated: 2024-03-21 - Author: Marin Katusa Even I have to admit that some old cliches might need an update… *There’s no rush like a gold rush* might have met its match in the new generation of social media and instant gratification. As there seems to be *no bull market fever quite like Bitcoin bull market fever*. Moonshots, computer coins, meme coins and $25 billion market cap dog currencies are now normal. Colorful charts with dots and lines indicate everything from $1million target prices to antiquated stock-to-flow models (which I’ve broken down [why it doesn’t work with Bitcoin, here](https://www.youtube.com/watch?v=IqgSPS5bXJQ)). The fact is cryptocurrencies are widely adopted, traded, liquid and their price rises… until it doesn’t. But that day is not today. - **There are 109 cryptocurrencies with market caps over $1 billion**** right now.** In the halls of the global crypto markets is one of the highest stakes bets and players making his mark, that’s incredibly fun to watch. And it reminds me of a cautionary tale… ## **Saylor’s Bitcoin ****“****Infinite Money Glitch”** Michael Saylor’s MicroStrategy is playing a high-stakes game, reminiscent of the Hunt Brothers’ infamous silver market gamble. This narrative isn’t just about accumulating wealth through Bitcoin; it’s about challenging the conventions of traditional finance and investment. His approach could either set a new precedent or serve as a stark reminder of the dangers inherent in market speculation. Michael Saylor has transformed MicroStrategy into a Bitcoin behemoth, adopting a strategy that’s as daring as it is unconventional. - **He’s not just acquiring Bitcoin; he’s leveraging the company’s future on its ultimate rise and success.** By using their assets as collateral, MicroStrategy aims to purchase additional Bitcoin, hoping the cryptocurrency’s value will surge enough to not only cover their debts but also propel the company to new heights. Here’s how it works: 1. **Debt for Bitcoin**: Saylor takes on debt for MicroStrategy by using its Bitcoin holdings as collateral. The borrowed funds are then used to purchase additional Bitcoin. 2. **Stock Value Increases**: The strategy hinges on the expectation that Bitcoin’s value will rise. If it does, the value of MicroStrategy’s stock (MSTR) will increase correspondingly, given the company’s substantial Bitcoin investments. 3. **Debt Repayment**: The plan is to repay the borrowed funds as the stock value escalates, potentially at a premium, given the expected rise in Bitcoin’s price. The repayment is facilitated through the issuance of more MicroStrategy stock, not by selling Bitcoin. 4. **Continuous Cycle**: This cycle of borrowing, investing in Bitcoin, and repaying with appreciated assets is intended to continue, leveraging the potential upward trajectory of Bitcoin’s value. 5.** Recent Acquisition**: Illustrating his commitment to this strategy, Saylor recently acquired an additional 12,000 Bitcoins. Yet, this approach is fraught with immense risk and reward, given Bitcoin’s notorious volatility. ## **Familiar Sounds: The Hunt Brothers’ Silver Play** Ever heard of the **Hunt Brothers**? After inheriting their father’s fortune, Herbert and Nelson Hunt invested heavily in silver, believing it would be a safeguard against inflation. Their silver market saga provides a valuable lesson for Saylor’s Bitcoin strategy. Their blueprint was simple yet audacious… Buy as much silver as possible to control the market. - **At their peak, they held one-third of the world’s silver supply, betting that inflation would skyrocket the value of their holdings.** Sound familiar? They accumulated a vast amount of physical silver and futures contracts, aiming to control the market. Their actions drove silver prices to unprecedented heights. ## **The Marc Rich Zinc “Cornering”** Cornering is a risky venture, and you can get burned big time. For example, in 1990 the late **Marc Rich** famously tried to corner the zinc market. It backfired big time and he ended up losing over $200 million and the controlling stake in his company. That company eventually evolved into what is known as **Glencore** today. Enter the Regulators… The Hunt Brothers and Marc Rich strategies backfired when federal regulators stepped in with new rules to prevent market manipulation, leading to a dramatic collapse in silver prices. The Hunts faced severe financial repercussions, including bankruptcy and hefty fines. This historical episode underscores the risks of heavily investing in a single asset, particularly when the strategy involves significant market manipulation. It’s nearly impossible to corner a market like gold or silver because the government will always intervene. My theory is simple, the government will never allow the collapse of the many for the gain of a few. Will Bitcoin be any different? ## **Backfire Beware: Lessons and Implications** While Saylor’s strategy with Bitcoin is not a direct market manipulation like the Hunts’ with silver, the high concentration in one asset and the use of leverage mirror the inherent risks. - **If the price of Bitcoin’s falls, MicroStrategy could face a predicament similar to the Hunts’ ordeal.** - **Saylor is betting on Bitcoin’s long-term value and broader market acceptance, unlike the Hunts’ reliance on controlling market supply.** This narrative serves as a cautionary tale about the perils of speculative investment, highlighting the thin line between visionary strategy and reckless gambit. Saylor’s bold maneuver with Bitcoin is a testament to the allure of digital currencies but also a reminder of the volatility and unpredictability inherent in these markets. Saylor has cojones, no doubt. And it’s fun to watch. But whether his bet will be a landmark in financial innovation or a footnote in a history of speculation remains to be seen. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Lithium Market is Quiet, Until It’s Not - URL: https://katusaresearch.com/the-lithium-market-is-quiet-until-its-not/ - Type: article - Published: 2024-03-15 - Updated: 2024-03-14 - Author: Marin Katusa The lithium market experienced a mix of ups and downs last month. On the downside, automakers delivered some blows to lithium demand. **Mercedes** has backed away from its 2030 “EV only” goal, while **Lucid** and **Rivian** reported weaker EV demand than anticipated, directly affecting lithium needs. Additionally, a shipping bottleneck has led to a surplus of China’s EVs meant for abroad, further dampening lithium sales. As a result, lithium and lithium equities have been taking it on the chin to start the year. Prices for spodumene in China and Australia have slid 35% and 15% respectively year to date. Lithium Carbonate pricing has also dropped, with prices hovering near $14,000 per metric tonne, as the lithium carbonate price was over $40,000/tonne just 9 months ago. In the last six months, falling prices for lithium carbonate and spodumene have paused development and expansion, leading some medium to high-cost producers to halt production. **However, there’s bullish news…** In the last couple of weeks, the lithium price has snapped back 21% and resulted in a sharp bounce in lithium stocks off a multi-year bottom. **More bullish news came on February 27th,** when two major battery companies forecasted a 70-80% production boost for March 2024 over February. With January and February’s capacity utilization at 35-40% for top battery makers, this increase could push utilization near 80%. - **That day also saw lithium futures in China jump by 9%** Additionally, Western lithium supply databases discovered an untracked extra 50,000 tonnes of LCE from China’s high-cost lepidolite producers, contributing to the price surge. ## **An Eye on Lithium Cash Costs** Despite this, low prices are self-correcting as high-cost producers in China, Australia, and Africa might be operating at a loss. Yet, as shown in the chart, most production remains profitable at current prices. On average, the major brine and spodumene mines are still able to break even, with average cash costs of production ranging from $7000-$12000 per metric tonne of LCE. - **Cash costs are different than all in costs (AISC) which as a general rule of thumb, add 50% to the mine cash costs. Lepidolite producers are out of money and are producing at a loss.** Recent updates on our data feeds show that lepidolite’s contribution to the market is 13%, not the 6% previously estimated, doubling its market share to 100,000 tonnes out of 900,000. Analyzing global production by dividing it into four ‘quartiles’ reveals that 65-70% of production remains viable at present cash costs. Even if not profitable, these producers are likely to keep operating, hoping for market improvements, a trend consistent across commodities over the past two decades… ## **Lithium Learning from Uranium Markets** If we think about the uranium bear market which saw prices collapse to $17/lb no mine on the planet could turn a profit after 12 months when all in costs were applied. That is why we saw two of the world’s largest, highest grade, and profitable mines, McArthur River and Cigar shut down production. Although the prices of lithium have cratered, we are not at the “uranium lows” moment where the highest grade and largest mines are shutting. **From the table below you will see that relative to other commodities, lithium prices are highly volatile.** - **After stale or major drawdown periods, prices can snap back and soar.** Often, Lithium is either one of the best or worst-performing commodities. This means that companies with direct exposure will also take big swings in valuation. ## **Profitable Producers are Coming Back** **In recent news, Arcadium Lithium** (a recent merger of FMCs spinout Livent and AllKem) a top 5 global lithium producer, forecast that at a selling price of $15,000/t LCE, company’s EBITDA margin would be 34%. This is another useful data point, showing that large producers are still profitable. Could lithium prices go lower? Yes, it is possible. Especially if China wants to pull a “Cut to Kill” strategy to increase their global exposure to the largest, highest-grade lithium mines. - *(For some background on the “Cut to Kill” strategy *[*see this piece when Russia and Saudi Arabia employed this*](https://katusaresearch.com/market-bloodbath-the-end-of-oil/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)* in the oil markets. And Kazatomprom has done *[*the same in Uranium*](https://katusaresearch.com/russia-1-trump-0-section-232/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)*).* Despite the short-term pessimism surrounding lithium prices, the long-term outlook based on supply and demand dynamics is far more compelling. Projects that are not under Chinese control, situated in mining-friendly +SWAP Line Nations with strong rule of law, and positioned in the lowest production cost quartile close to battery manufacturing centers, will be considered premium assets. ## **A Lithium Market Contender** Amidst a sector-wide downturn, one standout in our [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) portfolio defies trends, showcasing robust geological results that hint at a substantial lithium deposit. While peers falter, this company excels, diving deeper into its flagship project to reveal promising mineralization at depths previously uncharted. **Recent drills are going deeper and have hit significant lithium-rich zones…** **Potentially expanding the project’s value exponentially and drawing major mining players’ attention.** We’re watching closely as this hidden gem begins to outshine the competition, positioning itself as a key player in the lithium market’s future. [Click here to learn more and get the details](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Gold’s Price Breakout is Here - URL: https://katusaresearch.com/golds-price-breakout-is-here/ - Type: article - Published: 2024-03-08 - Updated: 2024-03-07 - Author: Marin Katusa The Congressional Budget Office projects that within a decade debt held by the public will approach $45 trillion, up 63% from this year. ## **Why the Fed Got it Wrong** With trillions of dollars pumped into the system during Covid, directly into people and corporate bank accounts, the Fed believed that inflation would only be “temporary”. *Transient inflation* became the flavor of the day, “it will subside” Central Banks said. Has inflation truly subsided? Strip out food and energy and it’s not so bad, one could argue. But, in case you haven’t seen it, gasoline prices are up 30%, and the price of chicken is up 50% in the past few years. Want a dozen eggs? It’ll be 60% more today than in 2021. Maybe inflation isn’t so transient. Gold certainly doesn’t think so. And the price action in gold is something investors should be paying attention to. ## **Gold’s US Dollar Price Breakout** Gold is now officially breaking out in every currency including the US Dollar, which means it’s in a bull market. The sneaky rally in gold has now gone full mainstream, yet is receiving no mainstream media attention. Gold has flirted with all-time highs several times over the past few years, only to snap back, consolidate, and try again… Which on a long-term time frame is very healthy for a powerful move to come as can be seen in the below chart. As the chart above shows, gold spent 5 years in consolidation after soaring 550% over the span of a decade. Then it began its move higher in 2019, bursting to a new high after Covid. Gold has since spent the last few years inching higher, making higher lows in a tight trading range. **Finally last week, gold popped hard, and it has not looked back.** Gold is up $100/oz in the past few days, making a new all-time high of $2,141 per ounce, and has closed above its previous All-Time-High (ATH). Below is a chart that shows the breakout through the major resistance point, that gold had failed at multiple times. ## **Gold Prices are Up, Miners are Down** You would think that companies which mine the yellow metal would have chart patterns that are similar. However, gold producers have not seen anywhere close to the same positive return. Would you believe it if I told you that gold producers were down 7% over that time frame? And year to date, while gold is up on the year, miners are down nearly 10%. - **Katusa Investment Insights Note:**** One gold stock we published here early last month is up over 42%.** The largest gold producer in the world, Newmont Mining is down over 20% since January 2020 and down 60% from its high set in April 2022. The chart below shows the widening disconnect in returns that started in mid-2021. This disconnect widened throughout 2023 and into early 2024. Looking at mainstream gold miner ETFs, the fund flow into the ETFs has been abysmal, with almost no new money coming into the sector in multiple years. This is contrary to the bull run from 2010-2012 where the major ETFs saw upwards of $7.5B come into the sector. ## **Are Gold Companies More Profitable?** What I find very interesting is that excluding the year of the pandemic, on average, gold companies are actually more profitable today, than any time in the past 10 years. For mining, it makes a lot of sense to define it as All-in Sustaining Cash Costs, meaning all those costs related to production, plus salaries, interest expenses, and maintenance capex at mines, relative to the average gold price for the year. The chart below shows this profitability margin on an annual basis since 2012. As you can see, over the past 10 years on average it has been an improving trend for miners. If margins were in the dumps, it would make sense that the gold miners would be hitting all-time lows. But given that margins are the strongest they’ve been in over a decade, and trending up, could this be Gold’s “value investor” moment? ## **Gold Stocks are Cheap… For Now** This is very rare: right now, the world’s largest gold companies are trading below Net Asset Value, while those in the “mid-tier” space are trading for as low as 50 cents on the dollar. - **I’ve only seen this during the depth of the 2008 Global Financial Crisis.** Valuations based on forward cash flow projections indicate that companies are at levels unseen in many years. Newmont, the world’s largest gold producer is trading 6x cash flow, the last time that happened was back in 2016. What I find even more amusing and ironic is the market cap of Newmont is less than the combined market cap of DogeCoin and Shiba Inu, two shit crypto coins. Which would you rather own? One that does produces almost 5 million ounces and generates over $4 Billion in cash from operations or DogeCoin and Shiba Inu? ## **There are 3 important takeaways right now are:** - **Gold metal prices are at all-time highs.** - **Companies are profitable and are trading at depressed valuations.** - **Institutional funds are not yet participating in a big way.** There is no rush like a gold rush where you can only lose 100% of the money you invest… But the returns can be spectacular in your favor. **You’ve already had the opportunity for a 42% gain as of this writing…** And yet it’s still early days for that company, as I can see the share price increase very quickly by another 50% if gold consolidates above its all-time highs. We just published an incredible small-cap gold opportunity for those with high-risk appetites in the March issue of ***Katusa’s Resource Opportunities*** just days ago… One that we believe should be an easy double from here if gold stays where it’s at. If you’re not yet a subscriber, [click here to get on the list](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). Or call our Customer Service team directly at 778-737-7381. Things are getting VERY interesting now. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Canada’s Money Metrics Crisis - URL: https://katusaresearch.com/canadas-money-metrics-crisis/ - Type: article - Published: 2024-03-01 - Updated: 2024-02-29 - Author: Marin Katusa | **In this week’s edition:** **1. Big money is bleeding out of Canada.** **2. The volume crisis in Canadian small cap stock markets:** Who trades and who gets illiquid fast. **3. Following the money:** Capital Flows. | The “money metrics” coming out of Canada are alarming. In recent weeks, the country home to vast energy, base and precious metal reserves was on the receiving end of several heavy punches. - One of Canada’s biggest banks, BMO, just released research saying that foreign investors sold a net of $48.7 billion worth of Canadian equities in 2023. That’s the largest outflow EVER for Canada. What’s normal, you ask? “Over the past three decades, a ‘normal’ year would see net BUYING of $12 billion.” That’s not all… Canada’s pension funds have come under fire from major financiers like Pierre Lassone and Frank Giustra. Canada’s resource industry for example, accounts for about 15% of GDP. However Canadian pension funds have less than 3% of their total assets invested in Canadian public companies. That’s down from 20% in the year 2000. ## **Maple Leaf Stock Market Stagnation** For decades now, Canada’s TSX and TSX Venture have been the go-to for any mining company looking to raise awareness and capital. 36% of all capital raised in the mining sector worldwide were raised by public companies listed on the Canadian exchanges. In 2023 alone… - Resource sector companies made up 48.3% of all shares traded on the TSX. - And on the junior Venture exchange? An impressive 78%. Decades ago, people looking for exciting speculative mining investments would go to Canada for their mining exposure. Not anymore. ## **Pulse Check on the Resource Canadian Exchanges** Once the go-to for thrilling speculative investments, they’re facing new competition from buzzworthy sectors like crypto and AI. Now don’t be fooled – mining and resources are still a major player, for now. While the Canadian exchanges continue to dominate mining financings, the landscape is evolving, with major companies opting for cross listings in the USA. And smaller ones facing liquidity challenges post-capital raise. - **Investors are fed up with rules that allow ridiculous overcompensation by management and board members of Canadian listed companies.** This type of thing would never fly on US exchanges. And to really see what’s going on in Canada’s markets right now, we’ll break down the data and see what it says. ## **NYSE and Nasdaq from the Top Rope** First, let’s compare the Canadian stock exchanges by their average daily volume traded, in U.S. Dollar terms. We’re going to include the big dogs to provide a better sense of scale: the NYSE and Nasdaq, as well as the crypto markets. The big American stock markets, notably the NYSE and Nasdaq, are way ahead of Canadian ones in trading volume. Interestingly, the global cryptocurrency market is now a major player, potentially ranking third worldwide, making it just behind the NYSE and Nasdaq. And competing with China’s Shenzhen Stock Exchange. The TSX in Canada might look small next to these huge markets, but it’s actually in the top 10 worldwide for the value of shares traded. Last September, it was in 9th place, beating some big Asian markets and Euronext. However, the TSXV and CSE are much smaller, with average daily volumes of $37.2 million and $8.2 million USD. That makes them relatively minor players on the global financial stage, and volumes continue to decrease. It’s worth noting that the TSX-Venture is currently experiencing a historical low in activity. There’s a clear correlation between the performance of the markets and the volume traded. - **But burn rates, in management overcompensation in these same markets, are at record highs.** ## **Canadian Volume Down: Shareholder Blues** In the past three months, out of over 2,600 listed companies on the TSXV and the CSE, only 65 of them maintained average daily trading volumes over $100k CAD. That’s 3% of the Canadian publicly listed companies on the TSX-V and CSE traded over CAD$100,000 (USD$75,000) of dollar liquidity volume per day. In a world of passive management (large pools of capital which make up over 50% of the stock market capital in North America), the Canadian junior markets are a non starter due to lack of liquidity. Out of 65 companies, 41 (nearly two-thirds) are in the resource industry, dominating the trading activity in this sector. These 65 companies represent (which make up 3% of the listed companies), make up 43% of the total volume of 2600 companies during the past three months. Despite low trading volumes for Canadian juniors, the resource sector remains the primary focus. - **The median market capitalization for these resource companies is $134 million.** - **Notably, only 8 out of these 41 companies have less than a million dollars in cash.** The median cash position for these companies is $4.8 million CAD, suggesting most are not funded for any major exploration program. To alleviate the liquidity crisis, many companies are choosing dual listing now in the US. The primary challenge is that with a Canadian primary listing, companies often incur double the legal fees. Additionally, the low share price (often under $5) restricts many Americans from investing, due to the regulations of major U.S. exchanges. Yet the legal, listing and accounting fees to be listed on the TSX-V and CSE are like those for a NYSE or NASDAQ listing. If you have a real asset, why bother with a Canadian listing? For instance, in the last Initial Public Offering (IPO) where I led the order, the company, helmed by a legendary mining hall of famer, chose to forgo a Canadian listing entirely. This decision was made to avoid the extra costs of having a Canadian listing. ## **Follow the Money** There’s no question that crypto trading volumes have soared. And a lot of this has come at the expense of small cap Canadian (and even US) markets. What’s becoming clear is that crypto seems to have replaced the junior resource markets as a speculative investment among the younger generation of investors (Millennials and Gen Z). Just take a look at total trading volumes on the TSX Venture in 2021… 2021 saw some of the highest trading volumes on the TSX Venture in the past decade and a half, surpassing even the previous peaks from the ends of 2010 and 2017. This was at the same time that the Bitcoin market saw all-time highs – as did cryptocurrency trading volumes, which are overlaid on the same chart above. ## **Capital Flows are Critical** It should come as no surprise that currently, between high interest rates and generally unfavorable market conditions, the junior Canadian exchanges are practically ghost towns. **With only a small percentage of companies doing trading volume that can accommodate larger investors, major funds and family offices need the liquidity from major US exchanges.** It’s why a lot of new issuers, even those based in Canada, are listing – or looking to list – in solely on the US markets and delist from Canada. If you’re invested in a company that’s solely traded on the Canadian markets, your first question to management should be: - *“What’s your plan to attract the largest pool of investors and capital in the world – in the US markets?”* At Katusa Research, we’re very familiar with the pros and cons of Canadian markets – especially the limitations or the bad apples and actors to stay away from (and that list is growing). One of the major things you learn first as an investor, is that your investment needs to have liquidity at some point, especially at the point of your exit strategy. **In our premium newsletter – [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)**** – we’ve got you covered on this metric and many others that few are talking about.** Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Trump Effect: A Market Rollercoaster from Shock Victory to Bull Run - URL: https://katusaresearch.com/the-trump-effect-a-market-rollercoaster-from-shock-victory-to-bull-run/ - Type: article - Published: 2024-02-23 - Updated: 2024-02-22 - Author: Marin Katusa In November 2016, Donald Trump’s unexpected win over Hillary Clinton in the U.S. Presidential election shocked the world. This wasn’t just a political upset; it was a seismic event that sent shockwaves through global markets. Before the election, Trump was far behind Clinton. However, on Election Day, his supporters came out in large numbers, leading to one of the biggest political surprises in recent U.S. history. As Trump’s prospects surged late into the night, financial markets braced for impact. - **Volatility skyrocketed. Gold prices whipsawed, swinging by $69/oz, while equity markets took an initial nosedive.** But then, in a dramatic rebound, the S&P 500 surged by 30 points on November 9th, boosting the market capitalization of the index by a staggering $200 billion. This was just the prologue to an ensuing bull market, especially for big tech companies. During Trump’s time in office, the S&P 500 index had increased its market capitalization by over $10 trillion. ## **The Winners and Losers: Trumps’s Stamp on Market Sectors** Trump’s time as president was known for being business-friendly. He cut taxes and encouraged American companies to manufacture more in the U.S., fostering a robust domestic business environment. - **We looked at how the market did during Trump’s presidency, from his surprising win to when he lost to Biden in 2020.** We focused on two periods: before COVID-19 (Nov 8th, 2016 – Dec 31st, 2019) and the total return from Nov 2016 through Nov 2020. The period before the pandemic is particularly telling… It offers a glimpse into the direct impact of Trump’s policies on various asset classes, *unaffected* by the global turmoil of COVID-19 and money printing. - **Commodities thrived in this pre-pandemic era.** We are not saying he will, nor are we positioning our portfolios, as he will win. But rather, stating which sectors could benefit from a Trump 2.0 administration. Drilling down deeper, we can look at the equity returns by sector… Relative to other commodities, gold miners fared the best by a considerable margin. Energy stocks were the worst, with raw materials producers such as steel and copper breaking even. ## **Trumponomics 2025: A New Era in American Economic Policy** As we venture into 2025, the economic landscape under Trump’s potential second term presents a blend of familiar strategies and bold new policies. Trump’s first term was marked by a focus on boosting the US economy through stock market performance, reshoring American jobs, and lowering corporate taxes. His approach, characterized by tough trade terms and tariffs, increased US GDP growth rates above the 20-year average. ## **Breaking Down Key Areas for Investors** Monetary Policy and the Fed Trump’s relationship with the Federal Reserve has been tumultuous. His first term saw interest rates rise from 0.50% to 2.50%, amidst his vocal criticism of the Fed’s reluctance to cut rates. With Jerome Powell signaling a potential decline in rates in late 2024, and Trump’s intention not to reappoint Powell in 2026, a shift toward more business-friendly, low-interest policies seems imminent. Trade and Tariffs Doubling down on his “America First” agenda, Trump plans to implement a system of tariffs on most foreign goods, with penalties for unfair trading practices. His focus is particularly sharp on China, proposing a four-year plan to phase out Chinese imports in key sectors and pushing for a decoupling of the world’s two largest economies. This hawkish stance finds support in Congress, signaling a potential reshaping of global trade dynamics. Energy Policy Trump’s energy policy revolves around achieving the lowest-cost energy and electricity. - **His plan includes ramping up oil drilling, offering tax breaks to fossil fuel producers, and investing in natural gas infrastructure**. Contrasting with Biden’s policies, Trump’s approach favors traditional energy sources over renewable ones. Climate and Environmental Policies Rejecting Biden’s climate policies, Trump is likely to rescind energy regulations and exit the Paris Climate Accords again. - **His version of a **[**Carbon Border Adjusted Mechanism**](https://twitter.com/KatusaResearch/status/1694010123780567367?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)** could be a strategic move against China, aligning with his broader trade and protectionist policies.** Taxation and the Economy Trump’s tax policy is expected to maintain the status quo, with a focus on sustaining corporate profits and personal net incomes. His administration’s approach to taxation is likely to continue benefiting wealthy households and small-business owners. ## **A Second Trump Term…** Could very well usher in another massive vote of confidence in many business sectors (as shown above). Bullish for commodities, tech, businesses and energy… Trump could be attracting voters fed up with rising inflation. On the other side, Trump will attract a LOT of negative attention should he win again. Our job is to cut through the headlines and noise and focus on the data. We broke down our entire Katusa’s Resource Opportunities portfolio into asset classes and sectors, to forecast what Trump 2.0 would mean. And we’ll do the same for Biden (or replacement) 2.0. Click here to get on board with [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com), *before* the fireworks start to happen. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # First Look: David Garofalo Unveils Gold Royalty Corp’s Competitive “Advantage” - URL: https://katusaresearch.com/first-look-david-garofalo-unveils-gold-royalty-corps-competitive-advantage/ - Type: article - Published: 2024-02-16 - Updated: 2024-02-20 - Author: Marin Katusa LEGAL NOTE: Please read important disclosures & disclaimers for sponsored content at the end of this article. Dear Reader, I’m thrilled to introduce you to a figure who’s reshaping gold markets yet again. He’s driven forward 10x production growth through the 2000’s, shifted to the copper space during the Chinese super cycle, and most recently engineered at the time the largest merger in gold industry history… That’s the kind of flagship milestones CEO David Garofalo has already navigated. Now, as the mastermind behind **Gold Royalty Corp (GROY: NYSE)**, he’s on the cusp of something special. In less than a year since its NYSE debut, Gold Royalty Corp acquired more royalties in number than giants like Franco Nevada and Wheaton… **Becoming the fastest-growing gold royalty company globally.** With a portfolio boasting over 240 royalties across early exploration to production stages, including major assets in stable jurisdictions like Nevada and Quebec, the potential is immense. ## **But here’s where it gets truly exciting…** David’s vision extends beyond traditional gold royalty models. He’s pioneering a dual strategy… Investing in both assets with existing cash flows and those at an earlier stage with potential for growth, a blend of stability and growth potential. This isn’t just another gold stock to watch; it’s led by a visionary with over 30 years of unmatched experience in the sector. And with Gold Royalty Corp’s recent announcements and on the cusp of positive cash flow, the signs and roadmap are clear, so I wanted to dig even deeper. We just did an exclusive interview with David Garofalo where he’ll reveal: - **The strategies set to grow Gold Royalty to new heights** in 2024 - **How to become a “Mining Bank**” to the precious metals sector - The blueprint that allows his **commando team** to accurately assess and price risks - Insights into the gold market and prices And most importantly, what this all means for you as an investor. Including many never before seen GROY.NYSE charts and data from Katusa Research. This is your chance to have a front-row seat, and gain boardroom-level insights from David himself. [**Click here to watch the interview**](https://www.youtube.com/watch?v=801RbSogz8s) Best Regards, Marin Katusa P.S. Remember, opportunities like this don’t come often… [Watch the exclusive interview](https://www.youtube.com/watch?v=801RbSogz8s) to discover more. Then do your own research – especially looking at their public filings. ## ## DETAILS AND DISCLOSURES Read their most recent annual report and other documents publicly filed at [www.sedarplus.ca](http://www.sedarplus.ca) and edgar.com to learn about these assets and for other important information. **IMPORTANT DISCLAIMER:** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Gold Royalty Corp. has reviewed and sponsored this article**. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from Gold Royalty Corp. in the amount of $250,000 in Nov 2023 and second payment of $250,000 in Dec 2023 and is thus extremely biased. Members of Katusa Research also own shares in Gold Royalty Corp. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the company, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. **HIGH RISK**: The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE**: By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS**: Certain of the information contained herein and in the Company’s disclosures referenced herein constitutes “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and U.S. securities laws (“forward-looking statements”), which involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance and achievements to be materially different from the results, performance or achievements expressed or implied therein. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements respecting the Company’s strategies, expectations regarding gold markets, expectations regarding the operations and results of the operators of the projects underlying the Company’s interests and expectations regarding future production and revenues from the Company’s royalties. Forward-looking statements are based upon certain assumptions and other important factors, including assumptions relating to commodities prices and the business of the Company. Forward-looking statements are subject to a number of risks, uncertainties and other factors which may cause the actual results to be materially different from those expressed or implied by such forward-looking statements, including those set forth in the Company’s Annual Report on Form 20-F and its other publicly filed documents under its profiles at www.sedarplus.ca and www.sec.gov. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. --- # My “Spidey Sense” Indicator Goes Off When This Happens… - URL: https://katusaresearch.com/my-spidey-sense-indicator-goes-off-when-this-happens/ - Type: article - Published: 2024-02-13 - Updated: 2024-02-16 - Author: Marin Katusa LEGAL NOTE: Please read important disclaimers at the end of this article. **In today’s missive:** - A key market indicator I get every boom cycle - GROY’s incredible rally - Three major catalysts and charts to pay attention to Dear Reader, I’ll tell you a little secret… **This one indicator never fails and happens every market cycle.** When I get calls from reporters and other media outlets for a quote on the sector or company – it’s never for something under the radar. The producer or editor wants clicks and views, giving the audience what they want in the markets that are making front page news… that will generate views for their internal data analytic quotas. That’s one strong signal to me that the easiest (and fastest) gains in a sector are in the rear-view mirror. Right now, there is no doubt there is still a lot of money to be made from uranium, but my phone is off the hook asking for interviews. I’m seeing an incredible amount of lacklustre projects from 20 years ago being repacked to be sold to the investor world looking for uranium exposure. Hint, if that same project didn’t work 20 years ago, what’s changed? Usually, nothing. When investors ride the FOMO train, they usually end up with a major loss. Most investors don’t have patience nor can they spot deeply undervalued plays and park it on the shelf until the eventual turnaround. Back when nobody cared, I took heat for backing up the track in uranium. But I didn’t care. **I could sit pretty and wait to see if those bets paid off… which they did. So, when I find an idea that I think has merit, I pay close attention.** What you’re about to read is not personal investment advice and it’s high risk. I’ve put up a lot of my own money buying this stock in the open market and I am severely biased for many reasons. But I think you need to pay attention to **Gold Royalty Corp (GROY)** right now… # On the Cusp of Positive Free Cash Flow In 2019, after completing the largest gold merger ever at that point… **David Garofalo had a light bulb moment.** Precious metal financing was already dry-as-a-bone pre-2020… Now, higher interest rates have only made funding new gold mines even harder. Staying in the ‘development and exploration’ space was a dangerous game to play. And David knew it. Cannibalization in the industry is already happening… … Gold mining projects delayed … Mega mergers (one he just completed) … even miner bankruptcies… David saw an opportunity to be in the ‘picks and shovels’ of the mining space. ## David Garofalo believes investors can have a double gold play: - Investing in cash-flowing mining assets with future size upside at no cost. - Invest in up-and-coming projects that have the potential to be cash-flowing over the long term that aren’t on the radar of the established royalty companies. And if a project in the portfolio achieves production, it can produce reliable cash flow passively over the long term. Gold Royalty’s portfolio… This is music to a value and growth investor’s ears. ## **Katusa Special Situations Company Alert:** **Gold Royalty Corp. (GROY.NYSE)** This is a highly speculative stock that comes with significant investment risk. If this bothers you, do not invest. Before making any decision you should review the company’s disclosure under its profiles at [www.sedarplus.ca](https://www.sedarplus.ca/landingpage/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) and [www.sec.gov](https://www.sec.gov/) for important information regarding it and its assets. So now let’s get to the exciting stuff… ## CATALYST #1: Value Proposition The current analyst consensus Price-to-Net-Asset-Value (P/NAV) is less than 0.5X. This is based off analyst consensus estimates. That means GROY is trading for less than 50% of the net asset value of the assets in its portfolio. ## CATALYST #2: Potential for Revenue Growth Under David’s leadership, Gold Royalty acquired three existing royalty companies. **As GROY acquires more… it increases the interests that could increase its potential revenue base along with additional royalties that are already produced.** Based on operator mine plans, Gold Royalty has projected strong organic cash flow growth potential in the next several years. The following are analyst consensus estimates for future revenue based on existing projects and mine disclosures. As additional projects ramp up production, cash flows to GROY from these projects could increase. It is important to understand that mining is an inherently risky business. This makes Gold Royalty’s diversified portfolio **an important part of the story**. ## CATALYST #3: Project Pipeline Below is a chart which compares the current Gold Royalty Corp share price to the average consensus Net Asset Value per share. You will see that the total net asset value estimated by analysts surpasses the current market cap. by a considerable margin. Below is a chart which compares analyst consensus P/NAV valuations for a selected group of other mid-royalty companies. **You can see Gold Royalty Corp is trading at the largest discount to Net Asset Value based on analyst consensus P/NAV.** However, with the company on track to go cash flow positive this year based on royalties on mining operations that are ramping up and should add revenue based on the current operator projections. These are the types of potential catalysts that can move share prices. ## Too Long, Didn’t Read (TLDR)? Here are the key takeaway messages: - Gold Royalty Corp has assembled an excellent, highly experienced management team with a demonstrated track record of success. - A large and diverse portfolio of top-notch royalties located in safe jurisdictions, - Shareholders in GROY benefit from commodity price exposure with relatively minimal exposure to inflationary costs typically found in traditional mining operations. - Strong revenue growth potential If this company is not on your radar, I think you should look into it further. Regards, Marin Katusa and the KR Special Situations Team **DISCLOSURES/DISCLAIMER ** **IMPORTANT DISCLAIMER:** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Gold Royalty Corp. has reviewed and sponsored this article**. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from Gold Royalty Corp. in the amount of $250,000 in Nov 2023 and second payment of $250,000 in Dec 2023 and is thus extremely biased. Members of Katusa Research also own shares in Gold Royalty Corp. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the company, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. **HIGH RISK**: The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE**: By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS**: Certain of the information contained herein and in the Company’s disclosures referenced herein constitutes “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and U.S. securities laws (“forward-looking statements”), which involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance and achievements to be materially different from the results, performance or achievements expressed or implied therein. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements respecting the Company’s strategies, expectations regarding gold markets, expectations regarding the operations and results of the operators of the projects underlying the Company’s interests and expectations regarding future production and revenues from the Company’s royalties. Forward-looking statements are based upon certain assumptions and other important factors, including assumptions relating to commodities prices and the business of the Company. Forward-looking statements are subject to a number of risks, uncertainties and other factors which may cause the actual results to be materially different from those expressed or implied by such forward-looking statements, including those set forth in the Company’s Annual Report on Form 20-F and its other publicly filed documents under its profiles at www.sedarplus.ca and www.sec.gov. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should review Gold Royalty’s public disclosures at www.sedarplus.ca and www.sec.gov for important information regarding it and its assets. --- # On the Cusp of Breaking into Positive Free Cash Flow (GROY:NYSE) - URL: https://katusaresearch.com/on-the-cusp-of-breaking-into-positive-free-cash-flow/ - Type: article - Published: 2024-02-12 - Updated: 2024-02-21 - Author: Marin Katusa **In this email:** - Meet David Garofalo - **Katusa Issues Special Situations Alert on GOLD ROYALTY CORP (GROY)** LEGAL NOTE: Please read important disclaimers at the end of this email. Dear reader, Every now and then you revisit a company and look at how undervalued it is. **And then you realize they’re about to hit the tipping point…** The market is rewarding companies that are cash-flowing and growing. And the company that’s got my attention today, in my opinion, appears to have both coming. **Gold Royalty Corp (GROY.NYSE)** is a mid-tier royalty company with a large, high-quality portfolio in excellent jurisdictions with strong organic revenue growth potential. The bigger companies, while they might have great portfolios, need *mammoth* transactions to really move the needle. They also usually trade at higher multiples. An ideal royalty company—in my opinion—has to be small enough that transactions can have an immediate material impact on the share price. This situation most often is possible in the <$1 Billion market cap range. ## That’s Where David Garofalo Comes In David is the General and mastermind behind **Gold Royalty Corp (GROY)**. His journey to the top echelons of the mining world is no ordinary tale. As the former President and CEO of Goldcorp (top 3 gold producer in the world), he steered the company to its monumental merger with Newmont, creating the world’s largest gold miner. His expertise isn’t just deep – it’s diverse. Having helmed Hudbay Minerals (senior miner in Canada) and served as CFO of Agnico-Eagle (currently the 3rd largest gold producer in the world). **Garofalo’s decision to lead GROY isn’t just a career move; it’s a strategic choice by a leader who’s shaped the gold mining industry.** The Katusa Special Situations Team has identified this opportunity for MANY reasons: - It has acquired 244 high-quality royalties in just three years. - It has 72% of its asset base in Quebec and Nevada, mining-friendly jurisdictions. - It is on the precipice of cash flow and growth in 2024 and beyond (you’ll want to hear the numbers the CEO is talking about). I’m HEAVILY biased, but my money is betting heavily where my mouth is. ## **Katusa Special Situations Company Alert:** **Gold Royalty Corp. (GROY.NYSE)** Note: It goes without saying that this is a high-risk investment. If you have interest, you should definitely review the company’s disclosures under its profiles at [www.sedarplus.ca](https://u5734527.ct.sendgrid.net/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdMikOzrxRz6IKQUY5Zr0-2F-2BolRfaHLj2Or-2BO876YMD4JwkWLf00y0apISNN44YWNnti2QTdcgEKoPS-2Flx5DehNs9wRgtsw1HjYVCNF4uilaUdXRsQstPo7TkFQhU7S6yW4w-3D-3DCG3p_AU8oF2B84393VN4NqZh-2B46xLoDJA1idYNWqHZbZCvaH2ncm-2BapWMCBU-2FenxO33LhpGpJAvdCFSCy4dBj7VWP-2F3vrr86xz7qkPKnPEcdSARrwZC-2FfKuVUSDva-2B-2FuVUr3HSnQ8idmm4XplTyuQmFnsAmZ0M62yU3ibiHNHV-2BPukx-2F3gaG0SzMlDqX42lVxvgWkPeHMHLX6DpUYFKTq2J5mbVL848sdcLA-2Bj1Yqo3Nj1G8-3D) and [www.sec.gov](https://u5734527.ct.sendgrid.net/ls/click?upn=u001.S-2Fcc4ny8HjVvlG1EfmAXdJrp5ueRGwIjYUFIRVnDa6DRdd7oHp45y2Bs-2FDXKRAaPXGxUy-2Fh9SH6oNXgKoHIXtZ6jntVj5UuNGVP4Aylm6jLxfqr6PTd2T4eZMrQsk1YzkHTU_AU8oF2B84393VN4NqZh-2B46xLoDJA1idYNWqHZbZCvaH2ncm-2BapWMCBU-2FenxO33LhpGpJAvdCFSCy4dBj7VWP-2F7-2FV9k3XWwoPenOVRO8hNQnNciTu3whfgqwn56pSHEG4gJYnquQ6rDVElby8dirHgrYTCf7-2FbP1e0xbbAHQ5Xe4F-2BrJClFfAbpF1IOZwVmtFOoC1PJWINjgzrNmWDDVxOcWiGjRSjmzkpXbKBAqQM7E-3D) for important information regarding the company and its assets. Gold Royalty’s management has moved at lightning speed over the past three years, snapping up multiple smaller royalty companies and hundreds of royalties. **Their aggressive moves – more than a 1,300% increase in total number of royalties since their March 2021 IPO – have moved them firmly toward the mid-tier of the market.** Here’s why that’s important: Companies that stay in the low-tier range become zombies. They can’t raise money, and they can’t deploy capital. Meanwhile, mid-tier companies get higher valuations, and it’s easier for them to raise money to buy new royalties. **Gold Royalty is trading at a discount to analyst consensus asset values.** Its focus on premium asset acquisition has given it an average net asset value (NAV) of $452M on average among all seven analysts that cover it. - **The current share price gives Gold Royalty a 0.45 price/NAV (Consensus NAV) ratio.** And positive cash flow is expected in early 2024 based on the operator’s disclosure of ramping up production. - Coté is over 90% percent complete and expected to begin operations by Q2 2024. - Barrick aims to incorporate Ren—the underground extension at Goldstrike—into the mine plan “in the short term.” These assets provide significant potential for revenue growth for Gold Royalty in the coming years. And that’s not including any “surprises” from future free exploration and drilling. While mining is a risky business, this is why the diversification of Gold Royalty’s portfolio of over 240 royalties is important. Not all assets need to become mines. **Gold Royalty Corp’s operating partners invested $200 million in exploration and drilling on their properties last year alone. All of this exploration upside comes at little to no incremental cost to Gold Royalty Corp.** Any ounces that may be delineated on royalty grounds through exploration and development, Gold Royalty generally has a royalty interest without contributing additionally for such work. That is the beauty of the royalty model. **To review, Gold Royalty has:** - Multiple strong assets in mining-friendly jurisdictions - Leadership with centuries of combined experience - Over 240 royalties, with the majority in Quebec, Ontario, and Nevada - Strong Expected Organic Revenue Growth - Trading below Analyst Consensus Estimates of Net Asset Value And that makes this an opportunity I think you should research further. [**Click here to read the full Gold Royalty Corp Report**](https://katusaresearch.com/gold-royalty-corp-groy-02/) Regards, Marin Katusa and the KR Special Situations Team **DISCLOSURES/DISCLAIMER ** **IMPORTANT DISCLAIMER:** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Gold Royalty Corp. has reviewed and sponsored this article**. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter.Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from Gold Royalty Corp. in the amount of $250,000 in Nov 2023 and second payment of $250,000 in Dec 2023 and is thus extremely biased. Members of Katusa Research also own shares in Gold Royalty Corp. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the company, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. **HIGH RISK**: The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE**: By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS**: Certain of the information contained herein and in the Company’s disclosures referenced herein constitutes “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and U.S. securities laws (“forward-looking statements”), which involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance and achievements to be materially different from the results, performance or achievements expressed or implied therein. Forward-looking statements, which are all statements other than statements of historical fact, include, but are not limited to, statements respecting the Company’s strategies, expectations regarding gold markets, expectations regarding the operations and results of the operators of the projects underlying the Company’s interests and expectations regarding future production and revenues from the Company’s royalties. Forward-looking statements are based upon certain assumptions and other important factors, including assumptions relating to commodities prices and the business of the Company. Forward-looking statements are subject to a number of risks, uncertainties and other factors which may cause the actual results to be materially different from those expressed or implied by such forward-looking statements, including those set forth in the Company’s Annual Report on Form 20-F and its other publicly filed documents under its profiles at www.sedarplus.ca and www.sec.gov. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should review Gold Royalty’s public disclosures at www.sedarplus.ca and www.sec.gov for important information regarding it and its assets. --- # The Mysterious Fortune of the “Witch of Wall Street” - URL: https://katusaresearch.com/the-mysterious-fortune-of-the-witch-of-wall-street/ - Type: article - Published: 2024-02-09 - Updated: 2025-09-10 - Author: Marin Katusa Whispers of the ‘Witch of Wall Street’ still echo through the canyons of New York’s financial district. During the Panic of 1907, financial institutions from New York to San Francisco crumbled like sandcastles against a relentless tide of bank runs, market declines, and economic woe. With no all-powerful entity to swoop in and save the system and provide much-needed liquidity like the Federal Reserve… The burden of rescue fell upon the shoulders of private wealth. Some names you’re probably familiar with: J.P. Morgan, Andrew Carnegie, John D. Rockefeller, and Cornelius Vanderbilt… But one name often overlooked, yet pivotal for anyone seeking a proven path to wealth in turbulent times, is… ## **Hetty Green, AKA The “*Witch of Wall Street*.”** While most investors were left reeling in Panic of 1907, Green’s investment acumen and keen foresight allowed her to not only emerge from the chaos unscathed, but wealthier than ever before. Known for her eccentric frugality, gaunt appearance, and the daily wearing of a simple black dress, the Witch of Wall Street accurately anticipated the 1907 economic crisis three years before the devastation hit. The Witch of Wall Street even made a fortune bailing out the City of New York by offering the city a $1.1 million loan in exchange for short-term government bonds. It was a bold move that pulled the city back from the brink of destruction while handing her a handsome return. Not only was Green known as the Witch of Wall Street, but she was also known as the richest woman in the world during the late 19th and early 20th centuries. At the time of her death in 1916, its estimated Green’s net worth was between $100 million and $200 million and this was all earned before women were even allowed to vote in the US. Adjusted for inflation, she would have been worth up to $5.4 billion today. What was the secret to amassing a fortune of such magnitude? According to the Witch of Wall Street, there was none… ***“There’s no great secret in fortune making. All you have to do is buy cheap and sell, act with thrift and shrewdness and then be persistent.” ****– Hetty Green* The Witch of Wall Street excelled in securing profits from industries like railroads and real estate, drawn to investments with regular returns like dividends. Post-Civil War, she heavily invested in Greenbacks, the first U.S. paper currency, trading at steep discounts due to economic uncertainties. Due to the uncertainty whether the US economy would be able to recover, these bonds traded at a huge discount to their face value. Predicting their gold redemption, she netted $1.25 million in profit, earning up to $200,000 in a day. ## **Taking a Page from the Witch’s Book…** Investors have long reaped rewards by mirroring the strategy of the Witch of Wall Street. She was a pioneer in value investing, a concept later popularized by the likes of Warren Buffett and Charlie Munger. Green’s strategy was simple yet profound: buy undervalued assets, then hold until their value peaks. ***“I buy when things are low and no one wants them. I keep them until they go up, and people are crazy to get them,”**** she famously said.* Known for her simple black dress and secretive nature, Green’s genius lay in her financial acumen. She excelled in identifying ‘unsexy’, undervalued assets, then profiting from their eventual rise. Her knack for earning steady income from dividends and interest made her a paragon of consistent cash flow. Take for instance, a company like **Microsoft. ** By licensing its software, a form of royalty, Microsoft has been a cash cow for more than 25 years. Enough to hand stock investors a gain of 11,000%. Then there’s **Broadcom**, a global technology leader in semiconductor and infrastructure software solutions. Broadcom earns a significant part of its revenue from licensing its intellectual property. Over the last 10 years, investors in Broadcom have seen gains as high as 2,800%! Then there’s **Nvidia**, in addition to selling its own microchips, Nvidia also licenses its AI architecture to firms like Samsung and Qualcomm. This royalty-based model gives Nvidia the ability to generate huge cash flows as it continues to dominate the market for gaming chips and AI technology—enough to send the company’s stock soaring by 13,506% over the past 10 years. However, these examples, while impressive, **are not undervalued in today’s market**. True to her principles, intelligent investing focuses on assets that are both undervalued and offer steady income. As an investor, I seek opportunities that align with the wisdom of the Witch of Wall Street… One gold company that I think merits review: - **It’s thriving on royalty income and trading well below the Net Asset Value (NAV) of its peers.** - **Its CEO shows growth based on existing lucrative deals on ramping up mines and some recently acquired royalties.** During times like these, like the Witch of Wall Street, I’m more than content to watch overpriced, headline stocks go to the highest bidder. But for those looking to… **“Buy when things are low, and no one wants them. And keep them until they go up, and people are crazy to get them.”** **I’m working on sending out an alert on one stock that’s *well* worth your time to take a closer look…** **Before**** people are “*crazy to get them*”.** Regards, Marin Katusa and the KR Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Legendary “Gold Landlords” That Revolutionized the Revenue Column - URL: https://katusaresearch.com/the-legendary-gold-landlords-that-revolutionized-the-revenue-column/ - Type: article - Published: 2024-02-08 - Author: Marin Katusa If you fail forty-three times in a row, it might be time to give up. Especially if your company is rapidly running out of money. That’s exactly where business partners **Seymour Schulich** and **Pierre Lassonde** found themselves. They were sick and tired of paying for gold exploration and coming up empty-handed. **But they desperately wanted a steady stream of cash for their new company.** On a whim, they decided to take a page out of the oil & gas playbook, bringing its ultra-successful royalty model to the gold industry. Their new mission was to find a project owner who didn’t have the funds to take a mine all the way to production. Then, Schulich and Lassonde would trade up-front capital for a percentage of the potential future revenue or profits from mining. ## The Idea Was Simple… - **Other people would have paid to establish a mineral resource.** - **They’d only have to provide funding to try to get it out of the ground. ** But Schulich and Lassonde were the first to try this new concept. So finding someone to go along with it was not easy. Eventually, a geologist contact found a classified ad in a Reno newspaper for a land package being sold by a Texas company. Lassonde and Schulich took more than half of their remaining funds—$2 million—and bought the whole 3,416-acre package. With ONE BIG exception that changed everything… They didn’t actually purchase the land—what they bought was the rights to 4% of any gold mined on the land. As it turns out, their investment was successful, and the property was home to a gold mine called Goldstrike. ## With That Purchase, the Men Had Struck Gold And identified what I and many others think is one of the best business models in the gold world. - **That one $2 million purchase for a 4% royalty has created A LOT of revenue.** Their company, Franco-Nevada, still doesn’t do exploration. They don’t run mines. They do zero mine operations. They just try to put their money where the gold is. And, in their case, it paid off tremendously for Franco-Nevada. Today, Franco-Nevada makes more revenue per employee than Apple, Facebook, or Google, in fact, more than those three combined! While Franco-Nevada is one of the best success stories in the mining sector, and its results are obviously not indicative for every company in the royalty sector… I think it’s a good example to show just how great a model the royalty business can be. Gold royalties are generally less risky than *gold mining itself*—**and far more profitable**. Let me explain why. ## As Good as Gold – but Better The largest gold miners in the world, like Newmont or Barrick Gold, have less than 20 operating projects. If the mining environment in a single country changes for the worse, or if a single site gets shut down, it can be a major blow to profitability. But typically, since gold royalties pay 1-3% of the production value of a mine to the royalty holder, royalty companies can hold hundreds—of royalties. Franco-Nevada, for example, **has more than *100* revenue streams**. That high level of diversification means very low risk across the entire royalty portfolio. **It gets better…** Most royalties have three crucial letters attached: “NSR.” That indicates that a mine owner must pay the royalty holder a percentage of whatever they get for the unrefined gold, less customary expenses and deductions to get to that point (i.e. “net of smelter”). But here’s the BEST part in my opinion… ## The Best Kind of Surprise Usually, the upfront payment is for the whole life of the mine. If an operator invests more capital to increase production, a percentage of the additional profit goes straight to the royalty holder provided that the royalty covers the area of production. Even better, deposits tend to grow organically over their lifespan due to exploration. Any expansion in the mine reserve on the same royalty ground, royalty companies get an *upside*. Recall, Franco-Nevada’s Goldstrike investment. It was originally a small gold deposit. Three years after the investment, though, a new discovery took the reserves from 600,000 ounces to more than 20 million. - **Since then, Goldstrike has produced more than 50 million ounces—and the royalty is still kicking off $20 million a year. ** Again, Franco-Nevada and Goldstrike are a huge success story and it doesn’t mean every royalty or royalty company will generate revenues or have similar results. Because remember: The mine is responsible for capital expenses, operating expenses, and exploration expenses. That makes royalty companies relatively efficient, with a small handful of employees handling operations. The operations consist normally of finding, acquiring, and managing these passive royalty interests. In my view, it’s the best kind of business… That is, **if you can get it and identify paying royalties or royalties with good operators that are ramping up into production.** Because of course, there’s a catch. Over the decades, Franco-Nevada has grown into a behemoth. It, along with two other massive companies, represents 80 percent of the value of all gold royalties. In my opinion, there’s little upside left in their overweight, $20B+ stocks. They’re trading at huge multiples (2-3X book value) that imply they have lots of growth left—but they are more than fully valued. So where can you find a deeply undervalued royalty company… With lots of growth runway, set to cash flow in 2024…? **You’ll want to circle your calendar for Monday, February 12th.** Regards, Marin Katusa and the KR Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Best Business Model - URL: https://katusaresearch.com/the-best-business-model/ - Type: article - Published: 2024-02-07 - Updated: 2025-09-10 - Author: Marin Katusa No one tells Elvis Presley “no.” Except for Dolly Parton. It was the early ‘70s, and Elvis wanted to sing one of Dolly’s songs. The only snag was that his manager, The Colonel wanted *half* of the publishing rights. The queen of country kicked the King of Rock ‘n’ Roll to the curb with a resounding “NO!.” Twenty years later, another musician asked to record the song—and this time the answer was “YES.” Whitney Houston’s rendition of “I Will Always Love You” won her three Grammy’s. And it went on to become the best-selling song by a female artist *of all time*. Dolly Parton, business savant that she is, raked in the profits in the background. “Enough to buy Graceland,” as she put it. **In the ‘90s alone, Houston’s recording of that one song made Parton more than $10 million in royalties.** And she didn’t have to sing a single note. In fact, all she did in exchange for that gold mine was *not* perform her own song for a period of time. She’s still making money from royalties on Whitney’s cover of her song today. That’s what makes royalties one of the best business models known to man. They require: - Small up-front investment, - No ongoing work, - And the potential for a long-term, high payoff. If it sounds a little too good to be true—that’s because it is. To make music royalties work, you have to be a songwriter, or purchase the rights to the song. And you have to ensure that those songs are hits if you expect to collect a meaningful royalty. The best minds in the music game have figured out a massively lucrative way around both of those… starting with Michael Jackson. ## **Paid to Do Nothing Except Wait** In 1985, Michael Jackson outbid *Paul McCartney* to buy the rights to the majority of the Beatles’ catalog. Every time one of those 251 songs was aired on the radio or used in a TV show or played in an arena, the proceeds lined Michael Jackson’s pocket. Buying a whole bunch of royalties wrapped into one means that you never have to write a single word, you get wide diversification—and best of all, you get a solid, steady cashflow from your investment. ## Invest on the Front End, Get a Paycheck Forever The royalty business model has spread into other industries. While music royalties are inherently unique, the business model of acquiring passive interests for potential future payouts is compelling across industries. Royalty businesses have been created for pizza and steakhouses, tire & lube auto shops and even oil & gas production. Now there’s one industry that’s practically custom-built for the royalty model—and its royalty returns put Dolly Parton and Michael Jackson and even Netflix to shame. ## Out of the Ground, Into Your Pocket This industry is where a lot of *real *money—I’m talking billions of dollars has been invested. McKinsey says the industry “could be set for **significant expansion over the next decade**.” - **The Katusa Special Situations Team has identified a royalty company in a niche industry that Katusa Research believes merits attention.** Based on the number of royalty interests in developing and near-term producing assets, we believe they have good potential for growth. And over the next couple of days, I’m going to tell you everything you need to know about it. Let me tell you why. Like the companies in the music business, their mission is to acquire royalties on valuable projects. They owned 18 royalties when they IPO’d just two and a half years ago. Now they own more than 240… Don’t worry. We’ll reveal more details so that you can look at this company’s public filings and review what I think is a good opportunity. More details in 2 days. Regards, Marin Katusa and the KR Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Making Bank in the “Couch Economy” - URL: https://katusaresearch.com/making-bank-in-the-couch-economy/ - Type: article - Published: 2024-02-02 - Updated: 2024-02-01 - Author: Marin Katusa Plainly put, I think that the economy will do worse before it gets better. Notice I said the **economy**, not the **stock market**. With the market within striking distance of all-time highs, there’s little to no significant economic contraction risk baked into the market pricing right now. Another way put; the market is priced to perfection. This is because the market is already pricing in *multiple* interest rates this year. However, I think there is a potential scenario where we enter a mini-cycle of stagflation… Which is defined as a period of elevated inflation combined with slowing economic growth. ## **Enter the “Couch Economy” Theory** Tech giants like **Netflix**, **Apple**, **Google**, **Meta**, **Microsoft**, and **Nvidia** have become indispensable in two key ways. - Everyday use - Google, for instance, dominates over 90% of the search engine market. In a recession, people turn more to their devices, not less. - Technology becomes a social lifeline, and companies supplying these services outperform others. - Portfolio construction - In recessions, traditional safe investments like **Costco** or **Walmart** shine (and they have!). - But now, high-powered tech stocks might join this league, not just for their market performance but their deep integration into our daily lives. Just look at the chart below… It shows the returns of the *Magnificent 7* versus the equal member weightings for S&P 500 and Nasdaq indices. - **The stakes are now higher than ever as the magnificent 7 are being priced to perfection and beyond.** These 7 companies are trading at a 34% premium to the S&P 500 in terms of 1-year forward price to earnings. ## **The VIP’s Feel the Heat** Now let’s look at the Goldman Sachs Hedge Fund VIP index. It’s composed of the 50 most crowded hedge fund trades (namely large-cap tech and semiconductors). It says we’re very overbought. Given the overbought nature of the index, it wouldn’t be surprising to see a lot of “*selling the news*” trades over the coming earnings season. There is no room for error given the massive premium valuation ascribed to the Magnificent 7. Any earnings miss could be met with major selling pressure. These “fast” hedge fund trades were the go-to trade for the past 18 months. But given the economic landscape ahead, it is hard to see quite such a risk on environment moving forward. ## **Complicated Relationships 101: Macro, Rates and GDP** In the world of fiscal realities, one truth stands as inevitable as death and taxes… Rooted deep before the Global Financial Crisis (GFC), this pattern has only accelerated in the last 15 years, leading to a surge in governmental spending. **I’m talking about the relentless growth of government budget deficits.** The USA is on a trajectory to balloon its budget deficit to a staggering $2.5 trillion by 2033. The enormity of this figure becomes stark when visualizing the budget components: - Primary deficits or surpluses in blue, - Dwarfed by soaring red columns of interest payments, as shown in the accompanying chart. ## **So, what’s the solution?** Taxes alone won’t bridge this chasm, so the government’s options are limited: - Printing money to cover the deficit. - Selling debt securities to the public. - The least favored by politicians: cutting back on spending to achieve a zero-deficit economy. Regrettably, the third option, while sustainable, is a politics no-go. With its looming public debt predicted to hit 180% of GDP ($143 trillion) by 2050, the USA finds itself in a tight corner. This fiscal trajectory sets off a domino effect, culminating in increased interest burdens for taxpayers. **Over the next decade, we’re likely to see interest expenses soar to 3.5% of GDP – that’s a 100% increase.** However, these projections by the Congressional Budget Office hinge on interest rates half of the current Federal Funds rate and a 5% deficit… while our current reality is closer to 8%. This mismatch could push interest expenses to an alarming 5%-8% of GDP, translating to an annual $1.5 to $3 trillion. Why are these rates climbing? Here’s the breakdown: - $2.3 trillion of Treasury Bills due in 2024. - $3 trillion in Treasury Notes maturing before December 2024. - $2.4 trillion due in 2025. We’re staring down the barrel of $10+ trillion in refinancing at rates up to 100% higher than previous levels. ## **But Hold Up, Governments Hold Pocket Aces** Investment-wise, the government’s ace could be GDP growth outstripping interest rates. This “modern monetary theory” approach relies on GDP growth exceeding interest rates. Still, expecting the economy to consistently grow at 5% per annum is a stretch. For reference, Q4 2024 US real GDP is expected to be 3.3%. **Here’s the takeaway****: Rates may be high now, but the burden of financing future debt makes sustained high rates unlikely.** The US, as a global power, can’t afford to let interest expenses spiral to 10-20% of GDP. This scenario would devalue the dollar and slash funding for defense, healthcare, and education. In the short term, economic growth may slow due to recent rate hikes, but in a 6-24 month window, rate cuts are plausible. **The situation gets even more cloudy once you take into account the Presidential election slated for November 2024.** The key is in discerning the nuances and positioning accordingly based on: - Liquidity - Rates - A longer time frame. Legendary investor Stanley Druckenmiller said it best… *“**First, never, ever invest in the present. It doesn’t matter what a company’s earning, what they have earned. You have to visualize the situation 18 months from now, and whatever that is, that’s where the price will be, not where it is today… If you invest in the present, you’re going to get run over.”* *“The other thing he taught me is earnings don’t move the overall market; it’s the Federal Reserve Board. And whatever I do, focus on the central banks and focus on the movement of liquidity, that most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.”* Right now, I’m making moves looking forward 12-18 months and positioning my portfolio accordingly. How do you find these opportunities? I spend hundreds of thousands of dollars a year on access to research databases and people to get me the BEST information to make decisions. And when I make a bet, it’s with a specific strategy and significant money. My **Special Situations Team** has given you a sneak peek into our research and companies we believe are poised for growth as markets adapt to a new reality. But if you want to see where I’m putting my own money, With in-depth research, price targets and much more… **Like our recent 220% return in an incredible company…** You’ll want to be a member of **[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)**. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Uranium Reality Check - URL: https://katusaresearch.com/uranium-reality-check/ - Type: article - Published: 2024-01-26 - Updated: 2024-06-21 - Author: Marin Katusa | **In this week’s Investment Insights you’ll see:** - Where we are in the Uranium stock cycle **and what’s next**. - The **Uranium stock in KRO is outperforming** some of the big tech names like Apple, Meta, and even Nvidia. | Let’s get into it… In the investment world, few sectors sizzle like uranium right now. With its price skyrocketing to a 17-year high of $106 per pound, uranium has become the poster child for dramatic market shifts. This meteoric rise has catapulted uranium exploration and production companies into the spotlight… Marking a significant turnaround from the sector’s previous struggles. - **RELATED: You can monitor [uranium prices here](https://carboncredits.com/uranium-prices-today/).** ## **The Contrarian’s Bet Pays Off** That is the key point—it has already paid off (more on how much later). I am going to make a very controversial statement here, like the same controversial statement I made five years in the uranium sector. For the next phase of the uranium cycle, you will only want to be exposed to: - - - Companies with real assets - Real people - In real jurisdictions Five years ago, in 2019, I penned a faux [‘Short Report’](https://katusaresearch.com/the-absolute-worst-things-youll-read-about-uranium-a-katusa-short-report/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) on the sector, showing the worst-case scenario for uranium. But most non-subscribers missed the whole point of the report as the conclusion was for subscribers only. If you can make an investment in the worst possible scenario and that company would do well, then you have a winner on your hands. **And that’s exactly what happened.** Looking back, that report caused so many “hate emails” from both longs and shorts. The longs hated that I wrote a “short report” without reading that it was not a short report. Many actually believed I was shorting uranium while in reality, I was the largest uranium financier globally at that time. I was, in fact, poking fun of the shorts. And the shorts, well, they hate anything the longs produce. But the best part was that my subscribers and I made an incredible amount of money on that company (both from open market buying and the financings available to myself and the Katusa subscribers). ## **180 Degrees of Uranium and Nuclear, Then and Now** I recently reviewed the report again and it was interesting how we covered many of the topics that came to fruition, such as: **1. Global Plant Shutdowns**: The nuclear sector was racing against time, with aging plants facing costly upgrades or shutdowns, threatening to slash global uranium demand. **2. Price Plunge Risks**: A scenario where low uranium prices would strain even the most efficient mines, potentially stagnating the industry. **3. The African Challenge**: Despite rich deposits, Africa’s uranium mines grappled with infrastructural and operational cost issues, making them less viable. **4. Market Apathy**: A growing disinterest in uranium investments threatened to curb the sector’s growth and innovation. **5. Geopolitical Tensions**: Uranium’s role in global politics, especially among key players like Russia, the USA, and China, added layers of complexity to the market. After 20 years in the uranium sector, I’ve had the benefit of traveling around the world to most of the real uranium assets and during that time, getting to know most of the management teams. The two big differences I have seen between now and the last bull market is the lack of institutional participation in the junior explorers. The large funds will avoid most of the small-cap explorers for various reasons. But the point is the big liquidity event for the small-cap sector last bull market was the big capital inflows of the institutions. ## **The Uranium Retail Run** Another difference between the last bull cycle and the current one is the number of anonymous social media accounts, with large followings that are promoting certain companies with zero disclosures**.** **Liquidity and Legitimacy** are important and will be even more so moving forward. At the most recent large retail resource investment conference, the uranium panel was packed. Gold, copper, and lithium?… not so much. Another sign of the current reality in uranium, **retail is engaged**. Fortunes have and will continue to be made from uranium. And if you understand the importance of liquidity, legitimacy, and access to capital with a pathway to monetization, you will do well. It’s not luck that the #1 performing uranium stock in the world post-France’s ejection from Niger (which really kicked off the most recent uranium leg of the bull market), **is in our newsletter portfolio**. **✓ That uranium stock is up 220% in our portfolio in the last 9 months.** That beats out Nvidia (116%), Meta (63%), Netflix (71%), Microsoft (33%) and Apple (16%). And I expect that company to continue to outperform its uranium sector peers because of: - - - Liquidity, - Legitimacy, - Access to capital, - With a clear pathway to monetization. **Subscribers got two major uranium picks, both deep in the green with profits, in my premium newsletter.** And in the next issue of **Katusa’s Resource Opportunities**… We are going to publish an in-depth on which commodities (including uranium) will do in 2024 and how each will be affected by the US election later this year. Play it smart and be safe. Regards, Marin Katusa **P.S.** Congratulations to those who followed our **KR Special Situations Alert** on **UROY.NASDAQ** last September/October and have profited nearly 30% from our profile on the company. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Francis Just Dropped a Bombshell… - URL: https://katusaresearch.com/francis-just-dropped-a-bombshell/ - Type: article - Published: 2024-01-19 - Updated: 2024-10-09 - Author: Marin Katusa Dear Reader, Just 30 miles East of Yellowknife is a lithium asset attracting attention. “Project Yellowknife” is home to what I and my interview guest today believes is a 100 million tonne lithium deposit. Now, what does that size mean? We’ve modelled that internally to be like a 10-12-million-ounce gold project. Which would make it top 5 in North America. The potential of this deposit is to produce a critical mineral that’s now labeled by the White House website as: “***Badly needed**** for so many American products, **we were in so desperate need of**… **without these minerals, we simply cannot function**.”* This interview is with Francis MacDonald, the CEO of my #1 lithium stock holding, **Li-FT Power Corp (LIFT.TSXV | LIFFF.USOTC).** Make no mistake… I own a lot of shares as do members of Katusa Research and think this company goes a lot higher from here. So, I’m fully biased. ## **And it’s not just catching the attention of us here at KR…** Various brokerage and investment banks have target prices much, much higher than where the stock is trading today.** The value proposition has me salivating, and it’s why I’ve accumulated over $1M worth of shares. Just take a look at LiFT Power compared to its peers: Translating this picture means this: We won’t have to wait long for the truth machine to go live… **Li-FT expects the Maiden Resource Estimate to come out by September this year.** And if they continue to hit grades between 1-2% lithium like they’re consistently doing, we might not have to wait until September to see dramatic results. ## **Here’s the Fast-Moving Lithium Market in 3 quick hits…** - China is one of the only places in the world that can produce AND refine lithium. - The US is looking to build its own supply chain and not be dependent on China for its battery supply chain as EV sales rocket higher year over year. - Major Oil companies, mining companies, billionaires, Car companies, tech companies, and major mining companies are scooping up lithium deposits and assets left right, and center. In fact, some lithium assets were recently acquired for major money ($1.6 Billion), WITHOUT even proving up a resource. Francis and I go into detail about Li-FT’s Yellowknife Project and its potential. I’ve waited a year to stake my position in this company and it’s coming close to some major catalysts that have my team and I excited. **In this short interview you’ll learn:** - **Who’s sniffing around the project** (Hint, they have deep pockets and big interest) *at 2:21.* - **What the *base case* and *high case* share value is** based on analysis and estimate (**Hint**: higher than current prices) *at 3:21*. - What I think the incredible asset value is worth using current low lithium prices right now, **nevermind if prices move higher** at *8:15*. - The **SIGNIFICANT tax advantage** the company has as geopolitical leverage. - Details on **the large lithium fund that’s backing Li-FT in a big way** (and deep pockets) at *16:47*. Do not miss this interview with Li-FT Power CEO Francis MacDonald. If you’re interested in the lithium sector, click on the link below: **[Watch the Full Interview Here](https://www.youtube.com/watch?v=GHPsY_CU0Q0)** Regards, Marin Katusa **Note: Consensus-published analyst’s prices can be found in the public domain at [MarketScreener](https://www.marketscreener.com/quote/stock/LI-FT-POWER-LTD-143538182/consensus/). **Details and Disclosures** **IMPORTANT DISCLAIMER:**** **Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Li-FT Power Corp has reviewed and sponsored this article.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from Li-FT Power Corp as reported in their Jan 9, 2024 news release and is thus extremely biased. Members of Katusa Research also own shares in Li-FT Power. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the company, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. Katusa Research does not undertake any obligations to update information presented, or to ensure that such information remains current and accurate. --- # [Urgent Alert]: Betting on a Monster in Li-FT Power Corp (LIFT.TSXV) - URL: https://katusaresearch.com/urgent-alert-betting-on-a-monster-in-li-ft-power-corp-lift-tsxv/ - Type: article - Published: 2024-01-16 - Updated: 2024-01-15 - Author: Marin Katusa **In this report:** - - **The Massive Hidden Value of “Project Yellowknife”** - **Katusa Issues Special Situations Alert on Li-FT Power Corp (LIFFF.US and LIFT.TSXV)** LEGAL NOTE: Please read important disclaimers at the end of this email. I just made a big bet on a small-cap lithium stock. And I’m going to share it with you today before anyone else. **It may be a small-cap stock—but it has a* huge *deposit.** We’ve mainly invested in gold, copper, and uranium in my premium newsletter, Katusa’s Resource Opportunities… **So, to show you how impressive I think this deposit is… I wanted to put it in terms of gold.** Here’s how we translate its worth into gold, a universal store of value: - We multiply the current price per tonne of lithium carbonate equivalent by the resource size. - We divide this value by the current gold price to arrive at the equivalent number of gold ounces. Answer: This deposit could hold the same value as an estimated 10.2 million ounces of gold. To put this into perspective… **Out of 2,500+ gold deposits globally, only 109 host a resource greater than 10.2 million ounces.** Now let’s fine-tune this calculation for all the mathletes reading this. If spreadsheets make you dizzy, just skip to the bold lines below. We can use global averages for open-pit gold mining grades and recovery rates to identify the number of ounces required to generate a similar in-situ value of a spodumene resource. This refined calculation demonstrates the incredible significance and potential scale of this deposit. **A gold deposit of 5M+ ounces in Canada would be highly sought after by any mid-tier or major gold producer. The upside case shows an equivalent value to a 10M+-ounce gold deposit.** Almost as important, this deposit would come in at almost 2.5g/t gold, which would be about 3x the global average for open pit gold mines of this size. If the price of lithium goes back to where it was just a year ago… The grades would be equivalent to almost 5g/t gold for an open pit gold mine is unheard of, and higher than the average grade underground gold mine. ## This is a Special Deposit Again, this is shown for comparison purposes only, based on our internal calculations. **The market cap of Li-FT today is only about USD$180M**—a *steal* for a major or mid-tier mining company. Simply put, it will be a cash cow for whoever puts it into production. **But that’s not the only reason this company could quickly attract M&A attention…** I’d expect the required capex to build a spodumene operation at this kind of deposit would be *substantially* less than for a 5 million-ounce gold mine. And our internal analysis projects production costs of $600/tonne. At current depressed lithium prices,** that yields profit margins comparable to open-pit gold mines **(53% spodumene vs. 55% gold, using today’s prices). Let’s recap: - Cheaper to build than gold. - More profitable to operate than gold. Every major mining CEO in the world will want to get in on that action. **I have bet big (I’ve invested over $1,000,000 personally) that’s the case. So I am fully biased.** And that’s why I’m issuing this rare Katusa Special Situations stock alert. **KATUSA SPECIAL SITUATIONS STOCK ALERT:** ## **Li-FT Power Corp.** **(LIFT:TSXV or LIFFF:US)** Besides the deposit, Li-FT has a world-class team: - The president and director of Li-FT company formerly led Millennial Lithium, which sold for $400M. - CEO Francis MacDonald is a workhorse—he’s the kind of guy who answers every call and returns emails at all hours of the night. He’s going to do what it takes. The founding team has access to capital to bring the project to production, having raised more than $70M so far. And they’ve done that while keeping an* extraordinarily* tight share structure: founders, management, and institutions still own 77% of shares. That means the stock is thinly traded on the TSX-Venture and the U.S. OTC markets—so when the bids come in, it’s absolutely ready to pop. Now… With the rules around U.S. EV subsidies changing on January 1, 2024, and the third lithium uptrend just beginning, this company could move far and fast with any rise in lithium prices. You’ll want to be ready. Imagine unearthing a treasure so vast, it rivals the grandeur of a 10-million-ounce gold deposit. In the world of resource mining, a discovery of this magnitude happens once in a generation. That’s the staggering potential of our Li-FT discovery. Now, there’s a lot to prove in terms of economics and feasibility to get there. **And that’s the risk I’m willing to take.** To help you profit from this opportunity, the Katusa Special Situations Team has put together a comprehensive, in-depth report on Li-FT Power Corp. [**Click here to read the full Li-FT Power report**](https://join.katusaresearch.com/liftpower-lift/) Don’t wait—M&A in the lithium sector is heating up fast… - **ExxonMobil** declared its intent to become a lithium major in 2023, committing over $10 Billion to the sector and planning on making “Mobil Lithium” a global player. That name should ring a bell for you. - **Koch Industries**, owned by the billionaire Koch family, has dropped $350 Million on two deals and plans on investing in others. - Last week we told you about **“Iron Lady” Gina Rinehart’s multibillion-dollar vise grip in the Australian lithium sector**. - **Mercedes-Benz **announced a raw materials office in Canada where they *“are going… directly to the mine here to secure materials.”* Car companies, tech companies, billionaire magnates, and entire countries are all in an all-out battle to secure this critical metal. To get **a monster payback from all of this**, you need to** find a monster deposit**. And **Li-FT Power** wants to make a killing off of proving one. Regards, Marin Katusa and the KR Special Situations Team **P.S.** This developing opportunity could accelerate as news from the company rolls out. Take a moment to [read the report](https://join.katusaresearch.com/liftpower-lift/) now. **Details and Disclosures** **IMPORTANT DISCLAIMER:**** **Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Li-FT Power Corp has reviewed and sponsored this article.** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from Li-FT Power Corp as reported in their Jan 9, 2024 news release and is thus extremely biased. Members of Katusa Research also own shares in Li-FT Power. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the company, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS:** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. Katusa Research does not undertake any obligations to update information presented, or to ensure that such information remains current and accurate. --- # Unveiling the Lithium Heist of the Century - URL: https://katusaresearch.com/unveiling-the-lithium-heist-of-the-century/ - Type: article - Published: 2024-01-12 - Updated: 2024-01-11 - Author: Marin Katusa Tesla is one of the darling stocks in the world. Nearly every new investor to the market either owns it or wants to own a share, and that bodes the same for investment funds and managers. And who wouldn’t, after hitting a low of $24 per share in the March 2020 lows, the stock soared to $400 before resting at its current price of $240 today. All told that’s nearly at 17x return in a highly visible stock. But there’s a Corvette that blew past the Tesla you might now know about. **The price of this Corvette soared 85x in just 2 years.** In fact, this Corvette is a major reason Tesla cars even run on the road today. There’s one major lesson to learn in investing you need to know… When there’s a *tech rush* happening, sell the power to the techies and you could see mind-boggling returns. ## **The Lithium Heist of the Century** In 2021, a well-known mining company sold a small patch of land in Quebec for just $1 million to an upstart exploration company called Patriot Battery Metals. It was called the Corvette property and had nothing to do with the gas-engine American icon sports car. But instead, had everything to do with exploring for the element powering the batteries of the fastest quarter-mile cars on the planet – EV’s. Looking back on this purchase, it can only be described as the lithium heist of the century. I’m not going to lie, this was one of my biggest regrets of the past couple of years – passing on the deal that became **Patriot Battery Metals**. Here’s why… Initial drill results on the Corvette property were promising and then the company hit the jackpot – a drill hole featuring 1.25% lithium over 97m. That extending the size of the project and got the attention of the street and the market – and sent the stock price into overdrive. Drill hole after drill hole revealed incredible lithium numbers. And when a “step out” hole gets high-grade results, then EVERYONE takes notice. The stock went from 20 cents per share in June 2021 to over $17 per share in early 2023. For those counting, that’s an 85x stock price return in under 2 years. Even more incredible… That Corvette property that was originally bought for $1 million grew to a market cap of over $1.7 BILLION. ## **The Right Lithium Stocks Can be Explosive** This is especially true if the exploration stock can hit the motherload, which is incredibly hard to do. In fact, right now there are hundreds of lithium small caps just like Patriot Battery Metals exploring and developing lithium projects. But the right projects, in the right countries – are especially important. **Tesla**, **GM,** and **Toyota** are not going to buy lithium for their EV batteries in countries where you see AK-47’s in the streets or deal with a government that will nationalize a project for their selfish interests and jeopardize supply chains. Electric elements and their supply will be critical. Are they close to roads, power lines, rail, shipping lanes? And is the grade high enough for a profitable mine to be built. ## **If Lithium Prices Go Up, A Few Will Become Big Winners** Although a surge in lithium demand doesn’t guarantee a corresponding rise in prices, it’s undeniably a potential outcome. **Consider this:** heightened EV sales, which drove lithium demand, played a crucial role in creating last year’s lithium market frenzy. If there’s even a hint of lithium prices escalating, look no further than the lithium miners—the bedrock of the lithium industry. Take a look at what happened to lithium mining companies during the big runup in lithium prices between 2021 and 2022: As you can see, each company at least doubled (delivered over 100% returns) at some point during the cycle… but that’s just for starters. **Frontier Lithium** delivered in excess of **900% returns**… And **Sigma Lithium **even went up by a whopping **1350%.** Another company, **Millennial Lithium**, was trading under 60 cents in the wake of the COVID-19 pandemic… - It was bought out at a valuation of USD$3.72 per share at the height of the lithium price runup early in 2022… **over 500% returns** for investors who picked the right time to buy. Things may be quieting down for the moment in lithium… but don’t count on it to stay that way for long. All signs point towards a massive influx of lithium demand over the coming years, and the supply to keep up with it will have to come from *somewhere*. **What’s the next Corvette that’s going to provide mind-boggling returns?** **Where could Tesla, Toyota, BMW, GM, and Ford be sniffing around to look for their next supply of North American lithium?** The lithium markets are set for massive growth in the years ahead. And these companies know it. So when the lithium markets take off again, you won’t want to pass up the opportunity for another ride. Regards, Marin Katusa and the KR Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Ore Wars are Breaking Out: The Truth about China’s “Untouchable” Lithium - URL: https://katusaresearch.com/ore-wars-are-breaking-out-the-truth-about-chinas-untouchable-lithium/ - Type: article - Published: 2024-01-11 - Author: Marin Katusa Dear Reader, Four years ago, a Tesla Model 3 was $10,000 more than the average new car in the U.S. That made it a difficult decision for new-car buyers. Today, an improved Tesla Model 3 is $5,000 *less *than the average new car in the U.S. And on January 1 this year, the $7,500 tax credit for EVs will change to a simple discount—making it effectively a coupon on the car’s price. In total, that makes a new Tesla 25% cheaper than the average new U.S. car. **It also makes the U.S. the next big EV market.** The EV market has been predominantly driven by China, where market penetration surged from 5.7% in 2020 to 33% by 2023. That incredible move was due almost entirely to subsidies that put EVs at price parity with gas cars. Now, the United States is in exactly the same position as China in 2020: just over 5% market penetration… and targeting 50% within six years. 2023 was the inflection point. It was the first year more than one million EVs were sold in the U.S.—with more than 1.3 million EVs sold. And the next two years are set to take it to 30% EV penetration. Which is why the Inflation Reduction Act (IRA) introduced massive EV subsidies. The $7,500 is the most famous one, but there are others that *really* matter to car manufacturers like Tesla. - **If Tesla hits its target of 1.5TWh of battery production in 2030, IRA credits are worth more than $60 billion *a year***. Tesla is extremely confident that they will be able to capture all those incentives, making them one of the lowest-cost manufacturers. The problem is that those incentives come with one giant string attached: the lithium cannot be extracted or processed by a “foreign entity of concern.” In other words, **NO CHINESE LITHIUM**. The only problem is that China has its hands in nearly every pot of lithium in the world. **It’s China All the Way Down** China is the third-largest producer of lithium in the world, but a distant third when it comes to lithium reserves, at only 15%. So in the late 2010s, it began scouring the globe, snapping up any lithium mine that would take its money. Other than China, there are really only two places in the world with producing mines: Australia, and the so-called Lithium Triangle, which contains Chile, Bolivia, and Argentina. Chile, with the world’s largest lithium reserves, was an obvious first target. During the last lithium cycle—from 2016-2018—China purchased a $4B stake in **SQM**, Chile’s lithium mining giant. And almost more importantly is involved in the management and at the board level of SQM. That makes **Ford** and **Toyota**, which both have lithium supply agreements with SQM, ineligible for credits on their EVs. It was a shrewd purchase, as SQM purchased a 50% stake in an Australian lithium mine in late 2023. That both gave China access to the largest resource of lithium in the world, AND removed access from U.S. manufacturers. And even after nationalizing its own new lithium supply, Chile let China make a $250M investment to set up a lithium plant inside Chile. Bolivia has the largest resource of lithium in the world, but it has had difficulty producing any. So CATL, China’s battery manufacturing giant, gave it $1 billion—just for infrastructure development around lithium projects. Not even Australia has retained the ability to freely mine, refine, and sell its own lithium: China also directly purchased a stake in Greenbushes, the largest lithium mine in Australia. **But it’s not just where lithium is now—China is even going to where lithium *will* be in the future**. In early 2023, Africa’s first Chinese-owned lithium plant started up initial production in Zimbabwe. Namibia is the next country on the take-over list, with Chinese exploration companies already having mined raw lithium and shipped it back to China. - **Out of the eleven major lithium products in Africa, seven are backed by China—and two are undecided**. The story is the same anywhere you go: *“It’s not so much fear of the Chinese getting there first. They are there first. It’s already happened.” * –Critical Metals executive director Russell Fryer China flexing its lithium muscle is not a matter of *if*, but *when*. **China’s Ore War ** In mid-2023, China surprisingly decided to limit exports of graphite, another key battery material. China, of course, refines more than 90% of the world’s graphite, and Chinese graphite is in nearly every EV battery in the world. It has complete control over the flow of the metal. The decision wasn’t surprising—only the speed with which China moved. *“This bold and unexpected move by China… has taken us by surprise, arriving far sooner than anyone could have predicted.”* –Kien Huynh, chief commercial officer at Alkemy Capital Investments If graphite can’t be used in an EV battery, it takes nearly twice as much lithium. The move was a warning to all global car manufacturers: China intends to slowly squeeze the supply of vital EV metals. **It’s Only A Matter Of Time Until China Tightens Its Fist On Lithium… ** *“Right now, if China decided to cut off the U.S… we’re in trouble.” * –Ben Steinberg, former Obama administration official Which is why demand for North American lithium is skyrocketing. - **The United States is projected to need 40x more domestic lithium in six years than it does today**. And EV manufacturers are quickly realizing that they will need to procure subsidy-safe, non-China lithium for themselves. *“They are going to have to start buying 25 percent of these mines if they want to guarantee supply.”* –Simon Moores, Benchmark Mineral Intelligence With the global lithium supply under a Chinese lockdown, U.S. EV manufacturers are *finally* moving to secure supply. The obvious places to look are the small pockets of Chile and Australia untouched by China—but those are becoming increasingly restricted, too. This is just getting started. And is setting up for a **sizeable opportunity**. Regards, Marin Katusa and the Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # A Price War is Coming in This Market - URL: https://katusaresearch.com/a-price-war-is-coming-in-this-market/ - Type: article - Published: 2024-01-09 - Author: Marin Katusa **Editor’s note:** Keep a close eye on your inbox, we’re tracking emerging signals in the lithium market. Stay tuned for a series of updates leading to a crucial alert you won’t want to miss. Tesla’s ambitious plan to spearhead the world’s shift to sustainable energy faces a big hurdle. Because every single one of Tesla’s products—its EVs, Cybertrucks, Semis, BESSs, and now robots—have a single thing in common… They all require batteries. Altogether, *billions* of them. - **If the U.S. meets its target of 50% EVs by 2030, it will require 300 billion lithium-ion batteries—for EVs alone.** And many of Tesla’s products require *an order of magnitude* more batteries than a Model 3. For example, the Tesla Semi will have an 850 kWh battery—requiring more than 10x the batteries in a Tesla car. A single Tesla Megapack can take 50 times the number of batteries as a car. And Megapacks are bundled together in the hundreds to form giant renewable energy batteries. To ensure a full supply for its manufacturing, **Tesla expects to need one out of every three batteries produced in 2028**. And nearly *half* of global battery production in 2030. In fact, Tesla plans to invest 3x more than every other EV manufacturer in batteries, *combined*. Which brings us to the Achilles’ heel. Because every single one of those batteries requires lithium. Lithium is the most energy-dense metal on earth, and there are no replacements. **Car Companies NEED Lithium at MAJOR Scale** To get a sense of the scale of lithium that just Tesla needs, take a look at their Master Plan Part 3. It calls for a total of 198 TWh of battery cells. **To build that out, it would take more lithium than the entire world’s current reserves**. The problem isn’t a lack of lithium, though. Discoveries have been made continuously over the past 20 years. However, not all those discoveries are in production. As Elon Musk puts it: ***“A fundamental chokepoint in the advancement of electric vehicles is the availability of battery-grade lithium.” *** In the past decade, lithium supply has increased by 200%. To keep up with projected demand, it would need to expand by a factor of seven in the next six years. But lithium mines generally take a decade or longer from when they are first discovered to operation. Which means a lithium shortage is on the horizon. - **If the high case for demand occurs**, it would cause global deficits to surge 6,000% to nearly a million tons in 2030—as much as the entire supply in 2023. - **Even using the low case for demand**, a severe shortage is coming. Tesla plans to build **3TWh** of battery cells annually by 2030—more than twice the world’s output in 2022. That would require more lithium than the entire world currently produces. The base case for lithium demand in 2030 is enough for **3.5TWh** of battery cell production. In other words, **Tesla will soon need every ounce of lithium mined on the planet**. No wonder Elon is begging for more lithium. *“Can more people please get into the lithium business?” – *Elon Musk Ready or not, a lithium shortage is coming. But it gets worse. Because for a company that is staking its entire future on the availability of lithium, the worst sequence of events just unfolded. **The Terrifying Lithium Trap ** Between 2021 and 2022, lithium prices soared over 700%. This surge was fueled by China’s booming EV sales, jumping from under a million to over 6 million, thanks to government subsidies. But when China didn’t renew these subsidies and U.S. interest rates rose, EV demand fell. So, major battery producer CATL slashed prices to clear stock. That’s when the bad news for Tesla dropped: because the lithium market lost its mind. The price started dropping… and plunged back to its previous level. Only none of it was true. Because long-term, Chinese EV sales aren’t actually dropping. In fact, China’s EV market is expected to grow by another 40 percent this year. **As of October 2023, demand for EVs in China was at an all-time high.** Even WITHOUT the subsidies. In the U.S., EV demand is expected to spike as interest rates drop in 2024. But for Tesla, the damage was already done. You see, this isn’t the first time this exact scenario has unfolded. The last lithium bull market, from 2016–2018, saw it rise 300% as EV production began. Then China reduced its EV subsidies. Lithium went into oversupply and demand crashed. In both bull runs, lithium supply picked up almost overnight. But it wasn’t new supply, it was existing mines bringing production back online. **This time, it’s different. Because the mines are all online. ** This is the early innings of the lithium bull market. And it could be the biggest one yet. In 2021, lithium hit a little speed bump. It’s about to hit a concrete wall. *“We’re entering a sort of new era in terms of lithium pricing… because the growth will be so strong.” – *Wood Mackenzie’s Gavin Montgomery **Moving The Goalposts for a Price Surge** The lithium market is so tight right now that **a single comment from the climate conference COP28 sent Chinese lithium futures up 10%**—the maximum allowed—three times in two weeks. They finally decided to increase the limit. So every North American battery manufacturer, including Tesla, is going to pull out all the stops in a desperate search for lithium. Only one problem: **Most of the world’s lithium is processed by one country**. And that country will do everything in its power to use that advantage against the U.S.A. and companies like Tesla. More on that in two days. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # You Don’t Own Enough - URL: https://katusaresearch.com/you-dont-own-enough/ - Type: article - Published: 2024-01-05 - Updated: 2024-01-04 - Author: Marin Katusa Let’s cut right to the chase… It’s the world’s most under-the-radar market move, and that’s a good thing. In 2023, gold didn’t just perform; it dazzled… Gold’s price hit a record high of nearly $2,150/ounce, later stabilizing around $2,050. This peak, fuelled by factors like Middle East tensions, anticipated U.S. rate cuts, and a weaker dollar, confirms gold’s role as a reliable asset in uncertain markets. Despite its significant rise, coverage remained minimal, mainly highlighted by gold enthusiasts. Looking ahead to 2024, the impact of the global economic climate on gold remains a key focus. ## **The Spotlight’s Back on the Fed** Right now, most economists are predicting a modest recovery year for 2024, with most countries growing below their historical average GDP growth rates: The expectation right now is for 2024 to feature a “soft landing” coming out of the high inflation environment of 2023. This could cover anything between the positive but below-average growth depicted above and a mild recession. But take note… Historically, the Fed has not had the best track record of managing a soft landing following a rate hike cycle: **With a soft landing, the impact to gold would be neutral to slightly positive.** Reduced economic uncertainty could diminish gold’s appeal as a safe haven, but market confidence and anticipated Fed rate cuts in 2024 might boost its attractiveness. On the other hand, a hard landing (traditionally the case with the Fed) would lead to a recession. In this case, heightened uncertainty and decreased appetite for risk could drive investors to flock to gold. In addition, a hard landing would justify additional Fed rate cuts, fanning the flames for higher gold prices. **A hard landing could push gold prices up – potentially to new record highs.** And you need to be prepared. If a roaring bull market sends the gold price above $2200 for any period of time, look out. - That’s why **I’ve been buying select precious metals companies **– which you can see for yourself – in [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)*,* alongside me and thousands of other investors. In either case, Fed policy would play a key role in deciding how the situation plays out. For the markets, being at the mercy of the Federal Reserve is a familiar story. ## **Following Where the Gold is Going** Now, let’s look at trends in gold demand… Despite gold’s strong performance in 2023, gold bullion ETFs saw significant outflows, exceeding $13 billion through the beginning of December. Most of these outflows came from European funds, which saw an 11% drop in demand over the past 12 months. Asian funds, on the other hand, grew their gold holdings by 14.6% from the beginning of the year… Central Banks were large buyers throughout the first 9 months of the year. Given the high inflation rate environment that began in the latter half of 2022… - **Central bank gold purchases were the highest they’d been in over a decade last year.** Year-end numbers aren’t out yet, but as of September 2023… central banks’ gold buying was on par with 2022, indicating sustained interest in the metal. ## **Landing the Biggest Returns** Overall, gold’s price performance in the coming year will largely be determined by the quality of the landing. While a soft landing would require less easing from central banks and leave gold largely flat (albeit with upside potential), a harder landing would see gold going higher. A recession in the U.S. – or even a global recession – isn’t entirely out of the books yet. Even with markets roaring. If that happens, expect to see gold establish new record highs. Even $2,500 wouldn’t be entirely out of the question if things continue to get worse globally. But given how much gold they’ve been loading up on, central banks certainly aren’t taking any chances. In that regard, China, Poland, and Singapore have been leading the way as the top buyers of 2023. Kazakhstan was the only major seller of note – [though as we’ve previously noted, they have a “SUR” thing of their own](https://katusaresearch.com/its-happening-miss-america-and-uncle-sam-go-all-in-on-nuclear/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) to bet on, which had an incredible 2023 which the Kazakhs expect to continue to go higher. Over the coming months, we’ll be keeping a close eye on inflation, unemployment, and of course, potential Fed rate cuts. **In the meantime, we’ll be watching the best companies closely for big moves and volume.** **And one particular gold company has caught our eye that we might share soon.** Not all gold miners are equal – for instance, long-time readers will know that [–**SWAP Line Nations** are to be avoided](https://katusaresearch.com/swap-lines-are-one-of-the-most-important-things-youve-never-heard-of/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) at all costs. Even in a high gold price environment, not all gold companies will see a strong price performance. The best companies with the highest-quality assets and management teams are the ones that will deliver the biggest returns. Those are the ones I focus on in my newsletter, where I buy major positions with my own money. **And days ago, in the January edition of my newsletter…** **I published on a new company I think is a 50-200% winner in the next 12 months in two realistic base-case scenarios.** **On the high side, 400% is not out of the question, and we show why.** This does not come without high-risk. Understand that you should only invest with any money you’re comfortable going to zero. If you know me, I don’t send out buy alerts often. But this is one stock has incredible potential. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # 4 Sectors that Could Have Monster Breakouts in 2024 - URL: https://katusaresearch.com/4-sectors-that-could-have-monster-breakouts-in-2024/ - Type: article - Published: 2023-12-29 - Updated: 2024-01-09 - Author: Marin Katusa As we close a year of market rebounds in the broad market, the commodity market lagged behind the Mag 7 tech darlings. But now, with signs of market aggressiveness returning (risk on)… That could pose for some **face-ripping rallies** in certain resource sectors. Normally, markets and stocks catch my attention when they’re down significantly from their highs – or at multiyear lows. That’s when my team and I will pull apart company financials, question every move, asset purchase, comp package, and company communication – and look for companies that have high reward, for the high risk. It’s hard to buy things out of favor, which is why most investors give up. But that’s exactly what I’ve done for two decades as an alligator investor… ## The Electric Elements: Lithium and Copper It’s time to pay closer attention to Lithium, and here’s why… Despite a significant price drop, the opportunity in lithium is more electric than ever. Tesla just announced its cybertruck deliveries and their new batteries are a major holdup… - *Road and Track* reports Tesla “***will need to raise its production tenfold to meet the quarter million units target”*** In fact, Tesla sales in China have skyrocketed. And EV’s are becoming more and more popular. This isn’t a chess match China will fall behind on, either. So they’re starting to take over entire lithium mines… ** ** China has started the “Ore Wars” and will flex its muscle to secure its supply. It just announced a cut to critical raw materials tariffs, and you guessed it – lithium was top of the list. North American EV manufacturers are quickly realizing that they will need to procure subsidy-safe, non-China lithium for themselves. ## **The Copper Conundrum** Copper is not just a metal; it’s the backbone of our electric future – THE electric element if you will. The past year saw many copper explorers and developers fall 50-80% – even while copper prices remained range-bound for the most part. But, the copper price has jumped in recent weeks, gaining momentum on supply concerns, a potential soft economic landing, and a weaker dollar. **Here’s what’s happening that’s got my attention I’ve written about [behind the paywall](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)…** On the supply front, First Quantum’s Cobre Panama mine had its activity suspended due to disputes with the Panamanian government. The mine was responsible for 1.5% of world supply. There were also strikes at the Las Bambas mine in Peru and pauses in BHP’s Chile operations. Add in a slowdown for copper drilling activity in 2023 compared to the year previous and things are setting up quite nicely for copper. In the latest December edition of *Katusa’s Resource Opportunities*, we profiled an early-stage company looking to change that exploring a copper asset… With a team that’s done it before and made us money. ## **Carbon: The Dark Horse of Tomorrow** In the carbon market, the winds are changing. Carbon’s split personality in 2022-23 – [a bust in voluntary markets](https://carboncredits.com/carbon-prices-and-voluntary-carbon-markets-faced-major-declines-in-2023-whats-next-for-2024/) but a boom in compliance markets – is just the prologue. Voluntary market carbon credits have all but plunged from elevated levels – while compliance prices continue to move higher and higher. - The **UK** just announced “carbon import levy”, where the UK benchmark carbon contract is $46 per tonne. - **Germany** jacked their carbon price by 50% with the stroke of a pen, from 30 to 45 Euros. - **Canada’s** carbon price is set to increase yet again in 2024. This is only the start. You don’t even see the [carbon price](https://carboncredits.com/carbon-prices-today/) on your Bloomberg screen, MSNBC or Twitter. But you will in the coming years, and look back wishing you were involved much earlier. **Here’s where the money is going right now…** Major financial investments are pouring into carbon capture technology. This isn’t just about corporate profit; it’s about making decarbonization lucrative, attracting both corporations and the brightest minds. In Q3 2023, climate tech startups, especially those in carbon and emissions, secured a record $7.6 billion in venture capital. Despite low nature-based carbon prices, there’s a surge in interest and investment in carbon capture… This includes significant ventures by major companies and startups, for example, 2 major deals recently: - **ExxonMobil’s** $5 billion acquisition of Denbury Resources and strategic investments in startups like Avnos. - **Carbon Growth Fund** just announced a $200M investment into **Entropy**. This growth fund is managed by the Canadian federal government. In addition to the $200M investment, it agreed to buy up to 1 million tonnes of carbon credits per year for 15 years at an initial price of $86.50 per tonne. With carbon capture essential to reducing emissions, over 573 projects are underway globally, and the industry is set to grow exponentially. I’m keeping a close eye on both the compliance and voluntary markets. And you should too. ## **Gold: The Silent Giant Awakens** While the world was busy elsewhere, gold quietly breached and torched its all-time high in an epic and fast run. And now, gold has quietly made a solid run during the Christmas period. Could a Santa Claus rally set the tone for 2024? As shown below, this marks the 4th attempt for gold to burst out above $2,100 with force. If that move was a sign of things to come, then a flash move up or down could happen very fast. Any decisive and sustained price move up, you’ll wish you owned more gold stocks, because we could be on the cusp of a gold rush like no other. Look for gold to cross $2,200 for any period of time, then hold onto your hats. There is a “feeling” out there that gold could be exiting its [“Echo” market cycle](https://katusaresearch.com/the-all-important-echo-market-cycle/). And if that’s the case, you’ll want to stay away from gold companies with sexy stories in –**SWAP** line nations. You’ll definitely see a LOT of them coming out of the woodwork. Or you’re playing with elevated risk, as seen with Franco Nevada and First Quantum. When in doubt, use the [Katusa AK-47 Indicator](https://katusaresearch.com/the-all-important-echo-market-cycle/) to help narrow down your stock selection. And if the gold price corrects further, you can scroll down to the bottom here and find some of the highlights of my [gold stock checklist](https://katusaresearch.com/how-far-can-mining-stocks-fall/). With that, I wish you and yours a healthy and prosperous 2024! Regards, Marin Katusa **P.S.** I’m working on publishing a brand new recommendation in one of these sectors next week… **the stock is up over 20% over the last week** and I believe has much more to run. Get the name and full details in the January edition of [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Modern Cash Flow and Growth Secrets - URL: https://katusaresearch.com/modern-cash-flow-and-growth-secrets/ - Type: article - Published: 2023-12-22 - Updated: 2023-12-21 - Author: Marin Katusa In our most recent edition of **Katusa’s Resource Opportunities**… We went into detail showing some cash flow metrics most investors have never heard about. It breaks down complex data into simple chart points that are easy to follow. We then published the “Spread on Growth” which is the economic value created or destroyed by deploying capital. And it has some alarming conclusions. - ***NOTE****: If you’re not yet in the room with us, I encourage you [to get in on the inside](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)**. We’re working on finalizing the details of a **brand-new buying opportunity for subscribers – I call it “Big Game Hunting”**.* ## **But here’s what I can tell you for free…** From our projections, it looks like US companies (on average) will be facing major headwinds for the next few years. This is because the cost of capital is going to outweigh the return on invested capital. This is already being shown in the BIG 7, where Google Cloud isn’t meeting its growth expectations, same for Amazon and Meta. It gets even worse for the companies whose cost of capital is much higher than the Big 7. Companies utilize their cash flows for 3 primary uses. - Capital Expenditure Programs - Share Buybacks - Dividends ## **Share Buybacks 101** To reward loyal shareholders and signal confidence in its future, a company announces a massive stock buyback program. Suddenly, everyone’s talking about what this means. - **In the public markets, a stock buyback, also known as a share repurchase, is a corporate action where a company buys back its own shares from the marketplace.** - **This process reduces the number of outstanding shares, increasing the ownership stake of remaining shareholders.** It’s often seen as a way for a company to invest in itself, reflecting its belief that its own stock is undervalued. Buybacks can positively impact the stock price, as they often lead to a higher earnings per share (EPS) ratio, making the company appear more profitable and attractive to investors. However, they can also signal a lack of profitable growth opportunities and lead to questions about long-term value creation. This financial maneuver plays a significant role in stock market dynamics, balancing corporate strategy with shareholder interests. As you can see in the chart below, share buybacks became an important tool in the corporate toolkit and is the fastest-growing segment of cash uses. What’s important for investors to understand about the share buyback plan is that the company has control over when and how much stock to buyback – and at what prices. In some instances, a company may elect not to buy back its full allotment. ## **Cash Flow and Stock Dividends** Let’s compare to a dividend policy which is approved by a board of directors and is fixed. It’s rare for a stock to sell off hard when it fails to buy back its full allotment of shares. On the other side, it is common for dividend-paying stocks to get crushed upon the announcement of dividend cuts or halts. The chart below shows the 3 uses of cash as a percentage of the cash flow generated by the business. - **If the ratio is above 100% it means that companies had cash outlays greater than cash inflows in that year.** Over the past 2 decades, where investors were starved for yield most of the time, share buybacks and dividend payments represented lucrative inflows for investors. Below is a comparison of the S&P 500 versus the top 100 S&P 500 buyback companies and the S&P 500 dividend aristocrat index. These are all compared on a total return basis. The results speak for themselves… - **Companies that increased shareholder returns via buybacks or dividend payments greatly outperformed the S&P 500.** Today there are only a handful of companies in the United States that have a dividend yield greater than the 5.5% Fed Funds rate. Given the rocky market conditions and the fact that the majority of dividend-paying companies are currently paying less than the Fed rate of 5.5%… Means that, in most cases, we are taking significant equity price risk and not being compensated for it appropriately. Below is a chart that shows the number of companies with dividend yields exceeding the Fed Funds rate since 2000. We track these companies in our database… And now that the pretend in the old playbook ‘Amend, Extend and Pretend’ is over, we expect many of these companies will not be able to continue the distribution payments. It will result in cuts to the dividend which could lead to significant equity share price decreases in 2024. **Key Takeaways** I suspect that the cost of capital due to the interest rates will remain elevated for longer than most investors desire. This will put a strain on corporate profits along with capital raising and capital deployment. In turn, this will negatively impact company growth rates. This is not a situation that will be solved next week or next month, or maybe even next year. - It’s paramount that Alligator Investors remain steadfast in our vision to buy great companies, with great assets, in safe jurisdictions at quality prices. **In the next issue of Katusa’s Resource Opportunities, we’re going BIG GAME HUNTING.** There is a very interesting project… Hitting all the right numbers and grades… Getting all the right attention… **And after nearly 12 months, the price is right for me to pick up shares.** [Click here to learn how to become a member of Katusa’s Resources Opportunities.](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) Ensuring that you get the alert when I hit “send”. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # It’s Happening: Miss America and Uncle Sam Go ALL IN On Nuclear - URL: https://katusaresearch.com/its-happening-miss-america-and-uncle-sam-go-all-in-on-nuclear/ - Type: article - Published: 2023-12-15 - Updated: 2024-06-21 - Author: Marin Katusa This week, there are 4 major developments in nuclear power you need to know: - **The U.S. House clears the “NO RUSSIA” uranium act to the Senate,** - **Miss America is putting the crowd on nuclear power,** - **Microsoft and major tech darlings are going full nuclear throttle,** - **Uranium prices are at 15-year highs** ## **Uncle Sam Pushes the Red Button: NO RUSSIA** In [a major move this week](https://carboncredits.com/breaking-the-us-house-passed-a-bill-that-just-repatriated-the-nuclear-cycle-from-russias-control/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com), the U.S. House of Representatives passed bill H.R. 7403 (117th), the National Opportunity to Restore Uranium Supply Services In America Act (NO RUSSIA Act) of 2022. Also approved was a separate but related piece of legislation, bill H.R. 1042 (118th), the Prohibiting Russian Uranium Imports Act. Combined, these two bills are a clear response to reduce Russian influence in the U.S. uranium market and both enjoy widespread bipartisan support. - **The bills, now awaiting Senate approval, ban the importation of low-enriched uranium (the kind used in nuclear reactors) from Russia.** - **While also calling for the Secretary of Energy to establish a Nuclear Fuel Security Program.** This program aims to revitalize the U.S. uranium industry, vital for fueling 93 nuclear reactors and military nuclear needs. With these reactors require nearly 50 million pounds of uranium yearly, a steady, secure supply is crucial. Russia is the U.S.’s top foreign enriched uranium supplier and third in uranium oxide. Reshoring production and enrichment demands a significant investment. But wait, there’s more… ## **Miss America Goes Nuclear** Grace Stanke, Miss America 2023, is using her newfound fame to push for one specific form of zero-carbon energy. And for good reason: after studying as a nuclear engineer, Grace is especially qualified to teach people the truth about the world’s safest zero-carbon energy source: nuclear energy. Most importantly, she wants to squash the widely accepted view that nuclear power is dangerous and expensive. In fact, in a recent interview, she explained that nuclear energy already plays a large role in the lives of many Americans, whether they know it or not… ***“From curing my dad’s cancer twice, to powering 20% of America, to helping with agriculture which is so important in my home state of Wisconsin… it really does feel like nuclear does it all.”*** To reduce global carbon emissions, clean nuclear energy plants are VITAL. And soon, demand for uranium is projected to explode much, much higher. Why is that, you ask? ## **The AI Energy Challenge: A Computing Power Explosion** AI development has seen an unprecedented surge in computing power requirements. - **Since 2010, the energy needed to train AI systems has been doubling every six months – a dramatic acceleration from the previous two-decade norm.** This surge signifies a looming challenge: [AI’s future advancements hinge on massive energy availability](https://katusaresearch.com/energy-wars-silicon-valley-a-i-and-u/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). The world’s most advanced supercomputers, like the 1.1 exaflop Frontier and the upcoming 5 exaflop AI Research SuperCluster by Meta, illustrate this trend. These machines, essential for AI progress, consume power equivalent to tens of thousands of homes. Intel’s “Zetta Initiative” aims even higher, planning a zettascale computer by 2027… - **Such a machine would require the energy output of 21 nuclear power plants with current technology.** It’s only a matter of time before large funds investing in the AI revolution figure out that a supply chain of clean baseload power is the key to guarantee the AI Revolution. Microsoft will be one of many, but expect the smart funds looking to clip their share of the profits by locking down a piece of the power supply. ## **The Nuclear Solution: Small, Efficient Reactors** Addressing this energy challenge, Gates, Thiel, and Altman are focusing on Small Modular Reactors. These reactors, notably being developed by companies like **Oklo**, **Helion,** and **TerraPowe**r, promise efficient, scalable energy solutions for powering AI’s backbone – supercomputers. Their goal is to reduce a zettascale computer’s energy consumption to about 100MW, matching a small nuclear reactor’s output. And the vision extends beyond AI… These nuclear reactors are designed to power not just supercomputers but also large-scale industrial sites like mines and refineries. The first of these reactors are expected to be operational by 2027, marking a new era in energy production. **Google and Chevron are also preparing for this energy race…** They’ve invested a whopping $250 million in TAE Technologies, a nuclear fusion startup that’s now raised $1.2 billion: Both preparing for the mad dash for power that’s about to happen. And don’t count out Japan just yet. With one of the lowest costs of capital globally, companies like **Mitsubishi Heavy Industries (MHI)** will also be a force in the growing nuclear industry. Speaking from personal experience, the folks at Mitsubishi are wonderful, smart, and great to work with. **Hint**, **hint** to the tech companies looking to secure stable baseload green power for their own AI initiatives and data centers. ## **Enter the Radioactive Elephant in the Room** In 2015, I gave the keynote at the World Nuclear Fuel Market (WNFM) in Paris where the utilities meet the producers to cut deals. My talk spoke about the cost of enrichment, how prices would go lower, and why Kazakhstan held the power to truly benefit if they planned accordingly. When Kazatomprom (the largest producer of uranium globally) went public in 2018, the investor PowerPoint presentation featured data and charts credited to Katusa Research. Kazatomprom executives got the point loud and clear. And now they’ve positioned themselves to become the OPEC of uranium. - Kazatomprom quietly partnered with the nation’s Sovereign Wealth Fund to** build a Strategic Uranium Reserve (A SUR Thing) that now has plans to purchase $500 million dollars of physical uranium**. Think about the advantage this Strategic Uranium Reserve will have compared to [the other market players](https://katusaresearch.com/a-run-on-the-uranium-bank-has-begun/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) looking to purchase uranium, due to their close association with Kazatomprom which produces 43% of the world’s supply. It’s an incredible leg up for one to be tightly aligned with such a powerful force in the physical uranium market. For context, last year, Kazakhstan alone produced 46.8 million pounds of uranium. At today’s price of $85 dollars per pound, that’s $4 billion in a single year. Purchases by Kazakhstan’s Strategic Uranium Reserve will make the price of uranium that utilities outside of the country must pay go radioactive – in other words, a lot higher. In a similar move, Chinese state-owned energy company China National Nuclear Corporation signed a massive deal with Canadian uranium company Cameco earlier this year in an attempt to get as much uranium as they can get their hands on. There are even rumors floating around that Cameco may actually be short in their committed contracts and will be required to enter the spot market to purchase physical uranium to meet their contracted obligations. To make things even more interesting, there’s also hearsay that Kazakh ISR production is coming in lower than expected. The uranium is all still there, but the cost of production will increase and deliveries will be later than scheduled. Expect actual physical delivery of uranium in both the spot and long-term markets to be delayed. The uranium spot price just soared to a 15-year high of $86 per pound this past week and is showing no signs of slowing down: - **RELATED: You can view the latest [uranium prices here](https://carboncredits.com/uranium-prices-today/).** And if you want to know what I’m doing with my own money in the uranium/nuclear arena… [Click here to learn more about my premium newsletter](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com), ***Katusa’s Resource Opportunities***, where I detail what companies I’m buying, holding and looking to get into. Before you see it on the front-page news headlines. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Now Entering Gold’s 4th Dimension - URL: https://katusaresearch.com/now-entering-golds-4th-dimension/ - Type: article - Published: 2023-12-08 - Updated: 2023-12-07 - Author: Marin Katusa Nearly 15 years ago we began an incredible global fiscal experiment. Banks got a little too adventurous with risky debts and had assets that were pretty much a mystery in value. This mix almost crashed the entire banking system. It was wild – big names in banking, ones we thought were untouchable, crumbled within months. Remember these? - Lehman Brothers - Merrill Lynch - AIG - Washington Mutual - Fannie Mae and Fredie Mac - Royal Bank of Scotland - Bradford & Bingley - Alliance & Leicester These were the giants of finance, and they either went bankrupt or were scrambling for a bailout. These bailouts paved the way for what would become the largest fiscal and economic experiment in generations. Governments stepped in with what turned into the biggest money experiment we’ve seen. It’s called quantitative easing. Basically, central banks slashed interest rates to almost nothing and increased the money supply into the economy, all to kickstart growth. In the span of 10 short years, the Federal Reserve and the ECB had nearly doubled the money in circulation. Coming out of the depths of the financial crisis, you would have expected that the combination of exorbitant money supply growth in combination with ultra-low rates would pave the way for gold to scream higher. And for a short period, this was the case. Gold rose spectacularly from $850 ounce in early 2009 up to $1900 by mid-2011. In fact, relative to major indices, gold and gold stocks were the number 1 performers around the world. A key driver in explaining the performance of gold was not the demise of the US dollar like many incorrectly called for. But in fact, the “real rate of return” became an integral explanatory variable for gold price movement. ## **Gold Enters the 4th Dimension** Real yields are bond yields which are those that are adjusted for inflation impact. For 15 years there has been a correlation between the gold price and the real yield. As you can see in the chart below there are 3 distinct bubbles. - **In red**, is the 2005-2007 pre-GFC area. This interestingly showed that higher real rates tended to be paired with higher gold prices. - **In yellow**, from 2008 through to early this year, there was a strong correlation between low or negative real rates of return and high gold prices. If the past 15 years are any indication, gold prices are massively overbought using this real rate analysis. However, at least in the short term the tide seems to have shifted. This past week, gold albeit briefly, ripped to new highs all the way up to $2146 per ounce. Yet typical drivers of gold price action were muted. The US Dollar is essentially unchanged relative to other major currency pairs, interest rates have soared, and inflation has cooled off. Theory says that this should be a bearish environment for gold, but recent price action says otherwise as gold is up close to $200 per ounce for the year. ## **Bearish Trading Setup in Gold** The recent trading patterns for gold at these upper levels are not particularly favorable. We have approached the top end of the recent range for now a 4th time. And each of the past 3 attempts to breakout concretely through 20050 has been met with ferocious resistance. Is this the head fake that shoots us to $2,500 per ounce and forces consolidation above this level? Perhaps. And our portfolio and picks in ***Katusa’s Resource Opportunities*** are prepared for that scenario. But that is not my base case scenario and probably shouldn’t be yours either. ## **Gold Stock Party Invites Got Lost in the Mail** Interestingly, gold miners have not participated at all this year. Gold is up 10% for the year, yet miners are actually negative, down 1%. - The Achilles heel of the gold miners continues to be construction and operational **cost control**. Below is a chart which shows the steep rise in costs over the past decade. One of my go-to phrases is *“fortune favors the bold”* but I do believe this is a time where being bold is to be very careful. Loading up on the expectation of continuation of soaring gold prices seems overly aggressive. Rather, I am hawking several world-class businesses that have been crushed. These are companies that have generational assets and world-class management teams. KRO subscribers just found out about my latest idea 4 days ago and know exactly how I am going to play it. I do believe 2024 is going to be a challenging but fruitful year, and it will provide significant opportunities – but many death traps as well. Prepared investors can do well but I do not believe a rising tide will lift all boats. Let us help do a lot of the heavy lifting, research, site visits, board room visits, and analysis for you… It’s all found behind the curtain in my premium research letter – ***[Katusa’s Resource Opportunities.](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)*** Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # A Sneak Peak of Mega Bull Markets in a Forgotten Sector - URL: https://katusaresearch.com/a-sneak-peak-of-mega-bull-markets-in-a-forgotten-sector/ - Type: article - Published: 2023-12-01 - Updated: 2023-11-30 - Author: Marin Katusa Rare earth elements (REEs) are set to become the epicenter of a high-stakes global market. This is a market where 1000%-2000% gains come and go faster than the hottest crypto token of the day. These elements are not just materials; they’re the backbone of world-class magnets, far beyond the simple fridge adornments. From sleek smartphones to robust wind turbines, REEs are the secret sauce in cutting-edge tech. They’re not just components; they’re catalysts of innovation, making modern gadgets faster, smaller, and more efficient. These magnets are the lifeblood of contemporary technology. **In wind turbines and electric vehicles, the role of REEs is pivotal.** Their magnetic properties are transforming wind energy with direct-drive turbines and driving electric vehicles with unparalleled torque and precision. - **Each electric vehicle requires about 1 kilogram of neodymium-praseodymium oxide,** - **While a single wind turbine needs over 200 kilograms.** In a market that China has had a stranglehold on for decades, breaking into the market is no easy task. ## **Understanding REE Supply: The Chinese Dominance** China’s control over the rare earth market is nearly absolute, handling most mining, refining, and manufacturing processes. This dominance poses a strategic challenge, especially as the U.S. depends entirely on imports for refined rare earth products. Their scarcity and unique properties make them a goldmine for investors keen on future-forward industries. Below is a chart which shows global rare earth element production by country. As you can see, China is the 800-pound gorilla in this sector. Rare earth elements (REEs) are not particularly useful coming straight out of the ground. The elements need to be refined through delicate and complicated chemical processes to be turned into oxides and alloys. These refined elements are used to create permanent magnets which are critical to the energy transition movement. They are found in electric vehicles and wind turbines which are poised to grow dramatically over the coming decades. As shown in the first chart, China is the largest player in the rare earth element space. So, without question, rare earth elements are a matter of national security for China. ## **Protecting Valuable Assets** In a protectionist move, it recently merged 5 of its largest producers into a single entity, giving it a vice-like grip on the global rare earth market. China operates its REE production under a quota system, which avoids flooding the market and depressing prices. This approach is similar to that of OPEC in the oil market, where it acts to control the supply-side economics to balance budgets and keep prices elevated. China’s version of sanctions is utilizing cutting off exports of critical elements. In 2011, the country cut off exports of REEs entirely, sending the prices for REEs skyrocketing. The chart below shows the past pricing activity since 2008. Between 2009 and 2011, **stocks with nothing more than an early-stage deposit were 20 baggers if in politically stable jurisdictions.** But note, the share prices of those equity speculations crashed below their pre-rise prices for those holding the bag when China opened the gates and flooded the market with the rare earths. As you can see, we have had several big runs in REE prices, only for them to quickly dissipate. This latest rip from 2020 through 2021 was no different, as prices for NdPr Oxide more than tripled in price, only to fall off a cliff this year. ## **Can you make money in Rare Earths?** The simple answer is yes, but you must time the windows correctly. The windows are “China sanctions” and “stage of company”. One company I’ve had my eye on for many years is becoming more and more attractive. When 200-500% returns are on the table, even in a sideways and scary market, it gets my attention every single time. [Click here to get the name of the company](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) and learn more about my premium research service – **Katusa’s Resource Opportunities**. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # NASA’s Not-So-Secret Rocket Fuel is Attracting Big Dollars - URL: https://katusaresearch.com/nasas-not-so-secret-rocket-fuel-is-attracting-big-dollars/ - Type: article - Published: 2023-11-24 - Updated: 2023-11-23 - Author: Marin Katusa With how EV sales have blown past every projection… And how government backing means charging infrastructure buildout is simply a matter of time… It should be clear by now that EVs are no longer just a potential in the future – they’re already well entrenched in the present. Road transportation currently accounts for roughly one-sixth of global carbon emissions. According to the International Energy Agency, if the rate of growth in EV sales from the past two years can be maintained, CO2 emissions from cars will be on track to hit net zero by 2050. However, as clear as the benefits of EVs are, they also come with certain disadvantages. - **Two of the big ones that most people are aware of are that EVs still have issues with their range and charging time.** According to the Electric Vehicle Database, at the end of last year, the average maximum range of available retail EVs was 216 miles. In contrast, the median range of gas-powered cars sold in 2021 was 413 miles – nearly double that of your average model EV. Charging times are a similar story, with Tesla advertising its superchargers as being able to deliver a 200-mile charge in just 15 minutes. But you are probably well aware, it only takes maybe 2-3 minutes to fill up your tank at the gas station. **The core issue is battery-specific energy.** - Tesla’s advanced 4680 battery cells offer 272-296 watt-hours per kilogram, impressive for batteries. - However, gasoline boasts 12,800 watt-hours per kilogram, 42 times more efficient. And there’s speculation that these batteries might not even meet their theoretical performance. But battery technology is advancing. Scientists at the U.S. Department of Energy’s Argonne National Laboratory have developed a battery with potential energy of 1,200 Wh/kg. Yet, it’s still dwarfed by gasoline’s energy density. The reality is, we’re far from making all vehicles electric. For daily commutes, EVs suffice. But for long-distance transportation, like trucking and air travel, they fall short. ## **Enter Hydrogen** Hydrogen’s flammability often raises safety concerns, but modern safety standards and research have shown hydrogen vehicles to be as safe as traditional gas cars. Hydrogen’s advantages include: - Near-zero emissions. - Quick refueling times. - High energy efficiency. However, there’s a catch. Most hydrogen is produced using fossil fuels, leading to carbon emissions. Green hydrogen, produced using renewable energy, is the ideal solution but is currently expensive. Whether it’s a **Fuel Cell Electric Vehicle** (FCEV) or **Hydrogen Internal Combustion EV** (HICEV), the core concept and benefits are the same: - When used as fuel for vehicles, hydrogen is zero emissions, or close to it. - Filling up your tank at a hydrogen station is only slightly slower than filling up at a gas station – you’ll be in and out in five minutes. And you’ll still get 400 miles out of your tank. - With a specific energy of **126 MJ/kg**, hydrogen is nearly three times as energy efficient as gasoline, pound-for-pound, allowing vehicles to weigh less and yet travel further. **Fun Fact:** Many of NASA’s various spaceships, such as the moon-going Saturn V modules and the Space Shuttles, used liquid hydrogen fuel for their engines. This all sounds fantastic, which is why veteran subscribers already have their next question lined up: “Marin, what’s the catch?” Well, as it turns out, there’s one very big catch: ## **All that hydrogen must come from somewhere…** Right now, hydrogen is already used globally in a number of different sectors, with oil & gas refining and ammonia production for fertilizer being among the top sources of demand: 2022 saw 95 million tonnes of hydrogen demand, up 2.7% from the previous year with most of it going towards pre-existing industrial uses. Governments and organizations are investing in reducing green hydrogen production costs. The U.S. Department of Energy’s Hydrogen Shot program aims to produce green hydrogen at $1/kg by 2030. Not to mention it’s investing $7B into [Hydrogen Hubs](https://carboncredits.com/us-does-7b-clean-hydrogen-hub-grant-the-7-chosen-ones-fhyd/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). But challenges remain, and the transition to green hydrogen is gradual. - **Currently, over 95% of hydrogen is produced via fossil fuels. And this production, as you might guess, produces carbon emissions.** Known as **grey hydrogen**, or alternatively **blue hydrogen** when the carbon emissions are captured and stored… This type of production is how the world satisfies most of its demand for hydrogen right now. As you can probably imagine, having carbon emissions baked into the hydrogen lifecycle itself kind of defeats the purpose of driving a hydrogen-powered car. Though battery EVs face a similar issue regarding the source of the electricity used to charge the vehicle, the renewable energy transition is one that’s already taking place worldwide. Likewise, there does exist a method of producing hydrogen without creating carbon emissions. ## **Hydrogen Electrolysers** Known as electrolysis, it’s an extremely power-intensive method. Electrolysis powered by renewable energy creates what’s known as **green hydrogen** – a truly zero-emission, fully renewable power source. Infrastructure is another hurdle. The U.S. has limited hydrogen pipelines, and building a hydrogen infrastructure requires significant investment. Countries like Japan and South Korea are pioneers in hydrogen infrastructure, but even they face challenges in hydrogen vehicle adoption. - **Despite these obstacles, many companies, including oil giants like Shell, BP, and Exxon Mobil, are investing heavily in hydrogen.** Saudi Arabia is building the world’s largest green hydrogen plant, and companies like Amazon and Walmart are securing green hydrogen supplies. This has investors and financiers paying attention… In our latest issue of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com), we went into detail on the early nature of the hydrogen markets and growth opportunities. Many companies are starting to move from the *Science Experiment* phase to the *Engineering* and *Production Phases*. This has us interested and watching capital flows closely in the sector. And there’s no shortage of private opportunities are hitting our desks while we’re narrowing down the best way to play it. Members of [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) will get the first alert when that happens. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Debt Pinch: Are We Near Crisis Levels? - URL: https://katusaresearch.com/the-debt-pinch-are-we-near-crisis-levels/ - Type: article - Published: 2023-11-17 - Updated: 2023-11-16 - Author: Marin Katusa Main Street USA is feeling the pinch. Groceries, rent, travel, transportation… Every light in every home, every ringing cash register, every swipe of a credit card is a heartbeat in the living, breathing entity of our economy. The $17 trillion debt figure looms like a skyscraper, casting a long shadow over the streets. But there’s more to this skyline than meets the eye. When scaled against the US Gross Domestic Product, this towering debt transforms into a mere milestone on the path of economic evolution. In this week’s missive, we’ll do a deep dive into the real story behind these numbers. That despite the daunting height of debt, the GDP has soared even higher, reshaping our view of America’s financial health. Let’s get right into it, and it’s not pretty… ## **All American Dream: The Bet on Debt** American households currently hold roughly $17.3 trillion in household debt. It is a startling large figure. Housing debt accounts for $12.5 trillion, while non-housing-related debt accounts for the remaining $4.8 trillion. However, although household debt has grown, so has the economy, wages, prices for goods, think of this as the “income or earnings” side of the nation. Debt should be put into relative terms to paint a clearer picture of the situation. A common way to normalize household debt is against US Gross Domestic Product, over time mega trends are evident. As you can see from the chart above, debt grew faster than GDP for decades, culminating during the Great Financial Crisis. However, since then, debt to GDP is not nearly as bad as it was during the GFC from 2007-2009 period. In absolute terms, household debt has gone up, but GDP has gone up faster over the past 15 years, which has led to a decline in the ratio. Now there is a lot of debate on the quality of GDP, but it’s a constant measure to be compared to… Remember, this is just one metric to demonstrate current debt levels relative to past levels. ## **GDP Growth and Credit Cards** Going deeper, GDP growth has outpaced household debt because of ultra-cheap borrowing rates. Trillions upon Trillions of dollars injected into the financial system have supported the economy, with consumers and corporations gorging on cheap debt. - **Headlines may tell you that consumers are feeling the impact of higher rates, but we are nowhere near crisis levels of past recessions.** When times are really bad, consumers don’t make payments on their credit cards and used cars and give up on mortgages and so on. We saw this happen during the Financial Crisis in 2008. A good real-time indicator is delinquency rates on credit cards. As you can see in the chart below, in 2008 delinquency rates doubled, shooting up as high as nearly 7%. Today rates are still below average but have begun to spike and are approaching 3%. Auto loan delinquencies paint a similar picture. Auto loan delinquencies are rising, but not anywhere near crisis levels. With the consumer in *reasonable* shape, the economy still reporting higher-than-expected GDP. So we feel the Federal Reserve is not under immense pressure to cut rates just yet. ## **Who’s Working and Who’s Not** The two preferred gauges of economic health used by the Federal Reserve are PCE Inflation and the unemployment rate. As you can see in the chart below, unemployment has not spiked, and PCE inflation is heading lower, but is still near 4%. All of this to me suggests that the Fed is not ready to cut rates yet, which in turn means borrowing costs for companies will remain elevated in the near future, at least 6-12 month time frame. This means there’s a fight for cash. If you have money, your benchmark right now is that you can earn over 5% in the USA and Canada, risk-free. (That is, unless you see the government defaulting). Any public stock or private company enticing you to buy a share or a thousand is now dealing with this struggle. It’s the cost of capital. Your capital. Company capital. Debt capital. All of the above. Right now, we’re not a crisis levels of debt when you factor GDP into the equation, but there is a crisis of liquidity emerging in the markets. It’s making your favorite stocks get cheaper and cheaper. ## **Following The Money is What I Love Doing…** We’re undertaking a massive project analyzing corporate treasuries, burn rates and available cash. We put many companies through the ringer to find out where they’re spending their money – and how wisely. - Are they paying themselves first through excessive compensation to keep their lifestyles afloat? - Are they juicing up their companies to look good on paper, vs growing shareholder value - Are their dividends safe - Are stock buybacks worthwhile A lot of companies are value traps right now at current rates, and other companies are coming right into my alligator investor buy zone. **We went into deep analysis on two companies high on my watchlist****, picking everything apart in a stress test.** **And then we revealed two potential high-risk, high-reward takeout candidates**. You can do this all yourself… Or you can make a few clicks and let us do the heavy lifting for you by joining [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # WATCHING: Big Money Moves in Carbon Capture - URL: https://katusaresearch.com/watching-big-money-moves-in-carbon-capture/ - Type: article - Published: 2023-11-10 - Updated: 2023-11-09 - Author: Marin Katusa Corporate greed meets corporate greed as major money is moving in the carbon space. But that’s not a bad thing. If decarbonization becomes profitable, not only will corporations be chasing the benefits, but so will the brightest minds in the world. The world doesn’t need more lawyers and bankers. We need the bright minds of today to get into decarbonization, and more will follow if the financial gains are there. And things are moving fast… Startups focusing on climate technology, particularly those dealing with carbon and emissions solutions, **secured a record-breaking $7.6 billion in venture capital investments during the third quarter of 2023.** This amount surpasses the sector’s prior highest funding by $1.8 billion, countering the overall trend of reduced fundraising. Did we mention this is all happening while nature-based [carbon prices](https://carboncredits.com/carbon-prices-today/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) in the voluntary market are at their lowest recorded level, ever? This week we are going to take a deep dive into Carbon Capture, one of the most important growth markets **attracting major dollars**. By the end of this, you will become smarter than 99.99% of other investors in this arena, including management teams of certain royalty carbon credit companies. ## **Breath In, Breathe Out** Carbon capture refers to capturing carbon dioxide either before or after it has been released into the atmosphere. To meet net-zero ambitions by 2050, it’s estimated that the US alone will need to invest over $150 billion, $80 billion of that dedicated to the “capture” of carbon dioxide. Now, put aside any bias you have or emotional trigger about the words “climate” or “global warming”… Greenhouse gas emissions are on the rise and there are few ways to reduce course at this point. **Carbon capture** is an integral part of the long-term solution to reduce greenhouse gas emissions. - **Swiss Re,**** one of the largest insurance companies in the world, cited that 18% of global GDP or $20+ trillion could be wiped out if we do not curb emissions.** Today we only have a few tools in our toolbox and capturing carbon at scale through technology is vital. According to the International Energy Agency (IEA), there are 573 carbon capture projects worldwide that are in early development through to operational stages. The majority of these projects are “planned” meaning they are very early stage, likely requiring many permits and capital for build out. Below is a forecast for global CCUS projects. The growth in advanced development projects makes sense, as lawmakers around the world have pledged big subsidies to these types of projects. The lead time to build a carbon capture facility varies greatly from a few years up to a decade and I think the IEA is overly optimistic in their forecast. Government subsidies play a crucial role but so does debt and equity financing, which has gotten tremendously more expensive, raising big slugs of capital is not easy right now and I think this will push out the timelines considerably. - **Total CO2 capture in operation today is approximately 46 million tonnes, with 250+ million tonnes in the development pipeline. ** It would be considered a political failure if total CO2 capture didn’t scale into the billions of tonnes per year over the coming decades. ## **Immediate Opportunity: Power and Heavy Emitting Industries** Electricity and industries like cement, steel, and petrochemicals account for over 50% of global emissions. This is an enormous market for carbon capture to be deployed at scale. Coal-fired power generation presents a particular challenge but is a massive opportunity. - **The global coal fleet accounted for almost one-third of global CO2 emissions in 2019,** - **And 60% of the fleet could still be operating in 2050.** Other than retiring the plant early, Carbon Capture and Storage is the only alternative to maintain the electric grid while mitigating emissions. Retrofitting CO2 capture equipment can enable the continued operation of existing plants, as well as associated infrastructure and supply chains – but with significantly reduced emissions. Carbon Capture and Storage is also the only solution to address CO2 emissions from natural gas processing. This is important given the continued reliance on low-cost natural gas across the global energy system. ## **Capturing the Man of Steel… and Cement** Steel, cement, and petrochemicals are industries that stand to benefit greatly from CCS activity. These are emissions-intensive industries. The challenge with those industries is that they are all very price-sensitive and may elect to wait until technology improves rather than diving in today. To incentivize these businesses to jump in, the government could play a support role in the transition. Typically, from a cost perspective, “capture” represents roughly 50% of the total capex of a CCU or CCS project. - The most advanced and widely adopted capture technologies are **chemical absorption** and **physical separation**. Below you’ll see a *cost curve for carbon capture* for various industries. As you will see, the more concentrated the CO2, the lower the cost of carbon capture. This makes sense as the air has a very low concentration of CO2 relative to power generation. - This indicates that it takes enormous amounts of energy to capture 1 tonne of CO2 in the air versus 1 tonne of CO2 from a natural gas power generation facility. There have been some major moves and money exchanged in this arena… - **According to PitchBook, over the last 2 years, there have been 1000+ deals in the carbon capture space, which have raised a total of $28 billion.** Well-known industry titans have begun to enter the space, a few of their deals are below. - **ExxonMobil** [just acquired](https://www.investing.com/news/stock-market-news/denbury-shareholders-approve-merger-with-exxon-mobil-3215867?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) **Denbury Resources**, an oil and gas producer with an extensive CO2 pipeline network, for about $5 billion. Denbury’s current infrastructure, including 1,300 miles of pipelines and ten onshore carbon sequestration sites, positions Exxon as the owner of the largest operating carbon pipeline network in the US. This move aligns with the growing carbon market trend and allows Exxon to take advantage of tax credits available through legislation like President Biden’s Inflation Reduction Act. - **Brookfield Renewable Partners** alongside the Brookfield Energy Transition Fund will invest $1.3 billion into a handful of early-stage carbon capture and storage opportunities. - L.A.-based carbon capture startup **Avnos** signed [strategic investment](https://carboncredits.com/carbon-capture-startup-secures-80m-from-shell-conocophillips-jetblue/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) deals worth over $80 million with big oil companies, **Shell** and **ConocoPhillips**, and **JetBlue** to ramp up commercialization of its novel Hybrid Direct Air Capture (HDAC) technology. When the largest, most well-connected, and cashed-up companies in the world are making MAJOR moves like this… You might want to take notice. I do. **These are smart people investing billions into a specific sector, early.** Subscribers to **Katusa’s Resource Opportunities** are well ahead of most investors on the learning curve in the carbon markets. If you want to read about opportunities and specific ways to invest in one of the fastest growth markets on the planet… [Click here to learn more about my premium research](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). It’s better to be early, than a minute late. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Nuclear Energy Infographic - URL: https://katusaresearch.com/nuclear-energy-infographic/ - Type: page - Published: 2023-11-08 - Author: Marin Katusa ![Nuclear Energy Infographic] --- # Troubled Waters Ahead for China - URL: https://katusaresearch.com/troubled-waters-ahead-for-china/ - Type: article - Published: 2023-11-03 - Updated: 2023-11-02 - Author: Marin Katusa They had a chance… Several months ago, I wrote that if China’s economy didn’t improve quickly, then the rest of the world would start feeling the pinch, not just China. Well, here we are, two months later – and things have only gotten worse since we last visited the situation. To recap – for the last 18-24 months, many indicators coming out of China have been negative. Ever since the post-COVID market lows, the Chinese markets have not experienced the same recovery that markets in other regions have, and continue to lag behind in performance: Also of particular interest is China’s property sector, which accounts for a quarter of the mainland Chinese economy. ## **Chinese Real Estate Signals Don’t Look Good** With several high-profile Chinese real estate developers in trouble, there are significant headwinds for the Chinese real estate market. Last year’s biggest developer by sales, **Country Garden**, just defaulted on a US dollar bond for the first time last week. China’s property sector isn’t just down over 70% in the last two and a half years… It’s also lower than it has been at any point in the past decade and a half, except the very tail end of when China’s property market bubble burst in late 2011. It’s important to remember that given how much of China’s GDP is made up of real estate, weakness in Real Estate drags down many other industries indirectly associated. When people aren’t buying homes, nobody needs new furniture, appliances, or renovations. Demand for new utilities and services hookups decline, and related manufacturing and industrial segments suffer. ## **China Capital Flows** Another major sign of lack of confidence in the Chinese economy comes from looking at capital flows in and out of the country. This past August experienced the highest capital outflow from China since early 2016, a period marked by a major anti-corruption drive and unexpected currency devaluation. According to Goldman Sachs, China saw a $42 billion forex outflow in August 2023. And this was immediately followed in September by another massive jump of $75 billion leaving the country, nearing the record previously set in 2016. Record amounts of money are also leaving the Chinese financial markets… - **Roughly $26.2 billion in direct investments left Chinese shores this past September.** Outflows are bad, inflows are good. China is experiencing major outflows. That’s bigger than the peak in 2016, and the largest outflow seen since this data began getting tracked in 1998 (orange line below). The Yuan is down 5.7% against the USD this year, and preventing the Yuan from depreciating further is one of the CCP’s top priorities. All these various problems compounded together has led to drastic action on the part of the CCP to keep things stable. ## **Xi’s Opening Chess Moves** In late October, President Xi visited the People’s Bank of China for the first time since he became president in 2013. He also stopped by the State Administration of Foreign Exchange on the same trip – another first. Though the reasons behind the visits were not publicly announced, Beijing announced a new $137 billion sovereign bond issuance… While also raising its 2023 budget deficit by an additional 26.7% at the same time. While local government debt in China is at an all-time highs of 76% of GDP, central government debt sits at 21%. If those numbers are accurate… Then there would be plenty of room for the government to work further stimulus into the economy. That means even more bond issuances and debt into the system. ## **Eyes Wide Open: China’s Trading Partners** So why should you care about what goes on in China? China is the world’s second-largest economy and largest importer of raw materials. Any slowdown in China will have knock-on effects for the rest of the world. Not only is China the US’s third largest trade partner, but they’re also the world’s largest importer of copper ore, iron ore and crude oil, to name but a few commodities. And demand for many of these commodities are tied to – you guessed it – the health of their real estate market. **Right now, it’s not yet clear whether things will be turning around soon in China.** Investor sentiment has taken a big hit in the last two months, and there’s a good chance we haven’t seen the bottom of the property market. If things continue to go south for Chinese real estate, you should expect to see a corresponding drop in demand for iron ore and other raw materials like copper. - **This would negatively impact the resource markets meaning both commodity prices and the corresponding equity prices of producers and explorers will go lower.** As such, we’re keeping a close eye on the situation. And in the recent edition of my premium newsletter, you’ll read about a niche market that’s directly influenced by China every few years. **It can lead to many 500-1,000% returns in your portfolio if you know where to get ahead.** If you don’t want to wait, you can read about the sector, and a company on my radar in my premium research letter – [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Luxury Watches, Bonds and Gold - URL: https://katusaresearch.com/luxury-watches-bonds-and-gold/ - Type: article - Published: 2023-10-27 - Updated: 2023-10-26 - Author: Marin Katusa What can luxury watches and fine wine auctions tell us about the economy? The luxury market is coming back to the mean. Covid Cash that was injected by most Western governments helped the luxury watch market reach astronomic highs. This was a classic unintended consequence of government planning. You didn’t have to look far to see articles like this… Watch prices from Rolex and Audemars Piguet, staples of flashy investment bankers cashing in on successful IPO’s, went through the roof on the resale market. - A typical AP Royal Oak went up from $24k in 2019 all the way to $83k in March 2022. - While an in-demand Rolex Submariner Hulk climbed from $13k in 2019 to $34k in April 2022. Things changed quickly when the Fed spiked interest rates at the fastest rate in modern history. The Overall Market Index according to WatchCharts is down 36% from its peak – back to May 2021 levels. And no signs of slowing down to newer lows. Since those early 2022 highs: - A basket of Rolex’s are down 31%… - A basket of AP’s are down 33%… - And even top vintage wines are down (looking at auctions)… We’ll find out shortly how popular the secondary markets are for luxury excess items, once the world’s “[most sought-after scotch whiskey](https://nationalpost.com/news/world/bottle-of-96-year-old-scotch-whisky-hits-the-auction-with-1-9-million-price-tag?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com)” sells at auction. And at what price. However, the price correction might show that the investment bankers are trading in their timepieces for some even sexier 10-year treasuries… ## ***The Name’s Bond, Government Bond*****: US 10-Year Yields Pop Above 5%** Monday of this week, at the market open, long term bond yields shot up to over 5% for the first time since summer 2007. The spike prompted a tweet by hedge fund managers Bill Ackman and Bill Gross to declare that they are covering their short bond positions. With yields at generational highs, cashed-up companies and investors are making the easy decision of taking the guaranteed 5% with cash in the bank. So why is this important to you? As we wrote previously, [it’s the new cost of capital](https://katusaresearch.com/the-real-price-tag-cost-of-capital-101-and-how-to-make-5-2-million/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) and continues to rise higher. This is free, no-risk money so when an investment opportunity crosses my desk, I ask immediately: - **Why is this better than me making 5.15% (annualized) for doing NOTHING?** If your favourite stock or private company isn’t planning for higher rates for longer, they’re going to have a rude awakening. ## **The Fight for your Money: The Cost of Your Capital** Speaking of rates, not since Nokia smartphones dominated the portable device market have we seen 6-month T-Bills yield the same (or more!) than the current S&P 500 earnings yield… In a rising yield/cost of capital type of market, value traps are plentiful. It bears repeating… DO NOT BLINDLY CHASE YIELD. Know what you’re buying, and what the company is doing. Companies are just now starting to see the impact of a rising rate environment. Not to mention, CEOs of many small companies have never seen interest rates this high or run a company in this type of capital-constrained environment. **They’re used to the ultra-cheap ultra-loose financial heroine of the past decade.** **Those days are long gone.** Interestingly, the debt markets are not fully pricing in all the risk at this point, risk is elevated but not near ultra-crisis levels. Below is a chart which shows the yield on High Yield C-rated debt in the United States. You can see the cyclicality of the debt in times of crisis; notably in the tech bubble in 2001 and then again in 2008-2009 during the financial crisis. During uncertain times… ## **High grading the portfolio is my favourite approach** Why take the risk of a speculative junior with no liquidity when I can get a comparable return in a large cap? Or better yet, for the first time in over a decade, wait and get paid over 5% (annualized) [until it’s Alligator Time](https://katusaresearch.com/the-way-of-the-alligator/?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com). We’ve just done an in-depth analysis on one of my favourite energy stocks. It’s the type of monster company that’s difficult to disrupt and will pay me to own it for years to come. But we’ve uncovered a very important technical item that not a single analyst (that we are aware of) has mentioned in any institutional report. We aren’t smarter, but we do have considerable skin in the game, so we are willing to look where others may have not. - **In this month’s edition of my premium newsletter – [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) – we will publish those details.** And we suspect it will be a topic discussed in a few months in institutional research reports. We love being first. ## **Interest in Gold is Picking Up** A few weeks ago, even though gold was well above $1800, the sentiment in the gold sector was absolutely horrible. - **In fact, spot gold was the most oversold it’s been in TEN YEARS.** Things changed fast, when less than a fortnight later, gold ripped $150/oz and entered overbought territory. Gold is responding to uncertainty on the geopolitical chess board and could just as easily spike to new highs, or correct lower. My team and I are prepared for both scenarios and I continue to monitor the entire gold and silver market, looking for alligator-type opportunities in the public markets. Some companies continue to wither lower and lower, as the liquidity factor continues to dry up. Investors are preparing for what could be a unique tax loss season. Corporates are also waiting to see what assets shakeout from the **Newmont/Newcrest** merger. That’s the main reason the market hasn’t seen any mojo in the gold M&A sector. Since Feb 2022, we have been warning of a rise in cost of capital and have largely stayed on the sidelines. The alligator opportunity is coming much closer… And we get right into these options in this month’s [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) KRO. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Debate 10 Years in the Making - URL: https://katusaresearch.com/the-debate-10-years-in-the-making/ - Type: article - Published: 2023-10-20 - Updated: 2023-10-19 - Author: Marin Katusa When two alpha’s in finance lock horns over a major thesis, you know things are going to get interesting and intense. Your entertainment is guaranteed. Especially when both are willing to do so being recorded live. The debate topic is simple: - One believes it’s the *End of America*. - The other believes in the *Rise of America*. For over 15 years, **Porter Stansberry** and I have gone head-to-head on many matters. Neither of us hold back. Neither are afraid to share our opinions. But we are both willing to put money behind our research. It’s what we do, it’s who we are. Porter comes with well-researched data, has built a billion-dollar business and is an incredible mind when it comes to writing and finance. Although I respect Porter’s accomplishments, I also come with well-researched data, have been part of the creation of multiple billion-dollar businesses and have written two bestselling financial books. I don’t fear the accomplished and prepared; in fact, it motivates me. So, when someone pitched the idea of a Porter vs. Marin debate… ## **End of America vs Rise of America** Both Porter and I thought it would be fun, to go at one another, yet another time. And when I reflect over the last 15 years, whether Porter’s going all in on a poker game against me, golf course, or on an investment conference stage; we always have fun and always entertain. But there has been one consistent pattern: The same guy has always found a way to win—because that’s what winners do: they win. I’ve always admired his ability to back his views with hard facts in his articulate, reasoned, and persuasive style. Porter is a much better public speaker than I am. And I trust you will enjoy this debate, because I did. ## **Why you will want to watch this debate…** Porter, who’s been vocal about the “End of America” and I, the optimistic believer in the “The Rise of America,” go head-to-head in a debate that’s as personal as it is enlightening. Our contrasting views, combined with their shared history, make this a must-watch for every reader of *Katusa’s Investment Insights*. **In this rare debate, you’ll hear:** - Why Porter believes **America’s cultural and economic decline is inevitable**. - Marin’s **three pillars that predict America’s rise to even greater heights**. - **The Taiwan situation**: A potential flashpoint or just a strategic game? - How the **US Dollar’s trajectory could shape global politics and investments**. - Personal anecdotes, including old wagers, that add a touch of humor and humanity to the debate. This isn’t just another interview; it’s a front-row seat to a dynamic discussion between two old friends with world-class expertise. It’s the End of America (Stansberry) vs Rise of America (Katusa) debate. ### **[Click here to watch the full interview.](https://www.youtube.com/watch?v=FZnqJIB2aos)** Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Real Price Tag: Cost of Capital 101 and How to Make $5.2 Million - URL: https://katusaresearch.com/the-real-price-tag-cost-of-capital-101-and-how-to-make-5-2-million/ - Type: article - Published: 2023-10-13 - Updated: 2023-10-12 - Author: Marin Katusa There’s no shortage of deals and opportunities that cross our desks at Katusa Research. - A promising copper exploration play in a South American country - A new lithium extraction technology in the USA - Hydrogen technology from a consortium between Japan and Canada But the question I ask immediately is this… **Why is this better than me making 5.15% every month for doing NOTHING?** In a zero-interest rate world, capital is pushed to far reaches of the risk/reward spectrum to earn a return. Now that rates are the highest in a generation, that has flipped in what feels like overnight. As you can see in this chart, we are amidst one of the fastest hiking cycles in modern economic history. As we find ourselves amid historically high interest rates, understanding the concept called **Cost of Capital** has never been more crucial. The US 2-year is currently yielding an astonishing 4.98%, with the 30-year not far behind at 4.69%. For anyone, from the individual homeowner to the multinational corporation, this shift and interest rate has implications. But what does the ‘cost of capital’ truly mean, and why should it matter to the everyday American? The “Cost of Capital” might sound like jargon reserved for Wall Street insiders or those with a finance degree. Yet, at its core, this term pertains to something inherently simple: the cost required to make a particular investment. ## The Real Price Tag of Doing Business Think of Cost of Capital as the price tag of using money. Whether you’re borrowing to buy a house, a business owner taking a loan for expansion, or a massive corporation weighing investment risks, there’s always a cost attached to the capital you use. This “cost” isn’t merely about the actual dollars you’re putting to work. It’s a comprehensive figure that factors in lots of parts. At its foundation lies the risk-free rate—essentially what you’d expect to earn from a completely safe investment, like a US Treasury Note. And right now, every major cashed up investor and corporation are sitting with dilemma. To understand this, let’s travel back a few decades. In a world of relatively stable and low-interest rates, businesses and individuals became accustomed to cheap borrowing. Affordable loans encouraged everything from ambitious corporate projects to the American dream of homeownership. However, as the tides shift with soaring interest rates, this landscape is rapidly changing. Borrowing is no longer as cheap, and the repercussions are felt far and wide. - **For homeowners**, this might mean re-evaluating the decision to refinance or even enter the property market. - **For the rich individual**, this could translate into re-assessing their investment portfolio, ensuring that the returns they’re hoping for align with the increased costs. - **Businesses, both big and small**, might find themselves rethinking expansion plans, scrutinizing the feasibility of projects in light of these heightened costs. - **For large-scale operations, like mines**, the evaluation becomes even more intricate, with global markets, job opportunities, and local economies hanging in the balance. By understanding the intricacies of the cost of capital, individuals and enterprises stand in a position of strength. ## Generational Times for the New *Nouveau Rich* Consider Samantha, a high-net-worth individual with a diversified investment portfolio. In an era of historically low interest rates, Samantha enjoyed impressive returns from equities as companies benefited from cheap borrowing and robust growth. Like many investors, she follows the 60/40 rule and thus she also had a sizable portion of her portfolio in bonds, often considered safer investments. Now, with interest rates on the rise, the cost of capital for companies has surged. This might mean some of the companies she’s invested in could see reduced growth or might have to cut back on ambitious projects. Concurrently, the value of her existing bond holdings has decreased as rates have risen. Now, as a wealthy person, Samantha might frequently engage in leveraging—borrowing money to invest, hoping the returns exceed the interest. With higher interest rates, the cost of such leveraging rises, making it crucial for her to reassess her strategy. **It’s not just about potential returns now, but the increased costs associated with achieving them.** And right now, Samantha could take her $2 million liquid, invest it in [20 year US Treasuries](https://www.cnbc.com/quotes/US20Y?utm_campaign=website&utm_medium=email&utm_source=sendgrid.com) paying 4.89%. Then wake up in 20 years with her kids entering college and over $5.2 million in the bank. Every decision a rich investor like Samantha makes is pitted against this. That’s the cost of her capital right now. ## Large-Scale Operations: The Mining Example On a grander scale, consider a multinational mining corporation, SilverRock. Such a company requires significant capital to fund new projects, often relying on a blend of equity and debt. In a world where capital is costly, project evaluations become stringent. Imagine SilverRock evaluates a new mining site. The potential yield of the mine looks promising, but the upfront costs are hefty, not to mention in an inflationary world, the true operational costs have also soared in recent years. In times of low-interest rates, SilverRock could have taken on debt relatively cheaply to fund the project, expecting that the returns from the mine would easily outpace the interest. **Now, however, with interest rates hovering around 5-6%, the scenario is different.** This is because, even a multinational company like SilverRock will be paying upwards of 10% or higher interest rates on newly issued debt. Relative to the 3-5% money just a few years back, this has a dramatic impact on project cash flows. The project’s feasibility would need rigorous reassessment. - **Will the yield from the mine, after factoring in the higher borrowing and ongoing operational costs, still promise a good return on investment?** It’s not just about the raw potential of the mine anymore; it’s also about the cost of the capital required to tap into that potential. Moreover, the broader economic implications of higher interest rates could mean reduced demand for commodities, as businesses scale back expansion plans. If SilverRock anticipates a drop in silver demand, it might decide that the new project isn’t viable, regardless of the site’s potential yield. These are exactly the numbers and mindset we run simulations, cash flow forecasts and analysis on – leaving no stone unturned. We’ve just done a deep dive on a critical energy company – and going into detail on another one – I want to add to my portfolio, based on higher interest rates and the cost of capital. You can see my method of picking companies and adding them in my premium research service – *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*. The Cost of Capital is critical in this new era of interest rates. And many wealthy investors won’t move a muscle or pay you any attention, until they know they’re getting more than 5% return. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # I bet you don’t know Scott - URL: https://katusaresearch.com/i-bet-you-dont-know-scott/ - Type: article - Published: 2023-10-06 - Updated: 2023-10-05 - Author: Marin Katusa Dear Reader, You’ve probably never heard of him. But he’s in what I call the “inner circle” of the uranium sector. No, he’s not some banker pitching deals. He isn’t a rig-hand tossing core in the Athabasca Basin, nor a government bureaucrat going through the motions on permitting applications. **Scott Melbye** is the CEO of **Uranium Royalty Corp** **(UROY, URC.TO)** and is one of the most powerful players in the uranium sector from purchases of tens of millions of dollars of uranium – at a time. **And he’s one of the main sources of capital to operating and developing uranium mines.** He’s probably the only person in the market who’s been on both sides of what I’ve called the *Colder War*… When Scott talks, the industry listens, and for a good reason. Scott was the president of Cameco USA the largest uranium producer in the Western world. He was also the advisor to the chairman of Kazatomprom, which is the largest producer of uranium in the world and also worked with the Russians. In this tight-knit sector, I don’t think you will find an executive more rounded and connected on the East & West way of doing things in the uranium sector than Scott. With 39 years of experience in the global nuclear and uranium mining industries, Melbye’s profound insights and expertise have consistently positioned him at the forefront of the industry’s seismic shifts. Why should you sit up and take notice? Scott has led UROY to incredible value creation for shareholders – **Uranium Royalty Corp (UROY, URC.TO) **by securing over 1.8 million pounds of physical uranium and royalties on operating mines. **He’s taken the company quietly up nearly 300% from its IPO, and we believe this is just the start.** Apart from his stellar resume and record in navigating the choppy uranium for years, his intimate knowledge of supply, demand, and the nuanced dynamics of the uranium market is unparalleled. We recently had the pleasure of hosting an interview between Scott Melbye and myself, Marin Katusa. There’s no wasted time, we want to get right into the details and behind-the-scenes. Here’s a glimpse of what you’ll uncover: **1. Market Transformation**: Dive deep into how 2023 has transitioned the uranium market from inventory supply-driven to production-driven, a scenario unseen in decades. **2. Speculation vs. Reality**: Scott discusses the shift in the uranium market from being driven by excess inventories to one that is production-driven, largely due to various forces absorbing the excess, notably speculative interests like Sprott, Yellow Cake, and ANU, as well as several other entities. This shift hasn’t occurred in decades. **3. Global Demand Spike**: Utilities with reactors have inelastic demand for uranium; they need it irrespective of price. Discover how countries like Korea and global RFPs are heralding a new age of “have-to” uranium buyers. **4. Price Projections:** Melbye suggests that the current uranium price is not prohibitive for these utilities, and prices could potentially increase further without hurting the viability of nuclear power. **5. The Value of Uranium Royalty Corp**: Learn straight from Scott’s mouth about UROY’s strategies of purchasing uranium below production costs, and their aggressive pursuit of growth opportunities. **6. The Future of Uranium**: Decipher the bullish stance on uranium as an irreplaceable energy asset, driven by stable, secure supply needs and the advent of innovations like Small Modular Reactors (SMRs). Don’t miss this riveting discourse that not only sheds light on the current uranium climate but also outlines its future trajectory. If you’re keen to stay ahead of the uranium curve, this is one interview you can’t afford to miss. ** ** [**Watch the Full Interview Here**](https://youtu.be/9Pb68clYvck) Regards, Marin Katusa **IMPORTANT DISCLAIMER & DISCLOSURES** **Investing in stocks is HIGH RISK. You could lose All of your investment.** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. **Uranium Royalty Corp has sponsored this report. ** The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. Katusa Research, its owners, directors, and employees are also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED: ** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from Uranium Royalty Corp and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the companies, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. Katusa Research, Marin Katusa, and its directors, employees, and members of their households directly own or may own shares of Uranium Royalty Corp (UROY/UROY.TSX). Therefore, Katusa Research is extremely biased. Measures are in place such that no shares will be sold during the active awareness campaign. **HIGH RISK: ** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE: ** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. **FORWARD-LOOKING STATEMENTS: ** Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. Katusa Research does not undertake any obligations to update the information presented or to ensure that such information remains current and accurate. --- # A Run on the Uranium Bank Has Begun - URL: https://katusaresearch.com/a-run-on-the-uranium-bank-has-begun/ - Type: article - Published: 2023-09-29 - Updated: 2024-06-21 - Author: Marin Katusa In 2016, a member of the California State Lands Commission began advancing an effort to shutter the last remaining nuclear power plant in the state: Diablo Canyon. Diablo is the single-largest source of electricity in California, providing nearly 10% of its power. Four years later, the man who led the charge against Diablo Canyon was leading the state—Governor Gavin Newsom. And the political environment surrounding nuclear had, at that time, completely and irrevocably shifted. Facing pressure from scientists, celebrity activists, and multiple former U.S. energy secretaries—as well as devastating power blackouts… The governor quickly changed his stance. In fact, Governor Newsom has now become a vocal **advocate *for* **Diablo Canyon. **He has introduced legislation to keep it operating.** **And he plans to get part of the $6 billion in federal funding available to ensure it does.** The cosmic shift in California is reverberating across the U.S.—and the entire world. Which is why *thirty* countries are considering starting a new nuclear energy program. **Consequently, a nuclear renaissance is unfolding globally:** - **Canada** is set to construct the world’s largest nuclear plant. - **Sweden** aims for 100% nuclear energy with 10 new reactors. - **Japan** is reviving its nuclear program post-Fukushima. - Other nations, including India, France, the UK, and Russia, have ambitious nuclear expansion plans. India is planning 9 new reactors, France up to 14, the UK 24, and Russia 29. The list goes on. **Today, more nuclear reactors are being built than any year since 1992.** All of that has increased demand for uranium, but it’s also accidentally created something much bigger. ## **A Source of Demand That NEVER EXISTED Before** It’s one that’s going to completely change how the uranium market works. The prospect of unquenchable global thirst for uranium has invited speculators into the uranium market. A handful of them are intent on taking every pound of available uranium off the market in order to force a long squeeze—and make a huge profit in the process. One of those speculators is Sprott, Inc., which in July 2021 bought a physical uranium holding company and rebranded it as “**SPUT**”: the Sprott Physical Uranium Trust. SPUT immediately went on a buying spree, mopping up existing uranium inventory. In fact, it bought more uranium than the original company had bought in 16 years… in just 4 months. Total pounds of uranium the Sprott Uranium Trust holds to date is 61,845,847 pounds of uranium. - **This single trust is buying more uranium than every nuclear reactor in the United States, combined.** But here’s the real kicker, SPUT’s rules force it to buy uranium at spot prices every time its stock trades at a premium to net asset value (NAV). Every time SPUT goes above NAV, the intent is that the trust buys more uranium at spot pricing. - **That sucks up supply, which moves the price of uranium higher.** - **That brings in more investors, and SPUT buys more uranium.** But that intent changed on September 5th, 2023. Something that has never happened, ever, in the spot uranium market has happened since September 5th, 2023. On September 5th, 2023 Sprott Uranium Trust (SPUT) filed to raise $125 million. SPUT is now sitting on just under USD$68 million cash and bought ZERO pounds of uranium since their announcement on September 5th, 2023 up until Thursday, September 21. **SPUT was only able to secure 100,000 pounds on Friday, September 22nd, and nothing since.** SPUT is sitting on enough cash to purchase almost 1 million pounds. Prior to September 5th, 2023, SPUT has purchased 2,576,857 pounds of uranium. With $68 million in cash, SPUT has purchased only 100,000 pounds of uranium, but the whole point of raising cash since September 5th was to buy more uranium. The price of uranium during that time has literally moved from $61.25/lb the night before SPUT announced their funding to $72/lb as of close Thursday, Sept 28th. The spot price of uranium has increased over 15% in less than 30 days without a single pound purchased by SPUT from the spot market. **But wait there’s more…** There is a new fund that will raise $500 million dollars and has already closed their first tranche of $125 million from their cornerstone investor that intends on competing with SPUT to buy uranium in the spot market. But for utilities, it’s not necessarily the price that’s important. It’s the mere *availability* of uranium, especially if companies like SPUT keep taking it off the market. Because SPUT’s current structure does not allow these pounds to be sold. In other words, once they’re bought, they’re permanently (in theory) erased from supply. For countries with nuclear power, that’s a massive problem. ## **The Hair-Trigger Metal** The gap between the amount of uranium miners produce and what reactors need continues to widen rapidly: In 2022, coverage hit another record low. Only 74% of uranium demand was actually produced. - **The cumulative uranium supply/demand gap from the last decade just hit 100,000 tonnes (220 million pounds).** That’s 150% of yearly demand, and it’s growing larger faster every year. And now SPUT (and other investors) will be taking uranium off the market, making it unavailable for use. For years, “secondary supply” has been used as a stopgap measure. - ***RELATED NEWS: *****You can see the latest ****[uranium prices here](https://carboncredits.com/uranium-prices-today/).** The secondary supply is miscellaneous uranium inventory held by utilities, fuel cycle companies, and governments. But as the gap has widened, secondary supply has dropped precipitously. It’s down to 10,000 tonnes a year—enough to cover about 60% of the current gap. **And miners have stopped investing in finding new uranium altogether. **Exploration expenditures plummeted more than 80% from 2011–2021. **By 2030, low investment in new mines is projected to cut uranium supply in *half*.** Meanwhile, the World Nuclear Association is predicting nearly a 100% increase in uranium demand by 2040. Even More shocking is the World Nuclear Association **does not** include a single pound in their projections from small modular reactors (SMRs) demand. Why doesn’t the WNA include a single pound of demand from the future demand from SMRs in their demand projections? Because not a single independent SMR developer is part of the WNA (paying member) so the brain trust at the WNA doesn’t recognize the SMR future demand. SMR demand is real and expect the independent SMR developers to do to the WNA nuclear developers what Tesla did to the traditional car manufacturers: kick their asses. In short, while nuclear is taking off, the uranium market could set itself up for a *severe, decades-long deficit*. ## **A Run on the Uranium Bank HAS BEGUN** Now, with no new major mines coming online within the next 24 months… Secondary supply drying up… Hardcore production discipline by miners… investors like SPUT grabbing new uranium off the market… and SMRs going unnoticed in the nuclear sector by associations like the WNA… **Utilities are suddenly facing unprecedented uncertainty about future supply.** And if there’s one thing a nuclear plant operator doesn’t want to hear, it’s that there’s no uranium available. **There are no substitutes for uranium.** Every nuclear plant owner, operator, and developer in the world is beginning to realize that they need to buy uranium *before there’s none to buy*. “*We’re in inning two—and no more than that… **and now we have a bit of a crisis setting in**.” – SVP of Cameco* That transforms this from a security-of-supply issue into a *major* energy security issue. The last country to try to procure uranium might get caught without their largest source of power. So the biggest nuclear powers in the world—France, the U.S., Russia, and China—are taking ruthless steps to ensure uranium access for their nuclear fleets. **Whoever can provide that access stands to become very, very wealthy.** In less than 72 hours you’re going to find out one of the best ways to play it. Regards, Marin Katusa and the Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Energy Wars: Silicon Valley, A.I. and U - URL: https://katusaresearch.com/energy-wars-silicon-valley-a-i-and-u/ - Type: article - Published: 2023-09-26 - Author: Marin Katusa Dear Reader, Most people think that Bill Gates left his full-time role at Microsoft in 2008 to become a philanthropist. He did, but that’s not the full truth. That same year, he started a new company completely unrelated to computers. It was called Terrapower, and its lofty goal was to revolutionize nuclear energy in the U.S. Five years later, PayPal and Palantir cofounder **Peter Thiel** and OpenAI founder **Sam Altman **(The Godfather of ChatGPT) led a massive initial investment in another new nuclear company, Helion. That same year, Sam also funded and became the chairman of Oklo, which aimed to commercialize nuclear energy using small, mass-produced reactors. So why have three of the smartest, wealthiest, most successful men in Silicon Valley decided to branch out from computing and into nuclear—especially if nuclear is “dead”? What did they see coming a decade ago that the rest of us couldn’t? In a picture, this: For half a century, the amount of computing power required to train AI systems doubled every twenty months—roughly following Moore’s Law. But in 2010, without explanation, that “law” *broke*. The amount of computing power used to train AI is now doubling *every six months.* **In a little over a decade, the amount of computing power used to develop AI models has grown by *a factor of 10 billion*. **And it shows no signs of slowing down. That’s why Sam Altman says AI is going to take “a lot, lot” of energy to keep developing. In short: AI is going to take *far* more energy than you can imagine. And that’s what Bill Gates and Peter Thiel also saw coming. ## New Powerhouse on the Block ***Note**: You’ll want to re-read this section three times to see where we’re headed.* To see how much energy we’re talking about, look at the world’s highest-capacity supercomputer, Frontier, which came online in 2022. It’s rated at **1.1 exaflops**, which means it can perform 1 followed by 18 zero operations *in a single second*. That’s the kind of computing power now required to develop AI. Frontier is the most energy-efficient supercomputer on the planet. But it still requires 29 MW to run—or as much power as 30,000 homes. To put it another, Canada’s third-largest copper mine runs on 60 MW of power. And the development of the next biggest supercomputers is progressing at a breakneck pace: - Intel’s Aurora supercomputer finished construction in June 2023. It’s twice as powerful as Frontier (and takes twice as much power). - Meta expects to complete its AI Research SuperCluster later this year, which will be capable of **5 exaflops**. - And the Department of Energy requested bids for building a **20 exaflop** supercomputer by 2025. Intel has already launched its so-called “Zetta Initiative.” It plans to build a zettascale computer—**1,000 times as powerful as the most powerful computer that exists today**—by 2027. ## There’s Just One Huge Problem… If a single zettascale computer were built using today’s tech, it would require 21 nuclear power plants to run. For context, that’s as much energy as is used by all the data centers in the U.S. today… combined. *“Power is the number one challenge that we have to continue the dramatic increases in performance and capability that we have seen.” *– AMD CEO Lisa Su Fortunately, efficiency is improving alongside computing power. Even so, at the current rate of growth, a single supercomputer will still take half a nuclear power plant to run in 2034. The goal is to get a zettascale computer down to 100MW of power consumption, which is roughly the output of a 21st-century small modular nuclear reactor. It’s also the power consumption of a major mine, oil refinery, and chemical refinery (I’m connecting the dots for you on cross-sector potential) That’s *exactly *what Oklo, Helion, TerraPower, and others are preparing to provide: small nuclear reactors, built specifically to power supercomputers so that AI can transform our world. And they won’t stop at just supercomputers. Super mines, super refineries, and super sites require loads of reliable clean baseload power. And they’re coming faster than you think. ## A Chain Reaction with World-Changing Consequences Because for Gates and Altman, Chat-GPT was only one part of a two-piece puzzle: *“The two most important inputs to a really great future are abundant intelligence and abundant energy.” – *Sam Altman And for the past decade, they’ve been quietly working hard on *both*. It’s just that developing new nuclear reactors is slightly harder than creating generative AI. But they’re finally ready to go mainstream. Take Sam Altman’s company, Oklo, for example. Oklo’s first reactor is scheduled to be approved next year—and to be generating electricity by 2027. The specs are revolutionary for nuclear: - Expected cost of $60M per plant - A construction time of less than one year - Land footprint of under two acres - “Walkaway safe” plant technology **Oklo already has nearly fifty more nuclear plants in the pipeline**—half as many as the U.S. has built in the last century. It’s coming just in time since Open AI (in which Microsoft has invested billions) desperately needs cheap power. Sam Altman himself has publicly stated that “the compute costs [of Chat-GPT] are eye-watering.” And Microsoft needs more power than it can possibly get. In fact, Microsoft has said it could need more than 30 nuclear reactors just for its data centers. Once the smaller reactors have been proven for industry and defense purposes, they’ll be built out at a mass scale to power small towns. Fortunately, Sam Altman and Bill Gates are not in this alone. A dozen other visionary tech billionaires, including Jeff Bezos, Jack Ma, and Reid Hoffman, have all made huge bets on nuclear. The first small nuclear plant from Jeff Bezos’s company, General Fusion, is expected to begin generating power in 2025. Imagine what will happen when small nuclear reactors are manufactured at Amazon’s scale—first to power their data centers and AI, then to power your home as part of your Prime subscription. PAAS: Power as a Service! As quickly as Chat-GPT spreads through the world, AI will enable safe, cheap, nuclear energy. Only one tiny thing is standing in its way. ## The Atom That Makes A.I. Possible While advances in nuclear technology, necessitated by AI, will bring massive numbers of nuclear plants *online*… Uranium producers have deliberately taken massive amounts of uranium *offline*. Which means that the limiting factor now for both AI and nuclear is a single atom: uranium. Without uranium, nuclear reactors do not run and AI does not get developed. Gates’s TerraPower found that out the hard way when the war in Russia broke out. Russia is one of the only providers of the type of uranium TerraPower planned on using. So just as the company got a $750 million cash injection to build a reactor, it found that it would be incapable of buying any fuel for it. Which is why Bill Gates is already calling for a U.S.-based uranium supply. And that’s why part of Oklo’s stated mission is to “revitalize domestic nuclear fuel manufacturing.” **It won’t just be a couple of nuclear startups bringing uranium production home.** Because at the same time as nuclear is going mainstream in the U.S., dozens of other countries are restarting their own nuclear programs. That makes uranium independence a matter of national security. So the United States will take every step necessary to secure a domestic supply of uranium. In fact, on February 2, 2023 Senator Joe Manchin introduced Bill S.452… **And if passed in the Senate, would require the Secretary of Energy to establish a Nuclear Fuel Security Program.** Expect this Bill to pass the Senate in late November 2023. When the richest, smartest minds in the world—and the U.S. government—begin quietly moving in a new direction, it often pays to move with them. There’s something big brewing that we’re working on releasing to you… More on that in the coming days. Regards, Marin Katusa and the Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Black Swan Event about to Spike Uranium—Again - URL: https://katusaresearch.com/the-black-swan-event-about-to-spike-uranium-again/ - Type: article - Published: 2023-09-22 - Updated: 2023-09-21 - Author: Marin Katusa Twice in the past fifty years, the price of uranium has shot up **600%**. Both were due to a “black swan” event—one that cannot be predicted, but completely alters the landscape of an industry. **Another such event is taking place *right now*.** **And it’s likely to have a similar effect on the price of uranium.** To understand it, you need to know what caused the first two “black swans.” The first occurred in the mid ‘70s, when the global nuclear reactor buildout began to gain momentum and go global. Nuclear reactors require a lot of uranium to start up and operate, and it can take more than a decade to get a new uranium mine online. Utilities became extremely concerned that they wouldn’t be able to actually *run* their expensive new reactors when they were finished. And it didn’t look like the world would slow down building new nuclear reactors any time soon. In just four years, a run on uranium took it from $6/pound to $42/pound—or over $200/pound in 2023 dollars. Of course, every boom has a bust, which is exactly what the Three Mile Island accident did to the uranium market. Sentiment toward nuclear changed, new construction dried up, and the price of uranium fell… and fell… and fell some more. By 1990, it was sitting right back at $7/lb., and utilities were sitting on huge stockpiles of uranium. And uranium producers were sitting on huge losses from mining. So they devised a slick solution: cut production. *A lot*. For fifteen years, mine after mine was taken offline to create an artificial uranium shortage. From 1980–1995, uranium production was cut by more than 50%. Years of overproduction seemingly took forever to use up. By 2001, uranium was back at… still $7/lb. But in early 2006, the price finally broke free. Black Swan #2 took the form of a single busted pipe at an unfinished uranium mine in central Canada called Cigar Lake. ## **The Wrench Twist Heard ‘Round the World** Cigar Lake held the largest reserve of high-grade uranium, *at* *100x the average grade*, anywhere in the world. - **When it was complete, Cigar Lake was intended to produce more than 10% of the world’s supply.** But when a small standpipe sprang a leak, two workers trying to fix it accidentally broke a valve completely off. The resulting gush of water couldn’t be stopped, and the mine flooded—several times. Mine development couldn’t resume for *four years.* **Pay attention to what happened next… because it’s happening again.** The existing mines that were built, like Cigar Lake, are not meeting production guidance because of equipment reliability issues, supply chain delays, and lack of trained personnel. Which all contributed to lower uranium production than expected. Supply issues are happening across all mines globally. - **The mere *possibility* of a tighter supply,** - **Combined with planned nuclear construction around the world, sent shockwaves through the entire uranium market.** Producers, wanting to get more money for their metal, held onto their uranium as the price rose. Utilities, the primary buyers of uranium, grabbed as much as they could—again afraid of not being able to buy enough inventory to keep reactors running. **Spot prices spiked from $20/lb. to $140/lb. in early 2007— a second 600% gain.** But ultra-high uranium prices led to historically high exploration and production, and the price began to drift back to normal. Then Fukushima happened in 2011, and it was Three Mile Island déjà vu. As major developed countries like Japan and Germany pulled away from nuclear altogether, producers just kept producing uranium. As a result, the price of uranium fell to one of the lowest inflation-adjusted levels in history. And it stayed there. The low price forced hundreds of mining companies into bankruptcy and others to completely exit the uranium sector to stay alive. The number of uranium miners listed on the ASX and TSX cratered—from 585 to about 50. More than 70% of the market value of major listed producers was erased. ## **The OPEC of Heavy Metal Throws Its Weight Around** So uranium companies returned to their old strategy: “production discipline.” In short, that means keeping uranium in the ground until it becomes valuable again. In 2013, the largest producers of uranium began to take mine after mine offline. Then the unthinkable happened. You see, about 40% of the world’s uranium is mined in Kazakhstan, a former Soviet state. That makes Kazakhstan effectively a single-member OPEC; their decisions around uranium can singlehandedly dictate its price. And in January 2017, Kazakhstan cut production by 10%. **The rest of the world got the signal…** A few months later, the McArthur River mine in Canada shut down—and 15% of global uranium production went offline. Cameco announced that the suspension was “for an indeterminate period” due to low uranium prices. **By 2018, more than 50% of global uranium demand** **had been cut from production.** And a single company had removed more than *twice* the annual global demand: *“Since 2016, **we have removed more than 190 million pounds of uranium from the market***.” – Cameco president and CEO Tim Gitzel Then came another twist: COVID. In March 2020, production at Cigar Lake (the formerly flooded mine) was suspended. The next month, Kazakhstan reduced operations at *all* of its uranium mines. To be clear, the shutdowns had little to do with COVID. Otherwise, mines would have come back online the next year. Instead, global uranium production in 2022 was only *3% *higher than in 2020. **The shutdowns were all about further shrinking supply so uranium miners could eventually capitalize on skyrocketing uranium prices.** In fact, of the top seven uranium-producing countries in the world, five of them cut production between 2021 and 2022. - In 2022, Cameco stated: “We are continuing with *indefinite* supply discipline.” The uranium market is rapidly shooting from oversupplied to severely undersupplied . . . and no new supply is coming online soon. **“*For some time now we have said that the uranium market is as vulnerable to a supply shock as it has ever been, due to persistently low prices*.”** – Cameco president and CEO Tim Gitzel Utilities are just beginning to notice that there’s very little uranium to go around. Even the COO of Kazatamprom, Kazakhstan’s nationalized uranium producer, has gone on record saying that there simply isn’t enough uranium for the next contracting cycle. If you think you’ve seen all of this before, it’s because you have. The first spike was caused by a run on uranium by utilities. The second was an accidental removal of uranium production from the market. **This time, it’s *both*.** Because mine operators have already deliberately taken massive production offline—*and* utilities are just beginning to make a run on uranium. History doesn’t repeat itself—but it certainly does rhyme. So you know what comes next. We’re one busted pipe away from $150/lb uranium. - **But there’s a THIRD EVENT unfolding that no one could have predicted or anticipated—and it’s one that will irrevocably alter the course of global uranium demand.** More on that very, very soon. Regards, Marin Katusa and the Special Situations Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Thank You Page Uranium Rich Dad - URL: https://katusaresearch.com/thank-you-page-uranium-rich-dad/ - Type: page - Published: 2023-09-18 - Updated: 2024-01-26 - Author: Marin Katusa # **Subscription Confirmed** Your email has been added to our list. A copy of [***Meltup Uranium 101 and a Nuclear Energy Primer***](https://katusaresearch.com/wp-content/uploads/2023/09/Meltup-Uranium-101-and-a-Nuclear-Energy-Primer_NU.pdf)*** ***has been sent to your email. You can also view your copy right now by clicking the image below. In the meantime, learn how [you can get FULL access](https://join.katusaresearch.com/richdad-special-offer/?sl=richdad-monthly) to Marin Katusa's PREMIUM research, an offer **exclusively for Rich Dad members**. --- ### "**Marin **is in an enviable position. He is the right person, in the right place, at the right time. His **years of experience in the world of resources**, give him an edge." *- Robert Kiyosaki* [Share 0](javascript:void(0)) [Tweet 0](javascript:void(0)) [Share 0](javascript:void(0)) --- © 2023 Katusa Research. All rights reserved. [Privacy Policy](https://katusaresearch.com/privacy-policy/)| [Legal Information](https://katusaresearch.com/terms-conditions-use/) --- # Gold’s Stay at the Hotel California - URL: https://katusaresearch.com/golds-stay-at-hotel-california/ - Type: article - Published: 2023-09-15 - Author: Marin Katusa *“You can check-out any time you like But you can never leave”.* When Don Henley and Glenn Frey wrote those famous lyrics, little did gold investors think it would be their problem. Like a guest at the infamous Hotel California, gold investors find themselves trapped between a rock (paper) and a hard place (liquidity). Despite being able to “check-in” with ease, escaping this hotel might be trickier than most investors anticipate. - **In this volatile landscape, gold funds wane and lawyers prioritize protection over profitability.** - **Investors, once optimistic, now exhibit caution and are often “frozen”. And the flow of funds seems more ebb than flood.** But what lies beneath this shift? ## **The Liquidity and Volume Problem** In short, gold and nearly the entire resource sector is suffering a problem with liquidity. And more importantly, there are no large new gold funds being created. In fact, the large gold funds are seeing net outflows. This means that the funds are selling to meet redemptions by their unit holders… and any deal the fund wants to buy means they are selling what they already own. Put simply, the generalists are not buying gold stocks. Below is a chart which shows the net creation and redemption of ETF units aka “fund flow” for major gold miner ETFs. As you can see, fund flow into the sector peaked in mid-2016 and since then, more money has come out of the sector than gone into it. With the lack of fund flow in mind, let’s examine the performance of the mining sector across different segments. Perhaps the most telling bearish signal is the sheer number of companies that are trading below their 200-day moving average across most industry segments. ## **Equity Financings: A Lens Into the Appetite for Gold Stocks** One of the best ways to gauge market sentiment and investor optimism is through financing activity. Companies across all sectors are continuously trying to grow, build and acquire new assets and talent. The mining sector is no different, especially when considerable growth comes through mergers rather than internal organic growth from operating sites. This means the companies need to raise cash to trudge on. Below is a chart which shows the total equity financings completed by companies in the gold sector over the years. **Total deals completed this year are roughly half of the previous two years and significantly down since the onset of QE post GFC in 2008.** Yet exploration and capex programs have gotten more expensive – as have lawyer and accounting fees. And that means even fewer dollars are going to value creation. ## **Gold Equities: You Can Check In, But Can You Check Out?** I have written before on [the secret killer of the mining sector](https://katusaresearch.com/dark-market-secrets/?utm_medium=email&utm_campaign=website&utm_source=sendgrid.com), which is illiquidity. Misunderstood by most investors, illiquidity can destroy returns. How so? A stock is illiquid when there is minimal trading activity relative to the company’s size and number of free trading shares. - **If a stock is illiquid it makes it difficult to sell shares once purchased, simply because there are few buyers.** - **This situation magnifies when there is negative news and all existing shareholders run for the exits and crater the stock.** Next is a chart which shows the *dollar volume traded* for a group of large gold focused companies, that are listed on major exchanges in Canada and or the USA. Dollar volume is calculated as total number of shares traded multiplied by the average share price of the day. In recent years you can see it too has been sliding lower, indicating less activity and less investors bringing hard dollars into the sector. The steady decline is noticeable even in these large-cap stocks that generate billions in revenue and have research coverage by many institutions and are held by ETFs. ## **Before you Invest: Staple This to Your Desk** Our office sees countless resource deals every week from companies looking for financing to companies looking to go public and everything in between. One of the first questions we ask ourselves is “Will this company have a liquid market post-financing?”. You might have excellent project economics… you might have a brilliant and illustrious management team leading… But if you don’t have anyone in the market looking at your stock, do you even exist? As an investor, you must be mindful of shareholder turnover and liquidity in any company you buy. Or else you’ll find yourself in a situation where you can check in any time you like… But can you leave? Regards, Marin Katusa P.S. Every month my team and I publish a detailed look at what I’m investing in and which resource sectors are catching my attention. It’s called **Katusa’s Resource Opportunities** and [you can learn more right here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_source=sendgrid.com&utm_medium=email&utm_campaign=website). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Nuclear Nightmare: America’s Achilles Heel - URL: https://katusaresearch.com/nuclear-nightmare-americas-achilles-heel/ - Type: article - Published: 2023-09-08 - Updated: 2025-09-10 - Author: Marin Katusa Dear Reader, A seismic shift is underway in America. It’s a realignment of the world’s power structure that will unfold around the world. You’re probably already aware of it, but just can’t quite put your finger on the problem, or the solution. **It’s about who has – and will have – actual power… and who doesn’t.** Everyone is talking about wind, solar, and electric cars. But the dark horse of the energy race is something we’ve known about for centuries yet misunderstood just as long. Little did German chemist Martin Klaproth know, while tucked away in a dimly lit lab in 1789, that he’d discover the commodity that would be the key element to the world’s biggest power struggle when he stumbled upon a curious element. If he were alive today, he’d be shocked that this “curiosity” would go on to shape wars, fuel the most catastrophic weapons, and yes, revolutionize clean energy. Uranium is feared and misunderstood yet holds an almost otherworldly ability for both destruction and creation. Could the unthinkable happen in the US by 2030? Could America be crippled from a catastrophic shortage of efficient, stable, baseload power? **It’s a problem the top 0.01% are well aware of and doing something about.** You might not know this (Katusa subscribers do as we’ve written about this for years), but Bill Gates has become a cornerstone investor in the next generation of nuclear reactors. Many silicon valley investors are following suit, like Sam Altman, the founder of ChatGPT, Peter Thiel and even Jeff Bezos. Venture capitalist Marc Andreessen even called for “1,000 new state-of-the-art nuclear power plants in the U.S. and Europe, right now.” Do you think big tech would put significant money if they didn’t believe in the long-term profit thesis and potential of nuclear energy? Of course not. ## If it Bleeds, it Leads… The Three Mile Island incident cast major doubts on the nuclear industry. And then Fukushima in 2011 all but turned out the lights for nuclear power, causing the price of uranium and the uranium companies’ stock prices to fall hard. The public tuned out of nuclear. And as expected, if it wasn’t popular, the politicians would avoid nuclear as well. Even though it provides almost 20% of America’s baseload electricity. But that all changed when America and Europe were hit with continuous rolling blackouts and baseload power problems. Places like Texas, California, and even Germany and Japan felt the blackout blues. And the Texas grid was strained to the maximum again this week. In early 2021, amidst historic power shortages, Japan’s Energy Minister finally reversed course on the nuclear-free policy. “***Nuclear power will be indispensable***,” he said. A year later, the Prime Minister of Japan called for the “maximum use” of nuclear. And he ordered the government to restart idled nuclear plants at an accelerated rate. Out of Japan’s 36 operable nuclear reactors, 10 have already been restarted. Sixteen more are slated to be restarted by the end of 2023, and two new reactors will be brought online. ## The Harmony Project – Carbon Free Electricity Accelerating the nuclear U-turn was The Harmony Project, a global initiative by the World Nuclear Association (WNA) to ensure that nuclear energy plays a vital role in achieving the goal of a decarbonized energy mix by mid-century. The main target of the Harmony Project is for nuclear energy to provide at least 25% of global electricity by 2050. This means the construction of approximately 1,000 gigawatts (GW) of new nuclear capacity or about 1,000 nuclear plants. Right now, 1 in 5 homes in the USA are powered by nuclear and government officials want that much, much higher for several reasons. - **Emission Killer**: Unlike fossil fuels, nuclear reactors produce zero greenhouse gases during operation. In 2020 alone, U.S. nuclear power plants avoided emitting 471 million metric tons of greenhouse gas. That’s like taking 100 million cars off the road. - **Energy Density Like You’ve Never Seen**: One uranium fuel pellet creates as much energy as one ton of coal, 149 gallons of oil or 17,000 cubic feet of natural gas. - **The Baseload Powerhouse**: Your favorite renewables? They’re fair-weather friends. The wind stops, and wind energy collapses. Clouds roll in, and solar is out of commission. Nuclear is the 24/7, rock-solid, Herculean energy provider the world desperately needs. Nuclear power has the lowest land-use of any electricity production source, generating the most electrical capacity per acre. You could add up EVERY single other power source, then multiply by 3, and nuclear power is still in first place for land use efficiency. You can’t say the same about hydro, or wind, or solar. ## The Great Nuclear Race: China and Russia If you’re still thinking the West controls the future of nuclear energy, you need to shift your gaze eastward. Two countries are moving at the speed of light to keep their lights on. About 67% of new nuclear reactors to be completed by 2030 are from China or Russia. In fact, China alone has: - 24 reactors *under construction* - 44 reactors *planned* - 154 reactors *proposed* China has more reactors planned than almost every single other country, combined. Of the nuclear reactors that started construction since 2017, 87% were designed by either China or Russia. Russia’s state-owned Rosatom has $133 billion in reactor export orders—more than fifty reactors in nineteen countries. China is planning to export thirty of its reactors by 2030, netting it $390 billion. The U.S.? Zero. China’s plan to increase its nuclear capacity from 51 GW to 150 GW by 2030 will alone hike up global uranium demand by 33% annually. Let’s add India, with its nine new reactors, Japan’s reinvigorated nuclear program, and France’s ambition to build 14 new reactors to the equation. **In total, we’re staring down the barrel of 90 new reactors and 300 more on the drawing board.** Uranium is to nuclear energy what oil is to fossil fuels: indispensable. But here’s the twist. Extracting uranium is a geopolitical and bureaucratic nightmare. Worse still, secondary supplies—the leftovers, the safety nets—are running dry. The “Megatons to Megawatts” program that once saved us? It’s history. Do you really think Putin will get rid of his nuclear arsenal and down-blend the uranium in the nuclear warheads to provide cheap power to the United States and Western Europe? **But wait, there’s more…** Recently, Xi Jinping and Vladimir Putin, after meetings in Kazakhstan and Uzbekistan, cemented a “no-limits” friendship, essentially agreeing to take control of global uranium supply. These nations now control a staggering 74% of global uranium, leaving Western countries, including the United States, in a vulnerable position. ## American Power Crossroads On one side lies the promise of a clean, limitless energy future and a potentially lucrative investment opportunity. On the other, the ghosts of nuclear disasters past and the labyrinth of geopolitical issues loom large. It’s a high risk, high reward, and the clock is ticking. Here’s the harsh truth: Investments in new mines have fallen off a cliff and there hasn’t been a major new mine put into production for many years. Uranium mine development takes a minimum of 15 years, and let’s not even talk about milling, converting, enriching, and fabrication. Translation: The supply and demand gap is locked in until 2030. No turning back. The nightmare scenario is unfolding. As the old adage goes, “Fail to prepare, prepare to fail.” This is the Unthinkable Energy Crisis, and it’s unfolding before our very eyes. It’s not about “if” anymore; it’s about “when.” Regards, Marin Katusa P.S. You probably want to avoid investing in uranium where there is a French Embassy present. 😉 **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # China in Trouble - URL: https://katusaresearch.com/china-in-trouble/ - Type: article - Published: 2023-09-01 - Updated: 2023-08-31 - Author: Marin Katusa This might come as a surprise to some of you… Yet as someone living in Vancouver, Canada, the signs have been there for years. Lately, China has been seeing very large capital outflows out of its economy. Over the past several months, foreign investors have been leaving in droves: As the chart reveals, China has been steadily increasing its share of foreign investment in emerging markets for the past decade. Yet, the COVID-19 pandemic sharply reversed this trend, even causing capital to flow out of China for the first time in nearly 10 years—a total loss exceeding $10 billion. Meanwhile, within China’s borders, wealthy domestic investors are also packing their bags… - **As an estimated 13,500 Chinese millionaires are projected to leave for greener pastures this year.** This is the most of any country, more than even Russia. This exodus marks an uptick from last year’s figure of 10,800 millionaires… - **Anecdote: By the way, Canada has been one of the top destinations worldwide for high net-worth individuals looking to resettle, a fact that’s been evident in my hometown of Vancouver with skyrocketing housing prices. But I digress.** The Chinese economic recovery has been anything but, and the government is struggling to restore a semblance of confidence in its flagging markets. Global macroeconomic conditions have been tough everywhere, however, between high inflation and the war in Ukraine. So, what sets China apart from the rest of the world? ## **It’s Not Easy Being Red** While global economies and stock markets have largely bounced back since the bleak days of late spring 2020—despite intermittent setbacks—the Chinese markets remain a notable outlier. But China’s markets, like the Shanghai Composite, haven’t done as well as those in the U.S. and Europe. As you can see, Chinese stock markets have lagged since the pandemic started, while markets in other countries have recovered more strongly. Now, there have been extra obstacles since the worst parts of the pandemic ended. The Ukraine war seriously affected food and energy prices, making them go higher. This added to existing problems in the supply chain caused by COVID-19. Government actions to boost the economy during the pandemic, along with people buying more goods instead of services because of lockdowns, also played a part in rising prices during the second half of last year. ## **Building Blocked** One major factor affecting the Chinese economy that hasn’t been seen in other countries is the slowdown in its real estate sector. Demand and sales for new homes have plummeted, and major property developers such as **Evergrande** and **Country Garden** are in serious financial trouble – with the former having to file for bankruptcy earlier this month. - **China’s High-Yield Real Estate Total Return Index is down 82% in the past two years. ** The Chinese property market makes up about a quarter of China’s economy. So, when it slows down, the impact is felt worldwide. To fight this, China’s government has been spending more on things like roads and bridges. But now, city debt is at an all-time high. So high that local governments can’t “amend, extend, and pretend” anymore: Put together, local governments in China alone hold roughly USD$8.1 trillion worth of debt – half of China’s GDP. Contrast this with total U.S. municipal bond debt of $4.0 trillion versus domestic GDP of $26.8 trillion – just under 15% – and you see just how much this problem is getting out of hand in China. - **Of over 200 Chinese cities with financial data available for the last calendar year, half of them saw interest payments account for 10% or more of their total cash flow.** Two major cities, Lanzhou and Guilin, had interest burdens last year exceeding 100% of all the fiscal resources available to them. ## **It’s Not Just Government Feeling the Pinch** Earlier in August… A major Chinese financial services firm, **Zhongzhi Enterprise Group Co.** along with its affiliate, **Zhongrong International Trust Co**., missed payments on over 30 different high-yield products. Keep in mind this isn’t some local credit union… Zhongzhi manages about USD$137 billion in assets for Chinese citizens, and much of that money has gone towards a 33% stake in Zhongrong. Zhongrong had to freeze withdrawals from its short-term investments, prompting Chinese regulators to get involved. They’ve asked major state-affiliated banks, such as Citic Group and China Construction Bank, to scrutinize Zhongrong’s finances. This opens the door for a possible government bailout. Adding to the mounting challenges, urban youth unemployment has surged to a record high. In fact, the rate hit 21.3% in June, leading the government to stop publishing these troubling statistics. Meanwhile, both China’s manufacturing and consumer sectors are in a slump, as evidenced by falling industrial output and declining retail sales over the past few months. **Long story short, things aren’t looking great in China right now.** So, given where things stand, President Xi Jinping has had to reach into his bag of tricks for alternative options. Chief among these was another surprise rate cut of 10 basis points to the Chinese central bank’s one-year loan prime rate, announced just last week, and the third one this year. Following this there was also a reduction of the Chinese government’s 0.1% duty on stock trades down to 0.05%, to bolster market activity. - In the same vein, **Chinese stock exchanges have also lowered their margin financing requirements to do the same.** - In fact, **Chinese regulators are even thinking about banning the shorting of stocks!** It’s not likely to happen, but that’s a major red flag if I’ve ever seen one. ## **Where China Goes, the Rest of the World Must Follow** According to the IMF, every 1% growth in the Chinese economy corresponds to about 0.3% growth globally. Simply put, when the Chinese economy is hurting, so too is the rest of the world’s: - **Falling Chinese imports** has hit its neighbours like Japan, South Korea and Thailand hard. Besides Asia, Africa has also been hit hard, with import values down over 14% year to date. - **Discretionary spending** on things like luxury brands and overseas tourism have traditionally been a staple demand of the Chinese upper class, but spending here has also suffered as a result of the slowdown in the Chinese economy. - **Deflationary pressures** from the Chinese economy have led to cheaper prices for Chinese goods in the U.S. While this is good for consumers dealing with inflation, it will present headwinds for domestic manufacturers in the months ahead. For the moment, China’s problems are largely China’s problems. If the Chinese government doesn’t find a way to improve the situation quickly, the world will start paying attention, whether China likes it or not. This could force President Xi to take more extreme steps to stabilize the economy. Depending on how things in China shake out, there may be more rough sailing ahead for the global markets. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Former 7UP ingredient Could Bankrupt EV Manufacturers - URL: https://katusaresearch.com/former-7up-ingredient-could-bankrupt-ev-manufacturers/ - Type: article - Published: 2023-08-25 - Updated: 2023-08-24 - Author: Marin Katusa No one wants metal in their soft drink. But in the 20th century, lithium was used as the “active” ingredient in 7-Up, just enough to provide a small mood boost. Other than that, there were few industrial applications for the metal. That’s changing extremely fast. **In just a few years, lithium has become a *key* element required for human survival.** Its unique properties—it’s lightweight, malleable, and has extremely high energy density—make it ideal for energy storage in the form of a lithium-ion battery. And reducing carbon emissions to keep the planet from burning is going to require a *lot* of batteries: - The entire **transportation sector**, which accounts for a full 25% of U.S. emissions, must be fully electrified. - **Utility-scale storage** must be built out for the entire energy grid. The electrification of the U.S. transportation system alone will require *hundreds of billions* of lithium-ion batteries. That may sound like an exaggeration to you. I assure you that it is not. A single EV battery pack uses more than 7,000 individual batteries. If the U.S. meets its 2030 target, there will be more than 48 million EVs on the road in just seven years. - **That means by 2030, the United States will require more than 300 billion lithium-ion batteries—*for EVs alone*.** That doesn’t include battery energy storage systems (BESSs), which stabilizes the energy grid by storing renewable energy until it is needed. The United States is planning to 14x its BESS capacity in just the next three years. - **Combining EVs and BESSs, the *growth* in demand for lithium-ion batteries from 2020–2021 equaled *total* demand in 2018. And then it nearly doubled *again* in 2022.** Meeting exponential demand growth will require the United States to engage in domestic lithium-ion battery production on a war-time scale. # Net Zero: 300 Billion Lithium-Ion Batteries Not Included The private sector began the fight with a few small artillery rounds. In 2021, GM and LG announced **a $2.5 billion investment** in a battery plant in Tennessee. But as Elon Musk has said, lithium batteries are “the new oil.” In 2022, Congress passed the Inflation Reduction Act (IRA), granting more than $7 billion to jumpstart domestic battery manufacturing. Companies leaped at the chance to claim the funds: - SK Corporation opened** a $2.6 billion factory** in Georgia. And it’s teaming up with Hyundai to build another **$5 billion factory** there. - Ford announced an **$11.4 billion investment in battery plants** in Tennessee and Kentucky. - Freyr and Koch Industries are investing **$2.6 billion in a battery factory** in Georgia. The list goes on. In just over a year, the IRA has successfully formed a robust “Battery Belt” from Michigan straight down to Georgia. Dozens of multibillion-dollar battery factories now span the U.S., ready to churn out lithium-ion batteries—with more on the way. The outliers on the map above (Tesla’s factories) give a sense of the grand scale on which these batteries will be produced. Tesla’s first Gigafactory, located in Nevada, is expected to achieve production of 500GWh of batteries per year. **That’s enough to power every EV sold in 2021—all from a single factory.** Then there’s the “megafactory” Tesla recently opened in California. It’s “just a test”, they say. A test that is the thirteenth-largest battery factory in the world. Once it’s operating at capacity… - **The first megafactory will deploy more energy storage in a single quarter than Tesla Energy has *in its entire history.*** There’s just one problem. No one remembered to actually bring the lithium to this party. # No Lithium, No Batteries Due in part to the new Battery Belt, it’s estimated that lithium demand will skyrocket by 1,000% by the end of this decade—and 5,000% by the end of the next. In fact, the International Energy Agency says demand for lithium is growing faster than demand for any other metal or mineral. **But the supply just isn’t there.** Remember: until recently, there were limited uses for lithium. So few mines have been built out around the world. As the Battery Belt comes online over the coming months, the lithium supply will dry up shockingly quick. In fact, massive shortfalls are already being predicted ***for next year:*** *“Beyond 2024, we are stumped as to where [lithium] supply will come from to satisfy demand.” – Scotiabank* Meanwhile, EV manufacturers have spent—are spending—tens of billions on battery manufacturing plants. They are literally staking their future on lithium being available. And they are already waking up to the fact that whoever gets the lithium, gets batteries. So in an extremely rare move, car manufacturers are getting involved in lithium mining themselves. Scott Keogh, CEO of **Volkswagen**, said: *“We are not going to become a mining company. But certainly, we will get significantly closer.”* **Ford** is in an even worse spot, as they borrowed $9.2 billion from the government to pay for their battery plants. So if they don’t have lithium to produce batteries—they’re *done*. Which is why Ford pre-purchased 1/3 of the lithium output of a new mine in Nevada last year. And a few months after that, **GM** invested $650 million in another lithium mine—also in Nevada. In short order, lithium has transformed from a little-known 7-Up ingredient to a matter of survival for automakers. So dozens of new buyers with deep pockets are buying up lithium—both in and out of the ground. It’s making both the metal and the mines extremely valuable. In a matter of days, we’re going to explore an emerging lithium market. It’s one that very few people see coming, and *no one* has reported on. When Elon Musk said that lithium mining is “a license to print money,” this is what he was talking about. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Elon Fought the Law, and the Law Lost - URL: https://katusaresearch.com/elon-fought-the-law-and-the-law-lost/ - Type: article - Published: 2023-08-18 - Updated: 2023-08-17 - Author: Marin Katusa “Or you can just buy a Tesla.” That was Elon Musk’s terse response to Biden’s plan to build 500,000 EV charging stations across the U.S. The public feud started a year and a half earlier, in August 2021, when President Biden hosted an EV manufacturer summit at the White House. - **Tesla is the dominant U.S. EV manufacturer, manufacturing two out of every three U.S. EVs in 2022. ** No other company comes close. From January 2020 through March 2023, there have been 2.2 million EVs sold in the United States. Tesla accounts for roughly 54% of all sales. Yet President Biden passed over Tesla, choosing instead to meet with only Ford and GM. “It seems odd Tesla wasn’t invited,” Musk tweeted. Six months later, President Biden tweeted another Tesla snub: “Companies like GM and Ford are building more electric vehicles here at home than ever before.” Musk shot back twice, with his typical elementary panache: *“Starts with a T, Ends with an A, ESL in the middle.”* Then: *“Biden is a damp sock puppet in human form.”* Sitting presidents generally dislike being called damp sock puppets. So two weeks later, the Biden administration announced the **National Electric Vehicle Infrastructure Program (NEVI). **It included $7.5 billion in funding for the buildout of EV charging across the U.S. But there was one crucial stipulation… To qualify for funding, EV chargers would have to work with EVs “from more than one automaker.” Famously, Tesla’s Supercharger network with ultra-fast chargers spanning the U.S., only works with Tesla’s. It wasn’t just directly aimed at excluding Tesla from funding; the program was an attempt to dethrone Tesla as the de facto EV monopoly in the U.S. “There is no doubt [that NEVI] threatens Tesla’s competitive advantage. **That is actually the entire point of the program**.” *– Chris Harto, a senior policy analyst at Consumer Reports* ## **A Charging Standard By Any Other Name** Tesla moved quickly. In November 2022, a tiny, crowd-funded EV startup called Aptera announced they were adopting Tesla’s charging standard. Now there were *two* automakers that could charge at Tesla chargers, and Tesla qualified for a portion of the $7.5 billion in funding to continue building out its own charging network. Almost immediately, the White House changed the terms and conditions. Suddenly, chargers would have to include a single *specific *charging standard: CCS. That’s the charging standard used by nearly every EV manufacturer, **except** **Tesla**. In a rare move for him, Musk caved (ever so slightly) to ensure access to federal funding. Biden tweeted: “Elon Musk will open a big part of Tesla’s network up to all drivers.” In reality, Musk gave up almost no ground. Tesla only agreed to make at least 3,500 of its Superchargers “available to all electric vehicles.” That’s less than 20% of the total network. ## **Meanwhile, Tesla prepared a *serious* counterattack…** When Tesla began manufacturing EVs in 2012, there was no EV charging standard. So Tesla created its own, simply dubbed the “Tesla charging connector.” And now it was time for a brilliantly strategic rebrand: the “**North American Charging Standard**,” or NACS. Tesla made the newly minted NACS standard completely open and encouraged any manufacturer or charging network to make chargers or cars with NACS. Now, Musk knows that the best time to play a trump card is immediately after your opponent plays theirs. Biden played the CCS trump card, thinking he could put NACS out of business. There’s only one problem… - **Musk’s trump card is not a charging standard. It’s a massive charging *network.*** ## **Adopt or Die** The number one concern with buying an EV? Charging. But no car manufacturer other than Tesla has access to a nationwide fast-charging network. Building out a similar network would take years and cost billions. Those are years and billions car companies don’t have. - **Ford, for example, is investing its entire market cap into EVs—and losing $3 billion a year doing so.** Which is why Ford was the first domino to fall. In May 2023, Ford committed to integrating NACS ports into their EVs. The move instantly doubled the number of fast chargers available to Ford drivers nationwide. In June 2023, GM also agreed to adopt NACS. Elon had successfully locked 75% of U.S.-manufactured EVs into Tesla’s new charging standard. And the two companies Biden used to taunt Tesla – GM and Ford – were now indebted to Tesla. More importantly, a tipping point had been reached. - **Rivian**, **Polestar**, and **Volvo** announced in quick succession that they would also be adopting NACS charge ports. - The major U.S. chargepoint operators, including **Blink**, **Chargepoint**, **FLO**, **EVGo**, and **Electrify America**, have all already committed to building out NACS chargers. CCS support in North America is fading fast, which means that any auto manufacturer that refuses to make the switch will all but guarantee their buyers will have difficulty finding chargers in the future. - **Far from the government funding putting Tesla out of business, Tesla is now able to use the government funding to put the government standard out of business.** On June 27, 2023, SAE International announced it will move to standardize the NACS connector. The North American Charging Standard is now, officially, the charging standard of North America. ## **Never Bet Against America*** **(*Unless You’re Betting on Elon Musk)** Several states, including Texas and Kentucky, are bucking federal authority and joining Team Tesla. They require chargers to provide NACS access to receive federal funding. So, let’s review: - Tesla ended up with access to the $7.5 billion in federal government funding. - Tesla established its own charging standard as the de facto North American charging standard. - And Tesla eliminated its EV charging network competition once and for all. All in one fell swoop. And that’s not all. Within a decade, **the move to NACS is expected to be making Tesla an extra $5 billion in annual revenue.** Tesla is investing in continuously expanding its charging network, extending its incredible moat. Elon won, Joe. It really would’ve been easier to buy a Tesla. Regards, Marin Katusa P.S. The race to net zero is fueled by Governments and accelerating fast by major corporates. It will affect major resources and energy mixes, everything from carbon to hydrogen, lithium to zinc. This is an [exciting time for investors](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk&utm_campaign=website&utm_source=sendgrid.com&utm_medium=email). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The All Important “Echo” Market Cycle - URL: https://katusaresearch.com/the-all-important-echo-market-cycle/ - Type: article - Published: 2023-08-11 - Updated: 2023-08-10 - Author: Marin Katusa Sandwiched between the high-drama and fame of the “Boom” and the notoriety of the “Bust” exists a market phase that goes unnoticed. Often overlooked and elusive, I call it the **“****Echo****“**. This uncelebrated period is often overlooked, lost in the dramatic oscillations of the business cycle. But make no mistake… It’s during this apparent lull, this quiet echo, that silent fortunes are being made by smart investors. Are you feeling doubtful or intrigued watching stock markets and tickers? That’s precisely the sweet spot. We’re about to peel back the layers of this mysterious market phase and expose the hidden goldmine that even seasoned investors often miss. Prepare to decode the Echo, the enigma of market cycles. This knowledge isn’t just power, it’s your competitive edge. ## The Boom, Bust and Echo Everyone knows about the “business cycle.” Booms are succeeded by Busts which yield new Booms. That’s what analysts always focus on. Equities (and the businesses that underlie them) traverse an endless series of peaks and valleys. A stock rises on the back of strong company results, and plummets when things turn sour. Or investors simply tire of a stock, come to see it as overbought, and a selloff results. Sectors, and indeed whole markets, follow the same pattern. For instance, lithium prices saw a major Boom last year, rocketing up 6x in the span of a year. And right now, we’re in the middle of another Boom – the AI Boom, spearheaded by models like ChatGPT and Stable Diffusion. - As a result of the AI Boom, computer chip maker **Nvidia shot past $1 trillion market cap**… despite flat revenue growth and a decline in profits last year. The $1 trillion market cap club includes tech industry giants like Amazon, Apple, Google, and Microsoft – household name companies with 10x or more the revenue of Nvidia. For the markets to give Nvidia the same [valuation as the tech titans](https://katusaresearch.com/the-digital-atlas-club-reveals-itself/) shows just how much investors think the AI Boom will benefit Nvidia, as they make the chips that AI models run on. Going back to the cycle – during a Boom, there’s a general sense of euphoria, a feeling that the market will continue notching new highs forever. Of course, it can’t. There will inevitably come a Bust, after which gloom sets in, and investors begin to fret that it’s never going to turn around. And they’re just as wrong. I’ve not only studied markets intensively for many years now but have become one of the largest financiers in the resource sector over the last decade. Eventually, I was driven to the conclusion that the traditional way of analyzing cyclical sectors is badly flawed. **There’s more to a cycle than just Boom and Bust, bull and bear…** There’s also a sideways market that always appears somewhere between the last Bust and the next Boom. It is neither. Yet it’s an integral part of the process, with unique and definable features. It’s the third, most critical part of every cycle, and it’s never been properly described before, which is why I coined the term *Boom, Bust & Echo* for the resource markets. ## Understanding the Echo Some of what you read next might sound *very* familiar right now… During this period, the market is in what seems like a dead zone. It’s shunned by the mainstream. Yet what’s actually happening is entirely normal, and an integral part of the natural evolutionary process of all business cycles. Understanding how it works can make the difference between succeeding and failing in the markets. I’ve tried to explain the concept to friends of mine in the investment business, and at investment conferences where I’ve been the keynote speaker. I’ve gotten the distinct feeling that my words are just bouncing off and returning to me, as if I were shouting into a lifeless desert canyon. I’ve coined this neglected phase “the Echo”. It’s not a Boom or a Bust, yet it’s an essential transitional stage. Though counterintuitive, it’s in this overlooked market phase where real fortunes are crafted. - **Profit opportunities abound at this time.** - **Enormous wealth is created during the Echo, more so than during either of the other market phases.** Despite its ignored status, the Echo holds unique, predictable traits and untapped wealth. Regrettably, most stay away until they see clear signs of another Boom, a safer time to invest. The [Brother-in-Law Indicator](https://katusaresearch.com/beware-the-bbq-pitch-counter-indicators-to-avoid-losing-money/) explains this in all its hype-y detail. But, understanding and identifying your position in the Echo allows for better investment decisions. As a natural resources investor, my concept of Boom, Bust & Echo emerged from the volatility of this sector. To understand this cycle, you need to let go of traditional economic models. The Echo is non-linear, fluctuating, and evolving. Perfect timing isn’t required; awareness of your relative position in the Echo is. - **By patiently waiting for the Echo to end, you position yourself for maximizing profits during the following Boom.** The Echo isn’t a quick rich scheme, but a strategic phase that, with patience and understanding, can be your most rewarding investment period. ## Characteristics of the Echo Now, let me briefly introduce some of the Echo’s basic characteristics. To capitalize on Echo, understand its existence, happenings, and exit signals. Unlike Booms and Busts with their stark peaks, the Echo lacks distinct highs and lows. Emerging post-Bust, it serves as a calm period where the market steadies after considerable volatility. It’s a quiet time, but don’t be deceived. The industry is teeming with unseen activity, largely ignored due to its subtle nature. Here are a few of the important markers that *always* appear during any Echo period: - **Consolidation**—this occurs both within businesses, as they streamline and implement greater efficiencies, and between them, as the strong eat the weak. M&A will occur at zero premiums during the Echo. Big premium M&A is usually a sign of a bull market top. - **The liquidation of bad debt**—many companies will take on excess debt during the euphoria of a Boom and get squeezed during the Bust. In the Echo, those who can afford to pay down their ill-advised debt will do so; those who can’t will go under. - **Re-capitalization**—those who’ve maintained solid balance sheets and merit re-financing will get it, and will also be able to float new shares if they need to. - **Increasing market share**—on the part of those who are healthy enough and visionary enough to do it. - **And defining the fittest**—the best of the best, those who not only survived the financial Bust debacle but are strategically poised to catch the next Boom. It’s also the time during which informed investors can swoop in and take advantage of highly attractive buying conditions. As the old finance truism has it, *the cure for low prices is low prices* (i.e., the market is self-correcting; a fall of prices to unreasonably low levels will inevitably trigger a rise). During an Echo, the seeds of the next Boom are slowly germinating. But no one notices, and the stock of even the strongest companies goes on sale in the bargain basement. And that’s where an [alligator investor](https://katusaresearch.com/the-way-of-the-alligator/) absolutely shines. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Saudi Arabia’s Huge Bet and Carbon Taxes Flexing Muscles - URL: https://katusaresearch.com/saudi-arabias-huge-bet-and-carbon-taxes-flexing-muscles/ - Type: article - Published: 2023-08-04 - Updated: 2025-09-10 - Author: Marin Katusa This week we need to get you up to date… Because significant news is hitting the wires in the commodities and net-zero world. In a bold move to diversify its economy beyond oil, **Saudi Arabia** has entered the global mining arena with a $2.6 billion deal, acquiring a 10% stake in **Vale SA’s** base metals division. It’s a joint venture (JV) between Saudi Arabia’s sovereign wealth fund and state mining company, **Ma’aden**, and will close in early 2024, pending regulatory approval. This was a very smart move for the Saudi sovereign wealth fund. The agreement allows the kingdom to reach important mining locations, where they extract essential metals that are crucial for the energy transition. **It’s a priority set out by the Kingdom…** Crown Prince Mohammed bin Salman’s Vision 2030 places great emphasis on the energy transition and the mining industry is a cornerstone for the strategic metals required for the future energy transition and economic diversification. The initial investments will concentrate on minority equity positions in iron ore, copper, nickel, lithium, and other essential minerals. With Saudi Arabia owning 17% of the world’s petroleum reserves, the country believes it holds over $1 trillion worth of untapped minerals**.** By exploring and ramping up production from these deposits, the kingdom seeks to achieve its decarbonization objectives. - **Side Note:** Just take a look at Saudi Arabia’s Vision 2030 mega-projects ([including NEOM](https://www.neom.com/en-us)) to get an idea of how big into Net Zero the kingdom will become. KSA is making very large financial investments towards their Net Zero plans. The $2.6 billion stake in Brazil’s largest miner provides Saudi Arabia interests in copper, nickel, and other critical minerals. ## **A Smart Move into Critical Metals** Vale’s ambitions align with the growing demand for electric vehicles, as they plan to expand copper and nickel mining. - **The mining giant, with a market cap of $67 billion, intends to invest up to $30 billion in new projects across Canada and Indonesia.** The infusion of Saudi funds has boosted Vale’s base metals division’s implied value to $26 billion, as stated by the miner’s chief executive. Vale positions itself to cater to the surging demand for green metals crucial for the global energy transition. **Building a Lithium Powerhouse…** Lithium takes center stage in Saudi Arabia’s strategy, with plans to establish battery processing facilities as part of a comprehensive battery supply chain initiative. Last year, Ma’aden expressed intentions to invest significantly in exploring battery metals over the next two decades. The country wants to develop a $2 billion EV battery metals plant in partnership with EV Metals Group. And EVM Arabia will establish a $905 million battery chemicals complex in Saudi Arabia later this year. - **Additionally, the kingdom has pledged to procure over 100,000 EVs over the next decade.** Leading automakers like Tesla and Mercedes-Benz are making significant investments to secure high-quality lithium to scale up their full EV battery production. As the world witnesses a growing thirst for EVs, lithium companies are ramping up efforts to supply this critical metal. **Companies like ****American Lithium Corporation**** (AMLI)**** are stepping up to provide a safe and stable lithium supply with their vast lithium deposits.** Saudi Arabia’s aspiration to become a global leader in minerals and metals sets the stage for billions of dollars of investment in the sector, driving the transition to a global clean energy system. But wait, there’s more… ## **Major News #2: Carbon Taxes Flex Their Muscle** In the world’s developed and secure nations, the silent tremors of carbon taxes are starting to assert their influence. Back in 2021, I penned an article in my premium research service – **Katusa’s Resource Opportunities**, delving into the potential repercussions of carbon taxes on company emissions. Some may have dismissed the idea, but with countries like Canada, Australia, and Europe adopting aggressive stances on this issue, it made sense to investigate before the crowd. - **As recent headlines highlight, Rio Tinto faced an $800 million impairment on two aluminia refineries in Australia due to the impact of carbon taxes.** An impairment charge occurs when projected cash flows from an asset fall significantly below its current book value on the balance sheet. Rio Tinto, not fully considering the implications of carbon taxes, had to reevaluate long-term cash flow projections, leading to an $800 million decrease in asset value. **This challenge won’t be limited to Rio Tinto alone.** For any heavy emitter, it could become a pressing problem. As governments enact carbon tax policies into law, companies must incorporate them into their cash flow projections. Just as the concept of “peak oil” caused the recognition of “stranded assets,” companies in the heavy emitters sectors may face a similar fate. Operations reliant on coal-derived electricity could find themselves at a significant disadvantage, and industries emitting substantial methane quantities might encounter hefty penalties. The rumble of carbon taxes is no longer distant thunder… It is starting to shake the foundations of even the most developed nations, and companies need to prepare for the unfolding storm. It’s one of the sectors that [Katusa Research is most excited about](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) in the coming years. Much, much more to come. Regards, Marin Katusa P.S. Last week we promised to introduce you to a new period in the market cycle you’ve likely never heard before, but that will come in next Friday’s *Investment Insights*. ## **IMPORTANT DISCLAIMER** **Katusa Research**, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. American Lithium Corp** h**as reviewed and sponsored this article. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. **HIGHLY BIASED:** In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from American Lithium Corp as reported in their May 8, 2023 news release and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the companies, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. **HIGH RISK:** The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. **NOT PROFESSIONAL ADVICE:** By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. 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Katusa Research does not undertake any obligations to update information presented, or to ensure that such information remains current and accurate. --- # The Digital “Atlas Club” Reveals Itself - URL: https://katusaresearch.com/the-digital-atlas-club-reveals-itself/ - Type: article - Published: 2023-07-28 - Updated: 2023-07-27 - Author: Marin Katusa In the stories of ancient mythology, Atlas – the Titan of endurance – was fated to bear the heavens upon his stooped shoulders. He was a solitary symbol of resilience, standing strong amidst a world spiraling into chaos. Fast forward to the modern-day, a stark parallel emerges in the stock market… - A group of seven ‘Tech Titans’** – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla – **now bear an Atlas-like burden**.** Unlike the celestial sphere of the tale, their load is the weighty S&P 500 index, held aloft by their collective might. Yet, there is a sense of balance, a teetering dance with fate that echoes the Greek Titan’s difficulty. This week we peel back the layers of this **Digital Atlas** tale… It probes the outsized influence of these tech Titans and uncovers the potential repercussions if their shared balance were to falter. ## **Market Breadth and the Tech Titans** The healthiest market is one where gains are built through most stocks in the index going up, rather than by a select few. Broad market participation in a market upswing signifies strength in the economy as all cylinders are firing well. Right now, we are seeing the complete opposite. The S&P 500, with its unique construction, assigns greater weight to larger companies within the index. As such, the return of the index is primarily influenced by the performance of these dominant corporations. This leads to a self-fulfilling prophecy as larger stocks go up in value, they become increasingly heavier weights within the index. Seven stocks have been driving S&P 500 performance this year: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla. - **Together, these seven stocks represent 27.0% (of the $38.1 trillion market cap for the S&P 500).** On average, share price returns for the group of seven is up 95% for the year. - **The S&P 500 index is up 19%, which means that the members forming the other 73% of the index are massively underperforming.** The next chart shows the year-to-date returns for the Big 7 versus the S&P 500. ## **Equal Weight** Now let’s compare the S&P 500 index with a hypothetical variant where all companies hold equal weight. The chart below presents the S&P 500 on an equal weight basis, where each company has the same influence. That’s in contrast to the actual S&P 500 which varies weights based on the size of the companies. As you can see, on average, the average large-cap company is not faring nearly as well as the Big 7. ## **The Companies With No Profit** Another index we like to use as a proxy is an index composed of “**unprofitable tech companies**”. It can provide a unique contrarian perspective given they are the highest-risk investments. We can see in the post covid environment, the index soared massively on free money stimulus, only to fall precipitously once interest rates began to climb. Now in 2023, the index is up nearly 45%. Below shows the returns year to date for a variety of asset classes and equity types. ## **Winners Win: The Big 7 Outperformance Watch is On** The Nasdaq is another index which is also market capitalization weighted. All 7 of those “Big 7” tech companies above are listed on the Nasdaq which is what is driving the Nasdaq return outperformance. - **An equal-weighted Nasdaq Index would be returning 24% year to date, nearly half of what the actual Nasdaq return is this year.** The key takeaway here is that most of the market returns generated are coming from a very small group of companies from a specific industry. It’s not a wide swath of companies from a diverse set of industries leading the pack. To me, this indicates that the market is very fragile and likely heavily levered to those 7 stocks. If momentum fades, the balloon will pop quickly, and we could see a very sharp correction as longs quickly unwind. It’s something to prepare for. While possible, given the projected rise in interest rates, it is hard to see the rest of the pack playing catch up to these few market leaders. **Many stocks in the index are caught in one particular market cycle right now.** Next week, I’ll tell you why we’re in a critical phase of the market cycle where investors can make serious money. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Billion-Dollar Payload: AI’s Groundbreaking Entry into Mining - URL: https://katusaresearch.com/billion-dollar-payload-ais-groundbreaking-entry-into-mining/ - Type: article - Published: 2023-07-21 - Updated: 2023-07-19 - Author: Marin Katusa Dear Reader, Something unprecedented is unfolding in the mining sector… Big Tech and Mining are on an unstoppable collision course – potentially triggering a capital tsunami in the process. And it’s already underway with a major move. So, let’s get right into it… - Berkeley-based **KoBold Metals** is leading the charge, raising an astonishing $195 million from prominent investors, rocketing the startup’s valuation to a staggering $1.15 billion. Names like **Andreessen Horowitz** and **Breakthrough Energy Ventures**, backed by visionaries like **Bill Gates** and **Jeff Bezos**, are all part of the mix. KoBold is anything but your average mining company. The true marvel lies in their revolutionary fusion of Artificial Intelligence and the untapped potential of alternative energy sources. They’re leveraging cutting-edge AI to unearth critical battery metals – cobalt, copper, nickel, lithium – from the earth’s crust. ## **And that’s just the tip of the iceberg…** This newly-funded mining prodigy is all set to tap into an untouched copper reservoir in Zambia, backed by a hefty $150 million investment. Spanning continents with over 60 ongoing exploration projects, KoBold is turning the tables on traditional mining techniques. KoBold’s CEO, Kurt House, shared, *“The success rates of finding new deposits have been declining… It’s hard to see how we’ll get sufficient discoveries without breakthroughs in technology.”* Well, the breakthrough is here, and it’s kicking off the major intersection between mining and tech companies in search of net zero metals. As we’ve written before, car companies like Volvo, Tesla, Ford, Volkswagen and more are racing to cut deals with mining companies. In fact, earlier this year, - **General Motors** invested $650 million into Lithium Americas, and - **Mercedes-Benz** inked a contract with another lithium supplier. ## **Tech + Mining = Uncharted Waters** AI has been shaking up the mining industry for years now. It’s not just a buzzword – it’s the reality of today’s high-tech world. Take **Freeport-McMoRan** for example… Back in 2018, they put AI to the test at their Bagdad mine in Arizona. The results? By employing AI systems to evaluate capacity levels at their mill, they managed to increase their copper output by a staggering 9,000 metric tons. Incredible. And then there’s **Rio Tinto Group**… This mining powerhouse isn’t just dabbling in AI, they are embracing it wholeheartedly. They’ve crafted digital twins of their mines, allowing them to test decisions in a virtual environment before bringing them to life in the real world. But it doesn’t stop there. By merging AI with analytics, machine learning and automation, Rio Tinto has supercharged its productivity. They’re now able to use AI to assess data generated by everything from drills and trucks to conveyors and ships. This is just the tip of the AI iceberg in the mining industry, and it’s exciting to think about what breakthroughs are around the corner. Major tech companies will get involved with mining and energy too. And it’s only just began. This disruptive tech-mining amalgamation is summoning a financial deluge of unprecedented proportions. As S&P Global reports… - *“Artificial intelligence could be the key to locating the next sources of tomorrow’s materials,”* ## **The Inflation Destroyer?** Our team follows major capital inflows and inflows in commodities VERY close. The intersection of AI, tech and mining is drawing very close. And the market landscape is about to change. A whole new generation of investors are set to understand the importance of commodities and resources. **So as a valued reader…** **I’m excited to extend an exclusive $1,750 discount on our flagship *Katusa’s Resource Opportunities*.** This is your golden ticket to venture into this revolutionary mining frontier with confidence and conviction. Harness the disruptive power of this tech and mining convergence, and jump on your chance to capitalize on this trend as it unfolds. *Katusa Research* is keeping a close eye on all major developments, and you can join us. [Click here now to tap into this unique offer and stake your claim in the next age of mining](https://subscribers.katusaresearch.com/kr-charter-anniversary-offer-july-2023/). Take charge, take action, and let’s ride this wave together. Regards, Marin Katusa Founder, Katusa Research **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Put Your Seatbelt On: Warning Indicators - URL: https://katusaresearch.com/put-your-seatbelt-on-warning-indicators/ - Type: article - Published: 2023-07-14 - Updated: 2023-07-13 - Author: Marin Katusa Nils Bohlin used to design ejector seats for airplanes. But in the 1950s, he started working for Volvo and was tasked with inventing a safer seatbelt for cars. At the time, cars only had lap belts, but Bohlin wanted to create something that would be more effective at keeping people safe in car crashes. So, he came up with the three-point seatbelt, which is the kind of seatbelt we still use today. You’re likely aware, the three-point seatbelt goes across your lap and over your shoulder, which helps distribute the force of a crash across your body instead of just your waist. This can greatly reduce the risk of injury or even death in a car accident. Prevention is important. Before Bohlin’s invention, many people didn’t like using seatbelts because they were uncomfortable and restricted their movement. But the three-point seatbelt was much more comfortable and easier to use, so it quickly became popular – and safe. According to the National Highway Traffic Safety Administration, seatbelts save about 15,000 lives every year in the United States alone. - **What can the invention of the seatbelt – which prevents the loss of about 15,000 lives each year in the USA alone – tell us about making preparations in the stock market?** Glad you asked. While markets continue to climb a wall of worry, let’s look at some of the warning signals in the market… ## Warning #1 – The Buffett Indicator The Buffett Indicator is a tool used by investors to figure out if the stock market is overpriced or underpriced. Basically, the Buffett Indicator looks at the total value of all publicly traded companies in a country and compares it to the size of that country’s economy. - **If the ratio of the two is high**, it suggests that the market might be overvalued and due for a correction. - **If the ratio is low**, it suggests that the market might be undervalued and there could be opportunities for investors to buy stocks at a good price. Over time, the stock market has grown apart from the real economy, thanks to an era of cheap money. This made it easier for companies to leverage up and grow faster than the economy itself. In turn, market players have been pricing in more share price appreciation relative to fundamental corporate cash flow growth rates. But with big changes in interest rates, these high hopes seem less likely. Why? Because growth funded through ultra-cheap debt is not an option anymore. There’s not an endless supply of free money. Higher interest rates suppress growth rates. Based on this macro indicator, we are solidly in overbought territory. ## **Warning #2 – The Yield Curve** The *10-year, 2-year yield curve* is a comparison that gets a lot of press. It’s a way of measuring how much money you can make if you invest in the US government’s bonds for different lengths of time. This means people are comparing how much money you can make if you invest in a 10-year government bond versus a 2-month government bond. Usually, when you invest in something for a longer time, like a 10-year bond, you would expect to make more money. That’s because you’re taking on more risk by locking your money away for a longer time. But sometimes the opposite happens, and the shorter-term bond actually makes you more money. So, what’s the yield curve telling us right now? An inverted yield curve, where the shorter-term bond pays more than the longer-term bond, **is often seen as a warning sign that the economy might not be doing so great in the future**. It leads to an interesting psychological dilemma for an investor. - **Do I put cash to work today, knowing that the market is pricing in worse conditions down the road?** You may have heard of the term *“yield curve inversion”* before. This is the scenario when short-term bonds have higher yields than long-term bonds. Plotted in black against the 2 year-10 year spread is the Wilshire 5000. It is a large and diverse market capitalization weighted index of 3000+ US equities. You can see there is an interesting pattern that occurs. - **When the yield curve goes negative, the market typically declines substantially shortly after.** The early 90s market decline, the dot-com crash, and the financial crisis were all preceded by this yield curve inversion. Here we are highlighted in yellow, with the largest negative spread since the 1980s. I believe there is strong potential for this spread to widen further. This past week US Federal Reserve Chair Jerome Powell testified in Washington and stated that it was likely there could be an additional 2 rate hikes this year. Based on the economic climate later this year, this could send the yield curve to its steepest inversion ever. ## **Warning #3 – Stock Markets and Interest Rates** The stock market and interest rates move in opposite ways for two reasons. **First, when the interest rates go up, companies have to pay more to borrow money for projects.** This makes it harder for them to make money and some projects might not even happen at all. When profits go down, the stock prices go down too. On the other hand, when the interest rates go down, companies can borrow more money and make more profits. **Second, when the interest rates go up, people can make more money by investing in debt things like bonds on term deposits.** So, they don’t want to invest in stocks anymore. - **This makes the demand for stocks go down, and their prices go down too.** But when the interest rates are very low, people don’t have many choices, so they invest in riskier things like stocks to make more money. This makes the prices of stocks go up… Certain companies are highly sensitive to interest rate changes. More significant moves upward can be bearish to companies because the cost of capital goes up. **Years in the Making…** Taking all this into account, there is one particular company that’s rocketed up to the top of my watchlist as one I’m just about to buy after YEARS of waiting patiently like an alligator. I just revealed it to my subscribers earlier this month and you can get the full write-up in my premium research letter, [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Beware the BBQ Pitch: Counter Indicators to Avoid Losing Money - URL: https://katusaresearch.com/beware-the-bbq-pitch-counter-indicators-to-avoid-losing-money/ - Type: article - Published: 2023-07-07 - Updated: 2023-07-06 - Author: Marin Katusa The smell of sizzling burgers and the hum of lively banter – it’s the epitome of summer. Yet beyond the family camaraderie and lip-smacking barbecue, lies an unconventional and perhaps overlooked treasure chest of investment wisdom. The unlikely source? Your overly enthusiastic brother-in-law or, let’s say, the Uber driver that got you to the party. It’s a familiar setting where casual conversation can save you from a severe financial bruising. Because in the world of investing, preventing loss is just as important, if not more so, than securing gains. So, how can the incessant chatter about a ‘hot stock’ he came across in a pop-up ad save you from financial grief? More than you might think… ## **Listen to the Uber Window** Welcome to the era of the “Uber Window” – a concept that transforms every casual conversation into a potential goldmine of market insights. By mapping out when Uber drivers first started raving about Bitcoin (around the $40k mark) or GameStop (circa $400), we reveal a unique and effective investment compass. We’re not advocating following every piece of financial advice from an Uber driver, but their chatter can be a useful counter-indicator. In essence, when they start *advising* you on investments, it might be a signal that the market is overheated. What they hear and when they hear it can be attributed to how far outside the deal room they are. ## **The “Ring of Coverage”** Let’s visualize a bullseye of investing news called the “Ring of Coverage.” At the center, we have ‘boots on the ground’, and the decision makers in the room. Katusa Research prides itself on that mantra of being first to the story. This is followed by investment research firms, financial newsletters, Jim Cramer and the stock message boards like StockTwits. At the outer ring we have the brother-in-laws and Uber drivers with their RobinHood accounts. - **The closer the advice source is to the center, the higher the potential for profitability.** Conversely, as we move outward, the risk of encountering overhyped, overvalued, and often misleading information increases. ## **The Brother-in-Law Indicator** Full Disclosure: *[The following depiction is not based on a real brother-in-law of anyone at Katusa Research. Any similarity to a real-life person is entirely fictional. Or is it!?]* I can spot it from a mile away. The look on the face is the same every time. If it was closed captioned it would read “I can’t contain my excitement with what I’m about to tell you. Give me some confirmation bias.” Picture this scenario, I’m sure it’s happened to you… Clutching a half-empty beer, my BIL started rambling about a ‘revolutionary’ tech stock he’d read about in a pop-up ad. This was the same guy who had just learned how to check Reddit last month. Yet here he was, trying to sell me on his latest investment ‘discovery’. His enthusiasm was genuine, but as an experienced investor, I had an instinct for the kind of indicators that spell trouble. - **Little did he know, he was turning into my most reliable counter-trend signal – a walking, talking ‘Brother-in-Law Indicator’.** Should you run for the hills? Perhaps. But instead of dismissing the enthusiasm outright, take a moment to consider it from the perspective of the “**Brother-in-Law Indicator**.” This modern-day *Shoeshine Boy* concept suggests that when investment tips start trickling down to unlikely sources, it may be a sign that a market peak or bubble is nearing. The upshot? It’s time to protect yourself from possible losses instead of dreaming about the gains that might never materialize. The old school wisdom of ‘buy low, sell high’ holds true even in this age of artificial intelligence (A.I.) and quantum computing. Our approach combines this timeless principle with modern indicators like the “Uber Window”, the “Ring of Coverage” and the “Brother-in-Law Indicator”. ## **What’s Hot and What’s Not** The easiest way to spot what’s hot and what isn’t in the financial markets is to do a simple Google search of the trends in the USA. Right now, the hottest thing in the markets is Artificial Intelligence (A.I.), as you can see by the interest/trend spike below… No question you’re reading about A.I. on Bloomberg, in your email inbox, seeing it on T.V. And likely your BIL is telling you all about the coolest startup in the sector. And we’ve seen no shortage of presentations and company decks for rounders trying to raise money for their next A.I. deal. The money is flowing in, and the sector is hot. **Now you have the tools in your back pocket…** - **All of the above can serve as useful checks on our investment strategies.** While the *Brother-in-Law Indicator* reminds us to be cautious when inexperienced investors start doling out advice, the *Ring of Coverage* signals potential overvaluation when a sector becomes mainstream. In combination, these two indicators can help us avoid getting caught up in market hype and maintain a balanced, thoughtful approach to investing. These anecdotal indicators should not replace thorough market analysis but should serve as useful tools in your investment strategy. By remaining aware of these counter-trend signals, you can navigate the complex investment landscape with a more informed, critical eye. So next time you find yourself at a family barbecue, listen to your brother-in-law’s investment tips. You never know what valuable insights it might offer! Regards, Marin Katusa and the Katusa Research Team **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Tightening the Taps: A Macro-Economic Update - URL: https://katusaresearch.com/tightening-the-taps-a-macro-economic-update/ - Type: article - Published: 2023-06-30 - Updated: 2023-06-29 - Author: Marin Katusa Step back and watch the confusion in the heart of the U.S. monetary system. Because while the nation remains captivated by ongoing political drama, a quiet transformation is taking place… All concealed within the corridors of the Federal Reserve. Notably, the U.S. Money Supply is experiencing a sustained contraction for the first time since at least 1960, with over $1 trillion being withdrawn. These developments are signaling a shift in the fiscal landscape of a country heavily reliant on cheap debt and loose fiscal policies. Let that sink in for a moment. Because we’ve got a few visuals you need to see, to believe… ## **Money Supply: Tightening the Taps** A country that has loaded itself to the gills on cheap debt and loose fiscal policy is finally starting to see the tightening of the fiscal taps, so to speak. But wait, there’s more… ## **Interest Rate Surprises** Interest rates have risen from near zero up to 5.25%. If you can believe it, this is higher than the dividend paid on most investment-grade bonds today (and more on that later). - **And just this week, Fed Chair Powell indicated that two more rate hikes could be on their way.** But back to this point… The U.S. money supply is slowly contracting and the fallout effects from that aren’t something that has been seen in real time yet in this new global economy we live in. The chart below shows the U.S. M2 money supply (in green) which is composed of all the money in circulation, along with money in checking and savings accounts, retail investments in money market funds and term deposits under $100,000. In blue is the velocity of that M2 money supply. The velocity of capital is the number of times one dollar is spent to buy goods and services per unit of time. It’s calculated as the ratio of Gross Domestic Product (GDP) to Money Supply. In a sense, it represents the willingness of citizens to spend. - **If velocity is *increasing***, more transactions are occurring between individuals. - **If velocity is *falling*** (like we have seen continuously for 25+ years), less transactions are occurring between individuals. We can see the clear negative relationship between money supply and velocity of capital in the chart above. This is because money supply growth has outpaced GDP growth and indicates that every dollar doesn’t go as far as it used to. ## **Implications of Future Rate Increases** Looking ahead, it’s plausible that we see another 0.25%-0.50% rate increase over the next six months, which takes the Fed Funds target rate to 5.50%-5.75%. The reason? The primary driver behind these potential hikes lies in the Federal Reserve’s concerns regarding inflation. With its preferred inflation gauge standing at 4.40%, and a 4.7% reading when excluding food and energy, the previous significant interest rate adjustments aren’t fully reflected in the economy yet. - **I’ve said it before, these large interest rate increases are just beginning to work their way through the system.** ## **The Copper Signal** Copper serves as an invaluable proxy for short-term economic expectations. The spread between immediate copper delivery and copper delivered one month ahead reveals a telling metric. Right now, the discount between these two points is the widest observed in the past 25+ years. As you can see in the chart below, it’s cheaper to buy copper for delivery *right now* than it is for delivery one month from now. And it’s the biggest discount in nearly three decades. There are 2 possible reasons why there could be such a wide discount. **First…** A large amount of copper just became available. This is unlikely, as mines don’t just surprise the market with enormous quantities of copper with no warning. If anything, copper production is lower than expected due to political unrest in major copper nations. Recently, the only large copper mine put into production was Quebrada Blanca 2. Located in Chile, it’s a Joint-Venture between Teck 60%, Sumitomo 30% and the Chilean government 10%. This volume has been priced into the market. **Second…** Future copper demand is projected to be lower and as a result, copper sellers are forced to sell their product at a discount to sell out their inventories. Diving into this further we can look at the relationship between key global commodities, interest rates and recessionary signals. The next chart shows 3 items. - Up top, a white line showing the price of Brent crude oil, the global benchmark for physically settled crude oil. - In the middle, the U.S. Federal Reserve Target Interest Rate, and - On the bottom, the U.S. recession probability forecast. As you can see, as soon as the Fed started tightening, recession probability increased. And in lockstep, the price of crude oil began to fall. **Copper shows a similar pattern.** The chart below is the same setup. Copper in white, Federal Reserve Interest Rate in Blue, and the U.S. recession probability in red. Again, we’re seeing that as the Federal Reserve increases the interest rate, the probability of a recession increases, and copper prices fall. Let’s take this all and make it easy to digest… - The U.S. monetary system is going through unprecedented changes, including a sustained contraction in the money supply and rising interest rates. - The decline in the velocity of capital suggests that every dollar is not going as far as before, impacting individuals’ spending habits. - The wide discount in copper prices indicates potential concerns about future copper demand and inventory sell-offs. - As the Federal Reserve tightens its policies, recession probabilities increase, and commodity prices like crude oil and copper start to decline. It’s crucial to monitor these economic shifts and adapt strategies accordingly. - If you want to follow what I’m doing with my own money, join thousands of subscribers to my premium research… [Consider learning more and becoming a member of Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # What’s Next for Mining Finance? - URL: https://katusaresearch.com/whats-next-for-mining-finance/ - Type: article - Published: 2023-06-23 - Updated: 2023-06-22 - Author: Marin Katusa Mining companies, like any other business, need money to prove up their ideas via drilling and then advance the assets. Roughly 1 in 3000 exploration projects ever become a mine, and even fewer become a real positive cash-flowing asset. So how do they get this cash? By raising funds through financings and by issuing shares. These shares represent a piece of the company, and by buying them, investors become part-owners of the business. Issuing shares can be a fantastic way for mining companies to fund their projects, but it’s not without risks. - When a company issues more shares, it dilutes the value of existing shares – which could lead to a drop in the stock’s price. - However, if the company successfully uses the funds to grow and expand, the overall value could increase – benefiting all shareholders ## **The “Bloodhounds” are Wounded, So Who’s Raising Money?** Exploration firms are the “bloodhounds” of the resource business. They raise money and explore for resource deposits. You’ll often find them in jungles, deserts, and frozen wastelands. Typically, funds and institutional investors are prohibited from investing in junior and small-cap stocks for liquidity reasons. The most common exploration business model is to find an area that might have deposits, raise money from investors, then start drilling holes in the ground. If the explorer finds a significant deposit, it will sell the deposit to a larger company. It rarely happens that way. In last month’s edition of [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk), we detailed the fund flows and dollar volume in the mining sector to our premium subscribers. - **The key conclusion was that generalist fund flows are waning and that central banks had been the key buyer of gold.** In addition, there has been minimal if any new capital coming into the miner sector as shown by the GDX/GDXJ ETF fund flow levels. ## **Let’s Look at Mining Financing Worldwide…** The first is a graph which shows the number of equity financing conducted for mining deals around the world. The number of financings is helpful but does not show how much capital is actually being invested into these equity financings. Next, you’ll see a graph which shows the amount of cash going into these deals. - **So far as of this writing, globally, there has been $9 billion in equity financings for mining companies.** Given where we are in the year thus far, makes it an “average” year for financings. Finally, we can look at the size of these deals. Below is the average deal size for each year. So far, 2023 is shaping up to be an “average” year. ## **Gold Financings** Now we can drill down into this data further and look specifically at gold. Given gold has had a very solid year and has spent a lot of time near $2,000 per ounce, we should expect better than average type numbers for financings. So far for the year there have been over 300 equity financing deals for gold stocks. The average number of deals per year is about 1100, so we are below average. Now let’s look at the amount of capital that has been raised via equity financings… As you can see, $2 billion has been put into equity financings in 2023, which is well below the average since 2008. Even excluding the big years from 2008-2011, the average is $6.5 billion per year in financings. To date, the sector is around $1.9 billion. Finally, let’s look at the average deal size for gold equity deals. As you can see the size of the deals are roughly in line with those of the past 10 years. You would think that with gold doing well this year and flirting consistently with all-time highs that deal flow would be above average, but that is clearly not the case. **Katusa Takeaway:** What these data points show me is that there continues to be a lack of capital available to companies in the sector. This is great news for financiers like us. It means less competition, which means better deal terms for us. We just need to be patient but collecting 5% in the bank helps! **A major part of my checklist is to be wary of the risk factors in countries I call** –[**SWAP line nations**](https://www.youtube.com/watch?v=lyAhRYZN9eQ). Those are countries without direct access to US Dollars from the Federal Reserve. Time and time again, these sexy stocks in exotic countries have loads of rewards, until that is, the risk comes home to roost. If you want to get my in-depth research and know which companies I own (and at what price) – consider becoming a member of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). You’ll find in-depth examples of shareholder turnover charts and data on many of our KRO portfolio companies. And in simple terms that any investor can understand. (Leave the hard part to our talented team). It’s going to be a bumpy road ahead in the markets, so arm yourself with the best information. Keep it simple. Less is more and focus on the big score. Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Chile’s Shot Heard ‘Round the World - URL: https://katusaresearch.com/chiles-shot-heard-round-the-world/ - Type: article - Published: 2023-06-16 - Updated: 2025-09-10 - Author: Marin Katusa The biggest earthquake on record is the Great Chilean earthquake of 1960. But recently, Chile’s government did its best to top that. Its sudden, unthinkable move is sending massive shockwaves throughout the lithium industry. It threatens to decimate the entire EV and battery markets, both of which are heavily reliant on a stable lithium supply. Chile is the second-largest producer of lithium in the world, and it has the world’s largest reserves. It also has the highest-grade lithium in the world. So lithium’s new importance on the world stage has thrust Chile into a position of great power—or at least, that’s what it thinks. And recently, it decided to act on that. Socialist Chilean president Gabriel Boric announced **the nationalization of the country’s entire lithium industry**. In the next couple of years, the country’s two giant lithium producers, SQM and Albemarle, will be forced to cede majority control to the Chilean government. The last time this happened, in 1971, Chile took control of its copper mines through “negotiated nationalization”. The process was carefully designed to keep the peace with mining companies and their international investors. Within two years, “negotiated nationalization” became “nationalization without compensation”—what most people would call *stealing*. (It’s now widely referred to as “the Chileanization of copper”.) They’re transparently using the exact same process with lithium. In fact, **state-owned *copper* company Codelco** was commissioned to negotiate the nationalization of SQM and Albemarle. The government has stated that it is essential that Codelco—and by extension, the state government—be the ultimate controller of all lithium companies. The immediate fallout was swift. SQM, one of the two large lithium producers in Chile, lost more than $3 billion in market cap in a single day. But it’s the long-term consequences of Chile’s plan that will truly rattle the world. To support the nationalization, Chile has established the creatively named “National Lithium Company”. - **In a few years, a single company will control more than half of global lithium supply.** For reference, OPEC controls only about 40% of the global oil supply—and still controls the price. Chile will have complete price-setting power over lithium, and it will not hesitate to use that for its own benefit. And that’s exactly where the copper story took a dark turn. Chile’s “act of sovereignty” with copper led to a painful international economic boycott. President Nixon personally wrote: “Make [Chile’s] economy scream.” Chile found itself isolated from the world economy, and the government was overthrown in a coup two years later. - **The promise of wild instability will cause foreign investment to evacuate from Chilean lithium.** Imagine Albemarle, which spent $6 billion in 2016 to triple lithium output in Chile. Six years later, that investment is *gone.* No company is likely to follow in its footsteps. “*Under these conditions, I don’t think any sensible company will put their own money into [lithium] exploration [in Chile]*.” – Former SQM executive Daniel Jimenez **Investment will shift to more mining-friendly countries, reshaping the global lithium market.** Whenever the status quo is upended like this, there’s a profit to be made. All you have to do is follow the money. Where will the United States look to replace the 40% of its domestic lithium supply that comes from Chile? The so-called Lithium Triangle—Chile, Argentina, and Bolivia—contains two-thirds of the world’s lithium reserves. No other region in the world even comes close. Bolivia has massive resources (not reserves)—more than half of all lithium resources in the world. But Bolivia also has: - Extremely low-grade lithium deposits, - A hostile investment environment, - Poor lithium-mining technology, and - Zero major lithium companies or operations. So despite pouring hundreds of millions into lithium evaporation ponds, Bolivia has produced a grand total of 1,400 tonnes in the past five years—less than .3% of global supply. Meanwhile, Argentina has ricocheted from possibly nationalizing its lithium to campaigning against mineral development to aggressively denying foreign investment. Most of Argentina’s brine operations have also not proven to be economical. **The good news is, the Lithium Triangle is *completely made up*.** In reality, it’s the “Arid Diagonal” that makes the west coast of South America ripe for lithium. Parts of the Arid Diagonal are fifty times drier than Death Valley, making it perfect for lithium evaporation ponds. If you zoom in and look at where the actual reserves and projects are, there’s an outlier in the top left corner—making it more of a Lithium Rectangle. That deposit is in Peru, one of the most mining-friendly countries in the world—and becoming friendlier by the minute. “*There are countries that are making decisions that are scaring away investors who are looking for countries with enormous potential, and we want to take advantage of that*.” – Peru Finance Minister Alex Contreras If it’s hard to tell which country he’s talking about that is scaring investors, it’s Chile. Peru has an investor-friendly environment, an expansive mining sector (it’s the #2 copper producer in the world), an ideal location, and *zero* state-owned mining companies. And Peru has a free-trade agreement with the United States, meaning it can source lithium to U.S. auto manufacturers. That’s why, in an odd twist of fate, the *Peruvian* *government* is hard at work helping a *private* *company* get a $500 million operation off the ground. That company’s market cap is much less than $500 million—and that’s not even its biggest project. The flagship project is in Nevada, the ultimate location for lithium mining. There’s nothing better than extracting lithium in the U.S.’s own backyard—no AK-47s involved. Right now, Chile’s lithium earthquake is forcing every developed country to scramble for lithium supply. Countries are so desperate for lithium security that Bolivian officials have accused the CIA of orchestrating a coup just to gain access to the light metal. Which means a U.S.-based company with major projects in Nevada and Peru is likely to become a hot commodity in the very near future. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Is OPEC OVER? - URL: https://katusaresearch.com/is-opec-over-v2/ - Type: article - Published: 2023-06-09 - Author: Marin Katusa ## **The U.S.’s Bold Push to Become the First Electro-State ** The country that controls the global refined lithium supply will be the superpower of the 21st century. And it’s only a matter of time before that country emerges. Right now, 96% of lithium is mined in just four countries: Australia, Chile, Argentina, and China. But that’s deceptive. Because the countries that *have* the Lithium don’t necessarily *own* the lithium. You see, China is never content with its own resources. And it is rapidly moving to corner the global lithium market—in a bid to become the *only* powerful electro-state in the world. To get there, China has systematically steamrolled its way into the other three major lithium mining countries. - The second-largest lithium reserve in the world, located in **Australia**, is underwritten by Ganfeng Lithium, a Chinese company. - Greenbushes, the largest hard rock lithium reserve in the world and also in **Australia**, is majority-owned by a Chinese lithium company. That same company paid $4 billion to become the second-largest shareholder in SQM, the largest lithium producer in **Chile**. In 2021, Chinese companies bought *three* major lithium mines in **Argentina** in deals worth $1.3 billion. No corner of the earth is safe from China’s grasp. Out of the eleven lithium projects in Africa, seven are already partially or wholly owned by China. *“It’s not fear of the Chinese getting there first. They are there first. It’s already happened.” * – Critical Metals Executive Director Russell Fryer Around the world, China now controls the supply of lithium—which means it can set the price. **But here’s the most dangerous part: China can also control who has *access *to lithium. ** No country can transition to renewables, or EVs, or utility-scale energy storage, or distributed power grids, without access to mass-mined lithium. Most of the U.S.’s lithium supply is currently imported from Argentina and Chile. Those are the same sources that are getting bought out and taken over by China. Which means China finally has what it needs to make the lightest metal on the planet a *very* heavy weapon. ## **Mined in America** The United States used to have a strong grip on the global lithium supply. In 1996, the U.S. produced over a quarter of the world’s lithium. A quarter century later, it’s at less than 1%. **The grand total of lithium mines producing in the U.S. now? *One.*** The actual production number is so embarrassing it’s withheld on U.S. Geological Survey reports. Meanwhile, lithium has transitioned from *barely-used metal* to a *vital energy component.* But it’s estimated that the solitary Silver Lake mine, located in Nevada, produces enough lithium for about 80,000 EVs. That’s less than 1% of what the U.S. will need by 2030—for EVs alone. And that doesn’t even include the demand from utility-scale battery storage to make the switch to renewables. - **In other words, Silver Lake is a puddle. The United States desperately needs an ocean.** Fortunately, the U.S. is #5 in the world in lithium reserves. And that number is quickly rising as exploration locates more economic lithium. There’s plenty of lithium at home, and nowhere else to turn. So the U.S. government is enlisting every weapon in its arsenal to stimulate domestic production. In 2022, Congress invoked the Defense Production Act—originally intended to help the U.S. win wars—to get the industry moving again. The Act provides *huge* tax incentives to critical mineral miners and battery manufacturers. Tesla alone estimates the credits are worth $1 billion+ per year. But there’s a catch. To qualify, at least 40% of battery components have to be extracted or processed either in the United States or in one of twenty free-trade countries. That ramps up to 100% by 2029. The law also requires evidence that zero lithium has been “extracted, processed, or recycled by a foreign entity of concern.” (In other words, “China.”) But not just Chinese-*mined* lithium… - **Australia mines half of the world’s lithium—and ships 90% of that to China for processing. All off-limits to U.S. manufacturers starting at the end of 2023.** Car manufacturers have only a single option left if they want to do business in the U.S.: identifying a source of local lithium. By backing car manufacturers into that corner, the U.S. government has knowingly kicked off a new Lithium Rush. And this one’s going to put every Gold Rush to shame. ## **The Winner Takes It ALL** You see, the subsidies from the Defense Production Act are worth $10,000 or more per car. Manufacturers are desperate to get their hands on those subsidies. Because noncompliant manufacturers will have to charge $10,000 more *for the same car*. Whichever manufacturer is the first to produce a 100% Made-in-the-USA EV will dominate the entire market. And there’s simply no way that U.S. car manufacturers that don’t qualify for the credits can stay alive. So there’s nothing they won’t do to get their hands on U.S.-mined lithium. Now, that includes outright purchasing lithium mines to keep competitors from snatching them up first. For example, General Motors has invested $650 million to develop a mine in Nevada. It’s *literal* vertical integration—and it’s making lithium mines the hottest commodity on the market. Even Chinese car manufacturers are stepping into the market themselves, upping competition for mines. *“Chinese companies… have realized how much lithium they’re going to need… and [are] going after some of the most promising junior projects in development.”* – Seth Goldstein, senior equity analyst at Morningstar Over the next year, we’re going to watch the world’s biggest game of King of the Hill unfold—with the highest stakes. **I’m going to tell you about a little-known mine in a few days…** **Located in the United States, that has all the hallmarks of a *prime* buyout target.** America is about to strike back for energy security and independence. Hard. You won’t want to miss it. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # America’s Third Energy Revolution - URL: https://katusaresearch.com/americas-third-energy-revolution/ - Type: article - Published: 2023-06-07 - Author: Marin Katusa Within seven years, EV production will come to a screeching halt. Carmakers will switch gears back to gas-powered cars, net-zero goals will get thrown to the wayside, and emissions will rise precipitously. This flies in the face of current predictions, but it’s an unavoidable reality. Let me explain… **Analysts have consistently underestimated the growing demand for EVs, (including us here at Katusa Research!).** Bloomberg, a firm bullish on EVs, predicted in 2007 that 3.5 million EVs would be sold in 2022. By 2019, they realized their projections were off by over 40%, so they revised their outlook to 5 million EVs sold in 2022. The actual figure? 10 million. - **In fact, more EVs were sold in 2022 than from the beginning of human civilization through 2020… *combined*. ** Much of the EV growth over the past few years has come from China. **60 percent of 2022 EV sales were in China. ** Growth in the country was due primarily to EV subsidies, which ended at the end of 2022. But just as China is slowing down, the United States is putting the pedal to the metal with a full gamut of subsidies, tax credits, government investment, and regulations. EV sales in the U.S. have already shot up 400% since 2019 and it’s only the beginning. - **The United States plans for 50 percent of car sales to be EVs by 2030. ** That requires a 10x in EV sales in just seven years. The growth is global: Bloomberg now projects that by 2040, more than 56 million EVs will be sold worldwide. The hockey-stick EV growth is all due to two unstoppable forces bearing down on the industry. ## **The Gas-less Carriage Goes Global** The first is “Wright’s Law,” which predicts that every time global battery capacity doubles, the price will decline by **18 percent**. Over the past three decades, battery prices have followed Wright’s Law with precision, declining by nearly 90% in the last decade as production has accelerated: In 1992, a Tesla like battery would’ve set you back a jaw-dropping $450,000. Today, that same battery costs a mere $10,000. And by 2025, thanks to skyrocketing production, it’s expected to drop below $7,500. Tesla CEO Elon Musk nails it when he says, “EV demand is a function of affordability, not desire. Even small changes in the price have a big effect on demand.” Plummeting battery prices have allowed Tesla to slash costs across its lineup. It’s a virtuous cycle: lower battery prices fuel higher EV demand, which in turn drives battery prices even lower. **Enter the game-changing “Minority Rules Law.” ** This principle states that once 10% of a population embraces something, the majority will follow suit—practically overnight. In late 2022, EV sales reached that crucial tipping point, with 10% of all new vehicles sold worldwide being electric. ## **Hold onto your hats, we’re living through ****a rare, history-making moment.** The rapid global adoption of EVs is unfolding before our eyes, outpacing even the most bullish predictions. In fact, the growth from 2021 to 2022 alone surpassed the total number of EVs sold in 2020. The future is electric, and it’s charging full speed ahead. There’s only one problem, according to the IEA: “*Electric car sales continue to break records, but mineral supply constraints are looming*.” And that’s why EVs are already at severe risk of being phased out, just as they’re getting started. ## **Car Manufacturers Sound the Lithium Alarm** You see, lithium required to meet all this demand just isn’t on the market. Tesla plans to make 20,000,000 cars a year by 2030. That will require lithium equivalent to more than 225 billion iPhone batteries—more than twice as much as the *entire* lithium industry today. ## **We’ll need 78 new mines by 2035 to accommodate total demand.** But few mines are under development, and existing mines are not scaling up lithium production. Also, lithium mines take 10+ years to bring online. So if the mine is not already under development, it’s too late. This is why massive shortfalls are already being predicted. **Under the best-case scenario, the lithium *shortage* in three years will be as much as the entire *demand* was in 2022.** To avoid the impending crisis, EV manufacturers are taking matters into their own hands. In a rare move, they’re getting involved in lithium mining itself. What’s unfolding is an escalating, no-holds-barred brawl for lithium supply. Consider Volvo, which is talking with the biggest mining companies in the world about buying a stake in their operations. Not for a profit, but just to have access to lithium. Volkswagen’s CEO, Scott Keogh, echoes this sentiment: “We are not going to become a mining company. But certainly, we will get significantly closer.” Or Ford, which pre-purchased 33% of the lithium output of a new mine in Nevada last year. A few months after that, GM invested $650 million in a lithium mine—also in Nevada. GM Director of Purchasing Tanya Skilton predicts that the industry will be divided into winners and losers: Companies with minerals for “electrified dreams” will succeed. The rest are toast. ## **The Canary in the Lithium Mine** In short order, lithium has transformed from “unknown mineral” to “a matter of survival” for automakers. Even the CEO of Mercedes-Benz predicts a coming lithium squeeze—and says that’s why Mercedes is buying future output from lithium miners to help suppliers raise financing. Mercedes has even begun a nearly unprecedented step among carmakers: working on building its own processing facilities. Unprecedented, of course, except for Tesla. **Two years ago, Elon Musk announced that Tesla planned to mine lithium on 10,000 prime acres in Nevada.** Industry observers thought it was a gambit: Musk was just trying to put pressure on the industry to step up production. Only Tesla is actually following through. Dozens of new, hugely profitable buyers competing to buy lithium mines is going to make the mines *much* more valuable. But it’s not just that. You see, the prospect of future competition for lithium has caused the price to skyrocket. Lithium prices shot up from $6,800 in 2020 to $78,000 in 2022 before settling at the current ~$41,000 per tonne. Which means ready-to-produce lithium mines have become far more valuable—all before a single ounce has come out of the ground. Car manufacturers wouldn’t be getting into the lithium mining business if they thought the price was going down any time soon—or that lithium would be available when they need it. And it’s in part because they realize that cars aren’t the only demand for lithium. - **You see, Tesla has a non-car division that will eventually be bigger than Tesla Motors: Tesla Energy.** Forget about EVs for a moment. The batteries Tesla Energy is building—and the lithium they require—seal lithium’s fate as the white gold of the 21st century. Lithium mines as some of the hottest properties on the face of the planet. It doesn’t matter now how quickly supply is ramped up now; it cannot be fast enough through current production and refinement. And EVs are not the only thing increasing lithium demand… Because this isn’t just about cars. It’s about the literal future of power. Renewables will require utility-scale batteries, each of which require an order of magnitude more lithium than EVs. The future of energy in any form requires lithium. It has just become the most powerful metal in the world. **But America has just one, major, problem…** I’ll tell you how important it is in the next missive. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # American Lithium – Disclaimer - URL: https://katusaresearch.com/american-lithium-disclaimer/ - Type: page - Published: 2023-06-05 - Updated: 2023-06-07 - Author: Marin Katusa ## **IMPORTANT DISCLAIMER** Katusa Research, as a publisher, is not a broker, investment advisor, or financial advisor in any jurisdiction. Please do not rely on the information presented by Katusa Research as personal investment advice. If you need personal investment advice, kindly reach out to a qualified and registered broker, investment advisor, or financial advisor. The communications from Katusa Research should not form the basis of your investment decisions. Examples we provide regarding share price increases related to specific companies are based on randomly selected time periods and should not be taken as an indicator or predictor of future stock prices for those companies. American Lithium Corp** h**as reviewed and sponsored this article. The information in this newsletter does not constitute an offer to sell or a solicitation of an offer to buy any securities of a corporation or entity, including U.S. Traded Securities or U.S. Quoted Securities, in the United States or to U.S. Persons. Securities may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom. Any public offering of securities in the United States may only be made by means of a prospectus containing detailed information about the corporation or entity and its management as well as financial statements. No securities regulatory authority in the United States has either approved or disapproved of the contents of any newsletter. Katusa Research nor any employee of Katusa Research is not registered with the United States Securities and Exchange Commission (the “SEC”): as a “broker-dealer” under the Exchange Act, as an “investment adviser” under the Investment Advisers Act of 1940, or in any other capacity. He is also not registered with any state securities commission or authority as a broker-dealer or investment advisor or in any other capacity. HIGHLY BIASED: In our role, we aim to highlight specific companies for your further investigation; however, these are not stock recommendations, nor do they constitute an offer or sale of the referenced securities. Katusa Research has received cash compensation from American Lithium Corp as reported in their May 8, 2023 news release and is thus extremely biased. It is crucial that you conduct your own research prior to investing. This includes reading the companies’ SEDAR and SEC filings, press releases, and risk disclosures. The information contained in our profiles is based on data provided by the companies, extracted from SEDAR and SEC filings, company websites, and other publicly available sources. HIGH RISK: The securities issued by the companies we feature should be seen as high risk; if you choose to invest, despite these warnings, you may lose your entire investment. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. NOT PROFESSIONAL ADVICE: By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. While Katusa Research strives to provide accurate and reliable information sourced from believed-to-be trustworthy sources, we cannot guarantee the accuracy or reliability of the information. The information provided reflects conditions as they are at the moment of writing and not at any future date. Katusa Research is not obligated to update, correct, or revise the information post-publication. FORWARD-LOOKING STATEMENTS: Certain information presented may contain or be considered forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors which may cause actual results or events to differ materially from those anticipated in these statements. There can be no assurance that any such statements will prove to be accurate, and readers should not place undue reliance on such information. Katusa Research does not undertake any obligations to update information presented, or to ensure that such information remains current and accurate. --- # White Gold Mines and Wild Rides - URL: https://katusaresearch.com/white-gold-mines-and-wild-rides/ - Type: article - Published: 2023-06-02 - Updated: 2023-06-01 - Author: Marin Katusa Lithium prices soared to an astounding USD$80,000/tonne last year, only to plummet in recent months. But don’t be deceived. This rollercoaster is gearing up for another thrilling climb, and you’ll want to grab a seat. The cause of last year’s surge? A potent mix of battery demand and COVID-19 supply chain disruptions. Now that prices have settled back to late-2021 levels, you may think the excitement is over. Think again. The lithium game is about to change, driven by an insatiable appetite for electric vehicles (EVs). As countries battle climate change and phase out gas-guzzling cars, EV sales are skyrocketing – and so too will the demand for lithium. As more and more countries take up the fight against climate change and push for bans on the sale of gas-powered vehicles by the end of the decade, this trend in new EV sales will only accelerate. - **Electric vehicle sales are projected to triple by 2030… and lithium demand with it.** There is one problem though: as things are now, supply won’t be able to keep up. The simple fact of the matter is this: it takes years for a new mining operation to start up, and lithium is no exception. On the other hand, building a new electric vehicle factory is no different than building any other car factory. **Tesla**, for instance, has gotten building new gigafactories down to a science: - Their** Shanghai Gigafactory **was completed in **just 11 months**. The first assembled Model 3s were delivered a month later. - **Tesla** recently announced the construction of a **new gigafactory in Mexico** with a slightly longer construction timeline of 12-15 months, due to a new production line for their upcoming compact car model. In fact, if you were to retool a pre-existing car factory from gas vehicles to electric vehicles, you could be looking at a timeline measured in *weeks* rather than months. So, while lithium *supply* has an uphill battle to fight… lithium **demand** is going to explode the closer we get to 2030. And when they do, it’s quite likely that lithium prices will be impacted as well. ## **If Lithium Prices Go Up, A Few Will Become Big Winners** Although a surge in lithium demand doesn’t guarantee a corresponding rise in prices, it’s undeniably a potential outcome. **Consider this:** heightened EV sales, which drove lithium demand, played a crucial role in creating last year’s lithium market frenzy. If there’s even a hint of lithium prices escalating, look no further than the lithium miners—the bedrock of the lithium industry. Take a look at what happened to lithium mining companies during the big runup in lithium prices between 2021 and 2022: As you can see, each company at least doubled (delivered over 100% returns) at some point during the cycle… but that’s just for starters. **Frontier Lithium** delivered in excess of **900% returns**… And **Sigma Lithium **even went up by a whopping **1350%.** Another company, **Millennial Lithium**, was trading under 60 cents in the wake of the COVID-19 pandemic… - It was bought out at a valuation of USD$3.72 per share at the height of the lithium price runup early in 2022… **over 500% returns** for investors who picked the right time to buy. Things may be quieting down for the moment in lithium… but don’t count on it to stay that way for long. All signs point towards a massive influx of lithium demand over the coming years, and the supply to keep up with it will have to come from *somewhere*. This is a fact the founder of Millennial Lithium knows all too well… which is he’s also the of a *different *lithium company. And he plans to do exactly the same thing that he did with Millennial Lithium, with this new company. The lithium markets are set for massive growth in the years ahead. And if the markets take off again, you won’t want to pass up the opportunity for another ride. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The “Paper Gold” Markets - URL: https://katusaresearch.com/the-paper-gold-markets/ - Type: article - Published: 2023-05-26 - Updated: 2023-05-24 - Author: Marin Katusa Imagine you have a chocolate bar… You can touch it, hold it, and even take a bite from it. That chocolate bar is like real gold that you can physically see and hold in your hand. Now, instead of a real chocolate bar, imagine there’s a picture or a certificate that says you own a piece of that chocolate bar. This piece of paper represents chocolate that you don’t actually have – physically – in your possession. In the same way, the paper gold market is a system where people can buy and sell gold without actually owning the physical gold. It works like this: - **Instead of buying real gold bars or coins, you can buy pieces of paper or digital certificates that represent a certain amount of gold.** These pieces of paper or certificates are like promises that say, “Hey, you own this amount of gold, even though you can’t touch or hold it.” And they are traded on financial markets, just like stocks or bonds. The idea behind the paper gold market is to make it easier for people to invest in gold without the hassle of storing or securing physical gold. It allows investors to buy and sell gold quickly and easily using electronic systems. But, it’s important to remember that the paper gold market is based on trust, and the value of the gold is tied to the actual physical gold held by trusted custodians. ## Hard Assets and Dealmakers Since mid-2022 and at the time of this writing, gold is up over 19%, and year to date, gold is up 8% and currently trading just under $2,000 per ounce – with gold futures recently [spiking to new all-time highs](https://katusaresearch.com/gold-prints-new-all-time-high-and-a-look-at-profits/). Things look positive for the yellow metal… Yet, M&A activity for the developers and producers has been quiet and the financing deal flow of quality assets is low. You would think that with nearly $2,000 gold, this would be the time all the deals at lofty valuations would be getting done, but that’s not the case. Yes, **Newmont** is making a play for **Newcrest**, and **Agnico** bought out **Kirkland Lake** (a previous KRO holding). But outside of those large transactions, there is little activity. It is an odd time for the gold market, where some gold enthusiasts are excited about Gold2K, but generalist activity is far from as frothy or excited. It bodes the question… ## Who’s Right: The Gold Bugs or the Generalists? We can take a deep dive into generalist market sentiment to uncover clues about the situation at play. Currently, Exchange Traded Funds (ETFs) which provide exposure to bullion, hold over 93 million ounces of gold. This is what I call the “paper gold” market because you can buy an ETF which will provide the same exposure to gold price movement, without the requirement to store it. As you can see, the number of ounces represented by paper gold ETFs is not far off its highs. Note: I’m not going to get into the debate of whether or not the 93 million ounces is actually there to back the ETF paper, as we are NOT recommending the ETF. We’re using data to answer questions about generalist sentiment toward gold. Now, let’s show you the implied *value *of these holdings is over $186 billion (at $2000/oz) as shown below. ## Paper Pushers: Get to Know Fund Flows Understanding the paper gold market in detail requires analysis of “fund flows” which is the net activity of buying and selling shares of the ETF product. Shares are created and redeemed, and the net difference between creation and redemption is the “fund flow”. It provides a real-time indicator of market participants’ bullish or bearish behavior. - **When participants are bullish**, fund flows are positive because there are more creations than redemptions. - **When participants are bearish**, fund flows are negative and there are more redemptions than creations. You can be as granular as you want with this data if you know where to look and examine it on a day-by-day basis. But, I look at weekly and monthly data to remove the noise and get a better picture of the capital flow. Below is the monthly fund flow for the “paper gold market”. Green bars indicate months where there was more creation than redemption (bullish behavior), whereas red bars indicate months where there was more redemption than creation (bearish behavior). - **As you can see for most of the last 12 months, there has been more selling than buying.** Looking at the bigger picture, you can look at the cumulative fund flow vs the gold price over many years. So, here is a chart that plots cumulative fund flow versus gold since 2008. As you can see, through the first few cycles, gold price rises have been met with increased fund flows into the paper gold market. However, this past up move has not been met with the same buyer momentum. Below is a chart which examines this recent trend change in greater detail on a weekly time frame. **The chart is saying that at this granular level, there’s been almost zero buyer consensus in the paper gold market.** As you can see from previous highs in gold, fund flows have typically moved higher. However, there is an interesting pattern here of *“higher highs in gold”* and lower highs in fund flow from the paper market. - Gold hit $2,063 per ounce back in late 2020, and fund flow peaked above $35 billion. - Then in 2022, as gold again went above $2,000 per ounce, fund flows peaked at $30 billion. - Now here we are again at $2,000 gold and fund flow is at a paltry $15 billion, essentially unchanged since gold prices were at $1650. So, if paper gold buyers aren’t buying, then who is? [I believe I gave you the answer last week.](https://katusaresearch.com/central-bank-signals-and-the-secret-behind-the-gdxj/) Regards, Marin Katusa **P.S. If you want to know where I’m putting my own money in gold, resource, and energy stocks… [click here to learn more about Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk).** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Central Bank Signals and The Secret Behind the GDXJ - URL: https://katusaresearch.com/central-bank-signals-and-the-secret-behind-the-gdxj/ - Type: article - Published: 2023-05-19 - Updated: 2023-05-18 - Author: Marin Katusa The year is 2013, and the German central bank, Deutsche Bundesbank, unveils its daring plan. It will repatriate 21.67 million ounces of its gold reserves from foreign vaults in New York, London, and Paris. This courageous move captures the world’s attention, raising eyebrows and igniting debates. What triggered this decision? What does it mean for the global economy? As Germany embarks on this mission, it sends a powerful message about the significance of gold and the need to protect national assets. Over the course of four years, the Bundesbank successfully completed the repatriation, bringing more than HALF of Germany’s gold reserves back to its homeland. This remarkable feat demonstrated the importance of physical possession of gold reserves for central banks and governments in an increasingly uncertain world. - **But what does this mean for the global gold market today?** - **And what’s the secret behind the Gold Junior ETF, GDXJ?** This week, we’ll explore the role of central banks as the primary buyers of gold. You’ll see the strategies these financial institutions employ to secure their nations’ wealth and learn how their actions influence the world’s gold market. And we’ll reveal something you might not know about the GDXJ. Let’s get into it… ## **Central Banks Are Hungry for Gold** Central banks have been making noise in the markets, and are one of the primary buyers of gold in the last few years. Here’s a chart that shows the monthly “net flow” of gold purchases and dispositions by central banks around the world since Jan 2020. Only a handful of times have central banks as a group been net sellers and this is because they’re not opportunistic traders. Central banks buy gold as part of a nation’s financial reserve strategy. Looking at this on a cumulative basis since 2020, central banks around the world have added a lot of gold to their reserves. In total, they have bought almost 38 million ounces of gold, which is worth about $76 billion. You’ve likely heard me talk about the importance of fund flow. Measuring fund flow is done through analysis of Exchange Traded Funds creation and redemption patterns. - When investors are bullish, there is more demand for units than available for sale, so the ETF creates new units. - The opposite happens when investors are bearish. This can be done for any set of ETFs and I use it as a key metric for gold. Below is a chart which layers central bank and paper gold fund flow into a single chart that shows the cumulative flows relative to the gold price. This chart makes it crystal clear. - **ETFs have actually been net sellers for the past year.** - **The central banks have been driving the gold price higher, not the paper gold market.** ## **Who are the Largest Buyers of Gold?** So far in 2023, Russia (1 million ounces), Turkey (1.46 million ounces), China (1.28 million ounces) and Singapore (1.65 million ounces) have accumulated the most gold. Now with the understanding that central banks have been driving the gold price higher, rather than the paper gold investors, it is time to see how gold stocks are reacting. Central banks cannot buy gold stocks, so investors need to lead the charge if there is going to be one. The chart below tells us that if you bought a group of gold mining companies and kept it for the last 10 years, even though gold prices have gone up by 20%, you’d actually be majorly underperforming and likely down 50% on your money. ## **The Secret Behind the “Gold Junior” ETF** Staying focused on the chart above, and as we explained many years ago—the term **GDXJ** (*Gold Juniors Fund)* is a misnomer. GDXJ is an acronym for the “VanEck Vectors Junior Gold Miners ETF”, which is a fund that tracks the performance of smaller, so-called “junior” companies that are involved in gold mining. It’s a misnomer because companies like **Pan American** (2nd largest pure silver producer in the world with an MCAP of $8B) and **Kinross** (multi-million-ounce gold producer with an MCAP of $8B) are in the GDXJ and make 12% of the GDXJ. There are few “juniors” in the GDXJ, and that is sole because the liquidity was so low the selling pressure from GDXJ rebalancing would crush the stocks and hurt the GDXJ index performance. ## **The Gold Niche** Gold stocks are a niche and speculative sector, that requires testicular fortitude and precision timing. One of the major keys to success as a speculative investor in mining stocks is timing the window. You need to get in cheap and take profits when volumes and generalist fund flow are in your favor. Below is a chart that shows the fund flow across gold miner ETFs. Like the chart further up: - Bullish investor behavior is represented by green bars caused by ETF demand greater than redemptions, and - Bearish months where redemptions outweighed creations in red. Once again, monthly activity only tells one part of the picture. Seeing the fund flow cumulatively, relative to the gold price is more helpful. Below is a chart which plots cumulative ETF miner fund flow versus gold. - **This chart is even more concerning. Since 2016, there has essentially been no new money entering these ETFs.** Why can I make that statement? Because since that time, fund flow has remained unchanged. Buyers have mostly been equal to sellers, which means net fund flow is close to zero, and thus there’s been no new money coming into the gold miners to tip the scales. I’ve said it before, that in order for there to be a true bull market, capital must come from outside the sector. Or else it is just one current investor, selling to another current investor and the net change is zero. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Debt Ceiling Dramatics - URL: https://katusaresearch.com/debt-ceiling-dramatics/ - Type: article - Published: 2023-05-12 - Author: Marin Katusa This catastrophic scenario may seem like a plot from a Hollywood blockbuster, but it’s not entirely fiction… In 2001, Argentina faced a devastating debt crisis that shook the global economy to its core, leading to the largest sovereign default in history. Bank accounts were frozen, the Argentine peso collapsed, and violent protests erupted in the streets as millions were plunged into poverty overnight. As the U.S. grapples with its recurring debt ceiling crises, it’s essential for investors to understand the gravity of the situation and the potential consequences of inaction. While the U.S. has yet to face a disaster on the scale of Argentina’s meltdown… The ever-looming threat of default or credit rating downgrades sends shivers down the spines of market participants worldwide. ## **The Central Question Is – Has Debt Become Irrelevant?** Should the debt ceiling be raised or not? In the absence of an agreement, the U.S. government could potentially run out of funds by the end of the month. This would lead to immediate credit downgrades and missed payments by the U.S. government. Can you picture the chaos? Will this happen? Highly unlikely. In reality, the ongoing debate about the debt ceiling is mere posturing. We all know it will eventually increase. After all, there are two things politicians love: - Spending money they don’t possess (debt) and - Using taxpayers’ money (your money). Most politicians in Washington lack the expertise of Wall Street’s Fixed Income departments when it comes to managing debt finance, but that’s not the main issue. The debt ceiling in the U.S. and globally will persistently inch higher and this poses risks to citizens around the world. Because let’s face it, in the end, we the taxpayer end up taking the brunt of the loss. US debt has become more expensive as interest rates have increased. Debt that is maturing either needs to be paid back with available cash, or it needs to be refinanced. Most of the time, debt is refinanced and at new higher interest rates, these obligations become harder to meet. This in turn affects bankruptcy risks. We are seeing this in real-time here in the US debt markets. ## **Remember Credit Default Swaps?** A key market to watch for insight on ceiling risks is what happens in credit default swaps for the US government. You can think of a credit default swap as a form of insurance in case a bond is not paid back. - **Riskier fixed-income investments will have higher premiums in the CDS market because there is a higher chance of going under.** As you can see in the chart, spikes in the swap market typically occur during times of crisis, though this recent move is orders of magnitude greater than previous highs. A key reason for the move here is based on the government’s ability to pay its debts. A government bank account fluctuates depending on tax receipts, fiscal expenditures, and debt repayments. The chart below shows the historical and current level of cash in the US treasury. ## How the debt ceiling crisis affects financial markets When the U.S. faces a debt ceiling crisis, it can create problems not only for its own economy but also for financial markets around the world. Since the United States has the world’s largest economy, any issues it faces can cause concern for investors everywhere. In the past, debt ceiling crises have made financial markets uncertain and unpredictable. - **Worried about the possible negative effects of a U.S. default or a lower credit rating, investors might move their money to safer investments. ** This shift can lead to increased interest in assets like gold or U.S. Treasury bonds, which are often seen as more stable. The crisis can also have a big impact on bond yields and interest rates. If investors are nervous, they may ask for higher yields on U.S. Treasuries. This can make it more expensive for the U.S. government to borrow money and could result in higher interest rates for regular people and businesses. Higher rates can hurt certain parts of the economy, like housing and consumer credit. While there were no specific debt ceiling increases in 2020, the Bipartisan Budget Act of 2019 (passed on August 2, 2019) had suspended the debt ceiling until August 1, 2021. This suspension covered the entire year of 2020. For 2021, the debt ceiling suspension expired on August 1, and the U.S. Treasury began implementing extraordinary measures to avoid defaulting on its obligations. On October 14, 2021, Congress passed a short-term suspension of the debt ceiling, which raised the limit by $480 billion, allowing the U.S. government to continue borrowing until December 3, 2021. ## **Market Shock and Operation Twist in 2011** In 2011, a near disaster happened when the “Tea Party” Republicans and President Barack Obama’s administration clashed over the debt ceiling. The S&P 500 kept its gains for the year until late July when the problem got worse. After avoiding a crisis, stock prices started to drop. The situation got even worse when Standard & Poor’s lowered the U.S. government’s credit rating from AAA to AA+ because they didn’t like the deal that stopped a default. Stock prices began to go up again after the Federal Reserve used a plan called “**Operation Twist**” about two months later. This plan meant that they used money from bonds that were ending to buy new long-term bonds. And was supposed to make the difference between short-term and long-term interest rates smaller. Even though the S&P 500 finished the year almost the same as it started and had big gains compared to gold after the Federal Reserve helped, it was still behind long bonds at the end of the year. One thing is for sure, there is no free lunch with debt and likely wild times are ahead of us in the markets. If the markets fall apart, I’ve got my short list of world-class opportunities that subscribers and I are waiting to pounce on. If you are looking to gain an edge in your research, consider learning more about **[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)**. Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Gold Prints New All-Time High (And a Look at Profits) - URL: https://katusaresearch.com/gold-prints-new-all-time-high-and-a-look-at-profits/ - Type: article - Published: 2023-05-05 - Updated: 2023-05-04 - Author: Marin Katusa All it took was a hint. US Fed Chair Jerome Powell spoke that rates may be topping out and then gold prices took off late Wednesday, making a new all-time high of $2,085 per ounce. ## **Record Highs for Gold: Technical Analysis** Momentum buying popped stop losses that were set at previous highs which triggered a quick covering frenzy and pushed gold prices upwards. Gold has held its short-term support above $1750 and has pushed through past highs which are key resistance points. Examining the **Relative Strength Index** for gold, you can see that we are approaching an overbought level. This makes sense given the quick move up to new highs. However, just because an indicator says gold is overbought, doesn’t mean gold can’t go higher. Momentum is nearly impossible to gauge correctly. We can see how multiple times; gold broke well above the “overbought” level for its RSI. The same can be said on the downside. - **I have said it before, in order for gold to truly be in a bull market, we need to see multiple consecutive weekly closes above this $2085 area.** This would represent the creation of new support points above previous highs which would be bullish for gold. As I outlined recently to my premium members, generalist investors aren’t investing heavily in gold or gold stocks right now. However, this could change rapidly as new all-time highs come into play. ## **What will it take for record highs in copper?** I consider myself fortunate to have been involved in every stage of a copper mine. Everything from exploration, to financing an IPO, to permits and development to production. While I’ve discussed this experience before, I’ve gained a wealth of knowledge that most analysts are not aware of when analyzing a mine: Including start-up, exploration, permitting, financing, construction, and operation risks and challenges. This is because the actual operations of a mine are challenging and present numerous problems and obstacles that analysts rarely encounter. As an investor in commodities at all lifecycles, you have to know **Murphy’s Mining Law**… - **Everything and anything that can go wrong will go wrong.** After 20 years of travelling the world to analyze resource projects, I’ve ended up in the cautious camp for my portfolio and prefer to stay in advanced assets within +SWAP Line Nations. And I’m always a proponent of the [AK47 indicator](https://katusaresearch.com/use-ak-47-indicator/). That is unless I can obtain free upside through positive asymmetry (high reward for the high risk). The SWAP Line Nation concept continues playing out since we brought it to the forefront back in 2020. (You can learn about [what a positive or negative SWAP line is right here](https://katusaresearch.com/swap-lines-are-one-of-the-most-important-things-youve-never-heard-of/).) Here’s an example… Most recently, mining giant **First Quantum** has threatened to shut down the very large Cobre Panama mine. This is a mine I happen to know very well… Back when I first uncovered this asset, it was called Petaquilla. I first visited the Petaquilla copper project in 2006 and then organized a financing for my subscribers in early 2007. A little-known fact: That mine also almost became combined with another project I was involved with as a director that was put into production. The twists and turns in the boardrooms of producers is never boring. Inmet bought out Petaquilla Copper in 2008 and then First Quantum bought out Inmet and renamed the mine to Cobre Panama from Petaquilla. Safe to say, my subscribers and I did very well on the Petaquilla financing in 2007. But here is the thing, pre-Great Financial Crisis in 2008, it was a very different market… It was a bull market for resources, where China’s economy was booming and it couldn’t produce nearly enough copper or other base metals domestically to satisfy its internal demands. This meant the Chinese had to be very aggressive in acquiring copper and other industrial metals from overseas players. I was nowhere near as experienced in copper back then as today. I was young, aggressive, and took positions without understanding the full array of risks. I did not truly understand the magnitude of the risks at the time. ## **Politics and Profits** In another example, Chile just made a major announcement with the goal to nationalize its lithium sector. This sent stocks in a tailspin and put copper companies in the region on notice. It all means one thing… Across the board (especially in emerging market nations) Governments will want a higher cut of the profits. And the owners of the mine (most likely a foreign company listed on the US, Canadian or Australian exchange) will fight back. Who wins in this case? - The lawyers? Yes. - The politicians? Yes. - The consultants? Yes. - The shareholders? No. Going back to the First Quantum example, I believe the company will eventually have to pay more to the government of Panama in some capacity from the revenue of the metals generated from the mine. And I can almost guarantee the shareholders will always lose in this scenario. Before you go into just any jurisdiction, do your homework: - **The odds of making an exploration project into an operating mine are roughly 1 in 3000.** Few mines pay shareholders an amount from the free cash flow to warrant the risk one takes by investing in the operation. ## **Gold vs Copper: Profit Check** All of my subscribers know I’m a big fan of cash-flowing companies. Another recent analysis we did was to put the copper market against the gold market and make some cash flow and cost comparisons. The numbers were fascinating… You might think that miners would all have similar growth in costs and profit margins but that is not the case. Since 2005, cash costs for gold producers have increased by over 200%, whereas copper producer cash costs have only increased by 130%. The chart below shows this step change in costs over the years. Now that’s only one side of the coin. The selling price of the commodity is important to consider as well. If metal prices rise faster than costs, margins would improve and the producer would be better off. The chart below shows the appreciation in prices for gold and copper. So, as you can see, gold prices have risen faster than copper prices, which negates the cash cost inflation. Finally, we can compare the all-in costs relative to the selling price through a profitability margin metric. This margin is calculated using the difference between the selling price of the commodity and the all-in-sustaining cost. The chart below plots this metric for each year from 2005 through 2023. Interestingly, copper profit margins have typically outpaced those of gold miners. Now, these are sector averages so there will be companies on both sides of that average, but it is an interesting data point that many investors likely didn’t know. Moving forward, profit margins for copper and gold are healthy, but it is possible we see some compression through inflationary impacts on production costs. This is a glimpse of the data we take into account before buying shares in a company. If you want the heavy lifting done for you, [click here to learn more about my premium research](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Banking on Boring: 8 Lessons from the Legends - URL: https://katusaresearch.com/banking-on-boring-8-lessons-from-the-legends/ - Type: article - Published: 2023-04-28 - Updated: 2023-05-01 - Author: Marin Katusa In turbulent times, with market complacency and rising interest rates… A smart investment strategy rooted in patience and strength is crucial for lasting success. Throughout my 20-year career in the volatile resources sector, I’ve relied on this strategy. So have renowned investors like Warren Buffett, Bill Miller, and Howard Marks. Their success stories show the power of steadfastness in navigating financial storms. - **Focus on companies with robust cash flow and impressive dividends.** This tried-and-true approach ensures stability amidst uncertainty. The 2008 financial crisis taught us the importance of patience and prudence in investing. Amid chaos, those who identified businesses with sustainable cash flow and solid balance sheets reaped the rewards. Dividend investing was a potent tool during the Great Recession, with financially stable companies outperforming less secure counterparts. Dividend-paying companies prove more resilient in downturns, providing a cushion during market distress and reflecting a company’s financial health and management’s faith in growth. Embrace this approach and thrive – defense wins championships. ## **Unsexy Companies Making Money in Downturns** The names below are not resource-oriented, but more as axioms. The key takeaway is that boring (i.e. “unsexy”) companies with robust cash flows and reliable dividends outperformed their less stable counterparts: **McDonald’s:** As a fast-food industry leader, McDonald’s maintained solid cash flows and continued to increase its dividends throughout the crisis. The company’s shares appreciated significantly in the following years, outperforming the broader market. **Johnson & Johnson:** The healthcare and consumer products company demonstrated resilience during the 2008 crisis, thanks to its diverse product portfolio, strong cash flows, and commitment to increasing dividends, which it has done for over 50 consecutive years. **Walmart:** The retail giant’s consistent cash flow and dividend growth made it a defensive play during the crisis. Walmart’s focus on low prices and essential goods attracted budget-conscious consumers, helping it outperform competitors during the downturn. ## **Legendary Strategies YOU Can Add to Your Toolbox** Stalwart investors like Bill Miller and Howard Marks have walked this path before. **Bill Miller:** - Emphasis on long-term value: Miller focused on identifying undervalued stocks with strong growth potential, regardless of short-term market fluctuations. - Contrarian approach: Miller was unafraid to go against the market consensus, buying up shares of companies that were out of favor but had strong fundamentals. - Financial sector bets: Miller made well-timed investments in financial institutions like Bank of America and American International Group after their stock prices plummeted, later profiting from their recovery. - Patience: Miller’s investment strategy required patience and discipline, holding onto positions even during downturns to eventually realize their intrinsic value. **Howard Marks:** - Risk awareness: Marks paid close attention to risk management, focusing on investments with favorable risk-reward profiles. - Distressed debt investments: Marks and his firm, Oaktree Capital, capitalized on the crisis by investing in distressed debt, which offered attractive returns as the market recovered. - Quality over hype: Marks prioritized companies with strong fundamentals and reliable cash flows, avoiding overhyped, speculative investments. - Emphasis on intrinsic value: Marks sought out businesses trading below their intrinsic value, confident that their true worth would eventually be recognized by the market. Remember, when the going gets tough, the wise investor gets patient – and the rewards of such patience can be substantial. ## **Getting Paid to Wait in a Rising Interest Rate Environment** As we enter the second quarter of 2023, inflation has decreased from its highest levels last year, but it’s still high. According to the PCE (Personal Consumption Expenditures) index, February inflation was 5.0% – significantly higher than the Fed’s target rate of 2%. Historically speaking, the U.S. Federal Reserve didn’t first set its explicit target inflation rate of 2% until the beginning of 2012 under Ben Bernanke. But even before 2012, the Fed often talked about their desired inflation rate, usually between 1.7% and 2%. Next, you’ll see a chart of historical rates of inflation vs. interest rates in the U.S.: In the past, interest and inflation have mostly walked hand-in-hand, outlining the basic relationship between the two. Given what the data shows, and where inflation sits right now, it should come as no surprise that the Fed committed to high interest rates for the rest of 2023. - **In fact, as the president of the Atlanta Fed, Raphael Bostic put it, rates will need to remain high *“until well into 2024”*.** Unfortunately, as conventional wisdom has it, high interest rates also tend to correspond to weaker performance in the stock markets. When it costs more to borrow money, it’s harder for companies to grow. People also need to spend more on home loans and credit card debt when interest rates are high. This leads to less extra spending, more saving, and less money for businesses. However, as the next chart shows, markets can still grow even during times of high-interest rates, like in the mid-90s. Not every company flounders when interest rates are high – you just need to know where to look. That said, there’s a little more going on in the world right now than just high interest and inflation rates. With the current global geopolitical mess, on top of potentially another year of this high interest rate environment to worry about… What’s the best angle for us to play the markets moving forward? ## **What Katusa’s Doing: Banking on Boring** In my April edition of Katusa’s Resource Opportunities, I’ve targeted a company with a history of increasing dividends… - The company has an excellent **dividend increase** history. - A beautiful **dividend yield** that can pump out a lot of cash to your account - Posted very healthy **free cash flow** - Excellent **distributable cash flow** It’s the kind of company I want in my portfolio that pays me a lot to own it. And can appreciate in this environment as well for some capital gains. To find out what it is, you’ll have to become a member of *Katusa’s Resource Opportunities*. It wouldn’t be fair to those paying to share the full analysis I just presented to them. [Click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Metal Showing Signs of Rust - URL: https://katusaresearch.com/the-metal-showing-signs-of-rust/ - Type: article - Published: 2023-04-21 - Updated: 2023-04-20 - Author: Marin Katusa Copper, the red metal that electrifies our world, is poised for a bullish run. In [last week’s edition](https://katusaresearch.com/coppers-quiet-takeover/), we profiled our bullish long-term copper outlook. To recap… EVs’ soaring demand places copper at the forefront, crucial for motors, batteries, and charging infrastructure. Global economic recovery boosts industrial activity and infrastructure spending, supporting copper demand. Supply constraints, due to labor strikes, declining ore grades, and limited mining investments, have tightened the copper market, potentially driving prices above the current $4 per pound. Additionally, [the green energy revolution](https://katusaresearch.com/from-bar-to-barley-net-zero-cleared-for-liftoff/) increases copper demand for wind and solar installations. Urbanization in developing nations, particularly Asia, intensifies copper consumption in infrastructure projects. As these countries modernize, copper’s importance grows. Despite EV expansion, global economic recovery, supply challenges, green energy, and rapid urbanization, some near-term bearish factors warrant consideration. ## **The Rust…** The big challenge I see with the copper demand in the short term is the potential for an economic downturn. China has a whole host of problems, as does Europe and North America. The projections are rosy, but the current economic environment has signs of weakness and will require significant government stimulus across the globe to avoid a hard landing. ## **Copper Supply – SWAP Line Check** Now with all this demand potential, can the market actually get *enough* supply? I’ve written about many times how there is no shortage of copper in the world, but it won’t get it for $3 a pound. This statement remains true today. - **Higher prices are required to incentivize exploration and development and expansion.** The chart below shows global copper production, separated by **+SWAP** and –**SWAP** line nations. SWAP lines refer to agreements between the US Federal Reserve and foreign central banks. In times of crisis, the Fed can deliver dollars to those central banks. Only a small handful of nations around the world have access to these elusive SWAP lines. [Read about my SWAP line thesis here.](https://katusaresearch.com/swap-lines-are-one-of-the-most-important-things-youve-never-heard-of/) Breaking the copper-producing regions into jurisdictions that have access to SWAP lines can provide clues into the stability of a nation. As you can immediately see, most of the world’s copper comes from **-SWAP** Line nations. Chile and Peru are the world’s largest producers of copper, and they are not **+SWAP** line nations. In addition, there are numerous political and social issues within those 2 key countries (now and in the past). It is likely that royalty rates and mining taxes are going to go up to appease socialist views in those countries. Especially with the political force and view of making foreign companies “pay their fair share” for water and environmental protection. And don’t forget an increased standard of living for the workers and social welfare of the community. Naturally, this is negative for the producer, who sees its profit margins dwindle as foreign government rakes increase. ## **The Growth Factor** Growth in copper supply is much the same as the current production environment.It is primarily fueled by **-SWAP** line nations, namely Argentina, Peru, and Chile. However, there is also considerable growth in high-risk **-SWAP** line nations like China, Russia, the DRC, Zambia, Papua New Guinea and Argentina, and even Panama which we discuss further later in this report. The chart below shows the cumulative new supply which could come online over the coming decade. This considers expansion projects as well as development stage assets worldwide. ## **Forecasting The Global Supply** Now let’s layer all of this into a long-term global supply projection. The chart below shows current supply broken down into global recycling, **+SWAP,** and **-SWAP** Line nation’s current production and future production. As you’ll see below, most future copper production is not going to come from **+SWAP** line nations. ## **Tying it all together…** Below is a chart which shows the copper demand and supply projections under high, low and base case scenarios. These demand projections are plotted against the supply curve derived above. As you can see, under normal environments we will likely have enough copper throughout the decade, though in later years it is possible that a meaningful deficit arises. However, what is very difficult to model is the “real world” problems that can and will arise in the short term. - Local disruptions and ongoing social challenges - Higher costs of capital for exploration, development, and production - Higher operational costs - Longer permitting times - Increased government involvement Some, or all of these factors will lead to supply restrictions and have the ability to shift the supply curve considerably lower. What does this mean? It means that supply is likely to remain tight and that will lead to the world getting more copper, but not for $3 a pound. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Copper’s Quiet Takeover - URL: https://katusaresearch.com/coppers-quiet-takeover/ - Type: article - Published: 2023-04-14 - Updated: 2023-04-13 - Author: Marin Katusa In the high-stakes world of investing, certain assets like gold and Bitcoin often steal the spotlight, dazzling investors with their allure and opportunity for astronomical booms and busts. Amidst this glitz and glamour, copper, the humble workhorse of the metals market, has been largely overlooked. Despite its crucial role in driving innovation and powering the green revolution, copper remains an unsung hero – a hidden gem waiting to be discovered by a whole generation of investors. Especially those in search of a reliable, yet unassuming asset in a constantly shifting financial landscape. ## **Copper’s Last Two Millenia… for the Millennials** In Roman times, copper played a crucial role in the technological and infrastructure changes. The Romans used copper extensively in their building and construction projects, as well as in their technological innovations. It was used in: **1. Water supply systems**: The Romans were known for their elaborate water supply systems, which relied heavily on copper piping. These pipes were used to transport water over long distances, and they were often laid underground to prevent contamination **2. Coins**: Copper was one of the primary metals used to mint Roman coins. The Romans valued copper for its durability and malleability, which made it an ideal material for coinage. **3. Medical instruments**: Copper was also used to create medical instruments, such as scalpels and forceps. The metal’s antibacterial properties made it a popular choice for these tools, as it helped to prevent the spread of infection. **4. Art and decoration**: The Romans used copper to create a variety of decorative objects, including statues, vases, and other ornamental pieces. The metal’s warm color and durability made it a popular choice for these applications. For Romans, copper’s versatility and durability made it an ideal choice for a wide range of applications. And its value as a commodity helped to drive trade and commerce throughout the empire. ## **Copper Demand** Nowadays, copper demand has come from real estate, power, transportation, heavy equipment, and infrastructure development. These sectors are cornerstones to long-term copper demand, but all of these are strongly tied to population growth and global economies, which limits major growth potential. The key growth opportunities for copper demand over the coming decades will have to come from energy transition and decarbonization. More specifically, energy transition and electrification. Here are the different segments of copper demand… **Old World – This represents current demand and low growth potential.** - Infrastructure, Heavy Equipment - Real Estate **Modern World – This represents new demand and high growth potential.** - Energy Transition – phase out of inefficient, dirty power generation, transportation, and storage. - Electrification of Transportation Systems: passenger and commercial vehicles I am going to focus primarily on the new demand for copper because that is the potential catalyst for a sharp increase in copper prices. ## **Growth Catalyst #1: Energy Transition** The energy transition is the phase-out of dirty fuels such as coal and natural gas and replaced with zero-emission power sources like solar and wind and nuclear power. Once very expensive science experiments, wind and solar have rapidly become the lowest-cost power sources in most regions of the world. **Battery storage** remains a key concern for intermittent renewable power sources, and over time these costs will continue to come down. Batteries themselves are not a large driver of copper demand, but in order for wind and solar to be competitive at all hours of the day, high-quality, low-cost batteries are required. - Today the average onshore wind turbine will **use roughly 3,000 pounds of copper per megawatt**. - The big offshore wind turbines **use nearly 11,000 pounds of copper** per megawatt of power. - Solar energy also requires considerable copper, both in the array, cabling, and connections. **Today solar energy requires 5,000 pounds of copper per megawatt of power**. Below is a chart that shows the projected copper demand from the energy transition toward wind, solar, and battery storage. The potential growth in copper demand from energy transition is nothing short of significant. Within a decade, new copper demand could represent close to 50% of current copper production. ## **Growth Catalyst #2: Electrification of Transportation Sector** The second key growth sector for copper is in EVs. Regardless of whether you hate Elon Musk or love him, it’s hard to argue against the fact that Tesla has played an integral role in the electric vehicle world. Electric vehicles (EV’s) have soared in popularity, in part driven by lower costs and improved government subsidy programs. Even in the face of a slowing economy, EV sales continued to hit records, surpassing over 1 million monthly sales 4 consecutive months in a row last year. You can’t go anywhere in a major North American city without seeing a Tesla on the road. As EVs continue to gain popularity and truly become the norm, copper demand from EVs is poised to grow massively. - A **light-duty EV** requires **130 pounds of copper** on average. - A **medium-duty EV** requires **300 pounds of copper** on average. - A **heavy-duty EV** requires **900 pounds of copper** on average. Then you need to tack on the charging infrastructure, and of course, you need to hook it up to the grid. All of this needs copper. EV sales are expected to continue their parabolic growth trajectory over the coming decades. This paves the way for another avenue for meaningful copper demand growth. The chart below shows the expected demand for copper coming from EVs and charging units. ## **Calling All Copper Bugs** The growth potential for copper in the energy transition and electrification sectors is immense, and as innovations in wind, solar, and battery storage technologies continue to advance, the demand for this versatile and durable metal will only increase. As a result, we can expect a significant impact on copper prices, driven by these emerging markets and the ever-growing push towards a decarbonized world. Every single demand and supply chart you see is going up and to the right. **In light of this, investors and industry stakeholders must recognize the crucial role that copper will play in shaping our global energy landscape.** If you don’t own any copper companies in your portfolio, start doing some diligence. But maybe you don’t have the time or expertise – and that’s fine, we’ve got you covered. I’m working on deep diligence on a few copper-related opportunities coming down the pipe. And subscribers to my premium research – [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) – **will get first access to my ideas.** Unlike other newsletters, you’ll get to see where I’m actually putting my money to work – and at what price. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # America’s Power Play: Unlocking Mother Nature’s Metal - URL: https://katusaresearch.com/americas-power-play-unlocking-mother-natures-metal/ - Type: article - Published: 2023-04-07 - Updated: 2023-04-13 - Author: Marin Katusa An invisible chain shackles America. It’s an obstruction that leaves it vulnerable and dependent on foreign powers. Contrary to what you might think, no, it’s not copper, oil, or natural gas. It’s the lifeblood of our clean energy and electric vehicle future. But fear not, for America is poised to break free from these bonds and seize control of its mineral destiny. ## **Mother Nature’s Metal – Lithium** In this age of uncertainty, lithium is poised to become one of the most valuable and sought-after resources on the planet, driving a revolution that could redefine the way we live, work, and interact with the world around us. This isn’t some wild speculation or far-off fantasy – it’s a reality that’s unfolding as we speak. In fact, the lithium revolution has already begun, and those who recognize its potential now stand to reap the rewards in the years to come. **Lithium’s versatility is unparalleled, and its uses are ever-expanding, but one area it has a stranglehold on is the battery industry.** You can find it in the batteries that power our smartphones, laptops, and other portable electronics. - **60% of all lithium mined today is used for batteries.** But beyond the familiar, lithium is playing a more significant role than ever in the automotive industry. About 10% of every EV battery is made of lithium, with the remainder made of more common metals like nickel and cobalt. With electric vehicles (EVs) poised to displace the traditional internal combustion engine, the demand for lithium has skyrocketed. As you read this, EVs are gaining traction around the world, and they’re on track to become the dominant form of transportation within the next two decades. My own EV adoption projections from 5 years ago were incredibly wrong. Even my most optimistic demand forecasts were shattered. And that’s GREAT news. As countries around the world adopt aggressive policies to go net zero and reduce emissions, lithium sits at the heart of this revolution. Governments and automakers alike are investing billions of dollars to make EVs more affordable, more efficient, and more accessible to the average consumer. Lithium is the heartbeat – the lifeblood of the batteries that make it all possible. ## **Battling for Batteries: The Lithium Triangle** The so-called “Lithium Triangle” in South America – a region that’s home to more than half of the world’s lithium reserves – is already a hotbed of geopolitical intrigue, as countries jockey for position in this high-stakes race. Currently, over 80% of America’s lithium supply is imported, with the top producers being Australia, Chile and China. The United States, alarmingly, is home to only 1% of global lithium production. With such a staggering reliance on foreign lithium, America finds itself at the mercy of other nations, risking its energy security and economic stability. But a bold plan is taking shape, one that will reduce dependency and strengthen America’s self-sufficiency in lithium production. The American lithium revolution is characterized by federal support for domestic lithium mining and production, investment in cutting-edge lithium extraction technologies, and the development of a robust lithium recycling industry. With an ambitious vision and unwavering determination, America is ready to take the lithium world by storm, securing its place as a global leader in lithium production and reducing its reliance on foreign suppliers. ## **Mission Critical** To provide a supportive environment for domestic lithium production, the U.S. government is streamlining permitting processes for lithium projects, encouraging public-private partnerships in lithium exploration and mining. **In fact, the U.S. government deemed lithium a critical mineral as early as 2018.** And it’s offering financial incentives for lithium production within the United States. By doing so, the government is laying the groundwork for a thriving lithium industry that will fuel America’s clean energy future. The country is supporting research and development of new lithium extraction methods, which aim to reduce environmental impacts of lithium mining and decrease production costs to compete with global producers. In its quest for lithium independence, America is also embracing the wise adage, “waste not, want not,” by developing a robust lithium recycling industry. The United States is promoting lithium-ion battery recycling programs, encouraging battery manufacturers to design products for easy recycling, and investing in advanced recycling facilities and technologies. By doing so, the country will ensure that valuable lithium resources are reclaimed and reused, reducing the need for foreign imports. The stakes are high, but the potential rewards are even greater. By breaking free from its dependence on foreign lithium, America will secure its clean energy future and take control of its own destiny. The time for action is now, and the United States is rising to the challenge. **And it’s not just governments that are getting in on the action…** Corporate giants like **Tesla**, **General Motors**, and **Apple** are all vying for a piece of the lithium pie, as they seek to capitalize on the surging demand for EVs and portable electronics. At the recent BMO Metals conference, where major institutions, high net worth investors and power players meet every year – there was significant automotive representation for the first time. Think to yourself, *why*. For investors, the stakes have never been higher. With the global lithium market projected to grow exponentially, the rewards of early and strategic investment are immense. However, as with any nascent industry, there are risks and uncertainties that must be carefully weighed. As lithium’s importance grows, so too does the responsibility of investors to educate themselves on the intricacies of this vital sector. Moving ahead into this radicle new world through the 2020’s, it is essential to remember that the future is not yet written. Lithium may hold the key to unlocking a cleaner, more prosperous, and more stable world, but it is up to us to harness its potential responsibly. The Lithium Revolution has only just begun, and it is our collective responsibility to shape it into the force for good that it can be. As we navigate the lithium revolution, it is crucial to remain informed and engaged, understanding the complexities of this emerging market. We invite you to join us, in exploring the impact of lithium on our global economy, environment, society, and investments. That’s why, over the coming months in a special series, we’ll delve deeper into the lithium market. Get ready to embrace the Imminent Lithium Revolution and unlock the vast potential of this hidden element. Your portfolio will thank you. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Another Bank Bites the Dust - URL: https://katusaresearch.com/another-bank-bites-the-dust/ - Type: article - Published: 2023-03-24 - Author: Marin Katusa Exactly two weeks ago today, on Friday March 10th, Silicon Valley Bank collapsed after a bank run. For those of you who don’t remember what a bank run is, that’s when a bank’s customers collectively withdraw so much funds that the bank runs out of cash. Now despite what its name might lead you to believe, SVB wasn’t just a small local Californian bank. Before it went under, it was the 16th largest bank in the U.S., and its collapse marks the second-largest bank failure in the history of the U.S. - The only failure worse than this one? **Washington Mutual**, back during the GFC in 2008. So, what exactly happened here? How did one of the largest banks in the U.S. go from riches to rags – and just why has it seemingly taken the global markets with it? To answer those questions, we’ll have to take a step back in time to see how SVB managed to wind up where it did. ## From Startups to Stardom Founded in 1983, SVB initially focused on providing funding to startup companies, specifically in the tech sector. Even though the bank suffered when the bubble burst, it was able to stay in business and continue its focus on the tech sector. - By 2015, SVB would note that it provided services for **65% of all U.S. startups**, and could count household names like Airbnb, Roku, and Buzzfeed among its clientele. Growth for SVB accelerated through the 2010s, but where it really took off was during Covid. Amidst the pandemic lockdowns and challenging market conditions SVB thrived, growing its deposits and assets by over 60% in 2020 before nearly doubling both the year after. But while 2021 was a banner year for SVB on the growth front, it was also when, behind closed doors, things quietly started going wrong. ## Losing the Long-Term Bet SVB’s growth accelerated through the 2010s and soared during Covid, with deposits and assets growing by over 60% in 2020 and both nearly doubling the year after. However, behind closed doors in 2021, things started to go wrong. Flush with cash off the back of a successful 2020, SVB shifted its bond portfolio from short-term Treasury bonds into long-term ones to chase higher returns associated with longer-term instruments. Unfortunately, inflation reared its ugly head in 2022, and as a result, interest rates also rose… When faced with a cash crunch, Silicon Valley Bank was forced to offload its bond portfolio worth around $21 billion, mostly comprised of U.S. Treasuries, at a loss due to skyrocketing interest rates. On top of this, higher borrowing costs and a lackluster IPO market led to many of SVB’s clients withdrawing more cash to meet liquidity needs. Unfortunately, SVB’s long-term bonds were underwater, resulting in a loss of $1.8 billion, which they attempted to patch up with an equity offering. The offloading of their bond portfolio at a loss due to skyrocketing interest rates combined with higher borrowing costs and a lackluster IPO market led to uncertainty about the health of SVB’s cash position. This uncertainty ultimately led to a bank run, which compounded the bank’s liquidity problems, causing their stock sale to fall through and leaving no other banks willing to buy them out. The saga finally came to a close when the Federal Deposit Insurance Corporation announced that it was seizing SVB and placing it under receivership two weeks ago. The story of SVB’s collapse wasn’t a convoluted tale of financial intrigue or bad actors. There was no Bernie Madoff pulling the strings behind the scenes. It was a self-fulfilling prophecy of sorts, where customers’ worries about their cash led to a bank run, which ultimately sealed the bank’s fate. Perhaps Larry Summers, the former U.S. Treasury Secretary, put it best: ## Not Too Big to Fail SVB was not the only bank to fail this month… **Silvergate Bank**, the largest provider of banking services to the crypto industry, faced similar issues as SVB. Unfortunately, over 90% of Silvergate’s deposits were tied to cryptocurrency, which became their biggest weakness. They also carried some deposits for FTX, which negatively affected them following FTX’s collapse, resulting in a bank run. Silvergate was barely able to stay afloat by selling assets, but they had to do so at a loss and borrow money to maintain their cash position. Ultimately, they underwent voluntary liquidation just two days before SVB’s failure. **Signature Bank**, the second-largest provider of banking services to the crypto industry, also saw a bank run following FTX’s collapse. However, Signature had significantly less exposure to the crypto markets than Silvergate, and they remained in a healthier financial position until the day SVB failed. On the same day SVB failed, Signature saw another multi-billion-dollar bank run, leading to their closure by New York state regulators two days later. Signature had $110 billion in assets at the time of its failure, making it the third-largest bank failure in US history. The domino effect that Signature experienced from SVB’s failure carried over to other banks as well, causing the entire US banking sector to take a massive hit as bank runs took place on countless other banks. Banks like First Republic Bank and Western Alliance Bancorporation saw major share price drops and even credit rating downgrades. Knock-on effects were felt even in Europe, with Swiss bank **Credit Suisse** failing and being taken over by UBS. - **Despite the global banking crisis, the Fed announced another quarter-point increase to 5% and set their end-of-year target rate at the same.** The prolonged high-interest rate environment and uncertainty from the banking crisis, inflation, and geopolitical situation in Ukraine will make navigating the markets challenging for even seasoned investment veterans. In Marin Katusa’s KRO, he’s setting up his portfolio differently than most and anticipates what he calls an “Equity Compression” coming our way. And as we’ve seen, cash and cash flow are becoming more and more important to investors. It’s not news to our subscribers, as Marin Katusa has been championing real businesses for a long time. To see how we’re planning on playing these market conditions and where he’ll be putting his own money, consider a subscription to [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) – a guide for your investment portfolio in these treacherous times. Regards, Mike Chang Senior Investment Analyst, Katusa Research **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Gold Awakening - URL: https://katusaresearch.com/the-gold-awakening/ - Type: article - Published: 2023-03-22 - Updated: 2023-03-23 - Author: Marin Katusa Friends, I’m asking you to spend 1 minute of your time reading until the very end. What’s about to unfold in the global financial markets will be referred to as “the golden bull market of the century.” You’ll be bombarded with headlines about how economic instability and soaring inflation are propelling the price of gold to unprecedented heights. We predict that millions of investors will flock to precious metals in search of a safe haven, driving the price of gold to levels never seen before. Central banks will scramble to increase their gold reserves, while ordinary citizens will turn to the yellow metal as a hedge against the eroding value of their hard-earned money. But you’ll be ahead of the game. As you’ll discover, there is nothing surprising at all about the coming gold boom. In fact, it’s been years in the making. The stage has been set for a massive shift in global wealth, and those who recognize the signs early will stand to profit immensely. Not the mainstream media. Not your financial advisors. And not the governments. **No one is going to tell you what you need to know to protect yourself**,** grow your wealth, and seize this once-in-a-lifetime opportunity.** That’s why I urge you to take a moment and breathe before the golden bull market that’s about to take the world by storm. While the rest of the world scrambles to catch up, you’ll already be reaping the rewards… These same forces are at work across the globe, putting everyone’s financial future at risk… They point to a major shift in the way we invest, save, and provide for the safety of our families. There’s a very real chance that we’ll witness a global financial revolution… Forcing investors to rethink their strategies and flee to the safety of gold and other precious metals. It’s important for you to know what’s going to happen. So first and foremost, you can prepare. But, it’s also important to remember that a massive bull market like this is going to make a lot of money for a lot of people. Some of the world’s most successful investors and financial experts have already begun positioning themselves for this historic event – and you can join them. I know it sounds unbelievable, but as I’ll explain, it’s true. Because nobody else is going to warn you. And no one else is going to tell you how to take advantage of this opportunity. In the wealthiest nations in the world, markets don’t experience historic bull runs by accident… **INFLATION: THE SILENT WEALTH KILLER** Let me just start with this, so you’ll know how serious I am about these predictions… As you may know, inflation has been steadily rising for years now, eroding the purchasing power of currencies across the globe. Central banks have continued to print money at unprecedented rates, leading to a dangerous devaluation of fiat currencies. But what most people don’t realize is that this is just the tip of the iceberg. Behind the scenes, there’s a much more sinister force at work – one that has the potential to trigger a worldwide financial restructuring. And when that day comes, there will be only one safe haven left standing: GOLD. For centuries, gold has been considered the ultimate store of value. It’s been used as a form of currency, a hedge against inflation, and a safe haven during times of economic uncertainty. And now, as the world teeters on the brink of a financial catastrophe, gold is poised to reclaim its throne as the ultimate store of wealth. Just take my word for it. Some of the world’s most successful investors and financial experts are already positioning themselves for the great gold rush of 2023. Let’s examine the factors that are aligning to create this perfect storm for the precious metals market, particularly gold. **SURGING DEMAND FROM EMERGING MARKETS** As economies in countries like China, India, and Brazil continue to grow, so too does their appetite for gold. In many of these nations, gold is not just an investment – it’s a cultural symbol of wealth and prosperity. This insatiable appetite for gold among emerging markets will only serve to fuel the bull market in gold, as central banks and private investors alike scramble to secure their share of the world’s limited supply of the yellow metal. **FX ON THE BRINK** The decline of traditional currencies is just the beginning. The world is in for an economic storm, and many investors will be caught off-guard. But for those who are well-informed, opportunities to thrive in the chaos are abundant. This golden bull market will be fueled by a combination of factors, including central banks’ reckless monetary policies, geopolitical tensions, and dwindling gold reserves. It’s not a matter of if, but when this bull market will take off. As an investor, you must act now to position yourself for the inevitable surge in gold prices. Don’t miss out on this once-in-a-lifetime opportunity to protect and grow your wealth in these uncertain times. **AS AN INVESTOR THE TIME TO ACT IS NOW** Seize the opportunity to position yourself for the astonishing surge in gold prices that awaits. Don’t let this unparalleled chance to protect and grow your wealth in these uncertain times slip through your fingers. **Stay tuned this week for a series**** that will further explore the market chaos we’re in and the immense potential of the gold sector**. We’ll dive deeper into this historic trend and reveal how you can make the most of this opportunity. Don’t let the economic storm catch you off-guard. Prepare yourself to ride the wave of a golden bull market by keeping an eye out for our next email. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The “Perfect Shower” of Tomatoes - URL: https://katusaresearch.com/the-perfect-shower-of-tomatoes/ - Type: article - Published: 2023-03-17 - Updated: 2025-09-10 - Author: Marin Katusa We’ve just witnessed history, yet again. After a 1 in 100 year pandemic, we’re hit last weekend with the 2nd and 3rd largest bank failures in the USA. Couple that with the fastest interest rate rises in generations… And today we’ll talk about investor attitudes and one of the single MOST IMPORTANT rules in investing. ## **Have You Ever Been Hit by a Tomato?** The first recorded incident of an audience throwing tomatoes at a performer was way back in 1883. The *New York Times* reported how an acrobat named John Ritchie was pelted with tomatoes after disappointing a Long Island crowd. Ritchie allegedly fled through a “perfect shower” of tomatoes. Since then, audiences have used other foods like eggs and turnips to express their displeasure over a performance, but for some reason, the tomato became the protest food of choice. It’s how the world’s most powerful movie review website, Rotten Tomatoes, got its name. The truth is, we’re all performers in one way or another. As the Chief Investment Strategist of Katusa Research, even I’m on a public stage performing for investors, and just like any other performer, I’ve had tomatoes thrown at me. ## **Tomato Targets** It doesn’t take long to become a target in the investment business. Successful investing is a task where the difficulty is on par with brain surgery. Even the best guys can’t help but make embarrassing mistakes. But in this section, I’m not here to talk about the mistakes of famous investors. **Today, I’m here to talk about you…** The truth is, you might be making this mistake yourself. Now, what I’m about to say might sound critical, but there’s a big benefit for you in all this. If you learn why this source of anger and criticism is so misguided, you stand to become a much better investor. - **This is “master’s level” knowledge that will vastly improve your results.** So, with that said, here’s the most common and most misguided source of anger and nasty letters among investment research consumers. Comment #1: *“What you said about ABC Stock didn’t happen. You are the dumbest SOB on the planet. Because of my losses in ABC, I can’t retire.” * Comment #2: *“I can’t believe ABC Stock didn’t work out. I put everything into that stock. You’ve ruined me.”* Comment #3: *“You were wrong. ABC Stock didn’t go up. It went DOWN. I had half of my portfolio in that stock. You’re worthless. Your company is worthless. I’m screwed now.” * The comments you see above differ in wording, but they come from the same source: ## **The Wrath: Separation of Winning Investors from Losers** The most successful investors know that one bad stock recommendation doesn’t make or break an investment strategy. Because one single stock you recommended went down instead of up, a nice little schoolteacher from Kansas City will say the worst things in the world about your mother. An unsuccessful stock pick will make people say** truly awful things to you**. - **These kinds of comments come from a common source: Ignorance of what truly leads to a lifetime of successful investment.** In fact, these comments reflect what is perhaps the greatest difference between successful investors and investors who always struggle with investing and lose money in the market. The difference? - **The unsuccessful investor**** regularly places 100 times too much importance on what happens with a single stock position.** Because he gets so excited and emotional about the prospects of individual companies, the unsuccessful investor makes critical *position sizing* mistakes. This harms him every single year… and kills his returns over his career. - **Position sizing**** is the part of your investment strategy that dictates how much of your portfolio you place into a given stock, bond, fund, or commodity.** For example, suppose an investor has a $100,000 account. If he buys $2,000 worth of stock in a company, his position size would be 2% of his capital. If he buys $5,000 worth of stock, his position size is 5% of his capital. Position sizing is far, far more important to your success than any one single stock position. And many people who actually do think about position sizing think about it all wrong… Many people think of position size in terms of how many shares they own of a particular stock. But it’s much, much smarter to think of it in terms of what percentage of your total capital is in a particular stock. Now, the single most important thing to remember… ## **Avoid The *Catastrophic Loss*** Position sizing is the most important way investors can protect themselves from what’s known as a “**catastrophic loss**.” A catastrophic loss is the type of loss that erases a big chunk of your investment account. It’s the kind of loss that destroys retirement accounts… and even marriages. I’m talking about a loss that leads to a $250,000 account plummeting to $100,000 or $50,000 in value. - **The most common cause of catastrophic losses is going “too big” on risky positions.** This occurs when an investor takes a much larger position size than he should. He’ll find a stock he’s really excited about… he’ll start thinking of all the profits he could make…and then he makes a huge bet. He’ll place 30%, 40%, 50%, or more of his account in that one idea. He’ll go for broke and buy 6,000 shares of a stock instead of a more sensible 1,000 shares. If the position doesn’t work out, he can suffer a 50% hit to his capital. In some cases, he can suffer a devastating 100% loss of capital. For example, some Enron employees put all of their retirement money in the company’s stock…and then lost everything when it blew up. Those people made *horrible* position sizing mistakes by risking everything on just one stock. The obvious damage from a catastrophic loss is financial. An investor who starts with $100,000 and suffers a catastrophic 80% loss is left with $20,000. It takes most people years to make back that kind of money from their job. I’m telling you all this to emphasize a simple point: - **Avoid the catastrophic loss by carefully sizing your positions!** You won’t believe how many times I have to repeat that. ## **Position Sizing 101** Most top investors will never put more than 5% – 10% of their account into any one position. Some professionals won’t put more than 3% in one position. My personal limit is 10%. When dealing with more volatile vehicles like resource stocks, position sizes should be smaller. This will keep your risk level at an acceptable level. Put another way, before you start speculating in resource stocks, you should know how much money you want to allocate to the sector as a whole. This should be money that you can lose without it affecting your lifestyle. Never allocate more than 10% of your junior resource portfolio into any one stock. **Unfortunately, many investors will risk three, five, or ten times as much as they should.** **It’s a recipe for disaster if the company they own suffers a large unforeseen decline.** These large declines happen with much greater frequency than most folks realize. No matter how promising a company sounds, its fortunes can always turn south. Smart position sizing will keep the damage it causes to an acceptable minimum. I like to get as excited about a company’s prospects as anyone. I love analyzing balance sheets and visiting projects. I love taking a stake in a small company and watching it achieve success. But here’s the thing… I never lose sight of what is truly important for achieving long-term investment success. And that is making sure I’m not exposing myself to catastrophic losses. Successful investing is a marathon. It’s not a sprint. Building long-term wealth for your family comes down to regularly making intelligent decisions that provide a good balance between capital growth and capital safety. **It does not** come down to rolling the dice and “going big” on a single stock. ## **The Crystal Ball Doesn’t Exist** I will make mistakes. Only frauds would claim otherwise. We find stocks with huge upside potential. But we follow a time-tested approach used by the greatest investors throughout history. We never bet the farm on one position. Our winners more than make up for our losers. Over the long run, this approach will allow anyone to grow their wealth. Your number one job as an investor is “don’t lose money.” Smart position sizing will help you do your job well. The next time you feel rage or despair over what one single stock is doing, take a deep breath. Take a long walk. Ironically, the same goes if you miss out on a stock. Don’t worry. Be an [alligator investor](https://katusaresearch.com/the-way-of-the-alligator/). Don’t chase stocks. Be patient and wait for a market correction to happen; they always have, and they always will. And if you do miss one stock, don’t worry–there will always be a new idea coming to you shortly. Then, with a clear head, review your position size. Review your portfolio. Ask yourself, - *“Am I taking insane risks? Does this position make up far too much of my portfolio? Is my anger or despair an indicator that I’m doing this all wrong?” * If you think the answer to these questions is even *“possibly,”* it’s probably time to reduce your position size. Cut it by at least 50%. Avoid the catastrophic loss. Your net worth will thank you. Marin Katusa P.S. To see what I’m doing with my own money, including my thoughts and detailed analysis of a position, you’ll want to become a subscriber to ***Katusa’s Resource Opportunities***. I can’t make the trades for you, but you can learn from the bets I’m making. You can [get started right here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Executive Comp Control - URL: https://katusaresearch.com/executive-comp-control/ - Type: article - Published: 2023-03-10 - Updated: 2023-03-08 - Author: Marin Katusa One thought I want everyone to try to think outside the box on—is **executive compensation**. It’s no secret that as the average American worker’s annual salary has been negative with inflation, executive compensation has grown exponentially. I’ve read studies that have shown that (of publicly listed companies) **executive pay is on average 670 times greater than the average employee**. In fact, the media in Canada is jumping all over a story that says *Canada’s highest-paid CEOs made an average of $14.3M in 2021, shattering records*. - According to another report, the 100 best-paid chief executive officers in Canada now make 243 times what the typical worker earns. - By 9:43 a.m. on January 3rd, Canada’s richest CEOs have already earned the average worker’s annual salary. Like all reports, the devil is in the details, but it’s gotten out of hand—and nobody will argue with that. ## **Is Carbon Tied Compensation Coming to The S&P500?** What if, for example… Regulators or investors can legally tie executive compensation to not only financial metrics, which are verified by third-party accounting firms like Deloitte, PWC, or Ernst & Young, **but also to the corporation’s emissions liability**. That means executive compensation is directly tied not just to financials but also emissions: The corporations’ emissions footprint. The reality is somebody will eventually have to pay for the pollution created in some manner. Nobody will disagree that emissions and pollution are not good for the environment. So, a very simple and logical way to enforce that a company meets its emissions criteria and eventually does get to net zero is tied to the executive compensation to both financials and emissions. If the emission targets are not met, the cost to do so comes out of the executive compensation. Meaning, if the company doesn’t hit its targets, the upper brass who make the decisions don’t get paid either. Today, it would be tough to argue that most executives are getting rich while leaving the world in a more polluted state. It’s time for the executives to be made accountable and this is a trend you will see over the next decade grow. Then eventually becomes law. **Marin have you lost your mind?** I can’t tell you how many board rooms I’ve sat in, Chairmans and CEO’s I’ve talked to, regulators I’ve heard, and reports I’ve read. This will be coming sooner rather than later. And investors must prepare for it. ## **Checking in on the Carbon Market…** Carbon prices have corrected since their mountainous highs from a year ago. It caught financial markets by small storm and attracted investors and capital alike. What usually happens after a price spike is the “chasers” all pile in. Then, like clockwork, everyone loses faith and the world is ending. I’ve had many investors email me and tell me they have lost hope in carbon credits because the price has dipped from its highs in 2021. ## **We’ve heard this song before in uranium. Here’s what happened…** Uranium went as high as $137/lb in 2007 and went to a low of $17 in 2016 (the exact month I pitched and convinced a founder to create what became a major uranium player. This company went ahead and within 30 months, gave us early investors to make up to 680% – in what began as a lights-out uranium bear market. The point is, uranium has suffered a much worse (88% down) from 2007 to 2016 and is now in the $48/lb price range. - [Carbon Credit prices](https://carboncredits.com/carbon-prices-today/) have taken a big hit from their highs in 2021, but the prices of high-quality carbon credits are nowhere near the big price declines experienced by other commodities, such as uranium, rare earth, tungsten, and yes even gold. - [Gold in the 1980s](https://katusaresearch.com/gold-are-you-scared/) experienced over 60% correction. I believe 2023 will be another tough year for carbon credits. But as we did with the lows of uranium between 2016 and 2019 (**we made a big bet on a pair of uranium companies that returned multiple times our money**), there will be a significant opportunity and long-term upside in the carbon credit market. ## **Record Corporate Net Zero Targets** Some investors on the sidelines think corporates will do the bare minimum, and only meet NDC-required targets. I don’t see it. Some corporates will elect to go that route. However, immense pressure continues to be put on banks and institutions which act as capital providers to corporates with no emissions strategy. Many of the world’s largest institutional investors are putting gates in place that limit – or prevent – capital provision to large polluters. The lack of capital will be a major detriment to companies doing the bare minimum, and I do not expect it to be the norm. What we are seeing in real-time is exponential growth in net zero pledges. Over 3000+ companies now have a net zero target, a near three-fold increase in 5 years. ## Carbon Market Value Growth Exploded Higher in 2022 In 2022, the voluntary carbon market experienced growth despite periods of low trading activity. [According to reports](https://carboncredits.com/annual-carbon-market-vcm-review-2022/), the value of credits traded on CBL surged by 44% to over $795 million USD, while the volume traded reached 116 million tonnes, which was only 6% lower than the previous year’s record total. The number of firms conducting transactions in CBL’s spot market also saw an increase, rising to almost 200 firms, which is a 32% rise compared to 2021. Investors that are reading this know that I’m a BIG fan of precious metals, base metals and energy. But the carbon sector has now grown to the largest percentage of my net worth that it’s ever been. We are incredibly early to one of the most impactful financial sectors you will ever see in your lifetime. And either I’m wrong and this fizzles, or [this is a once in a generation type investment opportunity](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). My money is heavily on the latter. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Follow the Money: Climate Finance is Heating Up - URL: https://katusaresearch.com/follow-the-money-climate-finance-is-heating-up/ - Type: article - Published: 2023-03-03 - Updated: 2023-03-02 - Author: Marin Katusa It’s a trigger word no matter which side you’re on. But if you follow money and capital flows there’s no argument. In recent years, **one of the hottest segments** of the venture capital market has been something you may not have expected: Climate tech. The world is increasingly turning to climate tech startups to address the urgent need for sustainable solutions. These startups can be found in sectors such as clean energy, transportation and agriculture. Climate tech companies do one of three things: - **Directly remove, offset, or mitigate greenhouse gas emissions,** - **Alleviate the various harmful effects caused by climate change, or** - **Provide a better understanding of the climate and our impact on it.** While there’s been plenty of talk about green and sustainable investing, investors have been putting their money where their mouth is, as the chart shows… ## **Sail Where the Wind Blows** In the past five years, on average, around a quarter of all the money in the venture capital market has gone towards climate tech startups – **over $260 billion total in funding**. And these startups have attracted particularly significant investments in recent years, with many securing funding rounds of $100 million or more. **Key Points:** 1. Climate tech startups have attracted significant investment in recent years as they work to address the urgent need for sustainable solutions in areas such as clean energy, transportation, and agriculture. 2. The largest climate tech fundraisings up to 2023 include companies such as **Xpansiv**, **Arcadia**, and **Sweep**, all of which have secured funding rounds of USD$100 million or more. Here are the largest climate tech financings up to 2023, according to *Crunchbase* data: And here’s a breakdown of climate tech startup funding in the past five years, sorted by sector. As you can see, transportation, clean energy, and agriculture took the lion’s share of funding: It’s worth noting that transportation funding deal value has represented over 50% of total climate tech deal value. Yet, the transportation sector represents 16% of global greenhouse gas emissions. That is a lot of eggs in one basket. Companies and governments are getting more aggressive with their climate targets. There is a lot more to greenhouse gas removal and reduction than just transportation. ## **Climate Financings Were Affected by the Global Slowdown** Now, you may also have noticed that climate tech deals slowed down going into 2023. This should come as no surprise, as the combination of geopolitical issues, high inflation, and rising interest rates led to weak markets towards the end of last year. For instance, companies went public at the lowest rate in years in 2022. IPO offerings were down significantly, back to levels last seen during the start of the coronavirus pandemic. Last year, many companies chose to not go public, and raised capital from private funds and investors instead. However, many of these private climate tech startups could still get taken public or bought out in the coming years, and at much higher valuations… Especially since private equity firms were shored up with a large war chest of cash heading into 2023 ([click here to see our previous breakdown](https://katusaresearch.com/opening-up-the-black-box-what-is-private-equity/)). ## **Where’s Marin Putting his Money in the Sector?** I’ve made significant bets in the sector, specifically the carbon credit market. But with two major carbon credit markets, compliance and voluntary, investors can easily get confused. Recently, compliance [carbon credit prices](https://carboncredits.com/carbon-prices-today/) in the European Union hit record highs of [over 100 euros per tonne](https://carboncredits.com/carbon-prices-today/). Known as the ‘EUA’ and considered the benchmark in the industry, other carbon prices could easily follow suit in the coming years as we approach the critical “Net Zero” milestone year of 2030. Here’s why… According to a report published by **Ecosystem Marketplace** and **BloombergNEF** in 2020, the voluntary carbon market grew by 6% in 2019 to reach a value of $320 million. - **The same report projected that the market could reach $50 billion in value by 2030.** That’s assuming that companies and governments continue to ramp up their efforts to reduce carbon emissions. Other estimates suggest even greater potential for growth… For example, a report by the **Taskforce on Scaling Voluntary Carbon Markets**, published in 2021… - **Projected that the market could reach a value of $50 billion to $100 billion per year by 2030, and up to $1 trillion per year by 2050.** I personally believe energy transition and decarbonization is the biggest investment opportunity of my generation. The carbon markets are an integral part of the solution, and I am positioning myself and subscribers accordingly. You can read all about it by becoming a subscriber to Katusa’s Resource Opportunities – [click here to learn how](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Private Equity Cash and Mining in 2023 - URL: https://katusaresearch.com/private-equity-cash-and-mining-in-2023/ - Type: article - Published: 2023-02-24 - Updated: 2023-02-23 - Author: Marin Katusa Last week we brought you up to speed on [Private Equity firms](https://katusaresearch.com/opening-up-the-black-box-what-is-private-equity/). This week we’ll look at the deals they made. And how that can affect mining. 2022 was a tough year for public stock markets, but Private Equity firms kept themselves busy. - **PE deal values stayed healthy through the first two quarters of 2022, seeing $539 billion worth of activity:** Even though **deal count** was up 3.7%, Q3 saw a robust $280.6 billion worth of PE deals (down 20.4% versus the same quarter in 2021). - **This put the total value of PE deals for the first 3 quarters of 2022 at $819 billion** That passed the total deal value of any previous year besides 2021 (which was a record year for PE deals). Deal volume fell off sharply through Q3 and activity in Q4 2022 stayed depressed instead of bouncing as it did in Q4 2021. Overall, deal volume is estimated to be down in 2022 over 2021. All the usual suspects were in play here: inflation, rising interest rates, elevated valuations in the first half of 2022 eating into cash reserves, weak debt markets and geopolitical issues. ## **Show me the Money!** Speaking of weak debt markets… Look at this chart and you’ll see the falloff in PE activity was mirrored on the fundraising side: Fundraising was down 16% through Q3 of 2022 when compared to the previous year in terms of capital raised. **Fund closures** (funds that finished raising sufficient capital and stopped taking new money) were down 30.5%. More funds stayed open for longer, extending their timelines beyond their initial requested periods. Exit activity similarly suffered… - **PE exits were down a whopping 67% in Q3 of 2022 compared to the prior year:** ## **Cooler Heads Hit IPO Mania…** IPO activity almost completely dried up in 2022. It was the worst year for IPOs on record since the turn of the millennium. Heading into 2023, PE firm dry powder was at all-time record highs. - **An estimated $1.96 trillion in cash on hand was ready to deploy in the global PE markets, with $1.08 trillion, or 55%, of that belonging to U.S. firms.** Now let’s break it down by sector… The chart below shows the breakdown of the data we have for the first three quarters of 2022 across different market sectors. Breaking down 2022 *PE deals by sector* gives us even more details to work with: both by deal count and dollar value. - The tech sector was still the hottest destination for PE deals last year. - The next most notable sectors were the industrials in terms of dollar value, and consumer discretionary and staples by deal count. While tech deals are a major focus for PE firms, we can’t discount the mining sector (which falls under materials) just yet. It may not be as sexy as cybersecurity or enterprise software, but critical minerals mining projects are still catching the eye of many PE firms. ## **Private Equity Players in Big Mining** There are several PE firms that specialize in the metals and mining industry who fully buy out assets, like **Orion Mine Finance.** It has about $7.8 billion in total assets under management spread over a few different closed-end partnerships (think funds). Other names that buy pieces of public companies in either equity or debt include the **Energy & Minerals Group**, **Appian Capital Advisory** and **Resource Capital Funds**, among others. Due to the nature of deals in the PE industry deal values aren’t always disclosed. - **Thus, our lower bound on mining industry deals with PE firms involved on the buy side is estimated at $1.96 billion across 51 deals over the last twelve months.** The largest six of these deals were valued at over $500 million and the top 6 represented over two-thirds of the total PE mining deal value: We can clearly see that there was a big focus on rare earth mining deals. That’s no surprise as rare earths are critical to electronics manufacturing (like smartphones). Mining tech deals rounded out the list, with the first company, **KoBold Metals**, focusing on AI-driven mineral prospecting and exploration. And the second company, **Jetti Resources**, developing a low-grade copper extraction technology. As you can see, there’s still interest in the mining sector from PE firms. But there is a noticeable shift towards more tech-oriented deals like rare earths and battery metals. ## **The Alligator Fund: Is the KRO Bigger Than Most Mining PE Firms?** A staggering takeaway from the analysis of data is that… - [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)** subscribers, over the last 3 years, would be second only to Orion when it comes to the amount invested into mining.** **Think about that for a moment…** A “collective” of like-minded investors led by myself as the lead order are a dominant player in the mining sector. **So, what does this mean moving forward?** The private equity returns have not met the returns of the tech sector over the last decade. In fact, KRO returns have outperformed the other PE mining-focused firms. To put things into perspective, The KRO over the last 24 months invested almost 25% of the total PE invested in the last 12 months – and three of our deals were above $100 million. **Mining investment will struggle for the following reasons:** - [Crossflation](https://katusaresearch.com/crossflation-and-the-fiat-money-fiasco/)—the onsite inflationary pressures have increased at a higher rate than the commodity price - Increased government taxes and royalties - Geopolitical risks - PE capital Return to investors from mining over the last decade has not beaten the S&P500 over the same period - Unions and COLA commitments—I don’t want to get into a debate about unions, but the fact of the matter is, mining has been an area of growth for unions globally. - Within those contracts are the embedded COLA commitment (Cost of Living Adjustment) which is a double whammy for the miners the year after. And for most mines, labor is one of the big costs (at 25% of total costs). ## **The PE and Mining Takeaway** With interest rates rising, investor expectations and hurdles will rise. In addition, mining companies will be the last to benefit from *disinflation* on the balance sheets, meaning higher costs of production are here to stay for a while. A little dirty secret of the mining PE-focused funds is that they have not returned positive returns to their unit holders because of the delays in permitting, construction and higher cost of production combined with lower valuations of the projects. With everything I just presented, this means the KRO Alligators are major players in the mining sector. And we can be patient for the right product where the upside outweighs the downside on a risk-adjusted basis. Alligators don’t chase every prey they see. They are apex predators. Our criteria are the same, apex financial exposure. The one big difference is that very few of the managers of the PE groups are on the same “skin in the game” as their investors. I am. Stay tuned, it’s going to be worth it for your portfolio. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Opening up the Black Box: What is Private Equity? - URL: https://katusaresearch.com/opening-up-the-black-box-what-is-private-equity/ - Type: article - Published: 2023-02-17 - Updated: 2023-02-15 - Author: Marin Katusa You’ve heard the names… Blackstone, Carlyle Group, Thoma Bravo. But who are they and what kind of money do they put to work? One of the lesser-known market sectors of the investment world, **Private Equity (PE)** has long been a black box to the public at large. And yet, the tremendous growth in valuations and attention for private equity have dragged it much more clearly into the spotlight. For those of you who aren’t aware… Private equity is an industry very similar to traditional asset management. In its simplest form, private equity is owning either wholly or a stake in a company that’s not publicly traded. ## **Here’s how Private Equity Works…** 1. PE firms will look for deals and acquisitions that they think they can grow the value of. 2. They will then raise money from investors in order to buy said companies. 3. This is done by using a fund, known as a Limited Partnership, as a vehicle. In this setup, the investors who provided capital are then referred to as Limited Partners. 4. These funds are then used to acquire a prospective business. Most commonly, this is done through a buyout deal, though venture capital and growth equity deals are also popular. Some PE funds even specialize in turning around distressed companies or buying deals off other PE firms. 5. Once a purchase has been made, the PE firms will act as General Partners, managing the business and making improvements as necessary. The goal here for the PE firm is to grow the value of their newly acquired business with their expertise and resources. 6. The final step in the process is often an exit for the deal, in one of many ways – most often through an IPO, a secondary sale, or a strategic sale. In this way, PE firms can be thought of as specialized fund management companies. ## **The Velvet Cord and Private Equity Size** Private equity investments can be more sophisticated. Investors don’t have the ability to *easy exit* out of the deal if it goes south. On top of this, PE deals often involve significant amounts of capital. Hence, they are considered higher risk. That’s why private equities tend to be restricted to institutional investors such as large institutional funds or state-owned wealth funds, university endowments, or accredited investors. Those of you who have participated in private placements and financings in the past would be familiar with this concept. What you might find unfamiliar on the other hand is just how big the private equity market is. - **Near the end of 2022, the total size of the global private equity market was estimated to be worth around $7.1 trillion USD.** The global equity markets are worth around $110 trillion. The private equity markets are worth a respectable 6.5% of that. - **If private equity was a country, it’d be the fourth-largest equity market in the world.** That’s not an amount of money you can sneeze at, as the chart above shows. Who has all this money, and how is it being used? Let’s break down the private equity market. ## **Making It Rain: Names to Know in the PE Sector** There are a couple different metrics to consider when talking about PE firms. - Two of the most prominent are **assets under management** and **cash raised**. Assets under management, or AUM, should be self-explanatory. Like with traditional funds, larger, more well-established firms tend to have more capital under their umbrella. Cash raised, however, is arguably an even more important metric. Most PE firms don’t actually put up that much cash in their deals. Instead, the majority of their capital comes from their investors (Limited Partners, or LPs). Take a look at some of the largest publicly traded PE firms, and how their own cash positions size up against their total AUM: These 5 firms are among the largest in the sector in terms of both AUM as well as cash raised. However, as you can see, their own cash positions represent just a small fraction of the total amount of money they manage. Being able to raise more investor funds from LPs is what allows PE firms to go after the big, multi-billion dollar buyouts they’re so fond of. Without this, PE firms wouldn’t be able to grow the way they want to. ## **The “Rainmakers”** In the PE industry, the ones who are best at raising capital are king – the rainmakers. With that said, let’s take a look at the 20 PE firms who raised the most cash in the last five years: Though the above companies are ranked by the cash they’ve raised and not their AUM, they still represent around half of the total AUM in the PE markets. Which makes sense – the larger firms tend to be more successful with large raises. ## **Top 25 control 25%** 25 PE firms held 25% of the entire industry’s cash reserves. 18 of these companies were American, while the remaining 7 were based in Europe. However, these record cash levels only tell one side of the story. The other side of the story is that even as cash reserves have grown, cash as a percentage of total AUM has been on a steady decline over the past several years and is at an all-time low of 23%. Put all this data together, and it gives us some clues about PE markets as we start 2023… ## **PE in a Higher Interest Rate Market** Between low deal activity and large cash reserves, it signals that there are tons of buyers lined up looking for cheap assets. And there are far more buyers than sellers at the moment, given how exit activity has been. Next week we’ll feature part 2 of this private equity series and how it relates to mining and resources. Stay tuned, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Move Over, Big Mac Index: The McCarbon Footprint Is Here - URL: https://katusaresearch.com/move-over-big-mac-index-the-mccarbon-footprint-is-here/ - Type: article - Published: 2023-02-10 - Updated: 2023-02-21 - Author: Marin Katusa This ain’t your childhood McDonalds anymore. Gone are the statues of Ronald McDonald, the Hamburglar, and Grimace. Gone are the ball pits and playgrounds. Instead, kids can enjoy a biodiversity walk and a nature trail with rainwater collection. Because McDonald’s has been subjected to a UK mandate to reduce—and then eliminate—all carbon emissions. That’s why it opened a new kind of McDonald’s in Shropshire, UK a year ago. The UK Green Building Council verified the Market Drayton McDonald’s as the first net-zero building in the UK for construction. To get there, the restaurant had to make some peculiar choices: - The building is insulated with British sheep’s wool. - The drive-thru lane is made from recycled tires and the curbs are from plastic bottles. - Wall art is made from coffee beans and plastic cups, glued together with starch from McDonald’s potatoes. Not just that, but daily operations are also net-zero. It draws electricity from on-site wind turbines and solar panels. This first-of-its-kind store is a blueprint for a complete revamp of the 1,400 McDonald’s locations in the UK by 2030. It’s part of the company’s plan to reduce its emissions from the current 53 million tonnes of carbon per year—more than the entire country of Norway. And McDonald’s still has a long way to go—especially for its Scope 3 emissions. So they’re not stopping with groundbreaking restaurants. McDonald’s wants *customers* to get in on the action, too. **February 21/2022 Update:** [EU Carbon Prices reach 100 euros](https://carboncredits.com/eu-carbon-prices-surge-to-100-euros/) per tonne. ## Count Carbons, Not Calories Nutritional labeling on packaged foods in the United States began back in 1990 with the passage of the Nutrition Labeling and Education Act. The new law required that most packaged foods have a label that includes information on the food’s calories, fat, cholesterol, sodium, and certain other nutrients. The law also set standards for nutrient content claims, such as “low-fat” or “high-fiber.” Prior to all of this, providing nutritional information was voluntary. (Which, by the way, is where the carbon market is now—caught halfway between voluntary and compliance.) And now trailblazing companies around the world are starting to voluntarily add information to their labels… *carbon* information. **Just Salad** has added carbon labels to their food, and skincare company** CocoKind** has done the same in the beauty industry. But it’s not stopping with packaged goods. In 2018, the FDA began requiring large restaurant chains to put the caloric count next to menu items. Now, that’s being met with a carbon count. - Large restaurants such as **Chipotle** and **Panera** are voluntarily putting “carbon labels” on their menus. Katusa Research has predicted this many times over the past few years. Carbon counting is coming to nearly every product you purchase. [Google Flights](https://carboncredits.com/google-goes-green/) has adopted it. And it’s only a matter of time before the carbon footprint of your Amazon order is shown at checkout. Because a company can’t find themselves the *last* one to add it—otherwise they look like the bad guys. ## Double Cheeseburger with a Side of Emissions Reduction But for McDonald’s, showing carbon information to customers just won’t cut the mustard. You see, the company operates at a scale unlike anything else. It has a massive empire of 39,000 restaurants in 119 countries. It feeds 68 million people every day*—*one percent of the world’s population. - McDonald’s sold more than 200 burgers while you read this sentence. On top of that, the products it sells are incredibly emissions-heavy. All those burgers take lots of cows… - And beef has at least **five times the carbon impact of pork or chicken**, and more than fifteen times that of plant-based options like nuts or lentils. McDonald’s status as one of the largest fast-food chains in the world means its beef use has a huge impact on the environment. Cows are also more dangerous in the *way* that they affect the environment. Cattle are infamous for their immense production of methane, a greenhouse gas that significantly contributes to global warming. - **Methane is 84 times more dangerous than carbon dioxide in the short-term.** And cows are responsible for about 40 percent of global methane emissions. All of that is keeping McDonald’s working so hard they’re teaching customers how to cut their own emissions and gluing plastic cups to their walls. But there’s another culprit that’s less easy to blame than cows. And the solution they need could be much more profitable. ## Crystal (Clear) Meth Below is a chart which shows the growth in methane emissions by emitting sector since 1990. You’ll see a major culprit is the oil and gas industry. Why? Gas leaks. As oil and gas development flourished over the past few decades, so too did the methane emissions. The fix is simple: implement stricter regulations on the oil and gas industry, and increase investment in gas-capture technology. And the benefits are incredible… Reducing the oil and gas industry’s methane emissions by 45 percent could avoid 0.2 degrees Celsius of warming by 2100. United Nations research has found that many measures to curb leaks can be implemented at no cost—and even result in savings. In fact, right now, the oil and gas industry has the technical ability to reduce methane emissions by *75 percent* at low or zero cost. And all methane leaks from the coal sector could be eliminated without any significant effort. Everyone else may now return to eating their carbon-heavy Big Macs in peace. Regards, Marin Katusa P.S. My team and I follow the carbon markets closely, if you want to see where I’m putting my own money, [click here to learn more about my premium newsletter – Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Strings Attached: The Fed’s Gold Valuation - URL: https://katusaresearch.com/strings-attached-the-feds-gold-valuation/ - Type: article - Published: 2023-02-03 - Updated: 2023-02-08 - Author: Marin Katusa Daily borrowing in the US Fed Funds market surged to the highest in at least seven years this week. This is an important indicator because it provides insights into bank liquidity… When liquidity gets below minimum thresholds, banks borrow in the Fed Funds market to boost their reserves. Daily borrowing in federal funds rose to $120 billion on January 27th and that marked the highest level since at least 2016. ## The Fed’s Morse Code… Big moves in the Fed Funds market are telegraphing the expectations of big players. Namely that they expect the cost of capital to go up. This past Wednesday the United States Federal Reserve came out and **increased rates another 25 basis points**, further fueling the fastest tightening cycle we have seen in decades. Central banks and governments around the world have followed suit which has alleviated some of the upwards pressure on the US Dollar. This has created a tailwind for gold which has increased nearly $300 per ounce over the past few months, catching even die-hard gold investors off guard. ## The Gold Playbook of Perfection In early November at the same time as the bounce in gold began, I outlined a playbook to capital on gold stock tax loss selling to subscribers of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*. At the time, the **Gold Bugs Index** and similar ETFs like the **GDX** or **GDXJ** were down nearly 30% for the year. - **Putting the [tax loss strategy](https://katusaresearch.com/an-interesting-gold-tax-loss-strategy/) to work could have led you to a quick 30% gain in the span of a few months.** That trounced the performance of major market indices like the S&P 500 (+5%) and Nasdaq (+6%). What I find interesting is that even though gold is in the $1950/oz range and within hitting its all-time high, gold stocks are nowhere near their all-time highs. ## Why Aren’t Gold Stocks Kicking Ass With Gold’s Rise? It might surprise you, but to put it in perspective, since 2021 gold stocks are down nearly 30% as measured by the Gold Bugs Index… Whereas bullion has generated a positive return over the same timeframe. The main driver in the disconnect is likely due to **cost control**. Inflationary costs hit the miners hard as everything from drilling costs to milling equipment increased in price. The biggest miners in the world like **Barrick** and **Newmont** have seen their AISC (All in Sustaining Costs) go up 25%. Why? Because mandatory mine site items like ANFO (bulk explosives) are up over 50% globally, tires are up over 40%, gasoline for trucks is up, truck parts and delays are up significantly. **In fact…** - **Truck suppliers are stripping down brand new pieces of trucks and selling off individual parts – making more money than selling a whole new truck!** These are just a few of the inflationary signals at the mine site. Add in COLA contracts (Cost of Living Adjustment) with the unionized mines and the miners’ bottom line is getting squeezed hard. Higher costs reduce profit margins and cash flows which in turn negatively impacts share prices. With this massive disconnect, the million-dollar question is *are miners pricing in this gold price*? With such a big disconnect, one might be quick to say no, miners are dirt cheap. ## Pro-Tip: The Devil in the Details… The chart below shows the consensus 1-year forward price to cash flow estimates for the Gold Bugs Index, which is an index of 20+ publicly traded miners. - **The higher the ratio –** the more *expensive* the index is. - **The lower the ratio** **–** the *cheaper* the index is. You’ll see that on average, miners in the index have traded around 6.8x its projected cash flows generated in the following 12 months. Today, the index is hovering around 7.6 times next year’s cash flow after spiking as high as 11.7x at the end of 2022. Now this is only 1 of many metrics an investor should have in their analysis toolkit, and just because it shows prices are above normal valuations, doesn’t mean share prices can’t go higher. What you can see is that when gold was pushing for $2000/oz, 2 out of 3 times, valuations went up above 8x future cash flow. This does leave the door open for some additional upside… However, we also infer from this chart that we’ll need a scenario where gold prices must rise for gold stocks to accelerate and play catchup. ## Marin, When is The Mother of all Rallies Coming!? Contrary to what all precious metals bug spend decades waiting for, I don’t see a major rally coming for the miners without a continued lift in gold prices. The simple reason is that the cost of capital is increasing for the miners. The Fed just raised rates again, this means the costs of equity and debt will also go up. - **Raising money is going to get harder and will become more dilutive for miners (that’s bad for shareholders).** For the producers, we are still seeing inflationary pressures which crimp the ability to generate outsized cash flows, and the actual mine sites will be the last to feel the disinflation when it eventually comes. That’s not to say there won’t be many mini spikes and rallies along the way before *the* big commodity supercycle hits and goes into overdrive. For example… Right now, **I am working on a big transaction that I will publish to my Katusa Resource Opportunities subscribers, **where they can participate at the same terms as myself. It’s one of the most unique opportunities and deals ever structured and solves 2 major problems. In fact, I might actually be rooting for this deal to fall apart as that could bring much more upside. I’ll show subscribers exactly what I mean in the alert. As always, I take **zero** finders fees and tell you exactly what I’m putting my own money into. If you want to get on the list and learn exactly what we’re doing behind the paywall, I encourage you to [become a subscriber to Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) (KRO). And do it BEFORE the alert goes out. The KRO is my premium research letter that goes out on the first Wednesday of every month. You’re two days late for the latest edition. And I’m getting close (waiting on lawyers) to finalizing the next opportunity. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Crossflation and the Fiat Money Fiasco - URL: https://katusaresearch.com/crossflation-and-the-fiat-money-fiasco/ - Type: article - Published: 2023-01-27 - Updated: 2023-02-09 - Author: Marin Katusa In one of those odd coincidences that make history so interesting… It turns out that the adventurer Marco Polo was wandering through Kublai’s kingdom at the time, and as we know, Marco Polo was a pretty keen observer. He’d never seen paper money before, but the canny Italian caught on immediately, writing in his *Travels*: - *“You might say that (Kublai) has the secret of alchemy in perfection…the Khan causes every year to be made such a vast quantity of this money, which costs him nothing, that it must equal in amount all the treasure of the world.”* Marco Polo was understandably skeptical of the Khan’s grand scheme, and wrote of the consequences of this early experiment in currency inflation: - *“The best families in the empire were ruined, a new set of men came into the control of public affairs, and the country became the scene of internecine warfare and confusion.”* Polo took his keen observations back to the West. How much influence his writings may have had, concerning this subject, is unknown. Perhaps his warnings did in fact put people off. Anyway, all we know is that paper banknotes would not appear in Europe for nearly 400 years after he returned home (Sweden being the first to issue a banknote). What Khan understood nearly a millennium ago is still put in practice today. And it has many doomers cheering or reeling an end to paper money. Or boosting the latest conspiracy that the USD is doomed. Recently, Argentina and Brazil discussed forming a common currency. I can’t count how many messages I get saying “The Petrodollar is over, look what ____ is doing.” Nonsense. Follow the Fed and act accordingly. Right now, their number one target is inflation. The fed rate rise has been nothing short of historic, representing one of the fastest hiking cycles we’ve ever seen… I don’t have any reason to believe this will slow down until inflation is firmly under control. ## **Money Frenzy** It’s important to keep in mind the meaning of the term, inflation. Today, people tend to think of it exclusively in the sense of rising prices of goods and services in the marketplace. But it originally meant expansion of the money supply beyond the need to simply meet demand. When that happens, you have an excess of currency chasing the same amount of goods and services, which is what drives the market price of them up. Thus, price inflation is a consequence of monetary inflation; it isn’t so much a matter of prices going up as it is the value of the currency going down. - Deflation is the opposite; it is triggered by a withdrawal of currency from the economy. And that’s on purpose. As economist Ludwig von Mises put it: “The most important thing to remember is that inflation is not an act of God; inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.” Inflation is at the point where mainstream rap artists can’t help but talk about it. Sorry, I had to show you this clip—it’s just too funny and some of her other comments—either she is doing some grand messing with her followers or she is absolutely clueless about economics. ## Crossflation and Understanding the U.S. Dollar One of the major deterrents to the [Rise of America](https://www.riseofamerica.com/) would be a cratering U.S. Dollar, something that’s predicted by many of the self-appointed “experts” in the field of economics. I couldn’t disagree more. Today, we see disinflation metrics in many commodities and sectors of the economy that experienced significant inflation in 2022. In fact, deflation is the ultimate boogeyman that is just around the corner. In 2020 I coined the term ‘Crossflation’ and that is exactly the new state of affairs. - **Crossflation** means that we will have areas of broad deflation with concentrated pockets of inflation popping up here and there and real wages losing purchasing power. Understanding that is central to the way I see the status of the U.S. Dollar going forward. Crossflation will be the direct result of the implementation of MMT as the eventual guiding monetary policy. 1. Certain sectors of the economy, those that are primary recipients of MMT’s largesse, have and **will experience significant inflation.** For example, real-world economy like building a mine, etc. 2. On the other side, **there will be significant deflation in sectors** that are in direct competition with the ones that have most benefited from the government’s easy money, think digital world as an example. ## **Demand for the Dollar** There is no doubt there are some challenges faced by the U.S. dollar going forward… A number of powerful forces are running loose: Inflation, deflation, stagflation, crossflation, recession, depression, economic collapse—all of these things are in play. And no one can say with certainty what the eventual outcome will be as they interact. Many if not most of the mainstream economic talking heads are predicting a devaluation of the USD, if not the outright end of the USD’s reign as the reserve currency of the world. Some are calling for a ruinous inflation that will savage the currency, if not totally destroy it. I have a different view. I don’t like baseless speculation. As I’ve said over and over, I prefer to deal with what lies right in front of me. And what I see is a world that is currently in desperate need of U.S. Dollars, and will be for a long time to come. It’s within the full power and authority of the U.S. Fed, via the tools of FMC and then MMT, to “print” the digits necessary to satisfy the global dollar addiction. If you take nothing else away from these writings, take this: **the USD will remain the strongest global fiat currency going forward**. ## **The Debt Factor** Other countries, especially emerging market economies are deeply indebted to the U.S. As you can see in the chart below, nearly two-thirds of emerging market debt is denominated in US dollars. Emerging markets have borrowed to build out their infrastructures, modernize their industries, develop their natural resources and so on. **Those debts must be paid back in U.S. dollars, not the local currency.** **And who is to say the Braziltina Peso (Argentina and Brazil’s new currency) will happen or even succeed—do not forget, Argentina is where dreams go to die.** There will be bankruptcies and defaults along the way. There will also be places where nationalization of resources takes place. - **In my premium research service – **[**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)** – I identify these places in my analysis of companies.** But in general, countries with access to capital in the form of USD will not want to jeopardize that access. It’s a self-fulfilling loop: continuing indebtedness that must be paid off in USD naturally creates a continuing demand for USD. The Rest of the World (RoW) is in a predicament I call US ***DIC***. - **D** – Debt in USD is continuing or rising. - **I** – Income is down in USD as the U.S. purchases fewer imports. - **C** – Capital outflows are increasing, meaning foreigners are selling assets in order to acquire USD. This means that the Central Banks, corporations, states and provinces of the rest of the world are going to be in a perpetual shortage of USD. This is especially true during the pandemic and its associated crisis, as people everywhere are engaged in a flight to safety, which always means dollars. And high demand strengthens the market value of any commodity, including money. The RoW (rest of world) is in deflation (then eventually stagflation and then inflation) at a time when the U.S. markets are having their great reset. Yes, the RoW will experience deflation while the U.S. markets keep attracting money and remain on an inflationary trajectory. In a sense, it’s global crossflation. Through it all, the dollar will remain dominant, and the Fed’s implementation of international **SWAP Lines will continue.** Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Name’s “Bond” - URL: https://katusaresearch.com/the-names-bond/ - Type: article - Published: 2023-01-20 - Updated: 2023-02-09 - Author: Marin Katusa I know, you probably think I’ve lost my edge or have gone crazy. But let’s think about this carefully for a moment… There are 3 major stages in a cycle. (As I described in my book [*Rise of America*](https://www.riseofamerica.com/): 1) Boom 2) Bust & 3) Echo. 1. **Risk On (Boom)** – Reserved for times when the economy is exiting a recession and during strong periods of economic expansion. Just like what we have witnessed since 2009, minus the pandemic. 2. **Risk Off (Bust)** – This is when the economy has peaked, inflation has begun to rise and the central bank has begun to raise interest rates. Stocks and bonds get crushed in this environment. This should sound familiar as this is precisely what happened over the past 9 months. 3. **Pay me to Wait (Echo)** – This is the in-between stage. Equity prices have retreated but there is perhaps further pain to come, inflation is still high but there is a speck of light at the end of the tunnel. I believe we are getting close to this phase considering where we are now. Value Investing gets rewarded during the Echo phase. It is a fine line between the “pay me to wait” stage and the “risk on” stage. This gets muddled further these days as the stock market tends to be very forward-looking. This means it will attribute little value to short-term problems. And focus attention on the rosier long-term picture. Under this forward-looking environment, we’ll likely see equity markets bottom months in advance of total economic recovery. ## I Believe We’re Close to the Echo Stage… The Federal Reserve continues to push the narrative of higher interest rates and weaker economic growth. I believe this is done on purpose to specifically combat the market being so forward-looking. One of the best historical comparisons I believe is in the 1975-1980 time period. The Fed’s worst nightmare is a “double burst” of inflation… As you can see on the chart above, this double burst ended in an ugly fight where rates went to 20%. An interest rate of that magnitude would be catastrophic for a world that has gorged itself on cheap debt for a decade. I outlined [in previous editions](https://subscribers.katusaresearch.com/reports/growth-vs-inflation-cross-asset-volatility/) that the bond market has faced enormous losses last year. Higher interest rates, combined with expectations for higher inflation and heightened uncertainty of inflation led to a collapse in bond prices. ## Drilling Into High Yield Those taking a close look will look at the chart and notice something strange: High Yield bonds are down less than investment-grade bonds and US government bonds. Why is that? In large part, this is due to the interest rate sensitivity of the bond. Longer-term bonds have greater price sensitivity to interest rate changes than shorter-term bonds. Not to be confused with the length of time, a bond’s duration measures the price sensitivity to a change in interest rates. - **The higher the duration**, the greater the price change sensitivity to changes in interest rates. - **The lower the duration**, the smaller the price change sensitivity to changes in interest rates. This hiking cycle is not just impacting the equity markets. The bond market experienced an incredible shake out because of the interest rates rise. - **This has made for one of the worst returning years in the bond market ever.** The US Investment Grade bond market is currently worth approximately $25 trillion. It would make up the majority of anyone’s 40% in the traditional 60/40 portfolio. ## Investment-grade bond investors don’t like risk or volatility… They want stable, predictable returns typically in the mid-single digits. As you can see in the chart below, last year was the complete opposite. On average, Investment Grade bonds lost 13% last year, wiping out all the gains achieved over the past few years combined. Going down to almost the bottom of the bond market food chain is the “High Yield” segment. These are bonds which are issued by companies that are more cyclical and have more volatile cash flows, which increases the risk of the bond investment. To compensate for this risk, the bond issuer must pay a higher interest rate to the debt holder. Typical companies in this segment are energy companies, materials, miners, and small-mid-cap-sized issuers. 2022 was the second worst year since 1985 for High Yield bonds. ## Junk Bonds The bottom of the food chain is the **junk and distressed issuer debt**. These are usually very small, under-capitalized companies which toe the line between solvency and insolvency. Total returns in this segment as you might expect are more volatile, with some very high returning years and others which are very poor as in the case of last year. ## Predicting the Bottom for Bonds Every crisis and subsequent recovery is different. Let’s use historical bond yields to help paint a picture of where we are today, vs historical bottoms. It’s not foolproof, but it helps paint a picture. Below is a chart which shows the historical yield earned for holding a debt instrument through to maturity or being called back by the issuer. Bond yield is a function of several things, namely the interest rate environment, inflation expectations, and the quality of the issuer. As you can see Investment Grade bonds trade at lower yields than High Yield and Junk bonds. This makes sense as an Investment Grade issuer will be more stable and “safe” than a high-risk small cap. You can see the cyclicality of the changes in yield. During times of duress, bond prices fall, and yields increase. The yield increases because the issuer must compensate the investor appropriately for the market conditions. - In **good markets**, yields are lower, - in **bad markets** yields skyrocket. We can see that firsthand in 2002, 2009, 2016, and 2020. Yields have begun to spike over the past 6 months, but we are still well below all previous peaks put in at the worst times of the economic crisis. This is another sign to me that we have not hit the bottom of the market, but the start of the echo isn’t far away. Regards, Marin Katusa P.S. Bonds are a part of my long-term investment strategy, and we’ve profiled opportunities in my premium paid service, **Katusa’s Resource Opportunities**. [Click here to learn how to get access](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Sectors to Watch in 2023 Part 2: Lithium, Green Hydrogen, Uranium - URL: https://katusaresearch.com/sectors-to-watch-in-2023-part-2-lithium-green-hydrogen-uranium/ - Type: article - Published: 2023-01-13 - Updated: 2023-08-02 - Author: Marin Katusa Last week we profiled 3 sectors that caught our attention. [Carbon, Gold (and silver) and cybersecurity](https://katusaresearch.com/6-sectors-to-watch-close-in-2023/) were at the top of my list… With the first two at the top of my portfolio in terms of position size. This week I’ll detail several other sectors our team is researching and analyzing closely for hidden gems. ## Lithium Lithium is an interesting sector and by now most investors know this is a critical element in a net zero world. When you think batteries, you think lithium. And the world will need a LOT of it. - **The intense hockey stick price rise in lithium also caught the attention of investors. In 2021, lithium prices in China rose 400 percent.** Then in 2022, prices nearly doubled again, finishing the year up 80%. And it was one of the hottest sectors in 2022 even though it didn’t catch much mainstream attention. - **Demand for lithium continues to soar and the projections show demand forecasts increasing up to 10x by 2030.** Elon Musk expressed his desire for easy to reach, local U.S. sourced lithium and this ignited the fire on many lithium stocks. Tesla is building a refinery on the Texas gulf coast. **There are 4 major companies that run most of the world’s lithium production**. But there are many companies vying for their slice of the growing pie. Why I Like the Sector Battery chemistry changes every day. But Lithium is critical as a battery metal and demand is poised to grow significantly. How I’m Playing It Musk calls lithium refining “*You can’t lose, it’s a license to print money”. *Exploring for lithium and producing lithium is a different game than refining lithium and be very careful where you are putting your money. There are plenty of companies with empty promises and it could be hard for a regular investor to tell. **Most lithium companies and small caps have projects that will never get permitted or never get built.** **Be careful and stay away from those.** A previous lithium company we [waited like alligators](https://katusaresearch.com/the-way-of-the-alligator/) to buy, highlighted several years ago, got bought out at a significant premium. We’re well versed on the sector and have visited several projects in the Americas. I have a handful of assets on my radar owned by companies that could make sense if the price and valuation is right. **What to focus on when investing in Lithium exploration:** - **Management team and** insiders that actually know lithium and have successful past in the sector. Avoid those unblemished with success. - **Grade** is KING. Always. - **Metallurgy** is Queen. Always. - **Jurisdictional Risk.** Why increase your risk with political risk when there are incredible ultra-high-grade deposits in safe jurisdictions? - **Digitalization of Previous Exploration**. This is not the first lithium exploration boom. It’s happened before. A proven success strategy I have deployed many times is taking the old data on the highest-grade deposits with previous work OPM (Other People’s Money) and digitalizing using modern technology to better define the exploration potential. ## **Green Hydrogen** This is something investors are going to see A LOT more of starting in 2023… The most abundant element in the universe (other than stupidity) is buoying for a critical spot in the green revolution. Since being used to lift blimps in the 18th century, hydrogen-based technologies have come a long way. Two of hydrogen’s unique attributes are: - Ability to be stored and used as a clean fuel without direct emissions - Flexibility and versatility These properties provide an opportunity to solve the critical decarbonization issues faced in hard to abate segments. Things like cement, steel and heavy transport industries. **Solving these problems has the potential to lead to a massive increase in demand.** ***If *****we can get the technology right.** Today, the majority of commercially produced hydrogen comes from fossil fuels, primarily natural gas and coal. In order for hydrogen to go mainstream, hydrogen production will need to go green. - **Green hydrogen**** is produced through a process known as electrolysis. Today this process makes up less than 1% of global hydrogen production.** Over the coming decades, I expect this to change as economies of scale and technical innovation drive costs down. According to the World Bank… - **The demand for hydrogen reached an estimated 87 million metric tons (MT) in 2020 and is expected to grow to 500–680 million MT by 2050. That’s a 500-800% increase.** Below is a chart that shows the potential growth in the market over the coming decades. Don’t sleep on green hydrogen. As global decarbonization continues, hydrogen companies could become a new hot sector for speculative investors. We’re seeing a growing number of deals and investor decks coming our way and looking into each one of them. Not to mention the big shift in[commercialized transport trucks using hydrogen](https://carboncredits.com/nikola-hydrogen-stations-first-hydrogen-fuel-cell-vehicle-fhyd/). Stay tuned as this sector heats up in the coming years. ## **Uranium** Russia, together with Kazakhstan and Uzbekistan make up 58% of global uranium production. Yet the United States *required* 44% of global uranium production in 2021. - **Either the United States buys every ounce of uranium outside of Russia, or Russia has total control over the U.S.’s energy security.** The US Govt won’t let that happen and this is a major issue. And both sides of the political spectrum are accelerating funding and tabling bills to help revive the US nuclear energy industry. Did I mention that nuclear energy is critical to reduce emissions and get to 2030 net zero plans and projections? China, India and Russia are [building a large number of reactors](https://carboncredits.com/nuclear-education-the-great-nuclear-race/). Europe and [Japan](https://carboncredits.com/nuclear-education-the-nuclear-winter-is-thawing/) are re-starting dormant ones. Why I Like the Sector The nuclear scare of Fukushima is over and the tide is turning quickly. The world (and investors) are recognizing that nuclear is an all important baseload form of energy with much lower carbon footprint and overall cost than other forms of energy. Demand is going to increase, big time. For example, 4.6% of China’s electricity comes from their 48 nuclear reactors. They want to get to 20 percent—which will take another 150 reactors. That’s just China (wink, wink). How I’m Playing It I have a handful of uranium companies on my radar but I’m staying away from rinky-dink small caps on exchanges where liquidity is non-existent and the only shares that move are from paid promotions. - **You want to look for pure-play uranium companies** - **That are trading on large, U.S. exchanges where big ETF’s and funds can access big positions.** Otherwise, you’re playing with a pack of matches that burn bright and fizzle faster. ## **Bonus Sector: Oil?** Even with a massive anti-oil push from decarbonization, oil was one of the top performing sectors in 2022. Producer diligence both in North America and abroad has led to [tight supply-demand fundamentals](https://katusaresearch.com/the-strategic-petroleum-reserve-cant-save-you/) which in turn has supported higher oil prices. Tight fundamentals are likely to continue this year and beyond as fossil fuel companies face higher costs of capital which will curb excessive spending. However, even under the most aggressive of decarbonization scenarios, oil is likely to remain a key commodity for the coming decades. The transition away is real, but we’ve been reliant upon fossil fuels for centuries and substituting away from them will not be an overnight success. A key theme for oil companies in 2023 and beyond will mitigate greenhouse gas emissions, especially methane. Regards, Marin Katusa **P.S.** Every month my team and I [publish Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). It highlights the research and data I’m looking at, and where I’m putting my money in the resource markets. Give it a trial today. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # 6 Sectors to Watch Close in 2023 - URL: https://katusaresearch.com/6-sectors-to-watch-close-in-2023/ - Type: article - Published: 2023-01-06 - Updated: 2023-02-09 - Author: Marin Katusa Anyone that owned stocks and bonds knows the pain of 2022. If you were a passive investor, no doubt your financial advisor or bank teller told you that it was among the worst ever years for the 60/40 portfolio. Few sectors left the year unscathed, but several sectors are catching my attention for 2023 and beyond. And today I’m going to share what sectors I’m keeping an eye on and why… ## Carbon The carbon markets (and investors) enjoyed their first taste of what returns will be like in a real bull market in late 2021 and early 2022. Voluntary and compliance market [prices](https://carboncredits.com/carbon-prices-today/) reached record high after record high, only to come back down to earth. ![CBL Nature Based Global Emissions Offset] Compliance markets fared better, with the European Union Allowance permit rocketing up in 2021, but closed 2022 with a dud. Though it performed better than its voluntary market cousin. It feels like a distant memory, but at the time investors were caught up in meme stocks, SPAC frenzy, cryptos and trading gorilla and rock jpegs. **No one paid attention to the official start of Carbonomics.** Yet, dozens of major U.S. and Canadian banks and investment brokerages issued major analyst reports for the very first time on the sector, throughout the year. - **Major UK banks like Barclays and HSBC **[**pledged USD $2 Trillion for investment in renewables and decarbonization**](https://carboncredits.com/climate-commitment-major-banks-reach-5-5-trillion/)**.** - **JP Morgan Chase ($2.5 Trillion) and Citigroup ($1 Trillion) just pledged the same at the end of December.** This is the opposite of a crowded trade, unlike crypto and tech stocks in 2022. No one’s paying attention – meaning the biggest gains are yet to come. With the calendar changing to 2023, most net zero 2030 commitments will accelerate faster than most investors realize. Why I Like the Sector: More and more investors are coming into the sector every day. This includes major pension funds, sovereign wealth funds and other “big money”. Tesla is making major headlines, having just released its Q4-2022 financials and revealing its [2022 carbon credit sales hit $1.78 Billion](https://carboncredits.com/tesla-carbon-credit-sales-reach-record-1-78-billion-in-2022/). **Few outside Katusa Research are talking about it yet.** **But some major outlets are planting the seeds…** Carbon is not going away. It’s going to grow exponentially, and higher prices will be needed. - Did I mention that the voluntary carbon market is **growing at an obscene rate** and **finished with record transactions and dollar volumes in 2022**. There’s only one way to go over the coming years – up. How I’m playing it: The first half of 2023 will see continued pain in the carbon markets. However, companies in the carbon sector that were private and raised funds between 2020 and 2022 will need to show their investors the return on investment. For those who have done the right moves, more capital will follow them as they attract more capital to deploy into 2023 and 2024. For the rest, they will be on their way to money heaven. I am a major investor in many projects and I will have more on my strategy in the exciting carbon sector in the coming months. Time will tell if I’m right. But I’m betting a significant amount of my net worth into the sector **– **real, hard dollars. ## Cybersecurity Warren Buffett called it “*The number one problem with mankind**.”* In 2021, cybercrime accounted for $6 trillion in damages. And according to cybersecurity experts at Cisco, that number is expected to grow to $10 trillion by 2025. - **1 out of every 10 firms experience a cyberattack each year. And a ransomware attack occurs every 14 seconds.** This has companies all over the planet spending major money on cybersecurity and threat prevention. And there’s big money in it. Why I Like the Sector: According to a study performed by Deloitte in 2020, the average company spends roughly 10% of their annual IT budget on cybersecurity. Microsoft alone spends $1 billion per year on cybersecurity. Cybersecurity is a massive industry with revenues slated to accelerate growth year over year. How I’m Playing It: It’s not commodities, but this sector has my attention because it’s growing rapidly, and the company valuations (buyouts) are incredible. Even in a depressed market. For example,** in Q3-2022 there were 62 deals for $8.9B in** value according to Houlihan Lokey, the world’s leading cybersecurity analyst firm. That’s the quarter where the markets made major lows. And yet M&A was unfazed as private equity firms were scooping up cybersecurity firms for 12-16x earnings. Sectors like that always have my attention. - **Katusa Research will release a special situations report on cybersecurity sometime soon.** This is something you’ll want to pay attention to. ## **Gold (and in a small way, Silver)** Central banks purchased A LOT of gold last year. It was the most active buying by central banks since 1967. Big banks like Goldman Sachs are coming out with bullish forecasts on commodities, including gold. Stories are coming out from places like Austria and Canada where dealers can’t keep up with the physical demand. If you’re new here, there is a big disconnect between the paper price and the physical price of gold (and silver). Often as high as 40% markup. And in recent news, the US Govt is enacting law banning the purchase and transactions involving Russian Gold. The Gold Wars could be coming soon. Why I Like the Sectors: There’s no rush quite like a gold rush (and silver too). It’s a sector that offers explosive upside but is fraught with gut-wrenching downside. I’ve been to countless projects around the world, know all the major players and deposits. - **The commodity supercycle will come – and it feels like we’re coming very close.** How I’m Playing It: I have zero interest in pie-in-the-sky junior companies or typical rounders that peddle the same projects with different names in –[SWAP Line Nations](https://katusaresearch.com/swap-lines-are-one-of-the-most-important-things-youve-never-heard-of/). Or countries that don’t pass [my AK-47 Indicator Test](https://katusaresearch.com/use-ak-47-indicator/). I want **big**, **needle-moving projects** that make sense even at depressed gold prices. And I want companies on **major-league (U.S. exchanges)**. There are a handful of favorites I like in the gold sector and a select few of which I have large amount of capital in and holding on to for much, much higher prices. Could I be wrong? Of course. But you don’t get to live the dream by staying home. Fortune Favours the Informed and Bold. Paid subscribers to [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) know the exact two Golden Elephants I’m riding, and why. ## 3 More Sectors I’m Watching We’re getting longer than we originally planned with this edition. You can tell by the words and facts committed in this missive that these sectors have me excited for several reasons. And these aren’t just words. My excitement is met with significant bets in these sectors in the 6, 7 and 8 figures. Not a $5,000 swing trade. With that… **Next week I’m going to release part 2 of my “What to watch in 2023” series.** Stay tuned, Marin Katusa and Katusa Research **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Silver’s Bull Market Vengeance - URL: https://katusaresearch.com/silvers-bull-market-vengeance/ - Type: article - Published: 2022-12-30 - Updated: 2023-02-09 - Author: Marin Katusa It’s no surprise that silver has felt pressure lately. It may be a surprise, but in times of heightened volatility… Safe haven assets which are traditionally supposed to be uncorrelated to the market actually become highly correlated. It can lead to a situation where all safe havens and broad market equities can rise and fall together. We have seen that this year. As a combination of higher interest rates, slowing global growth and inflation rates, and instability in financial markets have weighed silver down. But here’s the kicker – more and more of the downside is becoming priced in. **And as investors and speculators…** **One must be *‘roundabout’* *(meaning: don’t focus on what’s currently priced in, but what will be later).*** That’s why silver bugs believe the metal is *highly* attractive here. Because as both market perceptions *and* monetary policy reverse, silver could be re-priced higher. Let me show you why. . . ## Silver: A History of Heart Palpitating Booms and Busts The booms and busts of silver have been truly exceptional over the last few decades – putting the testicular fortitude of even the *strongest* silver bugs to the test… The reason that silver can make such massive moves so quickly is because the global market cap is *tiny*. Thus, any marginal increase in silver buying or selling tends to send prices into a *frenzy*. Putting this into perspective, take a look at this chart comparing the silver market to other major asset classes and well-known companies. - **As you can see,* the entire silver market is a blip relative to these other *sectors** And this creates *massive* leverage for silver because of its small scale. Remember how violent the rise in the tiny crypto-currency sector was once capital flowed in? Exactly – scale is key for massive gains. ## The ‘Big’ Silver Lining Things are changing in the macro-economy that could directly lift the silver price. The *“anything it takes to tighten” *policy that central banks and governments around the world adopted in late-2021 has *significantly* shaken things up across all investment assets. But still, silver outperformed. For instance, since March 2020, **silver is one of the top-performing precious metals**. Even outperforming gold by a wide margin. Again, can’t stress enough the *scale* that silver offers relative to other precious metals and assets. What this means is, it could be easier for silver to double from here than it will be for gold or platinum. Now that we understand the upside torque silver offers – what’s next? ## What Gives Silver Strong Legs? Silver depends on its own supply-and-demand fundamentals (which are increasingly bullish). But silver also depends on the U.S. Dollar’s value. Why? Because global commodities are priced in US Dollars. And as the USD begins to *weaken* (after hitting multi-decade highs in 2022, courtesy of Federal Reserve tightening), asset prices all over the world could see a sharp rise. To give you some context – here is the last **two-decade correlation between the US Dollar Index and Silver futures**… As you can see, when the U.S. dollar *rises* (blue line) in value, silver (red line) takes a *hit*. But when the dollar *sinks* in value, *silver outperforms.* It’s also important to note how impressive it’s been that silver prices have held up so well in the face of such a strong dollar. For perspective, the last time the dollar was this strong, silver was less than five dollars an ounce*.* This just shows us how strong silver demand is. That’s why – facing both a weaker dollar *and* robust demand – silver upside on a multi-year time frame is only now beginning. ## Will Silver Stocks Follow Silver Bullion and Take Off? Lucky for investors, silver stocks haven’t soared – *yet*. But even if silver stays where it’s at – silver miners still have significant upside. The following chart shows the comparisons between silver bullion vs. silver miners over the last two-and-a-half years. And as you can see – even though silver bullion has outperformed gold – **silver miners have lagged considerably**… But – looking back in history – when silver miners *finally* move, it tends to move *violently*. Just look at the large silver producers between 2009 and 2011 – during the last *big* silver run… - You’ll see that while silver surged 300%, silver producers soared 500% or more. - Even Fresnillo – *the world’s largest silver producer* – was up over 500%. - And several small caps were up over 1,000%. . . You can see how the *right* silver stocks can produce mind-boggling leveraged gains compared to the price of silver. When the time is right. And as always in natural resource speculations: - **You need to be invested in the right projects and management teams or you and your investment will be left in the dust.** ## So – who are the largest silver producers? Well as mentioned above, Fresnillo – *the pride of the Mexican mining industry* – is the world’s largest silver producer. The company is solely focused on silver production. But as you’ll see in the list below, many of the other largest silver miners are in fact *gold and base metal* producers. **Key Fact****: Most silver is mined as a by-product of other metals – especially gold and zinc and lead.** Thus, many might find it odd that a *‘*gold’ producer churns out significant silver ore – but it’s true. Here’s a chart showing the top six-silver producing companies. Even as a by-product, a rising silver price will directly influence these firms’ cash-flows. Which will ultimately lead to higher valuations. ## “A Lightning Rod”: What’s Next for Silver? Keep in mind that silver is useful both as an industrial metal *and* as a store of value. **This has the potential to be a double whammy for prices when things heat up.** Hence why the hyper-aggressive easing policies global central bankers have used since 2008 are positive for silver’s industrial use *and* monetary use. It’s not far-fetched to think that silver will catch a bid. And soar. Remember – it has in the past*.* Regards, Marin Katusa **P.S.** If you want to see the companies **I’m investing my own money into** – and what prices I’m buying. [Click here to learn more about Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Nuclear Energy and the Uranium Breakout - URL: https://katusaresearch.com/nuclear-energy-and-the-uranium-breakout/ - Type: article - Published: 2022-12-23 - Updated: 2023-02-09 - Author: Marin Katusa It wasn’t widely shared or reported, but it should’ve been. There was major news in the nuclear sector last week that caught my eye. The U.S. Department of Energy (DOE) announced the achievement of **fusion ignition** at Lawrence Livermore National Laboratory. This is significant. Fusion was considered science fiction and wishful thinking until very recently. And now there’s scientific proof of a successful reaction. From the release: *“On Dec. 5, a team at LLNL’s National Ignition Facility (NIF) conducted the first controlled fusion experiment in history to reach this milestone, also known as scientific energy breakeven, meaning it produced more energy from fusion than the laser energy used to drive it.”* This is a major step to reliable, cost-effective, and stable baseload power for the world. Not to mention, ultra-low in emissions. Bravo and congratulations to all those involved. ## **You May Have Noticed a Nuclear Sentiment Shift…** When it comes to Nuclear energy, investors must [watch Russia and China](https://carboncredits.com/nuclear-education-the-great-nuclear-race/). They’re planning massive nuclear reactor capacity which will have major impacts on uranium demand. However, don’t forget to keep an eye on Europe… It will be the center of the policy and sentiment shift. It should come as no surprise that European nations are reversing their *‘anti-nuclear’* agendas as electricity prices explode. For instance: - Germany has [pushed](https://www.reuters.com/business/energy/germany-create-legal-basis-extend-lifespan-three-nuclear-plants-letter-2022-10-17/) to extend 3 nuclear power plants running. - Swiss politicians are now launching a [petition](https://www.reuters.com/business/energy/swiss-group-launch-petition-rethink-nuclear-power-plans-2022-08-28/) to revise the country’s anti-nuclear policies. - And even Italy is beginning to [rethink](https://www.politico.eu/article/energy-price-hike-prompt-italy-nuclear-rethink/#:~:text=Italy%20was%20a%20pioneer%20in,the%20Fukushima%20accident%20in%20Japan.) their long-standing no-nuclear stance ## **Suddenly, Nuclear is Cool Again. Why?** Simple, nuclear energy is carbon neutral. Right now, it powers 1 in 5 homes in America and is the cheapest operating source of baseload power in the USA. For example, 11 nuclear plants in Illinois and Pennsylvania produced more power than all solar in the U.S. in 2021. (Source: EIA) - **If the U.S. invests about $1 trillion into nuclear energy by 2050, it could supply more than 3,500TWh of energy per year.** In that scenario, nuclear would provide 85% of current energy consumption. Oh, and all carbon-free, for less than half of the CARES Act stimulus. Net Zero Solved. You’re welcome. ## **No Brainer: Affordable Net Zero Power** On top of this, the push for zero-carbon energy (aka energy that emits zero emissions) is growing sharply. Things like coal and crude oil production are taboo. So, there’s increasing demand for both cheaper *and* zero-carbon energy sources. **This is where nuclear comes in…** Putting it simply, you can’t hit consistent zero-carbon pledges *without* using nuclear energy. It’s just not possible. That’s because nuclear energy is a highly efficient, zero-emission, and clean energy source. Forbes wrote that, *“To reach net-zero by 2050, the US would need to deploy **one new nuclear power plant worth of carbon-free energy about every six days, starting this week** [this was written in September 2019],** and continue until 2050…”*** Global X ETFs showed the dire shortfall of nuclear reactors needed by 2050 to hit the base-case for net-zero emissions. According to them, there’s a roughly 50% gap between what’s planned vs. what’s needed… ## Who’s Building Reactors? No wonder so many [nations](https://elements.visualcapitalist.com/nuclear-reactors-under-construction/) – *like China, India, Turkey, the UK, and Russia* – recently rushed to build more nuclear reactors… Even the U.S. – which’s had nuclear power plants in operation decline over the last 30 years – is undergoing a resurgence in nuclear energy plans. Roughly **two-thirds** of U.S. states have reported plans to include nuclear in their energy policies going forward… as they try moving away from fossil fuels. ## **Uranium Forecast: Supply and Demand** Here’s the current supply and demand scenario around the world. - **A total of 99 nuclear reactors are planned, with over 300 more reactors in the proposal stage** Even the Biden administration supported the nuclear energy drive by handing out $6 billion in funding in April. Some other examples of the renewed nuclear renaissance are: - **Canada** committed C$970 million towards financing **new nuclear power technology**. - **South Korea’s** new president – Yoon Suk Yeol – has aggressively pushed at boosting nuclear energy to overtake coal as the main source of electricity. - **Japan** is planning to restart seven nuclear reactors by summer 2023 as nuclear energy begins to gain back political and public support. This is something that speaks volumes towards this, and that is the *sentiment shift* in Japan… Where nuclear energy is becoming more popular again, just 11 years after suffering their own nuclear crisis. It’s clear that nuclear power has come back into favor. This bodes well for uranium stocks that can profit from rising prices over the coming years. ## **Uranium Price** Over the past several years, uranium has been one of the best-performing commodity investments out there. Over the past 5 years, physical uranium has appreciated over 100%, far outpacing other commodities like gold, copper, and oil. This year, even in the face of a recession, prices for uranium have held solid, hovering between $48-$51 per pound. ## Notable Uranium Company Transactions There have been several notable transactions in the uranium sector recently. Let’s break down a key transaction that took place… - **Cameco, the world’s largest publicly traded uranium producer, acquired 49% in Westinghouse (the world’s largest nuclear services business).** The remaining 51% will be owned by Brookfield Renewables Corp (17%) and the Brookfield Energy Transition Fund (34%) managed by former Central Bank Governor and carbon market visionary, Mark Carney. Brookfield bought **Westinghouse** from **Toshiba** for $4.5bn in 2018. Last year, Brookfield began to explore the sale of Westinghouse. According to Brookfield, Westinghouse has made hundreds of millions of dollars per year in revenue and had made dividend payments back to Brookfield – nearly equal to the original purchase price. Now they are selling off 49% of the business at a total deal valuation of $7.9bn. With increased pressure on energy security and decarbonization, clean baseload power generation is a must. Westinghouse services over 50% of the worldwide reactor fleet, and these revenues are 85% contracted over many years. This is the type of deal that sets Brookfield apart from the rest of the renewable power and green energy producers. No other business has the capital and balance sheet strength to take assets on the verge of bankruptcy, hold them on the balance sheet for 5 years then bring it back to the market for big gains. It’s the kind of edge my team and I look for in the markets. We publish our findings and where I’m putting my own money in the markets every month in my premium research letter – [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). I invite you to give it a try. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # An Interesting Gold Tax Loss Strategy - URL: https://katusaresearch.com/an-interesting-gold-tax-loss-strategy/ - Type: article - Published: 2022-12-16 - Updated: 2023-02-09 - Author: Marin Katusa Buy when there is blood in the streets. We’ve all heard the cliché. And unless you are a vampire, most avoid blood. So, how do you benefit from the *blood in the streets* concept? Simple. By paying attention when the market gets hit with a large volume of sellers who need to head for the exits for tax loss purposes. This is how Christmas can come early for investors who are prepared. **I’ve been both a victim and benefactor of tax loss selling.** So, in today’s missive, my goal is to helpfully present how to go about tax loss selling to benefit and learn from my mistakes and successes. ## Tax Loss Tactics There is no doubt, Investors selling in panic is a great way to find cheap prices for great stocks. And that means opportunities to make hundreds of thousands – even millions – of dollars in extra profit. Here’s what happens… - **At the end of the year, investors and speculators start looking at their portfolios and formulate plans to reduce their tax bills.** - **This means deciding if positions should be held to get short-term gain tax treatment or long-term gain tax treatment.** But more often than not, it means deciding to sell stocks based on factors that have little to do with their underlying values. If you’ve read my work for a while, those words should trigger your interest. You know that most of the time, the market places the correct value on assets. But not all the time. As investors, we find our edge during those rare times when buying and selling decisions are not made based on values, dividends, or cash flows. But instead, on external factors like fund redemptions, tax considerations, or fear the world is about to end. **These periods are one of the only times that intrinsic value seriously decouples from share prices.** In other words, when selling decisions are based on factors that have little to do with underlying values, we – the patient [alligators](https://katusaresearch.com/the-way-of-the-alligator/) – can strike and pick up assets for bargain prices. Tech, precious metals and crypto have all been decimated. The energy sector is among the only major gainers in the year. This is exactly what happens at the end of a brutal market year like 2022. Investors dump stocks simply to lock in losses or gains because their upcoming tax bill is first and foremost in their minds. ## Tax Loss Buying in Gold Our team conducted a 25+ year analysis of tax loss selling in the gold market. It is a well-known strategy to sell unprofitable positions and use those capital losses to offset capital gains elsewhere. This can lead to “crowded” trades where many investors are heading for the exits, just to take the tax loss. Buying these dips for trades has the potential to be a sound strategy if executed correctly in the right stocks. The Gold Bugs Index is an index composed of 100+ gold stocks dating back to 1995. This provides us with 27 years’ worth of tax loss data. To build a visual below is a chart of the index going back to 1995. And this chart shows the average monthly returns for the past 20 years for the index. ## Now let’s devise a tax loss trading strategy… Here’s a tax loss strategy I presented first to my subscribers of Katusa’s Resource Opportunities in early November. The tax loss strategy is very simple, - Buy in November, which is typically around the time when tax losses are harvested, - Sell on the first trading day in February of the following year. Dates can be adjusted, but this provides a good proxy to understand the mechanics and potential of capturing profits based on tax loss sales. The table below shows the results of this buy-in-November and sell-in-February approach. **This simple strategy beats the S&P 500 and Gold both over the whole period** and in years where gold’s performance is negative leading up to the tax loss date. With this data in hand, I will continue to watch the market for potential tax-loss candidates. - **Subscribers to **[**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)** will get the first alert when I find something that hits my watchlist trigger.** A key determining factor will be if the company has enough volume to handle both large amounts of buying and selling. There will be many small illiquid juniors who will get hammered into the end of the year but taking advantage of those types of opportunities with the size is next to impossible. While there may be enough volume to get in, getting out is considerably harder and leaves you at the whims of the company and its catalysts, or lack thereof. **Keep cash in hand and don’t get scared with any increase in volatility…** That’s when multi-year fire sales happen and you stake your bids for multiples on your money in the coming years. **You want to target REAL businesses, making REAL cash flow in an era of higher rates and a slowing economy.** [That’s what I’m doing](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Market Reality—Avoid Herd Mentality - URL: https://katusaresearch.com/market-reality-avoid-herd-mentality/ - Type: article - Published: 2022-12-09 - Updated: 2025-09-10 - Author: Marin Katusa It’s the first year in many that we are gathering to celebrate the holiday season. Catching up with friends and colleagues you haven’t seen in years due to Covid is fun. But, let me ask you a question… Have you realized that you think totally differently than the “consensus” conversation going on? People are whining about interest rates going up but haven’t at all prepared themselves for the coming market carnage. But you have. Why? Because you are a realist and don’t believe the government will take care of you. Believe me, when I say, most do. But you are different. **And the Data is confirming your gut instinct. It shows that investors of all ages have been fleeing the market…** That’s what the herd does—the *worst thing* at the *worst time*. But the herd is ignoring some key facts: - Time is an asset - Volatility is your friend, not your foe This should come as no surprise… As volatility increased, younger generations with less poise and market experience were more inclined to sell rather than buy. ## What We’re Watching 101: Options Trading Activity A major change in the marketplace over the past several years is the massive increase in options trading activity. Historically, options were traded primarily by professional money managers to mitigate risk or to place calculated wagers on equities, currencies, and so on. The rise of discount brokerages like Robin Hood and eTrade, many of which have apps allowing users to trade through their phone, made option buying and selling easier. And exchanges now have options that expire weekly – further fueling the ability to gamble and ultimately increasing volatility. Not to mention, many newsletters and trading services were red hot with “secret options services” that could make you super rich and retire with a Lamborghini at 22. Pure nonsense. Here’s an anecdote I live through often… When the Vancouver Champagne Socialists whose glory days were the frat and sorority parties of 20 years ago ask me about options and stocks… it’s my 100% guaranteed “street signal” that volatility is about to rage wild in the markets. A lot of this fluff has created a massive change in the options market. - **Below is a chart that shows US options volume since 1995. You’ll see the massive increase in average volume that occurred after 2020.** ## Rule #1: Know Your Options Option trading for the retail (novice) investor crowd is likely a losing proposition. Leaving volume aside, for now, a ratio that I use to help determine market sentiment is the **Put-Call ratio**. - The **put-to-call ratio** is a metric that calculates the ratio of put buyers (bearish wagers) vs call buys (bullish wagers) across all US-listed stocks. Since 1998 the ratio has averaged 0.60, meaning that for every 10 call options purchased, there are 6 put options purchased across the US equity market universe. This intuitively makes sense since the market goes up more than it goes down, and results in more calls being purchased than puts. To isolate the noise and focus more on the trend of put and call buying, I like to use the 20-day moving average. You can see in the chart below that when things get very ugly like during the Global Financial Crisis or during the height of COVID, investors turn highly bearish. And the ratio of puts purchased to calls purchased approaches or exceeds 1. On September 23rd, 2022, the Put-Call ratio hit 1.02. It’s not shown on the chart because the data series is shown as a 20-day moving average. - **The point is, Sept 23rd was OFF the CHARTS!** This was the highest level of bearishness since the pandemic rocked the markets in March 2020. Over the past 6 weeks, the put call ratio has broken 1, five more times, hitting a single-day record of 1.40 on November 16th. As the chart below shows, it is likely that this year will have more put/call ratio days above 1 than any other year since 2008. While the put/call 20-day average is moving up, and the markets are ugly, volatility is elevated, but not remotely close to capitulatory. In fact, it’s barely above “average”. ## Options and the Volatility Index (VIX) We have yet to see a major spike in the **Volatility Index**, as determined by the premiums in S&P Index option pricing. We can chart the VIX back as far as 1990 to see the highs during the Tech Bubble, Global Financial Crisis, and during COVID. As you can see, those 3 pink circles remain well above current VIX levels… ## The Bonds that Bind Us A similar tool in my toolkit is the yield on different **bonds**. - **In good times**, bond prices are higher and bond yields are lower. - **In bad times**, bond prices are lower, and bond yields are higher. This makes sense because, in bad times, it is more difficult for businesses to incentivize investors to part with their capital and thus must offer a higher rate of return. The cyclicality of these yields is quite amazing. Below is a chart that shows the bond yields for 3 different major asset classes. - **Investment Grade** – Lowest risk. An index of bonds from only high-quality companies - **High Yield **– Higher risk. an index of bonds from which earnings and solvency are more questionable and volatile. - **Junk/Distressed** – the highest risk bonds, composed of issuers that are near the brink of insolvency. As you can see, bond yields soar during recessions (shaded in red in the chart below). Yields today are still lower than any recession in the last 20 years. ## Prepare for What’s Coming Like an Alligator Investor Alligators are “ambush predators,” as opposed to “pursuit predators.” They don’t spend their days chasing gazelles or monkeys. They don’t expend lots of energy sprinting after their prey. - **Alligators never think like the herd.** - **Alligators never act like the herd.** - **Alligators are survivors.** Surviving market downturns is the only way to be a successful and wealthy investor. Alligators take a patient “sit and wait” approach to hunting. They spend long periods of time observing, and calculating while waiting in the water for the perfect time to strike at obvious opportunities. When unsuspecting prey approaches the water, alligators spring forward with awesome speed and force. The alligator’s ambush hunting strategy is very efficient. It allows the alligator to get huge returns on the energy he invests in hunts. It has helped the alligator become one of the most resilient, successful species in the history of the planet. I am living proof of [‘The Way of the Alligator’](https://katusaresearch.com/the-way-of-the-alligator/). I couldn’t care about fitting in with the herd. I don’t care about being liked by the herd. Nor should you. **In today’s unprecedented times it is critical to remain nimble like an alligator and not over-committed at this point.** Subscribers and I have been preparing for an ugly winter for more than 6 months now. While I do see a speck of light at the end of the tunnel, we are still very much in a valley of darkness. Now is the time to prepare accordingly and understand how alligators invest. And the time will come soon – *“When they cry, we buy”*. Give yourself an edge in 2023 and [see how I’m preparing my portfolio](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) – and what sectors I’m very excited about over the next 24 months. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Amber Alert for All Stocks: Disclose or Die - URL: https://katusaresearch.com/amber-alert-for-all-stocks-disclose-or-die/ - Type: article - Published: 2022-12-02 - Updated: 2023-02-16 - Author: Marin Katusa His dad was a cigarette and pinball machine vendor… And as a kid, little Gary helped his dad count nickels in the bars of Baltimore, Maryland. It laid the groundwork for him to graduate *summa cum laude* at the prestigious Wharton School of Business, several years later. On March 21st, 2022, he made one of the most groundbreaking changes to stock market disclosures. Maybe ever. SEC Commissioner Gary Gensler hit the airwaves (via Twitter) to make the announcement. The SEC proposed a new set of regulations to standardize the reporting of various climate-related financial disclosures. Shortly after the proposal, the SEC Board of Governors voted to officially pass the new rules into law. And it became [under-the-radar news](https://news.bloomberglaw.com/us-law-week/sec-reporting-rules-are-years-biggest-climate-finance-hurdle) after the COP27 climate conference finished. The result is monumental. And will affect U.S. markets very soon. ## From Apple to Xerox: Climate Reporting and Disclosures Coming soon… All domestic and foreign companies that are publicly traded on US exchanges MUST add climate-related impacts from operations to their quarterly/annual financial disclosures. Why does this matter? The US exchanges represent 42% of the global stock market value. To put things in perspective, the Canadian exchanges represent 3% of the global stock market value. And China’s exchanges represent just under 10% of the global stock market value. **What America does matters. So, please pay attention.** There are 4 disclosures that companies are required to submit: - Disclosure of Material Impacts - Disclosure of Carbon Offsets or Renewable Energy Credits, if Used - Disclosure of Maintained Internal Carbon Price - Disclosure of Scenario Analysis, if Used Let’s make it simple… **1. The disclosure of material impacts** This will include an analysis on the climate-related risks that can have a material impact on the company’s business. Or their books. AND the disclosure of actual and potential ongoing concerns regarding the impacts on strategy, business model, and outlook. **2. The disclosure of carbon offsets or renewable energy credits** This requires companies to report any carbon offsets or renewable energy credits used as part of the company’s net emission strategy. The specific carbon offsets and renewable energy credits do not have to be reported until they are applied as an offset to the company’s Greenhouse Gas (GHG) footprint. This is a great disclosure so investors can see exactly which credits are being applied by the management of the company they own. **3. The disclosure of maintained internal carbon price** A public company must show what carbon price it uses to build their forecasts, and estimate financial impacts: - Price estimated per metric ton of CO2 equivalent - Estimate expected price changes over time - Boundaries for measurement of overall CO2 - How they chose the internal carbon price **4. The disclosure of scenario analysis** The company will now have to disclose the actual analytical tools (if any) and methods the company uses to assess varying magnitudes of impact to their consolidated financial statements and operational models. Companies will no longer be able to “talk” about reducing their carbon footprint. They will have to report specific plans, how they will be able to do what they are saying they will do and be accountable and auditable for their progress. Most importantly, the management teams will be held accountable. ## Impacts to Carbon Credit Markets & Public Stocks The impacts of the new SEC policies on carbon credit markets will be significant. These markets made significant moves earlier in 2022 when [various carbon prices](https://carboncredits.com/carbon-prices-today/) rocketed to record highs, under everyone’s nose. (Article update: Tesla just announced its Q4-2022 financials that it [sold $467 million in carbon credits](https://carboncredits.com/tesla-carbon-credit-sales-reach-record-1-78-billion-in-2022/) in the final quarter. - **Let’s use Netflix for example. Netflix purchased 1.5 million carbon credits in 2021.** The corporate [climate mission](https://about.netflix.com/en/news/net-zero-nature-our-climate-commitment) and their [strategy](https://s22.q4cdn.com/959853165/files/doc_downloads/2022/03/30/2022_US_EN_Netflix_EnvironmentalSocialGovernanceReport-2021-FINAL.pdf) imply this is not a one-time purchase. Below you can see the [complete voluntary carbon-credit](https://carboncredits.com/what-is-the-voluntary-carbon-market/) generating portfolio that Netflix currently finances. Netflix has a rigorous 5-step process for evaluating projects. Their goal is to continue building a robust project pipeline that will generate voluntary carbon credits for years to come. The application of these credits will offset the carbon footprint created from the company’s operations. Well done, Netflix. Every public company will be following this procedure. ## Brute Force: Comply or Die Now that publicly traded companies are required to report on their carbon footprint, you can bet that accountability and enforcement are soon to follow. As a result, the strategy Netflix is executing in the voluntary carbon credit market has a high probability for wider adoption. This provides a strong tailwind with respect to corporate demand for high-quality verified carbon-credit-generating projects. ## The True Cost of Carbon Our team ran the numbers on the entire universe of mining and energy stocks. This was the first of its type of analysis ever done in the resource sector. Our [premium KRO subscribers](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) saw this first over a year ago. As an example, the following charts show the EBITDA impact of various carbon tax scenarios for a group of base metal companies. It’s not just base metal companies. It affects Oil and Gas, fertilizer companies, tech companies and everyone in between. We’ve [published the data on all of these companies to our subscribers](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). ## The World Post SEC Carbon Disclosure Ruling The impacts of the new SEC rules around GHG emission reporting will be wide ranging. Companies will create entire departments or hire big outside firms to produce the carbon disclosures. You thought corporate year-end accounting was tough? The coming carbon accounting will test *everyone’s* patience. ## Find the Footprint Researching a [company’s carbon footprint](https://carboncredits.com/how-to-calculate-carbon-credits/) profile is critical to understanding how each aspect of the operation contributes to that footprint. Depending on how emissions are generated, some may be easier to reduce internally through operations. Others will prove too costly and time consuming. These emissions will be offset with carbon credits. **Most companies do not generate free cash to the extent they can simply purchase the necessary carbon allowances on the open market.** The majority of companies regulated under the new SEC rules will have to strike a balance between: - Reducing carbon emissions through operations, - Financing a pipeline of voluntary carbon-credit generating projects, and - Buying / selling carbon allowance permits on the open market as needed. Using the Netflix example, it’s clear the company is committed to achieving net-zero emissions. It’s also clear they understand the risks of over-reliance on public markets. Finally, make sure to know project operating expenses associated with new reporting standards. The carbon credit verification standards can change depending on which 3rd party verifying entity performs the audit. The costs associated with executing these verification processes can also vary, resulting in increased operating expense, and lower earnings. Due diligence in this space will best serve investors sooner rather than later. And before long, investors will have a handle on all of the above. As a result, markets will begin to discount all these factors into company stock prices, for better or for worse! Best to be educated and properly positioned before these market forces – Carbonomics – take effect. Regards, Marin Katusa **P.S. If you want to see** **my 2 big bets in the carbon sector**, consider becoming a subscriber to my premium research service [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). You’ll get the ticker, the price I paid and the analysis. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # The Boulevard of Broken Dreams - URL: https://katusaresearch.com/the-boulevard-of-broken-dreams/ - Type: article - Published: 2022-11-25 - Updated: 2025-09-10 - Author: Marin Katusa Even with a new steering committee focused on a potential Chinese reopening… President Xi’s absolute control of the Politburo in China allows as much Zero Covid policy as desired. Regardless of the short-term economic consequences. Whether it’s to truly protect citizens from Covid or to control the masses… The end result is a very bleak picture of economic growth. Our forecast was the lower growth in China would directly result in [lower prices for many commodities](https://katusaresearch.com/chinas-superpower-slump/). In addition, the further tightening of monetary policy in the U.S. will lead to decreasing velocity of capital and lower growth. And the most recent earnings of Google (missed consensus by 15%) confirm that the recession warnings we wrote about many months ago are here. - **Google lost more of its market cap on October 26th than the sum of the total market cap of ALL Canadian Mining companies COMBINED.** - **Meta** (Facebook) is laying off 11,000 people. - **Amazon** is laying off 10,000 workers in advance of their biggest money-making season of the year – Cyber Monday and Christmas. - Musk terminated thousand of **Twitter** employees last week. - And then there’s one of the world’s largest shipping companies, **FedEX**. They’ve furloughed workers. When the world’s largest companies make company-altering decisions like this, you want to pay attention. ## It is a Risk-Off Environment: Cash is King Bank of America recently released a survey of 350+ fund managers which in total manage over $1 trillion. Cash positions amongst these managers are at their highest levels since the tech bubble. This is a sign of uber cautiousness from the big money managers… ![Bank of America Global] This cautiousness is for good reason: - Global growth is slowing - Costs are going up - Political instability remains high You don’t need me to tell you that equity and bond markets have been crushed this year. A traditional investment portfolio historically has a weighting of 60% equities and 40% bonds. This investment portfolio is having its worst returning year in 100 years. ## Equity Markets Around the World There’s just nowhere to hide if you are a generalist investor. There isn’t a major stock market in the world that has generated a positive return year to date, and indices following the world’s largest economies are down over 20% from previous highs. ![Return Performance] ## How Long Must We Sing This Song? As the chart shows below, we likely are not out of the woods yet. Both in duration of decline and absolute loss… ![SP 500] As the chart shows, typically the S&P 500 will decline for nearly a year and suffer losses of 38%. If you look at the duration and losses during recessionary time periods, the picture is much uglier. - **During recessions, the average S&P 500 decline lasts 484 days while falling 51%.** Currently, we are sitting at 225 days of decline and a 17% decline. Could this time be different and the bottom is in? Sure, it’s possible. And every time we have a sharp bear market rally it looks like the bottom *could be* in. Last week’s massive rip was no exception. But with interest rate increases by the U.S. Fed are not finished (I expect more to come as of this writing) and this makes me strongly feel we have more pain to come in the overall markets. I am not alone in this bearish view. Federal Reserve Chair Jerome Powell said taming inflation is going to be painful for the economy – and I agree with him. - **I don’t think there is an easy way out this time. Interest rates must go up.** Raising interest rates helps cool the economy by slowing the velocity of capital. There will be a time when the Fed pivots and the market will front-run this by several months, pricing in the fed action. But I don’t see that any time soon. ## Rate Cycles’ Writing on the Wall This would be the first time in Fed hiking history that rates would have risen in absolute terms this much, without causing a recession. Below is a chart that shows every major hiking cycle since the 1960s. ![US Federal Reserve Tightening Cycles] Virtually every time rates hiked above 4%, we ended up in a recession. This aggressive interest rate policy by the Federal Reserve has increased rates faster than other developed regions, charting a course for a very strong dollar. This rapid strengthening of the dollar has considerable macroeconomic implications for almost all countries, given the dominance of the dollar in international trade and finance. The dollar’s share in world exports has held around 40%. For many countries fighting to bring down inflation, the weakening of their currencies relative to the dollar has made the fight harder. - **On average, ****for every 10% increase in the dollar relative to another country’s currency, inflation in that foreign country goes up by 1%.** ## Foreigners Feel the Heat the MOST This type of situation is felt most significantly by the emerging markets. Because they have high import dependencies, usually transacted in USD. This creates a spiral of requiring additional domestic currency to cover international transactions. And leads to further currency deprecations. The chart below shows the performance of foreign currencies vs the US dollar. You can see that outside of South America and Russia, the USD has strongly appreciated YTD. ![Foreign Currencies] This strong dollar as alluded to above, creates considerable challenges for nations that buy and sell goods in the international marketplace. Approximately 50% of all cross-border loans and international debt securities are denominated in US dollars. While emerging market governments have made progress in issuing debt in their own currency, their private corporate sectors have high levels of dollar-denominated debt. - **As central banks raise interest rates around the world, financial conditions tighten. It makes it harder and more expensive to borrow capital.** A stronger dollar only compounds these pressures. Especially for some emerging markets and many low-income countries that are already at a high risk of debt distress. A strong dollar is a trend I expect to continue for the remainder of this year. And this is a critical input into every one of my stock portfolio holdings. Regards, Marin Katusa **P.S. You can follow my every move in the resource markets by becoming a subscriber to **[**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)**.** **Stocks are entering a window of valuations not seen in many years – and I intend to pounce like an alligator on the best opportunities.** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Another One ₿ites the Dust - URL: https://katusaresearch.com/another-one-%e2%82%bfites-the-dust/ - Type: article - Published: 2022-11-18 - Updated: 2022-11-17 - Author: Marin Katusa Last week, Bitcoin prices took a hit, tumbling down to a fresh 52-week low of $15,554: ![Bitcoin Prices Past Year] Now, you’d be forgiven for not thinking much of this blip. After all, Bitcoin prices have already been in freefall for the past several months, having shed over 70% of its value since this time last year. This time, Bitcoin’s price drop had nothing to do with macroeconomic forces like geopolitical issues or rising inflation. Instead, what happened was strikingly similar to an [event earlier this summer](https://katusaresearch.com/crypto-contagion/) that shaved $10k off Bitcoin prices… ## FTX Gets F*Xed Crypto exchange FTX, founded in 2019 by MIT graduate Sam Bankman-Fried, was formerly the third-largest crypto exchange by volume in the world. Alongside respectable peers like Binance and Coinbase, FTX was held up as a prime example of the glowing future of crypto. With Bankman-Fried at the helm, who was lauded as a crypto genius, FTX led the push to bring crypto to the masses. - **The company spent millions on marketing**, with superstar athletes like **Tom Brady** and **Stephen Curry** acting as brand ambassadors. - **They took out an ad spot at this year’s Super Bowl**, sponsored both traditional sports and esports organizations alike, and even donated heavily to politicians and lawmakers. But it all started tumbling down for FTX, formerly the “cleanest brand in crypto”, two weeks ago. On November 2nd, a leaked balance sheet from FTX’s sister company, a crypto trading firm named Alameda Research was published by the crypto news site CoinDesk. Alameda Research, which had also been found by Bankman-Fried, had an unusually close relationship with FTX. What CoinDesk reported, however, was just how closely intertwined the two companies were. - **According to the leaked balanced sheet, 40% of Alameda’s $14.6 billion in assets were held in FTX’s own crypto token, known as FTT.** Having such a large portion of its assets tied to FTX’s illiquid token raised many questions in people’s minds about the true nature of the relationship between Alameda and FTX, as well as their financial stability. ## [![Marin Katusa Benzinga]](https://www.youtube.com/watch?v=dGQw53DHa6Y) ## Laws of Power: Crush Your Enemy Completely One person that realized this was Changpeng Zhao, CEO, and co-founder of Binance. He tweeted just four days later that Binance would be selling all of their remaining holdings of FTT. ![Binance] Though Alameda’s CEO quickly replied, offering to buy Binance’s FTT tokens for $22 each to minimize market impact, the damage was already done. Panic cascaded through the industry, and the selloff began. By early last Tuesday, the 8th of November, FTT would fall from $25 to below $10, and FTX customers started a bank run to withdraw money from their accounts. This would lead to a liquidity crunch at both FTX and Alameda, and Bankman-Fried, realizing things were rapidly spiraling out of his control, reached out for help. ## The Plot Thickens Thanks to Bankman-Fried’s efforts, Binance offered to buy out FTX later that same day after some initial negotiations, subject to due diligence… But it would only take **one day’s worth of due diligence for Binance to walk away** from that deal, citing “mishandled customer funds and alleged U.S. agency investigations.” As it turns out, there was much more to this story than just poorly diversified, illiquid assets and a cash crunch. Both the U.S. Securities and Exchange Commission, as well as the Justice Department, would join forces to launch an investigation into whether or not customer assets were handled appropriately. They also investigated whether or not some of FTX’s offered products should actually have been registered as securities with the SEC. - **It came to light that FTX had been loaning billions of its customers’ funds to Alameda to fund the latter’s investments, against FTX’s own terms of service.** - **On top of this, Alameda was also accused of frontrunning FTX clients by amassing tokens before they were listed on FTX – a form of insider trading.** With Binance outright stating that FTX’s issues were “beyond our control or ability to help”, things swiftly collapsed from there. On November 10th, last Thursday, Bankman-Fried announced that Alameda was being wound down, with the intention of repaying all of FTX’s customers and other liabilities. All the while FTX’s assets were frozen by regulators in the Bahamas where the company is based. To cap it all off, on Friday the 11th, Alameda, FTX, and their affiliated entities filed for Chapter 11 bankruptcy. And as if that weren’t enough, later that same day FTX was hacked, possibly costing the exchange $473 million in crypto assets – the icing on the cake. ## **The Treasury and the SEC Have to Regulate** As of the time of writing, the FTT token has fallen by over 90%, evaporating nearly $3 billion in market value: ![FTT Token] Earlier this year, there was a spate of similar bankruptcies. In the wake of the Terra/Luna failure mentioned earlier, which single-handedly caused Bitcoin to fall from $40k to $30k… There were also the crypto lenders **Celsius** and **Voyager**, and hedge fund Three Arrows Capital, which went bankrupt during the fallout. - [In fact, Voyager had just recently come to an agreement with FTX for the latter to buy out Voyager’s remaining assets – but now they’ll need to find a new buyer.] ## The Lehman Moment for this Generation But none of them can compare to the failure of FTX, which many have likened to a Lehman Brothers moment for the crypto industry. - **This is unique for tens of millions of new investors who just had the rug pulled from underneath them – experiencing their own Enron or Lehman Moment.** As an industry leader, Bankman-Fried had previously been leading lobbying efforts to shape the future of crypto regulation in the U.S. Just one month earlier, he had penned a set of possible Digital Asset Industry Standards in which he espoused an FTX-friendly regulatory framework. In fact, last December, Bankman-Fried had testified before the House Committee on Financial Services, chaired by congresswoman Maxine Waters, on the future of digital assets and finance. To quote Bankman-Fried directly from that hearing: - **“To be sure, there are irresponsible actors in the digital-asset industry, and those actors attract the headlines, but FTX is not one of them…”** I’m sure you got a good chuckle out of that. But my point isn’t the irony in that statement, though it’s not lost on me. What does it mean if the third-largest exchange in the world… Led by one of the most well-respected figures in the industry… Who’s considered trustworthy enough to inform government policy – can turn out to be a massive fraud, and even get hacked for half a billion dollars? It means that legislators and regulators still have a lot of work to do when it comes to protecting customers and investors. The fact of the matter is, it’s very much still the Wild West in the crypto markets these days, despite what you might otherwise be led to believe. And until the government manages to figure things out, the only person you can 100% count on to protect yourself in the crypto markets – is you. Cold storage folks—or you will be Bankman-Fried. Regards, Marin **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Is This the Ultimate Precious Metals Bottom Indicator? - URL: https://katusaresearch.com/is-this-the-ultimate-precious-metals-bottom-indicator/ - Type: article - Published: 2022-11-11 - Updated: 2022-11-10 - Author: Marin Katusa No investors paid it any attention… Central banks around the world just made a monumental statement, purchasing a record amount of gold this past quarter. - **Central banks purchased 400 tons of gold in Q3 and brought total purchases YTD to 673 tons.** Purchases of that size haven’t been seen since 1967 and the largest this decade… with a final quarter yet to go. And this does not include any reported purchases from two normally large gold buyers – Russia and China. - **Turkey, Russia, India, and China have the largest buyers of gold over the past 3 years, hoarding over 20 million ounces.** With gold up 5% the past week and holding above $1700, many gold stocks have seen sharp double-digit gains. Let’s look if the bottom is in… ## The Big Fed Question Given the transparent guidance from the US Federal Reserve, it is almost certain that interest rates will move higher. Higher interest rates in developed nations like the United States, traditionally strengthen a nation’s currency. Because foreigners will swap their local currency for dollars to earn higher interest rates. - **A strong dollar is a headwind for gold priced in US dollars, and a tailwind for gold priced in your local market.** Again, based off the Fed’s guidance, I believe rates will stay elevated for some time… - **This puts a headwind on gold priced in US dollars over the next 6-24 months.** This could be why foreign central banks are purchasing gold in record numbers. Now, this could all change overnight if there is a 180-degree shift in economic policy. But I don’t see the U.S. Fed doing a pivot by year-end. **However, even with all the negativity surrounding it, gold emerged as a good investment on *****relative***** terms.** The chart below shows the year-to-date total returns for major asset classes. Outside of the commodities basket (which in large part is up due to oil), gold has held in well relative to other asset classes which are down considerably more. Gold denominated in foreign currencies has proved to be a safe bet and is up YTD in many currencies. But to confirm… - **A true bull market in gold is only in full swing when the price of gold is going up in all currencies, [including the US Dollar](https://katusaresearch.com/the-dollar-war-path/).** ## The Ultimate Precious Metals Bottom Indicator? Gold producers have fared far worse than the bullion, on average gold producers are down 25% or more year to date. One of my sector health gauges for precious metals is looking at *cash as a percentage of market capitalization*. This measures the percentage of the company’s value backed by cash, relative to the amount of value the market is placing on the company’s assets. - **When times are good** – Cash will be a very small portion of the company’s valuation. - **When times are bad** – Cash will make up a higher percentage of a company’s valuation. As you can see in the chart below, the ratio has crept up and recently surpassed the recent 2018 high. This means that on average more than 12.5% of the sector’s valuation is backed by cash. For comparison in December 2019, roughly 5% of the sector was backed by cash. ## The Gold Bargain Bin Share prices for gold miners have declined but valuations are still not at bargain-bin levels. The chart below shows the price-to-cash flow estimate for next year for a group of large gold producers. You can see the sample is now trading *below* its 10-year average. This is a good sign for value investors, but what we are looking for is a move below 5.0x, which we believe will arrive. - **Under 4.0x**** would represent the most undervalued gold producers would be over the past decade.** I believe we will continue to see trading multiples compress further as cash flow forecasts are readjusted lower. Even if I miss the bottoms, we track the financials close enough that we will catch the uptrend if it starts taking off. I am not confident enough to try and call a bottom. And I think with the headwinds we see ahead, we are confident we have time to slowly build our positions using our tranche methodology. ## Bonus Bottom Indicator Chart… - **One of the key drivers in revised cash flow forecasts will be because of higher operational costs…** After managing to keep costs in line from 2014-2020, a rising gold price coupled with inflation paved the way for a large spike in operational costs. The chart above shows cash costs vaulting higher over the last 2 years. On a mine-by-mine basis, it’s possible to reduce operational costs by improving efficiencies. But as you can see in the chart, it’s rare for the whole sector to be able to claw back a substantial portion of any large increase in production costs. What does this mean? It means that these new elevated costs of production for the most part are here to stay. ## Parting Thoughts for This Week… I don’t know when the exact bottom will be, and I never try to catch a falling knife. Once the rug gets pulled and the final capitulation happens (and I suspect we’re close)… **I’ll be ready to jump on the best companies like an alligator.** - The central bank gold buying activity… - The precious metals company valuations at multi-year lows… - Corporate cash levels at multi-year highs… All the indicators are signaling a warning and that we’re getting to the good part. These are the types of bargains I live for. **Subscribers to my premium research service – **[**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)** – will see exactly where I’m putting my money in this bear market.** **And when I’ll be pulling the trigger to own companies on my radar.** There are amazing deals to be had, but fortune only favors the bold and well-prepared. [Uranium](https://katusaresearch.com/research/uranium/), [Carbon](https://carboncredits.com/carbon-prices-today/), and precious metals are all shaping up to be very important sectors over the coming years. These are times to batten down the hatches, make an alligator plan and prepare for the time to strike. Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Is Marin Katusa a Scam? - URL: https://katusaresearch.com/is-marin-katusa-a-scam/ - Type: page - Published: 2022-11-09 - Updated: 2026-07-27 - Author: Marin Katusa Marin Katusa publishes investment research and analysis on his website and various social media channels. His website has been active since 2015 and has hundreds of thousands of pageviews per month. He offers subscription products, namely his newsletter – *Katusa’s Resource Opportunities* – for an annual price. The subscription service is verified, has thousands of subscribers and has been ongoing since 2016. Katusa Research, founded by Marin Katusa, **is not a scam**. It’s been providing world class research and education to thousand of happy customers all around the world. ## **Who is Marin Katusa?** In print and digital media, he’s spoken to the fact he was a former high school and college math/calculus teach and tutor. He was a verified teacher in British Columbia, Canada. According to his biography… Marin is a *New York* *Times *and* Wall Street Journal bestselling *author. His most recent book, *The Rise of America* hit #1 on the Wall Street Journal, #1 in total sales in the U.S. per Bookscan, #1 on Amazon (all categories) and a USA Today bestseller. He’s also written one of the top books on energy geopolitics and it cracked the *New York Times* Top 10 – The Colder War. Robert Kiyosaki, one of the most bestselling financial authors of all time, wrote the forward to Marin Katusa’s second book, Rise of America: Remaking the World Order. Over the last two decades, Marin has become one of the largest financiers of publicly listed Canadian companies by raising over $3 billion in financings, debentures, and debt. Marin Katusa has a verified LinkedIn presence and he is verified on Twitter. ## **Does Marin Invest his Own Money?** Marin has visited over 500 resource projects in over 100 countries, and his insights have been featured in The Wall Street Journal, The New York Times, Bloomberg, CNBC, and other outlets. He was a founding member and director of Copper Mountain Mining, one of the largest copper mining operations in Canada. He is currently the co-Chairman and on the board of directors of Carbon Royalty Corporation. It is a private company that is a premium carbon investment vehicle that delivers a low risk, diversified and high-quality portfolio of voluntary and compliance carbon credits across multiple global jurisdictions with top tier counterparties. Marin publishes that he’s often the lead order in financings he takes part in, namely within the pages of his premium research service, Katusa’s Resource Opportunities. This can be verified through calls and communication with company management teams that he discusses. According to S.E.D.I (System for Electronic Disclosure by Insiders), Marin is an insider of Copper Mountain Mining Corp. And his premium research features full disclosures of positions he holds, or intends to hold. A [sample of disclosures is found here](https://katusaresearch.com/terms-conditions-use/). Katusa Research also uses cookies on their digital platforms and [provides a privacy policy here](https://katusaresearch.com/privacy-policy/). ## **Does Marin Katusa Have a Fund?** Marin Katusa is a major shareholder of several funds. According to an excerpt from his website: - *“Rick (Rule) and I created the KCR Fund (Katusa Casey Rule) a month later. It was to fund and invest in the next generation of resource superstars. We each put up millions of dollars and the experience has been incredible. It’s always a positive experience when your fund can pay major dividends in a tough market.”* ## **Is Katusa Research Worth It?** Marin Katusa is the founder and chairman of Katusa Research. It is a digital media company that publishes research, analysis and informational opinion mostly focused on commodities and natural resources. It also focuses on the net zero and carbon sectors. His website and social media channels feature many testimonials from typical clients and his audience. The testimonials used, according to his customer service team, are from emails received and surveys conducted since Katusa’s Resource Opportunities research service was launched in 2016. ## **Is Katusa Research a Scam or Legit?** Katusa Research is a verified company incorporated in Canada. It has a wide Twitter, website and LinkedIn following. The offices are located in Vancouver, Canada. Unlike some financial firms, Katusa Research does not accept money from companies in return for coverage in their premium newsletter. Katusa Research turns down all offers of kickbacks, brokerage commissions, and referral fees. It sells a premium subscription service for their readers. The pricing is transparent, with at least two reminder emails sent out before renewal date. Unlike other financial publications, cancellation is easy and hassle free and their customer service team answers calls during normal business hours on the Pacific Time zone. Katusa Research pride themselves in offering world class customer service for their subscribers – their email reputation consistently reaches 99%, refund rates are far below industry average, and customer response times are usually within a few hours during work day. ## **What is Katusa’s Resource Opportunities (KRO)** Katusa Research offers a subscription newsletter called Katusa’s Resource Opportunities (KRO). They have customers all over the world including United States of America, Canada, Singapore, Germany, Japan and Hong Kong. The majority of web traffic they receive (verified in 2022 from [www.similarweb.com](http://www.similarweb.com)) is from the USA (#1) and Canada (#2). The KRO educates subscribers on Marin’s investment research, analysis, ideas and recommendations and distribute them to those who are interested, no matter the experience, wealth, or background. He focuses mainly on the commodities and resource markets, with the notable exception of global macro and technology as well. Throughout the year, Marin shares new investment opportunities in the stocks he’s personally buying – and you get to buy before he does and sell before he does. ## **Katusa Research Reviews ** Katusa Research and Marin Katusa is respected and trusted by some recognizable names in the resource and financial publishing sector. ## **![Testimonials from doug casey, robert kiyosaki, jim rickards, john mauldin]** ## **Katusa Research Customer Testimonials** The company publishes testimonials that they receive direct from their audience or subscribers. **Mai E.** ​​*To Marin and the whole team at Katusa Research,* *I just wanted to say a BIG THANK YOU for all you do.* *My family and I deeply appreciate everything you do.* *And we (and probably the majority of KRO subscribers) realize that you go above and beyond with what you provide (e.g. paying out of pocket for site visits, financings, etc.). I fully agree with you that it’s unheard of that you put up your own money to backstop deals, incur costs, fight for the little guy…* *Please never change. I believe your “mission of equalizing the playing field” by “going after the brokers/lawyers/etc.” will change the world for the better. Just give it some time and looking back they will all say it was obvious, like zero commission trading.* **Ryan G.** *The May newsletter was outstanding. Everyone is happy when recommendations are on a win streak, but investors have a personal accountability to manage their own risk, understand their allocations, and make their own decisions on whether to ride things out. This is very clearly explained with a new subscription and reinforced regularly.* *Thanks Marin and team for a well written insightful article and value the reassurance and guidance for turbulent times just as much as the opportunities. Take care.* **James W.**, who—right after he signed up— wrote to say: *Already paid for itself in one week. Incredible!**** *** Or **Aaron B.**, who said: *Awesome service… most valuable investment dollars I spend.**** *** **Ronald T.** said: *I quickly understood that Marin was perhaps the most intelligent person I was aware of doing work in this sector. I can’t think of anybody who has a better command of what’s going on, that is more concise with their knowledge and sharing that knowledge, so I am 100% aligned behind Marin in whatever he does.* And** Bill T**. wrote to tell me: *With over thirty-five years in the business, I have never seen anyone work so tough, so hard, so diligently and so capably for a guy under forty. Marin is an incredible, hardworking individual, he is relentless in his negotiating skills with companies, and he is a tremendous, loyal person to his subscribers.* ## **Does Katusa Research Disclose its Holdings?** In every monthly issue of his newsletter, Katusa’s Resource Opportunities, Marin and his team disclose all the companies that 1) they have a position in and 2) it intends on buying. --- # A Dead Cat and Market “Misery” - URL: https://katusaresearch.com/a-dead-cat-and-market-misery/ - Type: article - Published: 2022-11-04 - Updated: 2022-11-03 - Author: Marin Katusa The end of October dead-cat bounce was in full swing. In a rise for the ages, returns for stocks in the S&P 500 cracked the top 20 all-time best months. Below is a table of the Top 20 best-performing months in the S&P 500 since 1985 and the subsequent returns for 3/6/12 months in the future. Over a shorter time period, returns are more volatile and less consistent. But if you look 6+ months out, the gains are large and frequent. So, if history rhymes, we’re likely looking at 3 to 6 months of volatility before there is any light at the end of the tunnel. ## Is This Market Misery Finished? **The Misery Index** is an indicator that has been used by investors for decades to gauge when the economy is in trouble. It was created by economist Arthur Okun, who served as a special assistant to President Lyndon Johnson in the 1960s. - **The “Misery Index” is an index created using the monthly inflation rate plus the unemployment rate.** “Highs” are a sign of increased misery caused by high inflation and/or high unemployment… in other words when the indicator is high, that signals trouble. And the indicator is approaching levels last seen at the peak of the pandemic and the depths of the Global Financial Crisis… But thus far, we haven’t even seen widespread capitulation. **This misery index that you’re looking at could very well exceed the global financial crisis panic.** And you MUST prepare for it. The Fed at that time had the tools to be able to flood the market with money, QE. And then look at COVID. It had the sharpest Misery Index and it was a real anomaly. But this one is very different. It’s going to be a long-haul recession. What worked in COVID in the markets will not work in this market. So how do you position yourself? Sure, we look at these indicators. And we’re in a recession, even though no media’s talking about it. But what do you do? ## Recession Survival Key: Cost of Capital The absolute key to succeeding in a recessionary market is one phrase, cost of capital. If the company you are invested in needs to go raise money in a very recessionary market, that cost of capital is going to be very high. So, unless the returns are significantly worth that dilution, you move forward. But most of the time it’s not – avoid these companies. - **The companies I want to own are the biggest in the world with the best balance sheets in their sectors.** And here’s the best part… If you really pay attention to the financial details of the contracts, you can see that for many of these companies, their contracts are linked to the inflationary markets. So, whether it’s a recession or an inflation or a stagflation, these companies will continue to make cash for us. When we’re at work, they’re making us money. When we go to bed, they’re making us money. That’s what it’s about. ## Deflation Station One thing investors and the general public are missing is that there is massive deflation going on in commodities right now. - **Gold** is down 16% from its 2022 highs… - **Copper** is down 29%. - **Oil** -32%… - And even the once famous and viral meme commodity – **lumber** – is down a significant 66%. The plunge in commodities is going to have a ripple effect on the economy in the months ahead. And it’s already wreaking additional havoc on many small-cap mining stocks that are driving on auto-pilot, head-first, into brick walls and off cliffs. It’s total carnage in the small-cap mining world. Where market caps of former investor darlings were at market caps in the hundreds of millions – and now 97% lower. Trading for pennies (and not on the dollar). This is where cost of capital comes in. - **Unless the terms are HUGE in my favor – I don’t care. The cost of my capital is high.** So before you fall for the next “sexy” stock in a foreign land, you want to know EXACTLY what you’re getting into. You’re getting in bed with that local and national government. And you better know what their intentions are… ## The World’s Currency Connection The US dollar is still the primary currency in the world, and it’s going to stay that way. But if you’re in an emerging market like Chile, Peru, and Latin America… or you’re in the emerging markets in Africa… as the US dollar gets stronger, your economy becomes starved more and more. - **Because you’re devaluating currency, everything becomes more expensive for you.** So, of course, the governments are going to prevent these foreign companies, (specifically American ones) from coming in and extracting the value of their nation. - They’re going to increase taxes. - They’re going to increase the royalties. - They’re going to deny permits. - They’re going to full-out confiscate assets. If your favorite mining stock has significant production in what I call **-SWAP nations**, [it could be at serious risk](https://katusaresearch.com/the-importance-of-dollar-swap-lines/). Below is a list of countries where U.S. Federal Reserve SWAP Lines exist (think of them as lifelines by the U.S. Federal Reserve). ## I call these Positive SWAP Line Nations (+SWAP): ![Positive-Swap-Lines-Nations] Is it just coincidence these are good-standing allies of the U.S.? No. These are the “safer” countries. Anything else doesn’t have an American Government lifeline – i.e. US Dollars on Demand. It’s the most important currency for a reason. And investors need to forget the dollar demise articles. **You want to be positioned to companies that are going to pay you to own them in US dollars, not a devaluating currency.** These are the companies I own, with more on my radar that I want to own. I’m preparing my portfolio for panic and recession. And you can see exactly how I’m positioning my money in the resource markets through my premium research service – [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Things will get interesting! Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Global Wealth Destruction - URL: https://katusaresearch.com/global-wealth-destruction/ - Type: article - Published: 2022-10-28 - Updated: 2022-11-03 - Author: Marin Katusa Capital moves at lightning speed in today’s interconnected world. And that’s where bear markets and recessions create spillover effects worldwide. I’m going to show you a scary chart that plots the combined market capitalizations of the world’s stock markets. You can see that since the Tech Bubble popped, we have been on an incredible global run. All thanks in large part to relatively loose monetary conditions and strong economic growth. Markets have begun to forecast these tightening conditions and slower economic growth rates. And it’s leading to massive wealth destruction. ## Here is the scary part about the chart above… During the Global Financial Crisis, 57% of global wealth was lost. Thus far, 25% of global wealth has been lost. To match the Global Financial Crisis’s total percentage loss of 57% there could be another $30 Trillion lost. - **That means we *****could***** only be 44% through this carnage using relative measures of the Global Financial Crisis.** To put this loss into perspective, money printed globally post-COVID pandemic has approached $19 trillion and in the developed world approximately $12 trillion. This means that the economic losses – associated with stock market losses – have destroyed more than all the stimulus packages provided worldwide. The financial heroin has been used. ## US Bond Market Chaos It’s not just the equity market that is feeling the effects. The US bond market has been decimated and is facing the largest decline in 20+ years. - **At its peak, the combined market value of the US Investment Grade and High Yield bond markets was 28 trillion. Over $3 trillion has been wiped out.** I don’t believe the spillover over effects from these huge losses has finished their full negative effects on the general population just yet. For example, if all bonds needed to be refinanced today at current rates, it would cost over $1 trillion more to do so. ## Portfolio Capitulation When you add all these pieces together, you end up with one of the worst investment climates we have seen in modern history. - **The average portfolio composed of 60% stocks and 40% bonds is facing its largest annual loss in 100 years.** Don’t believe me? The chart is below. You see that massive red bar? That’s this year. And as I outline to all my KRO subscribers [in this month’s massive report](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/), the market internals remain very weak. ## Rate Warning A year and a half ago [we wrote about the Rate Rise Era](https://katusaresearch.com/the-rate-rise-era-and-the-dragon/) and painted a picture of what was coming. Contrary to the mega-bulls, we started to take free rides in many portfolio positions to take initial capital off the table. This is ultra-hard to do when everything is going gangbusters around you… Bitcoin highs, SPAC mania, meme stocks going to the moon (and back). But even the forecast we posted was not aggressive enough for how the Fed acted given the massive increase in inflation. When rates rise as fast as they are right now, the recession is in the cards. And you need to have a fighting game plan for it. This is a historic handoff of power from the market-top buyers and cheap money addicts to the patient and prudent. Don’t be left behind. ## All Roads Lead to Washington D.C. I wrote this before but will repeat it again… If history is anything like the past, most countries’ economies will not have the economic strength to absorb many interest rate increases. The Fed is the most powerful decision-maker in the world. Fight it at your own peril. **But if you follow the moves they’re making as close as I am, you can set your portfolio up for success.** In today’s world capital is very mobile and moves rapidly across different asset classes around the globe. Investors are always looking for the highest return on their capital in emerging sectors [from carbon](https://carboncredits.com/the-ultimate-guide-to-understanding-carbon-credits/) to [uranium](https://katusaresearch.com/the-nuclear-shift-in-the-uranium-narrative/). - **Nations with higher interest rates** and strong economies attract investor capital, which in turn increases demand for the currency. - **Nations who cannot raise rates **or see their economies falter in the face of these interest rate increases will ultimately see their currencies decline in value versus those who have strong economies and currencies. This ultimately leads to a stronger US Dollar. **And the world will look to the dollar and the US equity market.** Are you prepared? Regards, Marin Katusa **P.S. You can see exactly what I’m doing in the markets by becoming a member of [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk).** You’ll see how I’m preparing for the coming chaos – and where I’m putting a significant chunk of my own money. I will reveal the landscape in the **November issue coming out on Nov 2**. **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Testimonial and Returns Disclosures - URL: https://katusaresearch.com/testimonial-and-returns-disclosures/ - Type: page - Published: 2022-10-25 - Updated: 2025-10-15 - Author: Marin Katusa # **Testimonial and Returns Disclosures** Before you buy any of the products or services on our website, please read this… The following contains facts, figures, explanations, annotations, full testimonials, and other resources about the promotional pieces on the Katusa Research websites. In short, these are the resources used to put together the previous promotion. As you have seen, we publish testimonials in our promotions. All those testimonials are the words of real subscribers that we received in real letters, emails, surveys, customer service tickets (via Zendesk) and other feedback (telephone – however this method needs a written follow up from the subscriber before being used in marketing and promotional material). **We publish this information to let you know that these results are *possible* and have been achieved by real people after reading our research.** **However, you should also understand that we are advertising these testimonials because they are not typical. ** **These results are examples of the very best possible outcomes.** Each testimonial received has a date and time stamp of when it was received and the name and email of the person that sent it. When we receive testimonials from a subscriber, we veil their last name and any identifying details to protect their privacy and identity. We are aware that personal feedback and the financial results they share is personal and sensitive. Some subscribers do not feel comfortable sharing this information with us, especially knowing that we may publish it. You should keep these questions in mind when assessing whether to purchase our products and whether you could obtain similar results. **Past results like these are no guarantee of any future result****.** We wouldn’t recommend anticipating such outstanding results with your own investments. Yes, you *could* have results like these – or perhaps even better. But, it’s simply not prudent to assume you will immediately make large investment returns. **Instead, we urge you to read our work carefully, to follow our risk management strategies conscientiously, and to invest cautiously while setting expectations that are based around our long-term performance *averages. *** **If you have ANY questions** or want more information about the marketing material you just viewed, you can send us an email to [subscribers@katusaresearch.com](mailto:subscribers@katusaresearch.com). Or you can also call our Customer Service team, from Monday through Friday, 8 a.m. through 8 p.m. Pacific Time. Our phone number is: 1–(778)–737–7381. Note long-distance charges from your phone company may apply depending where you are calling from. --- # China’s Superpower Slump - URL: https://katusaresearch.com/chinas-superpower-slump/ - Type: article - Published: 2022-10-21 - Updated: 2025-09-10 - Author: Marin Katusa It’s a strategy that has massive economic consequences. China has kept its zero-tolerance stance on COVID through 2022. This means that any outbreaks of COVID are met with aggressive regional lockdowns to minimize spread. Budget deficits have soared as local governments have tried to cover the tab for economic losses. For a nation that prides itself on massive economic output and exports to the rest of the world, [this has major consequences](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMog16T8lx0n-2BWKl19-2FwNBBBll5mvbHzr3MTquGNF-2Fn89k49cMSZC9Dpb8KuhYkjR4dw7xgg-2BBtBXJw5Txy0fg-2F7-2FVkBz0AktTDJDlBf1D80HSyfJB-2FgJCLv9wYZHhmgKutNdnEAbMuRQFvykkoU6hhYb9dk_zgzxDKT2OcndXpKQ9OfRN02T8DGFnuyFbxL06p7Z027QlXfvld8A4FaPdgFs4cdmQ6lkyDnfINeeg3nTRFEvQdgHZuhHX8O420CSCVq0Uvw-2FYanipHNLr8i7A-2F41-2F7UNANc7EUL8jYcxtdgQyIUCBXiCvn1X4Jekli5R9h7K4MafKvDIMsLVIrglEDl8BeJfCyPeGRHyun-2FUBfZL-2FJpQWQ-3D-3D). And has massive repercussions for the commodities market. ## A Taxing Time… China has 31 provinces; Shanghai is the only province to not be in deficit. - **That means 97% of Chinese provinces are spending more than they are receiving back in tax revenue.** Provinces granted 2.2 trillion yuan in tax rebates this year through the end of August, a third more than was planned for the whole year. They were also tasked with cutting taxes by another 1 trillion yuan for the whole year. As economic conditions continue to worsen, this puts increased pressure on local government finances. ## China’s Housing Heartache A key source of revenue for local governments was land sales to real estate developers. However, with the real estate market under massive pressure from taking on too much debt, this revenue lever cannot be pulled anymore. The Chinese real estate market is in a world of hurt. - **Land sale revenues are down 29% relative to last year while roughly 7.1 billion square feet of housing has been sold this year, the lowest amount since 2015.** The linkage goes even further because many of these local governments set up financing vehicles to support the loans. “Local Government Financing Vehicles” (known as LGFVs) are companies that build infrastructure on behalf of governments. And their borrowing capacity is backed by the local government. Now with local governments under considerable fiscal strain, this limits the financial capabilities of the LGFV. But more importantly, debt service payments are linked to the local government. This is a massive double-edged sword and creates a death spiral: - The local government is under double the fiscal strain as they are getting lower revenues. - But they also are funding debt service payments which are implicitly linked to them. So, borrowing costs either go up or they are forced to default. Either way, the fiscal situation for the local government gets worse and this will in turn reduce borrowing capacity again and again ## China’s Budget Freefall While local authorities can raise funds via bond sales, they’ve used up most of this year’s quota — which is set by the central government. Provinces have sold a total of 4.25 trillion yuan of bonds this year or about 87% of the annual amount permitted. Of that, more than 80% are so-called special bonds, which are mostly used for infrastructure spending rather than general purposes. The next chart shows the budget balances in China relative to 2021 and 2020. You can see that the orange line (2022 year-to-date) budgets are already as deep in the negative as they were in total for all of 2021 and on pace to meet the 2020s deficit. ## So, what will the Chinese government do? They’ll look for ways to create cash flow through taxes and fines at the civilian level. - **As an example, a vegetable vendor was fined 66,000 Yuan for selling subpar celery.** This is extreme from a western world perspective, but likely a norm going forward in China. Also, I’ve seen many analysts I respect publish reports on how equity valuations are cheap for publicly listed companies in China. While true from an analytical standpoint, I believe those analysts fail to understand [the risks of the government changing the rules](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMou8AgEOjc5C9OWsvAgd12Txf05LzhuND4WslCRrarqA0ol8CS8cROi8ycWV0rBs6Kr7L9i8zPhNCMf-2B35IaY4AnWK-2BDd8-2FkJp2t5QmG8LqswXrk0EZdgaZ3t9o6k15mPlYJlt6cAZnILKkoY5FDLS4Cnge_zgzxDKT2OcndXpKQ9OfRN02T8DGFnuyFbxL06p7Z027QlXfvld8A4FaPdgFs4cdmWR7Adq1jPmwExj9sJD-2FkM3dQh-2FhDL1ckMeIK0zXz0X7qoS-2B3JvQN0dk0m-2Bdk1s3PNvUjdTDSVSPsRVmvh9c2zvMJtHCfrKwn3hEECECk42YvmU5Qfke-2BGdapUzQwxDFZnAsY5q3qWRbk7H-2ByudI-2Bcw-3D-3D) on the companies regarding tax payments and fines. That’s why I’m betting big in America, and my thesis is laid out well in my book [“Rise of America”](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMrlATzvz3COsC7EoptohVdnJGk7XGb0SWvQa93wq2az1betG9452nQajAPntrbz2bo-2F-2BjQv-2F3g-2BWKXMiInZ6XW3pKeAzRaFbh1GsxyVKwo20rBdoTlYK15jvQmpQSWenUU-2BRLu0rsp-2Br6K7nhSQCeKe7KnU_zgzxDKT2OcndXpKQ9OfRN02T8DGFnuyFbxL06p7Z027QlXfvld8A4FaPdgFs4cdmL66k2KsdnpdmAM39Qr2TYtO9zP1Ji9ysljefrSDcr7CwS2CGwbZqr6o4k1emL3Cql9S-2B0tezxJD-2FiS-2Fy7BWskSTsCh4M4HVTdoCKGNSxA9Zp1Tx6L9DwwrZQKw5davri5ZtfZCS8ZWzbxlE2eoNUrg-3D-3D). - I don’t understand why you need to take those types of international risks when amazing companies are listed right in the US. - Companies that trade on Big League (U.S.) exchanges will soon be at Warren Buffett-style value propositions. Cash in hand and patience is the right move for today’s market. Chinese economic growth projections have been revised multiple times since the start of the year. In 2020, China’s GDP adjusted for inflation came in at +2.2% growth. Forecasts for 2022 are coming in near 3.5% after being revised down from 5.5%+ earlier this year. ![Consumption Slump - Katusa Research] ## Alternative Data Watch Back in the early days of the pandemic, I leaned heavily on “alternative data” to keep up (in real-time) with how economies around the world were operating. Things like real-time satellite imagery, artificial intelligence, and machine learning to recognize traffic patterns, port movement, and real estate construction activity. It provided a real-time understanding of how an economy is performing. This is even more helpful when trying to understand more opaque nations such as China. - **Below is a chart that shows truck activity at Chinese e-commerce distribution centers. You can see that the index is at its lowest point in 3 years.** ## **Why is this important?** Chinese consumers rely heavily on e-commerce for buying consumer goods. Solidifying the data, Ali Baba (China’s equivalent to Amazon) posted its first-ever quarterly loss in June 2022. Given that the index has flatlined here at 3-year lows, it seems likely to be another soft September quarter for the Chinese consumer and Ali Baba. I expect things to get worse before they get better in China, and this has major negative implications for the commodity market. ## **Key Takeaway:** - **You cannot replicate Chinese demand for raw inputs like copper, nickel, or zinc.** China represents a third to fifty percent of the worldwide demand for these commodities. When the demand of this significance dries up, this is bound to put short-term pressure on prices as supply massively outstrips demand. This is why we have seen commodity prices weaken in recent weeks, and it’s a trend I expect to continue and prepare for throughout 2022. And we’re preparing extensively in my premium research service – Katusa’s Resource Opportunities. [Click here to learn how to become a member](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMoQ2iCWUxvKiYSGKP8RqS3PhuZk7485sKmgTGWAV-2B3JGmqKBYtMjclhSu-2F0CisR0enkqgeHy8-2BSvcT5Rb2e-2B3mqtrLzXI-2FL40byBVzaQovSczQOts18dtGrBqTGGpT71ll8og4Jw3pyACeldzyi4Y2QQHov_zgzxDKT2OcndXpKQ9OfRN02T8DGFnuyFbxL06p7Z027QlXfvld8A4FaPdgFs4cdmJ0RAKfKQzI7CwIQAUzGrNPNtoQhtWEadfvgyhPZ1F7BR7xX25JtnH2lieg6noCN4MXEqyhBDKB8NIop9LEWrJ7bsFmLP5QRyuXEWLfGEvw5TeZ4owby-2FPolHimbuYhx5zncoyoQ-2BZgrmK90pp3merw-3D-3D). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Carbon - URL: https://katusaresearch.com/research/carbon/ - Type: page - Published: 2022-10-18 - Updated: 2022-10-19 - Author: Marin Katusa # Carbon Research --- # Gold Currency Wars - URL: https://katusaresearch.com/gold-currency-wars/ - Type: article - Published: 2022-10-14 - Author: Marin Katusa Year to date, gold is down 9%, in U.S. Dollars. Relative to the U.S. equity markets which are down nearly 25% as of this writing, gold is actually *outperforming*, or the lesser loser. “Marin, why do you hate gold right now?” First off—I don’t hate gold. I’ve stated for many months that gold equities and gold spot prices will be under pressure in U.S. Dollars. Many investors are oblivious to what data is screaming right in front of them. [I own large positions in a few gold stocks – for the long term](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). I’ll also be taking some tax losses on the ones that didn’t pan out as expected. - **Short term, all the signs are pointing to tough times ahead for gold stocks.** The prudent alligator investor must take caution, build up a cash war chest and prepare for a mass exodus. Hopium is still in full force – whether it’s gold, silver, oil, bitcoin… Going all in is never a good strategy for cyclical high-risk stocks. It’s a recipe for disaster. And one that can be avoided if you follow some first principles – like the [Katusa Tranche System](https://katusaresearch.com/the-investors-biggest-problem-and-his-worst-enemy/). ## It Doesn’t Look Good for Gold Right Now… The chart below shows some rough technical goalposts for gold. You can clearly see the double top occurring in early 2022 and the acceleration to the downside over the past 9 months. Prior to the breakout in 2019, gold spent 6 years in a consolidated phase between $1,200-$1,400 per ounce, before finally breaking out. Short-term momentum is clearly in favor of the bears, though any pivot in policy could snap prices higher overnight. It is a very challenging time to be a gold investor as there is a lot of whipsaw action coming from both camps. But, gold in almost all currencies except the U.S. Dollar has done its job, protecting from fiat devaluation. ## Currency Wars and Gold Protection If you are a gold investor outside of the U.S. who has purchased gold in your local currency, you have likely done quite well. This is something we have talked about for years. The reason is the strength in the US Dollar or weakening in your local currency increases the gold price per ounce in local currency terms. Here is the price performance of gold in currencies around the world… Money flows from low capital return regions to high capital return regions. This suggests that as US interest rates rise, demand for the US dollar will increase and reduces the gold price in US dollar terms. Now, staple this to your desk… - **For gold to truly be in a bull market, it must rise to new highs in ALL currencies INCLUDING the U.S. Dollar.** ## Gold Commitment of Traders Every week, the agency that oversees the U.S. futures market (the CFTC) releases a report that shows how companies and hedge funds are positioned in the futures market. This report is called the Commitment of Traders (or COT for short) report. Various participants with various goals come together in the futures market. Managed money has tended to be a contrarian indicator for gold. Gold has staged powerful rallies as managed money positions have built up large short positions. ## The “Complicated” Gold Relationship We’ve talked about this before… The relationship between [“real bond yields” and the gold price](https://katusaresearch.com/gold-beating/) is a classic negative relationship. A real bond yield is a bond yield that is adjusted by the equivalent maturity breakeven interest rate. Meaning if you take the US 10-year yield, and you subtract the 10-year rate earned on a 10 Year Treasury Inflation-Protected Security, you are left with a “real” rate of return which is adjusted for inflation. **Below is a chart that shows the relationship between real yields and gold…** Each dot represents the gold price and the real yield on the US Government 10-year bond each week since 2006. The yellow line shows the “trend” of the data, which you can see plainly with your eyes as real yields increase, the gold price declines. We relied on this chart heavily during the era of negative yields to help estimate the direction of the gold price. We can use it again here when real yields are positive. - **Do I think this model is perfectly accurate, no I don’t, but I do believe it forecasts the price trend of gold well.** Thus, if real rates stay elevated or increase, this will be negative for gold priced in US Dollars. ## Katusa’s Portfolio Positioning I recognize I have painted a lot of negative views here. But I am being totally transparent and honest with my feelings and expectations for the market. We may get occasional bear market rallies and the plan should be to sell into any market strength, but gravity will continue to take hold. That means sellers will outweigh buyers. Interest rates are going to continue to rise in the near term in most nations, which directly increases the cost of capital for businesses and slows economic growth. Recall, this is not just my outlook, but it’s the outlook of the United States Federal Reserve Chairman. He calls the shots. And we play them. Regards, Marin Katusa **P.S. You can follow the major changes I’m making to my positions this month by accessing my premium research service – [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk).** **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Blood on Wall Street – But What About Main Street? - URL: https://katusaresearch.com/blood-on-wall-street-but-what-about-main-street/ - Type: article - Published: 2022-10-07 - Updated: 2022-10-06 - Author: Marin Katusa It’s one of the most famous market sayings… *“Buy when there’s blood in the streets.”* Our firm spends hundreds of thousands of dollars on data feeds, subscriptions, and off-market insights. Not to mention employing a large internal and external team of analysts, consultants, and professionals in almost every field. But some of the best intuition I get comes from the OMI, *“Outside of Market Indicators”.* All my “outside-of-market” indicators have not flashed that we’re in tough or panic-like times, similar to 2008-09 or Spring 2020. To me, it says that there’s not the proverbial blood out in the main streets yet. ## Main Street Health Check **Art Dealers** I visited and spoke at length with one of America’s high-volume art and sculpture dealers at his headquarters. His firm travels across the continent to road shows, boutiques, and events, many of which you might be familiar with or have heard about. I’ll keep his name private to hold his identity in confidence. From what I’m told there’s no slowdown in rare, unique pieces at the high end just yet - **The sales dollar volumes in art and sculptures are among the highest he’s seen through many cycle downturns and slowdowns in 30 years.** Even his sub $2500 pieces are moving near all-time highs. Now that could all change the longer the market selloff and economic slowdown continue. But it hasn’t, yet. **Luxury Goods** Many people know that I’m a big fan of getting fine wines at a big discount to their intrinsic value. Anyone who’s had dinner with me knows that I love looking through the wine menu to find gems at under-market value. And it happens. Especially post Covid, as restaurants have not updated their wine menus and many are using 3-year-old menus. - **I’ve tried to be a hawk at certain wine auctions in the past – and recently prices and volume of bidders in the recent auctions are the highest I’ve ever seen** For example on the high end… A bottle of the wonderful 2016 Sassicaia, that in 2019 sold for $280, is now bidding prices north of $1200 per bottle (not the case!). Even a 2012 Caymus Cab Sav, which could be bought for $100 taxes included just a few years ago, touched $450/bottle. I get the cult following in Screaming Eagle and the bids in the $4000-5000 range per bottle. But for Caymus and Stags Leap getting 4-5x the 2019 prices? It doesn’t make sense to me. - **It tells me there’s still a lot of cash on the sidelines for high-end and mid-market wines willing to pay for what they like.** It’s not just fine wines… Auction prices for high-end whiskeys and bourbons are also through the roof. The market for luxury watches (new and second-hand) continues to be at an all-time high, but is starting to show signs of slowing down. **Houses** I’m lucky enough to live in one of the most “livable” cities in the world, Vancouver. I also look at it as one of the speculative capitals of the world. Whether it’s for small-cap companies looking for funding… Or international capital coming from China to offshore their assets to buy homes and inflate prices (especially on higher-end homes and properties). One of my tell-tale market pain indicators is high-end Shaughnessy homes ($10M+) and vacation properties in Whistler. Both attract major international capital. **Capitulation hasn’t worked through either real estate market yet.** But it will. **Airports** Look around you at the next flight you take. Terminals are packed and airplanes are all full. Is it just overspilling from pre-Covid bookings? I’m sure a lot of the travel is coming from pre-paid tours from before Covid that are now working their way through the system. Below is a chart that shows the **Revenue Passenger Miles (RPM)** for US carriers, and the associated load factor. The RPM is the actual number of seats sold on the plane multiplied by the distance traveled. You can see load factors are almost back to historical norms, while RPMs are climbing back to highs. All the while mortgage rates, and home equity lines of credit have shot up in terms of borrowing costs. Granted, the increase in interest rates hasn’t hit a big proportion of mortgages as they were fixed, but they will during renewal time. Much of the general population is living paycheck to paycheck and has not felt the pinch that is coming—but they will. Stress and austerity have not worked its way through most households just yet. ## Peak Panic Hasn’t Hit the Markets Yet A lot of the data and indicators we follow (including these main street ones) haven’t signaled capitulation. Like in cycles past, major dips in the past have been great buying opportunities. And to be clear, I expect that again. But not yet, as I see more downward pressure. I don’t know when that will be, and there are many metrics I use—but I do know we aren’t there yet. As I elaborate more in detail behind the paywall in my research service… **I believe we are just at the beginning stages of a very challenging time in the global economy.** A time when I believe the US Dollar will remain strong, and likely a very challenging time for the economy. **But fortunes are made in these types of markets.** [If you have cash ready and if you know where to look](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa **Details and Disclosures** Investing can have large potential rewards, but it can also have large potential risks. You must be aware of the risks and be willing to accept them in order to invest in financial instruments, including stocks, options, and futures. Katusa Research makes every best effort in adhering to publishing exemptions and securities laws. By reading this, you agree to all of the following: You understand this to be an expression of opinions and NOT professional advice. You are solely responsible for the use of any content and hold Katusa Research, and all partners, members, and affiliates harmless in any event or claim. If you purchase anything through a link in this email, you should assume that we have an affiliate relationship with the company providing the product or service that you purchase, and that we will be paid in some way. We recommend that you do your own independent research before purchasing anything. --- # Fistful of Dollars - URL: https://katusaresearch.com/fistful-of-dollars/ - Type: article - Published: 2022-09-30 - Updated: 2022-09-29 - Author: Marin Katusa On a late Saturday night, when I was 12, I came across a movie called *A Fistful of Dollars*. Never seeing a spaghetti western before, I was immediately drawn to Clint Eastwood’s character, “The Man with No Name.” Still to this day, he is one of my favorite characters ever. Growing up in the lower-income, blue-collar neighborhoods of East Vancouver with a name like Marin, you attract unwanted attention by the herd. Much like the character in the famous Johnny Cash song, *Boy Named Sue*; who gets ridiculed for his name and more. And he fights back. The Man with No Name was the coolest person I had ever seen on T.V. and he didn’t even have a name. So, I thought to myself: *Why couldn’t his name be Marin?* It was the first time in my life that I realized that you can make yourself into whoever you want to be. It might be a long, tough road. But, it’s possible. And trust me when I say, it’s been a long and tough road to get to where I am. And if I can do it, so can you if you are prepared to make the sacrifices required to execute the plan. Clint Eastwood’s character, The Man with No Name, rarely talks. So, when he does, you lean in close to listen to his raspy lean voice. One specific line of his stuck with me… and has since I was 12: ***“When a man’s got money in his pocket, he begins to appreciate peace.”*** You and I are alligators. My long-time readers [know what I am talking about](https://katusaresearch.com/the-way-of-the-alligator/). We are value speculators and investors. - **We look for significantly discounted companies in the world’s most speculative, cyclical sectors: resources and commodities.** I’ve discussed position sizing and the importance of keeping cash on the sidelines. And will continue to reveal my alligator strategy and blueprint. Sadly, we have not seen the worst of the resource market. ## Recession Proof Your Portfolio Earlier this year, I wrote to my KRO subscribers about how I believed we would enter a recession. And as a result… The U.S. Dollar would strengthen, commodities would decrease in price (including gold), and the share prices of the resource stocks would sell off. - **We are now entering tax loss season and I believe you and I need to prepare that the worst of the resource bear market is yet to come.** In this market environment, I appreciate the peace that comes from knowing I have money waiting for the right deal. When it’s time, I’ll pounce on great opportunities in the resource sector. And if it comes, we want to adhere to the 6 P’s… ## Proper Preparation Prevents Piss Poor Performance Many of you have likely heard of the saying “when there’s blood in the streets, you buy”. It is easy to get caught up in the day-to-day hype of the markets, especially these days when it is pretty ugly out there. - **As you can see in the chart below, based on the Relative Strength Index for S&P 500 companies, we’re nowhere near “capitulation levels”.** It’s only one indicator in my toolbox, but since 2007 it has been a reliable metric. ![Fistful of Dollars] When it’s time, I’ll pounce on great opportunities in the resource sector. ## Let Me Explain Why This Is So Very Important Right Now… Over the past two decades, I have watched as management teams have frantically pitched their company’s potential to large fund managers. They hoped those fund managers would fund their dreams. Unfortunately, most of these investment bankers and fund managers owned very little – if any – stock in their own accounts and funds. Picture that. They had no skin in the game. So, guess what happened? The funds underperformed. And more than three-quarters of them have lost over 65%. Or shut down entirely. Many of the big accounts that were lead orders to many junior explorers and mid-tier producers have walked away and are under a lot of pressure for their apparent lackluster performance and high fund redemptions. - **That means the traditional big buyers of stocks have been the biggest sellers in a market with very little buying volume.** This is exactly when an alligator buys – when Institutional Funds are forced to sell. That’s why there’s a massive opportunity for us right now as investors looking to buy the highly cyclical resource stocks. ## We Are The Buyers With No Name It’s me. It’s you. It’s how the alligator wins. I have nothing against the investment bankers and money managers personally—it’s just the ones that have no skin in the game that I avoid. The ones who have no skin in the game are the ones who take the largest take the largest fees from managing other people’s money, regardless of performance. And frankly, they are not one of us, as our interests are not aligned. They will never be The Man with No Name. **They are part of the establishment.** - **Suits who look down** at the retail crowd. - **Suits that look down at Marin Katusa** and what he stands for. - **Suits that fear what the retail crowd can do if they know of the broken financial system structure. **The one they have for far too long manipulated and exploited on the backs of the retail crowd. They remind me of another quote from A Fistful of Dollars when The Man with No Name says: ***“Sometimes the dead can be more useful than the living.”*** The players with no skin in the game are essentially dead in the resource sector. The few that are left are still experiencing redemptions. Redemptions are when shareholders of their funds or accounts want their money back. And when redemption happens, they are forced to sell shares of companies they own to give the fund shareholders their money back regardless of the share price. It’s time for those with no skin in the game to become useful to us. ## We Have a Fistful of Dollars We are going to be alligators, waiting for our prey to come to us… - **Buying up opportunities at valuations that make analysts blush, and corporate management teams cry.** So where am I looking to park a lot of my cash in the near future until the debt bombs start exploding? You can learn more about *Katusa’s Resource Opportunities* [right here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). And if you didn’t take profits and raise cash many months ago, what have you been reading and doing? Fortune favors the bold. And the bold moves. Regards, Marin --- # Gold Beating - URL: https://katusaresearch.com/gold-beating/ - Type: article - Published: 2022-09-23 - Updated: 2022-09-22 - Author: Marin Katusa This should be gold’s time to SHINE… In a time of high global inflation caused in part by massive money printing and fiscal stimulus experiments, gold should be rocking. But instead, gold hit a 2 year low this week. For decades investors have linked gold and inflation together. - **The Theory: As inflation rises, the purchasing power (or the quantity of goods) that $1 Dollar can buy, will go down.** Which in layman’s terms means the dollar bill in your pocket today will buy less stuff tomorrow, than it will today. Gold and other real assets like art and real estate tend to hold their value much better and retain their purchasing power. This means they should be a better asset class to invest in during inflationary periods. ## The Test: Gold and Inflation Below is a table that shows the performance of gold, dollars, oil, and equities during periods of US tightening cycles over the last 60 years. ![Gold Beating] Gold’s allure is loved and hated by many. For some like **Warren Buffet**, the pet rock is worthless because it has a negative carry. Meaning it costs money to store and it does not provide any income. For others like **Ray Dalio**, it is a cornerstone position because it provides diversification and an inflation hedge. Over the past year, what started out as a “transient” inflationary period, gave way to full-out inflation at scale. What was misunderstood initially was the supply chain shock caused by global economic reopening post-COVID. This led to higher materials prices which then were passed on to consumers with higher prices for everything from milk and eggs to gasoline. Now here’s where you really need to pay CLOSE attention… ## [![Gold Beating]](https://carboncredits.com/) ## Real Yield’s Effect on Gold A real yield is the yield on a fixed income instrument, adjusted for inflation. - **KEY POINT: There is a very clear negative relationship between the “real” yield on US treasury bonds and gold prices.** In the chart below, you can see that from 2006-2012 as the gold price rallied, real yields fell. Then as real yields rose from 2013 through 2019, the price of gold fell and traded sideways. Then in 2019-2020 as real rates crated, the gold price took off. ## ![Gold Beating] ## Gold’s Forecast Chart… Over the past few months, the linkage between gold and inflation has massively decoupled. The steep appreciation in real yield is in large part due to the aggressive hiking cycle of the US Federal Reserve. **As you can see below,** **Real rates have gone from -1% to +1%, while gold price action remains relatively rangebound.** This chart shows the strong correlation between gold and “real yields”… You can see the incredibly strong linear relationship between gold and real yields. Each data point below represents a weekly data point since 2006, with each dot representing the gold price and real yield that week. ![Gold Beating] Using the equation provided from the linear relationship, you can forecast the gold price. And we don’t want to be the bearer of bad news. It’s not what gold investors want to hear, but the data is clear. ## Gold Price Plunge Below is the actual gold price since 2006, and the modeled price. It’s not a perfect fit but it is reasonably close. Until recently… As you can see the model price has plunged in recent weeks, resulting in the largest differential between the model price and the actual price since 2006. ![Gold Beating] The model price has crashed because real interest rates are shooting higher. And forecasts a *lower *gold price than it is today. High inflation rates are proving tough to curb, and the surprise 8.3% CPI print from the other week fanned the flames for Jerome Powell and the US Federal Reserve to raise rates again. ## Gold Seasonality This comes at a time that is typically a weak period of performance for gold. Over the last 10 years, on average, gold has been a negative performer in the fourth quarter. ![Gold Beating] Real rates rising + weak gold seasonality + gold/inflation theory collapsing… Doesn’t look like any good news or data for gold. What is important to understand is that gold is catalyst driven. Gold price action is driven by changes in economic policy, interest rates, and currencies. - **Given the economic conditions today, it seems near certain that interest rates are going to stay elevated for some time.** Central bankers around the world are looking to pull money out of the economy for the first time in years. **Soft landing or hard landing, this is a risky time for all investors.** **And one that the TikTok investment gurus have never faced before.** I am not a gold bug, silver bug, or a copper bug. I am a profit bug I don’t hold myself to just a single commodity. Being nimble and riding the waves of capital flow is critical to success in the commodities sector. I look for the best opportunities across the commodities landscape. With 20+ years as a professional fund manager, I have developed the skill set to identify opportunities in a changing landscape before they become mainstream. If you are looking to gain an edge for your portfolio… And want to see where I’m putting my own money, consider learning more about [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa --- # The Dollar War Path - URL: https://katusaresearch.com/the-dollar-war-path/ - Type: article - Published: 2022-09-16 - Author: Marin Katusa Solving inflation is not a quick fix. Investors and the United States Federal Reserve are finding this out in real-time. Participants who were “hoping” for a deceleration in inflation this month were met with a surprise this week. - **Inflation remained stubbornly above 8%. And this paves the way for additional rate increases.** It’s becoming the norm in Jerome Powell’s toolkit. ## No Slowdown at Inflation Station Participants were hoping for a slowdown in inflation which in turn could lead to a smaller rate increase at the November Fed meeting. This would buoy equities and lead to a weakening of the US Dollar. You would think, at least. - **However, the early 1980s which is the last time we had a serious inflation saga…** And this was actually just the beginning of a 100% rise in the value of the US Dollar versus major currency pairs. Don’t believe me? Look at this chart. ## History Rhymes: What Should You Do? This goes 100% what you are led to believe in the day-to-day headlines, where most pundits suggest that slowing inflation leads to a weakening dollar. Now, why did the dollar rip during that 1980-1985 period? 2 reasons - **Tightening monetary policy** – Fed Chairman Volcker aggressively raised interest rates for 2 years. - **Expansive Fiscal Policy** – government spending under US President Ronald Regan spent more money than it generated from tax receipts. The trigger effect of the government spending aggressively to stimulate growth… Combined with high-interest rates… [![Climate Insurance Report]](https://join.carboncredits.com/climate-insurance/?sl=kii)Led to massive demand for the US Dollar and sent it soaring relative to other nations’ currencies. Does this sound at all familiar to you today? Right now, we have a US Federal Reserve which is hell-bent on reining in inflation, conducting the fastest increase in policy rates in decades. And combined with a Democratic government with an aggressive expansive fiscal policy from President Biden. Buckle up. ## The Meeting in New York That Changed America So, what led to the cratering of the Dollar after 1985? - **The Plaza Accord was a summit in New York attended by the most important central bankers and government officials of the time.** The United States, France, Germany, Japan, United Kingdom. During the summit, the officials enacted the ability to conduct coordinated central bank intervention and agreed to lower the Dollar by 10-12% over the coming 6 weeks. Why would the US vote in favour to devalue its own currency? Officials believed that the expensive US Dollar would lead to less competitive American industries and could trigger mass unemployment. ## The key underlying challenge in the United States was a simple issue of capital mobility… At the time, the world was not nearly as well connected as it is today. Globalization wasn’t a thing yet back in the early 1980s. Today, capital can move from regions of low return potential to regions providing higher potential returns on capital with ease. Capital mobility plays an integral role and is a key reason why I believe the United States (and U.S. Dollar) are not set up for a massive crash as others may suggest. No matter how you shake the tree – it is truly difficult to see a world where the US Dollar doesn’t retain its world reserve status. And remain strong against its peer group. We must remember… - We are in the very early innings of a major attempt by Central Banks and governments to deleverage. Deleveraging means taking money out of the system, which is a situation we haven’t experienced in decades. Some countries haven’t even started yet. The US is leading the pack, and as the strongest economy in the world, it makes total sense that they go first. Don’t get me wrong, there are massive structural issues to be sorted out in the United States. But there are even more structural issues abroad. - Do U.S. have an energy crisis? Where industries and citizens pay 10x their average utility bill every month? No. - Is there a massive lending crisis going on? Is household debt to disposable income at all-time highs? The answer remains no. Now, that does not mean this is a 1-way trade. There will absolutely be bumps in the road as investors attracted by short-term returns flock to other currencies. However, over a much longer period, I believe the US dollar will remain a stalwart for the global economy and in my portfolio. As interest rates go up, expect further declines in the equity prices of most publicly listed companies. ## Same Old Song and Dance… In the aftermath of the Volcker inflation era, Regan stimulus, and Plaza Accord, commodities took an absolute beating. The commodities index, measured by Bloomberg fell over 50% from 1981 through 1986, only to appreciate nearly 100% over the coming decade. It was a choppy ride, however, filled with many months with minimal returns and a few high return months scattered in. As you can see the commodity market didn’t truly begin “trending” again until after the Tech Bubble bust in 2000. This is why one of my boldest ideas, [detailed in full to my subscribers](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMqH2qjsokLmG83Skm5K1PipEo9dOdOWqw-2BWdfg447LuFy7qr-2BzgWYS1Zr3yIE2hjdGmTmllyLQJbMp4R-2FQ70BEFqn2p-2BNQqU5PZ5k5YTtccq1TRujru51I6hDBi14yCTglI8fXBnwowa5cbiXDafGxkYbLj_uL1DQLb5tYBX8EPsdA-2BdTMmbxE1Wj3Fa-2F839JsUrdXiW0bNudInfmFYrjgpVYtCLRCrgCwuHkLdXW9-2BjriaBptAl4uSLxtGVjEp-2FYN-2FghhqfFkMbM62-2B6jWBMpg7gnl8eQtokk6C8EDRoTp3qtxnED7gl89xi2Fb2qZKYOZvaVz3Qriocggn9rS-2Ft75-2Bm6Cw2aI0bucx8qg76XLlFpjA26G5UmQVqC-2BvZTczatYHM50-3D) is actually based on a soft or weakly trending market. - **If my investment thesis can reward me well in a lousy market, when commodity prices do trend strongly higher, it should perform exceptionally well.** If you’ve followed me for some time, you know that I eat my own cooking. You’ll also know that a key part of my 2-decade success as a professional fund manager in the natural resource space, is that I am rarely part of the herd mentality. **The investment ideas found within the [Katusa Resource Opportunities](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMrYicyyb4vRF7PhaOnAwHTQPPcitRFpEEhXVZGBkyOjUHMkpfIRSkb-2BDI-2BriaL7nruIZDTMugw47pSk40AOCdtWB-2BMBszUPU1Id2Jv2-2FAGUBpnwYYfHDZ9GJmYm-2B3uUHDIVUYPZWbkskqEJ5fWzA00a2xqV_uL1DQLb5tYBX8EPsdA-2BdTMmbxE1Wj3Fa-2F839JsUrdXiW0bNudInfmFYrjgpVYtCLRCrgCwuHkLdXW9-2BjriaBpgdqfV3WDGOhoVWkcBvG0lMK6FmFkQ6Vouw4T3-2FxeJlOGfHDWhJA8G-2FWeWZpY8nUX6FphwzTiKZSDoU4qxMqJ6AGQLpspFzeLY-2BZ1iP480b5CwdCnY2UZH-2FbfSEQ5dsty5QjziI0r0osXadTQrupqIw-3D) reports are unconventional.** If you want a newsletter to feed your confirmation bias, this is not for you. I challenge myself continuously to come up with the best ideas that no one has written about. Regards, Marin Katusa --- # Recession Protection: Pay Me to Wait - URL: https://katusaresearch.com/recession-protection-pay-me-to-wait/ - Type: article - Published: 2022-09-09 - Updated: 2022-09-07 - Author: Marin Katusa The best mob movie of all time in my opinion is Goodfellas. The movie isn’t for everyone (a lot of swearing and gruesome killing; rated R/18A). But Robert DeNiro, Joe Pesci, and Ray Liotta are great in the movie. Here is the [Goodfellas business mindset scene](https://www.youtube.com/watch?v=3XGAmPRxV48) that sums up the movie… *** Business bad?** F*** you, pay me. ** Oh, you had a fire? **F*** you, pay me. ** The place got hit by lighting? **F*** you, pay me.* I believe there’s a substantial chance that this is a long, drawn-out recession. And in between superstar opportunities, I want to get paid to wait. ## **Mr. Market, Pay Me to Prepare & Profit** In the United States, there have been 2 quarters in a row of negative GDP growth. Commodity prices have softened, which can temporarily ease cost inflation. However, interest rate shocks take longer to work through the economy. It seems highly likely that we will see minimal economic growth over the coming quarters. A recession can be crippling to the unprepared investor. If you have no cash to deploy near the bottom of the market, it will be very difficult to ride the future waves higher. - **Building on the narrative in last and this month’s edition of *Katusa’s Resource Opportunities (KRO)*, [incredible opportunities are possible for those who are prepared](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/).** Resource stocks are incredibly cyclical, and most are highly sensitive to economic conditions. Thus, in a recession, resource stocks can fall to incredibly low valuations. But on the upswing, they can rise tremendously. - **The KRO has taken Katusa Free Rides on as many of its holdings as we have had the opportunity to do so on.** **Note for Novices**: A [Katusa Free Ride](https://e7j3v5v7.rocketcdn.me/wp-content/uploads/2018/03/pic3.jpg) reduces your risk, returns your principal, and allows you to capture any future upside. We’ve maintained the position for years to have and build a cash position to deploy when the market falls. ## **Portfolio Preparation 101** I’ve long stated that two-thirds of a resource portfolio should be investments. Those are businesses with significant cash flows and the ability to pay a dividend. Expanding on this, we want diversified cash flows. This means that income earned by the company should be derived from multiple mines and from multiple commodities. Simply put, diversification lowers but does not eliminate risk. Picking up cornerstone investments in market troughs is crucial to preserving and generating wealth from resource investments. Recessions give investors the once-in-a-decade type of opportunity… - To buy multiple tranches of world-class companies… - At massive discounts to traditional valuations. For example, in the depths of the Global Financial Crisis, **Teck Resources**, Canada’s largest diversified miner traded below $4 per share. On a Price/Cash Flow multiple basis, this represented 0.5x annual cash flow. Prior to the GFC, Teck was trading at $50 a share and 7x annual cash flow. Moving forward a few years, Teck rocketed to new highs above $60 a share and 8x annual cash flow. **![Recession Protection: Pay Me to Wait]** **Newmont**, one of the world’s largest gold miners showed a similar pattern. Prior to the crisis, Newmont shares were selling for $50-$55, valuing the company at 10-12x annual cash flow. In the financial crisis, shares fell to near $20, compressing the valuation to less than 5x annual cash flow. By 2010 Newmont was back north of $60 a share. ![Recession Protection: Pay Me to Wait] We’re not trying to feed confirmation bias and pick our favorites; we’re letting the numbers and data do the talking and see where the chips lie at the end. Now, let’s review the blueprint. ## **World Class Resource Company Checklist** - Diversified asset base across multiple commodities - Assets are in multiple jurisdictions, with emphasis on **+SWAP** line nations - Dividend payer and/or ability to unlock shareholder value in creative ways - Ability to generate $1B in free cash flow from current assets or fully funded organic development projects - Survived the previous market downturns or demonstrated longevity within the sector - Low debt relative to company size and cash flow generation First, let’s break down the largest companies in the world by commodity. Each color represents that specific commodity’s contribution to a company’s total revenue. At the top of the chart, you will see gold-focused producers like **Newmont**,** Barrick**, and so on. In the middle, base metal producers like **Teck Resources **and **Freeport-McMoRan**. Followed by the global diversified miners, **BHP**, **Rio Tinto**, etc. **![Recession Protection: Pay Me to Wait]** ## **Mr. Market, Pay Me for Patience: Free Cash Flow Analysis** One major way to recession-proof your portfolio and pass the time – is that in a recession, we want to be paid to wait. - It’s the same thesis we used when we bought Brookfield Renewables and Pembina Pipelines in the [March 2020 correction](https://subscribers.katusaresearch.com/reports/kro-alert-when-anything-it-takes-is-not-enough/), which led to dividend payments and solid gains of 31% and 52%, respectively. - Both became *Katusa Free Rides*. Subscribers and I continue to hold free shares, at a no-cost base, and collect dividends in world-class companies, with no capital at risk because both are Katusa Free Rides. To be paid to wait, companies must generate free cash flow. This means cash inflows from mining activities must be greater than the capital required to operate them and to develop new projects. Below is a chart that shows the cumulative free cash flow of each company above since 2009. ![Recession Protection: Pay Me to Wait] As you can see, BHP stands head and shoulders above the rest. That doesn’t mean you should go buy BHP today. There is more to buying a stock than just a few analytical comparison charts. Now let’s do an apples-to-apples comparison and look at Free Cash Flow Yield. Free Cash Flow Yield compares the Free Cash Flow generated by a company to its market capitalization. The higher the free cash flow yield, the better. ## ![Recession Protection: Pay Me to Wait] ![Recession Protection: Pay Me to Wait] These types of apples-to-apples comparisons allow us to see discounts on a relative basis. **Vale** trades at a very high Free Cash Flow Yield, which we know is due to its Brazilian risk. On the other hand, look at a company like **Franco Nevada** which trades at a very low free cash flow yield relative to the rest of the group. This shows the market assigns a very high “premium” to Franco Nevada. ## **Crippled Corporate Cash** High debt levels can cripple a company or even bankrupt it. And this becomes even more challenging as interest rates rise. Higher interest rates mean any new debt issued is likely going to be at a higher cost than any debt issued in the past 5 years. We take this analysis a few steps further – and do all the heavy lifting for you – so you don’t have to. All the major mining companies were put through stress tests and the ring of fire in the **Katusa’s Resource Opportunities**. Before you buy any resource stocks, find out who will barely survive a recession– and who will thrive. And [get to know the companies that I’m buying personally](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk), and which ones are on my radar. That’s how you invest like an alligator. Regards, Marin Katusa --- # The Perfect Storm for Uranium - URL: https://katusaresearch.com/the-perfect-storm-for-uranium/ - Type: article - Published: 2022-09-02 - Author: Marin Katusa *Nuclear power and renewables are essential to proceed with a green transformation. Russia’s invasion changed the global energy situation.”* **– Prime Minister Fumio Kishida, August 24, 2022** I don’t know anyone else other than myself in the financial world that has written two bestselling books and both books include a chapter about uranium. As one of the few professional investors and the largest independent financier who has invested in uranium for over 20 years… I can say uranium is creeping closer to its final inflection point. - **In July 2022, the EU stated that nuclear power would qualify as a green investment beginning in 2023.** That’s a monumental statement. It paves the way for a plethora of tax and policy incentives to build out nuclear power plants. Keeping the momentum going… In a major policy shift, Japan just announced it’s going to restart several nuclear reactors over the next 12 months. - **The market for uranium stocks went bananas on the news. Most companies were up double-digit percentage points.** Understandably, the scars from Fukushima run deep in Japan. It was a horrific event and a major black eye for the uranium sector. ## **The Big Deal: Japan’s Nuclear About-Face** Japan is the world’s third-largest economy and fifth-largest greenhouse gas emitter. It has been stretching its power grid to the max since the Fukushima meltdown in 2011. - **Prior to Fukushima, 30% of Japanese electricity was produced by nuclear power.** After Fukushima, Japan immediately shut down all 54 of its reactors. Today, nuclear power produces roughly 7% of Japan’s electricity. However, an earthquake recently knocked out power and stretched the remaining power lines beyond the max. This is the second major power crunch felt by Japan, which could have been avoided if the country was running a full power grid. Their politicians are left with few other options than to return to nuclear as a key source of baseload power. ## **Japan Pledged to Become Carbon Neutral by 2050** To meet its global climate commitments, the country will need to restart almost EVERY nuclear reactor it shuttered in the aftermath of the 2011 meltdowns. And then build more. - **It’s forecast that to meet the Paris goals, Japanese nuclear power needs to make up 20% to 22% of its energy mix by 2030.** That’s a 3-fold increase from levels today! With carbon prices in the EU [making record highs recently](https://carboncredits.com/carbon-prices-today/), Japan’s pivot will be critical in the country’s energy policy. ## **Energy Transition or Energy Nightmare?** Worldwide, the energy transition and natural disasters are throwing new challenges at utilities, stretching grids and triggering blackouts. This threatens economies that are reliant on single fuel sources for large portions of their electricity generation. Europe [is caught in a firestorm of challenges](https://katusaresearch.com/energy-wars-and-an-economic-crisis/) as the continent once led the way in decarbonization efforts focusing on renewable power. However, retiring its nuclear and coal plants left it highly susceptible to Russian natural gas, which in the wake of the war in Ukraine has now created a continent-wide crisis. On the other side of the world, China is feeling the heat, literally. The historic drought in China is one many citizens have never seen before. Extreme heat has taken its toll on China’s hydro generation, which accounts for 18% of the country’s electricity generation. Low flow rates reduce hydropower production. Contrary to its sustainability goals, this led to a slew of new coal plants being permitted. ## **Steady Eddy Power** I’ve long stated that uranium has the potential to play a key role in baseload power generation. As the only zero-emission baseload fuel option, it makes all the sense in the world for nuclear to be an important segment of global electricity provision. ![The Perfect Storm for Uranium] Now many uranium haters will highlight the radioactive toxic waste as an issue, which is true. However, those are the old reactors, which also are the ones that caused meltdowns in Chernobyl and Fukushima. The new generation reactors as developed by companies like [Bill Gates’](https://www.youtube.com/watch?v=3XGAmPRxV48) TerraPower, X-Energy Ltd, and others are meltdown proof and do not produce radioactive waste. Furthermore, they’re smaller, making them modular and hence faster to construct, with the ability to load-balance. The catch? It still takes a long time to jump through the [bureaucratic hoops](https://katusaresearch.com/the-nuclear-shift-in-the-uranium-narrative/) and to get projects financed. - **Uranium has had incredible booms and busts, perhaps more so than any other commodity…** Below is the historical price of uranium going back to 1930. As you can see, when it moves, it moves big and fast. ![The Perfect Storm for Uranium] The latest collapse from 2009 through 2020 was sparked by the massive decline in uranium consumption out of Japan after the Fukushima meltdown. In 2011, before the Fukushima disaster, there were 442 reactors in operation. Today, there are 438 in operation with another 56 under construction. Japan currently has 33 reactors in operation. And according to Japanese officials… - **The initial restart could bring another 7 back online within the next 12 months.** ## **Uranium Price Moves** Recently, uranium prices have begun to tick back up as [spot market inventory began to dry up thanks to buyers](https://katusaresearch.com/the-uranium-frenzy-is-on/) like **Uranium Trust** and **Uranium Royalty Corp**. This has sent prices up 40% over the past 12 months and nearly 100% since the pandemic. ![The Perfect Storm for Uranium] With minimal inventory available for immediate delivery, this opens up the potential for a big squeeze in uranium IF the utilities need to source a lot of material quickly. Recall Russia and its Russian allies produce half the uranium consumed worldwide. ## **Uranium Forecast** Below is a chart that shows the current supply and demand scenario. If this chart is any indication, we could be heading for another spike in uranium prices. ![The Perfect Storm for Uranium] The phasing out of fossil fuels in favor of clean baseload power like uranium, coupled with intermittent renewable energy sources, provides a zero-emission, reliable, and scalable fuel stack. Japan is not alone in its quest for curbing greenhouse gas emissions. This is a worldwide goal and I believe decarbonization represents the single greatest risk-adjusted investment opportunity of my lifetime. To find out how I’m positioning myself, and my two major holdings in the uranium sector… - [Click here to become a member of my paid research service, *Katusa’s Resource Opportunities*.](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) Regards, Marin Katusa --- # Market Fake Out or Electric Breakout? - URL: https://katusaresearch.com/market-fake-out-or-electric-breakout/ - Type: article - Published: 2022-08-26 - Updated: 2022-08-25 - Author: Marin Katusa Ultra-loose monetary policy and massive government stimulus sent the S&P 500 soaring into record territory after the Coronavirus pandemic. Whether you were a fund manager running a $100 billion fund or a retail investor, the “buy the dip” strategy was in full force. Many sectors caught fire that the average rookie investor got hooked to… - Meme stocks - Reddit stocks - SPAC’s - NFT’s Any major dip was quickly swallowed up by stimulus checks and cheap leverage which drove share prices to record highs. ![Market Fake Out or Electric Breakout?] The uptrend has clearly broken over the past 6 months as share prices on average declined 23% in the S&P 500. Share prices have bounced hard off the low, gaining nearly 13% over the past few weeks. This has all the YouTube gurus and TikTok option traders calling the bottom in. - **However, you’ll notice that after the recent bounce off the low, we have met resistance right at the trend line.** The next few weeks will be key as the bulls and bears will jostle to drive momentum back down towards the 3000 level on the S&P 500. Or the bears will capitulate out of their short positions and share prices could recover further. ## **Valuations Remain Lofty** The challenge with a significant further recovery is that we are not starting from an ultra-low point of valuation. - **Valuations today are* higher *today than the long-term average.** You would think that with a war in Europe, soaring electricity prices, and high inflation the market would be pricing in a lot of negativity. But that is not the case today. I’m going to show a chart that shows the 1-year price to the next 12 month’s earnings for the S&P 500. Novice investors will rely on trailing 12-month earnings, but share prices are determined by* future *earnings, not *past* earnings. This means we should use forward-looking multiples for the S&P 500. As you can see in the next chart, we briefly fell below the long-run historical forward P/E of 15.2x as inflationary conditions and economic growth prospects slowed. ![Market Fake Out or Electric Breakout?] This makes sense that inflation and a slowing economy would set in motion expectations for lower earnings. This rapidly fell by the wayside and share prices and valuations have jumped, with S&P 500 P/E trading nearly 17 times next year’s earnings. While only a single indicator, it appears the market has become complacent with the economic conditions at play. ## **Fear Gauge Signals** The Volatility Index, which uses S&P 500 option pricing premiums to determine volatility is one of the many “fear” barometers. Right now, the fear gauge is modestly higher but there is no “panic” as seen in the massive spike to 82 during the pandemic. ![Market Fake Out or Electric Breakout?] I would argue that you won’t find true fear in the S&P 500 option market, or in the North American period. You will find it in Europe. - **Russia’s Gazprom will halt the Nord Stream pipeline for “routine maintenance”. This has sent natural gas around the world skyrocketing.** This has triggered massive spikes in already high European electricity prices and further declines in the Euro vs major currency pairs. To make matters worse, the Rhine river levels have been falling rapidly, which could make it prohibitive to ship coal and other goods along the riverways. ## **European Energy Costs** Energy costs around Europe have skyrocketed. The combination of Russian gas limitations, low Rhine waterway levels, and low hydro levels have led Europe to a precarious situation. The chart below shows the percentage change in natural gas, coal, and power prices in Europe. ![Market Fake Out or Electric Breakout?] With costs soaring, this will put immense pressure on downstream users of power consumption. Power-heavy industries like manufacturing, refining, and petrochemicals all will face major cost surges. We are seeing the effect on productivity in real-time. - **Poland’s** largest chemicals company Grupa Azoty has trimmed its production outlook. I expect to see more of this to come as the double whammy of limited natural gas supply and high power prices takes hold. - **In France**, new orders in both services and manufacturing declined. France’s economic output is contracting for the first time in a year and a half. This is the same trend seen in Germany as the EU has backed itself into an awful corner with seemingly no easy way out. ## **Euro Crash** Deteriorating economic conditions in Europe, coupled with rising interest rates in the United States have created a firestorm of deterioration in the Euro to levels unseen in 20 years. Are conditions perfect in the United States, absolutely not. But the chart below tells us they are far better than across the pond… ![Market Fake Out or Electric Breakout?] I have been a US Dollar bull for many years, and it is my currency of choice. It’s something I’ve spoken about at length in my bestselling book, [www.riseofamerica.com](https://www.riseofamerica.com/). Many people may hate the US Dollar, calling it worthless… But I have yet to see any formidable challenge to the world’s reserve currency. ## **Unorthodox Today Equals the New Normal Tomorrow** Economic gloom only lasts so long. It’s crucial to be forward-looking and to anticipate. Over the past few months, I have outlined my playbook in great detail to my subscribers. It’s a strategy I intend on using to capitalize on the next big market move. It’s a bold, unorthodox concept… Contained exclusively in the pages of my premium research service, Katusa’s Resource Opportunities. [Find out more about my research and become a subscriber here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). Regards, Marin **P.S.** We recently released **5 stocks to help recession-proof your portfolio**. You can access that special report and many more [when you sign up today](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). --- # China Signals “Buckle Up” - URL: https://katusaresearch.com/china-signals-buckle-up/ - Type: article - Published: 2022-08-19 - Updated: 2022-08-21 - Author: Marin Katusa Already being rocked by covid lockdowns… Lacklustre data coming out of the Chinese real estate sector shows a further weakening of the Chinese economy. China remains firm in its zero-tolerance policy for covid. And it’s leading to dozens of lockdowns in cities across China. ## **Sagging Indicators** Economic statistics released which include retail sales, industrial output, and fixed asset investment all slowed. AND missed economists’ estimates by wide margins in the July 2022 data release. This represents the weakest expansion of economic activity in China since the initial Coronavirus outbreak. ## **![China Signals “Buckle Up”]** ## **The Tik-Tok Employment Market is WEAK** In China, the government tracks a unique data point – the unemployment rate for individuals aged 16-24. - **This Gen Z demographic is working harder on their smartphones these days, as unemployment for them just surged to a record high of 19.9%.** ![China Signals “Buckle Up”] Taking a more broad-brush approach using survey data from 31 Chinese cities, the overall unemployment rate across all demographics is 5.60%. It might feel low, but this is well above the historical national average… ## **![China Signals “Buckle Up”]** ## **In Private, Politicians Are Worried** The Chinese leadership brass privately acknowledged the country’s annual GDP growth target of 5.5% is not achievable. Mainstream economists are forecasting 4% or lower for this year. - **China has never missed its GDP target by such a large magnitude before.** The government didn’t set a target in 2020, during the first wave of the coronavirus outbreak, and only missed it slightly by 0.2 percentage points in 1998. A miss of this nature represents a major black eye for the CCP. - **To curb the economic slide, the PBOC (aka the Chinese Central Bank), unexpectedly cut interest rates this week.** This goes against the grain of many other nations that have seen here interest rates hiked considerably over the past 3 months. ![China Signals “Buckle Up”] Chinese credit growth shows that monetary policy is pushing on a string… Last Friday’s data showed aggregate financing (a broad measure of credit) was almost half of what economists expected. Bank loan growth slowed to 11%, near the historical low. Below is a chart that shows the 12-month moving average for lending to non-financial corporations and households. Both averages have been trending down hard for months now. ![China Signals “Buckle Up”] You can always question the reliability of data, and it’s only 1 data set. But for what it’s worth, using the July data financing and loan issuances are down a lot. **Here’s a summary of the destruction:** - In July, new aggregate social financing came in at just 756 billion yuan, declining from 5.1 trillion yuan in June. Representing -85% month-over-month change. - New yuan-denominated loans slowed to 679 billion yuan from June’s 2.8 trillion yuan. Representing -76% month-over-month change. - Corporates issued 86 billion yuan, down from 2.4 trillion yuan in June. Representing -96% month-over-month change. - Bank lending to households came in at 122 billion yuan, down from 852 billion yuan in June. Representing -86% month-over-month change. ## Negative Nancy: Re-Shoring China Is Just One Concern China Inc.’s retreat from the US capital market is accelerating. Five of China’s largest state-owned companies, including China Life Insurance and PetroChina, announced plans to delist from US exchanges. This comes after US-China relations sank to new lows following House Speaker Nancy Pelosi’s visit to Taiwan. The barrage of trading halts comes at a bad time for the city’s equity market, after the Hang Seng Index slid to a 10-year low last month. Trading in 33 Hong Kong-listed stocks worth a combined $15 billion, was halted last week after firms missed a deadline to report annual results. Troubled Chinese developers including **Sunac China Holdings Ltd.** and **Shimao Group Holdings Ltd.** were among the stocks suspended. The high yield bond market continues its free fall, with an estimated $125 billion loss year to date. Average junk bonds are trading at 56 cents on the dollar. You can see there’s almost no end to the negative data. But wait, there’s more… ## Fire Sales in Chinese Real Estate The housing slump worsened in July, with sales falling more than 28% on year and prices declining for an 11th consecutive month. **This is the worst streak for Chinese real estate since 2014.** ## **![China Signals “Buckle Up”]** ## **The $90 Billion Wipeout** On the heels of price softening, the Chinese real estate developers index continues to plumb levels unseen since 2012. As [I wrote in last week’s missive](https://katusaresearch.com/china-taiwan-and-the-boycott/), Chinese developers are really hurting, with many facing major credit crunches this year. **![China Signals “Buckle Up”]** - **The median dollar-bond price of Chinese real estate firms was 16 cents on the dollar, versus 40 cents on the dollar in March.** - **Nearly 80% of real estate debt is trading below 50 cents on the dollar.** At least $90 billion has been wiped out in China’s real-estate stocks and dollar bonds this year. And a bursting housing bubble and an intensifying debt crisis threaten to inflict even more pain. ## **Commodity Demand Sours** In China, the economic pain can be seen across sectors, with crude steel output dropping around 6% year-on-year last month. Iron Ore demand continues to trend lower and looks to be trending lower since the covid stimulus spike in late 2020. ## **![China Signals “Buckle Up”]** ## **Currency Devaluation on the Horizon** The PBOC will do everything in its power to orchestrate a “soft” economic landing. An expansive monetary policy, coupled with soft or declining economic growth typically would be faced with a depreciating currency. However, because the Yuan is pegged to the US dollar, this math goes out the window. The big issue for China altering its peg is that buying commodities in the international market becomes more expensive. - **Each Yuan buys fewer commodities under a devaluation scenario** Is one possible? Nothing should be ruled out, but it is not my base-case scenario. Macroeconomic risk is something that few investors truly understand or account for in their portfolio construction. I’ve outlined my entire game plan in real-time to my subscribers including an example of how devaluation works. If you want to see my premium research – consider becoming a subscriber to [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). It’s a bold strategy that some may not agree with. But fortune favors the bold. Regards, Marin --- # China, Taiwan and the Boycott - URL: https://katusaresearch.com/china-taiwan-and-the-boycott/ - Type: article - Published: 2022-08-12 - Updated: 2022-08-10 - Author: Marin Katusa Eleven Chinese missiles landed in Taiwan’s waters this past week. Including 1 directly over Taipei, all while Chinese military exercises were conducted in six zones surrounding Taiwan. The recent Chinese power demonstration is the largest cross-strait exercise in decades. It is the most recent act of Chinese aggression in an ever-escalating tinder box of conflict. - **Domestically, there are power struggles going on within China which are only ratcheting up the tension for the CCP even further.** It’s no secret that for the past few decades, China enjoyed world-leading economic growth. However, double-digit economic growth can only go on for so long. A natural cooling of the economy is not unexpected or considered unhealthy. ## **Growth Cracks** Much of this economic growth has been supported by massive amounts of corporate and household debt. And it looks like the chickens are coming home to roost. Below is a chart that compares household debt to GDP for China and the United States. - **You will see that Chinese household debt relative to GDP has increased 256% since 2005.** For comparison, the United States has seen household debt to GDP decline by 16%. ## **![China, Taiwan and the Boycott]** ## **China and Income** Let’s drill down further… - **In China, you can see that disposable income levels relative to debt have soared 5x since 2006.** This indicates that Chinese incomes have not risen nearly as fast as the debt they have taken on. ## **![China, Taiwan and the Boycott]** ## **Chinese Mortgages and Housing** Much of the debt taken on by households in China, the US, and elsewhere is mortgage-related. Because it is usually the largest purchase an individual will make in their life. Fueled by low-interest rates, rising equity prices, and strong economic growth citizens around the world have been loading up on the real estate. And China is no exception. Recently, however, for many Chinese citizens, these projects have not come to fruition. Hundreds of Chinese citizens have taken to state-run social channels like WeChat to voice their displeasure. - **This has led to a “mortgage boycott”, where many Chinese home buyers are refusing to pay their mortgages.** ## **The Leverage Dynasty** It’s no secret that many major Chinese real estate firms like China Evergrande are overleveraged. When the times were good, they spent frivolously and expanded recklessly – Evergrande even bought their own soccer team. When crackdowns on lending began to occur in 2020 these developers had to slow down or halt construction completely. All while the buyers had to keep paying their mortgages. Now, these homebuyers are refusing to pay their mortgage payments on construction projects which are sitting idle. **This triggering effect of crackdowns and failed projects is leading to a surge in Chinese defaults.** Below is a chart that shows Chinese defaults. Onshore and offshore defaults are converted to US Dollars and shown in billions of dollars. As you see below, the amount of defaults are touching all-time highs… ## **![China, Taiwan and the Boycott]** ## **Now Let’s Look at Chinese Default Rates…** Looking through a different lens, you can analyze the data through default rates. You can see that issuers, especially offshore bonds are seeing default rates soar to multi-year highs. **![China, Taiwan and the Boycott]** - **In the last 12 months, 27 issuers that hadn’t been in debt trouble in the past, have defaulted.** This is an ugly trend that the Chinese government cannot be happy about. ## **The “Too Big to Fail” Card** There are a dozen issuers facing debt payments over the next 30 days, which could make the default rate climb even higher. I suspect that the CCP will continue to allow mid-sized “not too big to fail” type companies to fail. And this sends a strong message for the rest of the group to get their houses in order. But when push comes to shove, the CCP will likely step in and support the largest of the loans and the “too big to fail” tycoons whose political ties are in line with the establishment. China’s central bank is looking to issue $30 billion worth of low-interest loans to commercial banks. These banks will then be allowed to leverage the $30 billion up $148 billion in liquidity for the property sector. Is this enough you may ask? Well, Evergrande alone has $300 billion in development liabilities… Make no mistake, the CCP does not want China to become a declining superpower, it will do everything in its power to make sure that doesn’t happen. What does this mean for the rest of the world? **A lot, especially for commodities investors.** China has long been a major buyer of commodities such as copper, zinc, iron ore, and crude oil. Here’s a chart that shows just how important China is to the global commodity markets. ![China, Taiwan and the Boycott] In today’s world investors need to be acutely aware of macroeconomic changes. ## **China’s developments should not be taken lightly…** Just like how most market participants took a few months to understand how Covid was impacting China, so too, could be the case here. I recently outlined in my latest issue to subscribers how I am managing and looking to capitalize on Chinese risk. - **I outlined a full playbook and analysis of the number one company I am targeting over the next few months.** If you want to give yourself an edge and find out which sectors and ALL the companies I’m putting my own money into… It’s all detailed every month in my premium research service, [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin --- # Frontier Markets - URL: https://katusaresearch.com/frontier-markets/ - Type: article - Published: 2022-08-05 - Updated: 2022-08-04 - Author: Marin Katusa It is incredibly rare to be on the emerging frontier of market development. - 1792: The Buttonwood Agreement to allow securities trading in New York City - 1980s: The Quant Revolution begins - 2000s: Alternative Assets become mainstream These major changes all shaped the world’s stock markets into what they are today. If you were a part of those early days shaping those big changes, you stood to make a fortune. I believe we are at this tipping point in a new market that prices carbon dioxide emissions. The past 12 months have demonstrated we are in a once-in-a-generation opportunity, and I still believe we are very early to carbon. There are many highs and lows to come. Think about the Pre-internet revolution, access to information and deals meant a big potential arbitrage opportunity. As the internet made information more readily available, that arbitrage opportunity disappeared. For example… When the collapse of the Soviet Union happened, there was incredible potential for foreign companies to buy state-owned enterprises. The ones with access to information were able to make the right valuations and made fortunes. Most in the west avoided the Russian and FSU state auctions because of the corruption. But when the wall in East Germany came down, the compliance and governance of West Germany were applied to all state-owned enterprises. Very little corruption happened as a result and East Germany was properly brought into the modern world of finance and the region thrived. - **The opportunity present today in the ‘War Against Carbon’ Is the single biggest financial opportunity I have seen in my lifetime.** Even with so much technology and information readily available, so few people are aware of the opportunity present. There is an incredible arbitrage opportunity for us coming. When an investor is this early to an investment theme it can be challenging sometimes to think about the big picture outlook and not get caught in the minutia of daily volatility. ## **Carbon From 30,000 Feet** Sometimes it is helpful to think about things at a 30,000-foot view, rather than under a microscope. If you speak with almost any commodity producer on the planet, they’ll tell you it is very common to pre-sell current production using futures contracts. And it is equally as common for them to lock in hedges for things like currency exposures or electricity prices. - **Futures contracts provide deep liquidity and price transparency with the ability to settle millions of dollars in a single transaction over nearly any time frame.** Last year, roughly 90% of the carbon market is settled in the spot market. This means very few carbon offset developers or carbon credit buyers are using the futures market for exactly what it is designed for. Furthermore, as you’ll see in the chart below, the vast majority of trading is conducted outside of an electronic trading platform. ![Frontier Markets] In 2021, roughly a third of those spot market voluntary carbon market contracts were settled on an electronic exchange. Most carbon transactions today are brokered, and relationship-driven rather than companies logging into a platform to transact like stocks. Price discovery is non-existent. This will change. Below is a screenshot of the current voluntary carbon futures market. Both of these contracts trade on the Chicago Mercantile Exchange and represent 1 carbon credit. - The purple line is the **Global Emission Offset** which mirrors the framework used by the aviation industry under its CORSIA framework. - The second contract (the green line) is the **Nature Based Global Emissions Offset**, represents the price for “natural” carbon reduction or removal. ![Frontier Markets] As you can see, the price for a CBL Global Emissions Offset carbon credit for August delivery is $3.07 per contract and the nature-based credit sells for $7.40 per contract. - Each carbon credit represents 1 metric tonne of CO2e reduced or avoided. Further improving liquidity, the Intercontinental Exchange (ICE) will be listing 10 futures contracts for the carbon market with visibility out to 2030. This means that both the 2 largest exchanges for futures and commodity trading in the world will have carbon credit trading. This is a great step in terms of market development. ## **Not All Credits are Created Equal** I do believe the difference or “spread” between CORSIA and Nature-based carbon credits is a correct reflection of the quality difference. On average, the Nature-based credits are a premium credit then found under the CORSIA scheme. A flat curve indicates that supply will meet demand. However, if you consider the amount of capital flooding into the sector combined with corporations and speculators just beginning to enter the marketplace, this is ripe for another leg higher in 2023 and beyond. - **KEY POINT: The long-term demand for credits from corporations simply outweighs the immediate supply provided by offset generators.** In 2021, $2 billion worth of credits were traded across electronic and traditional markets. This represents nearly a 4-fold increase over 2020 volumes and a 13x increase from 2017 volumes. I have opened up an entire division within Katusa Research that’s dedicated to carbon. If you want to be at the forefront of market development, give my premium research service a try – **Katusa’s Resource Opportunities**. [Click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa --- # Energy Wars and an Economic Crisis - URL: https://katusaresearch.com/energy-wars-and-an-economic-crisis/ - Type: article - Published: 2022-07-29 - Updated: 2022-07-28 - Author: Marin Katusa It’s a crisis you’re not hearing about on the news… - **Recently, German Finance Minister Christian Lindner warned that the country was on the brink of a “very serious economic crisis,”** And that the government needed to explore all avenues to plug the gaps in the nation’s energy supply. With Russia cutting 60% of the natural gas going to Germany through the Baltic Sea pipeline in retaliation for sanctions levied on it for its invasion of Ukraine, the German government needs to figure out how to make up that energy shortfall – and fast. As the head of the German Federation of Trade Unions, Yasmin Fahimi put it… - **“Entire industries are in danger of collapsing permanently because of the gas bottlenecks: aluminium, glass, the chemical industry…”** The German government is so desperate for energy, in fact, that they’ve had to turn to an old nemesis…coal ![Energy Wars and an Economic Crisis] Last year, nearly a third of Germany’s electricity – 29.7% – came from coal. And this year, to reduce natural gas use, the country had to restart several coal plants. This is only a “temporary measure” to meet current demand requirements. So much for Germany’s ambitious climate targets! **A Problem of Their Own Making** Up until the early 2000s, 25% of German’s power matrix came from nuclear energy. - **A total of 17 reactors produced over 150 TWh/year of electricity at its peak – just as much as coal does now for Germany.** Because of a long history of negative public opinion (the Chernobyl nuclear incident didn’t help) – Germany decided to phase out all its nuclear power plants by 2022. Germany now has 3 nuclear plants running providing 13% of the country’s electricity. And they are slated to switch off all 3 of these plants by the end of 2022. It was a foregone conclusion, until the invasion of Ukraine. Now there are calls to extend the lifetime of the remaining operating reactors. Or even to restart some of the more recently shut down ones – in light of Germany’s impending energy crisis. **Here’s what the nuclear capacity in German looked like over the last 50 years…** It’s a lot of stable, baseload power gone: **![Energy Wars and an Economic Crisis]** **The Best of Both Worlds** If you’re wondering what I mean by baseload power… **Baseload power** is the minimum amount of electricity that needs to be supplied to an electrical grid at any given time. Let’s consider the popular renewable energy sources: wind, solar, and hydro. Of these three, only one of them – hydro – can stay on all the time. Wind power can only be generated when it’s windy. And solar power obviously doesn’t work at night. Hydro is the only one of the three which can keep producing electricity regardless of the conditions – which makes it a source of baseload power. Natural gas and coal plants, too, are sources of baseload power. On the greener side of things, you have nuclear, biomass, and geothermal for renewable baseload power. While the flexibility of renewable energy sources can allow for energy producers to turn them on and off as necessary to match demand, unlike the rigidly fixed power production of things like coal and nuclear plants, the availability and performance of each type of renewable energy vary greatly from country to country. These days, natural gas is becoming an increasingly popular baseload option – it burns much cleaner than coal without the negative stigma of nuclear. But that over-reliance on natural gas has [put Europe in a pretty bad spot](https://katusaresearch.com/natural-gas-nightmare/) thanks to the war in Ukraine. ![Energy Wars and an Economic Crisis] And while natural gas burns cleaner than coal, that’s a very low bar to beat. In the grand scheme of things, as the world shifts towards greener power production, natural gas must eventually go. Nuclear, on the other hand, remains competitive among all the other renewable energy options, making it an attractive option even in a net-zero world. **Across the Border, A Much Different Story** This low emission profile is one of the key factors that makes nuclear power attractive as a green energy source. **There is nuclear waste that must be managed properly.** **But nuclear power doesn’t produce direct carbon emissions like its fossil-fuel counterparts.** Its average lifecycle emissions come entirely from the… - Cement and steel production required during construction, - Manufacture of its various components, and - Transport of materials. The significant benefits nuclear power brings to the table can outweigh the negative stigma held by the public. **France Goes Nuclear…** Germany’s neighbor France, for instance, has a very different tale to tell: **![Energy Wars and an Economic Crisis]** - **France derives a whopping 69% of its power generation from nuclear.** Due to a long-standing policy based on energy security, the French government holds a very favorable view of nuclear power. And the country is a world leader in nuclear technology. Despite having more reactors than anyone else in the world except the U.S., France has also never seen a serious nuclear accident. This is thanks to their significant expenditures on technology and infrastructure. - **This policy has paid big dividends for France, making them one of the world’s largest net exporters of electricity.** All thanks to their very low cost of power generation. In fact, earlier this February, just two weeks before Russia invaded Ukraine, French president Emmanuel Macron laid out a plan to build at least 6 new nuclear reactors by 2050. With an option for an additional 8. At the start of his presidency, Macron had promised to reduce France’s reliance on nuclear energy… but the real and practical benefits of nuclear power generation have since changed his tune. And with the war raging on in Europe, Macron’s call for the rebirth of France’s nuclear industry is looking more and more prescient. **The Case for Uranium** Between the Russian natural gas situation and the global push towards net zero, uranium’s been getting a lot of attention as the next big “green fuel”. As France shows us, nuclear energy can work – you just need the right policies and the right investments. Obviously, it’s not the be-all-end-all solution – you need flexible energy sources as well to accommodate for fluctuations in power demand. But nuclear energy can make for the cornerstone of a healthy electricity generation mix. At home, the push to expand the role of nuclear energy in the U.S. energy mix now sees broad bipartisan support. - **In South Korea, recently elected president Yoon Suk-yeol has vowed to go all in on nuclear power.** - **Earlier this July, the Dutch government revealed plans to build two new nuclear power plants as part of their sustainable energy portfolio.** The list goes on, and the message is clear: nuclear will soon be back and in a big way. I’ve been covering uranium for two decades now, since well before its first big bull market run back in the mid-2000s. And I’ve never been as excited about the long-term prospects of uranium as I am now. I have a watchlist of uranium stocks, and capital ready to deploy. If you want to see exactly how I’m planning to ride the coming wave in the uranium markets, consider signing up for my premium newsletter service, [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin --- # The Strategic Petroleum Reserve Can’t Save You - URL: https://katusaresearch.com/the-strategic-petroleum-reserve-cant-save-you/ - Type: article - Published: 2022-07-22 - Updated: 2022-07-21 - Author: Marin Katusa Everyone wants a magic bullet. Especially when there’s a monster around – and anyone who’s filled up their car has seen what’s lurking behind the pump… ![The Strategic Petroleum Reserve Can’t Save You] What happens when the average price of a gallon of gas tops $5? ## **Mr. President, Do Something!** As we have recently seen, ordinary people get angry. Then the pressure builds on politicians to “DO SOMETHING”, and there’s a general sense of urgency. The most famous example was during the 1970s. - **Stagflation saw wages flatten while inflations soared. Inflation topped 11% in the US. In the UK, peaking at over 20%.** Much of the crisis was due to the infamous oil embargo of 1973-74. In response, the US created the Strategic Petroleum Reserve, the world’s largest emergency supply of petroleum. Now we’re in a similar situation, with inflation reaching 8.6% in the US in June. The United States Petroleum Reserve, aka the ‘SPR’, holds hundreds of millions of barrels of crude oil in case of an emergency. With sky-high prices at the pump, this begs the question where’s the SPR? Why not open it up? That’s a good question. But in fact, the SPR taps have already been opened. Over 129 million barrels of oil have been released from the SPR over the past 12 months. ## **3 CRITICAL Facts Investors Must Know About the SPR…** And they all lead to the same conclusion: The Strategic Petroleum Reserve won’t save consumers from high prices. Here’s why. **1. The SPR doesn’t solve long-term structural issues.** First and foremost, the SPR is a temporary supply-side solution. It was never meant to function as a price control over the long term. The SPR works by providing an alternate source of petroleum supplies. If supply drops in one area – say, another oil embargo from Arab nations, as in the 1970s – the SPR can be used to keep the oil flowing. And by providing extra supply, the SPR can – in theory – keep prices slightly lower. **2. The SPR supplies the same fuel to companies that set the prices.** The SPR is actually “open” now, with President Biden authorizing the release of a million barrels a day from the reserve. And the most recent numbers reflect that – 25.2 million barrels of oil left SPR sites in June, just a bit under the one-million-barrels-a-day target. But who gets that oil? Marathon, Valero, et al. – the oil refiners that supply most of the US with fuel for the pumps. After all, the SPR sells crude oil, not refined gasoline. If there’s a bottleneck with the refineries, then the SPR isn’t the solution. And of course, the SPR has a limited supply, in part because of another fact that’s often ignored. **3. The SPR: Congress’s dirty secret.** It’s the *Strategic *reserve; like a fire alarm, don’t open it unless there’s an emergency. So how did the President of the United States get away with opening the SPR now? Turns out, he’s not the only one who has tapped the SPR early. From 2015 to the present, no fewer than six bills in Congress – several of them bipartisan – have used SPR sales as a source of funding. Need some extra cash to fund infrastructure? To pay down the deficit? To fund tax cuts? Just plan some SPR sales sometime down the road, and boom. Easy money. So if Congress is already abusing the SPR, why get mad when someone else does, too? As an investor, here’s what’s happening: - You’ve got a reserve that was never intended to control prices - All releases go to the same supply chain that’s already having issues - Both Congress and the President aren’t using the SPR as initially planned. The SPR won’t solve the current price shock. It can’t. - **The SPR isn’t meant to control prices; it’s meant to add a supply for the US in an emergency. Tiding things over till supply chains are restored.** But what is the rest of the world decided to tap in? ## **The Global Strategic Reserve?** US oil exports have skyrocketed over the past few months. In weaning itself off Russian oil and gas, the EU is buying up all the supply it can find. ![The Strategic Petroleum Reserve Can’t Save You] Over the past few months, the SPR has been releasing nearly 1 million barrels of oil per day. This would rank the SPR as the “9th largest “producer” if you compared it to recent production from OPEC nations. ![The Strategic Petroleum Reserve Can’t Save You] It is somewhat ironic, that just a few short years ago, in the depths of the pandemic, we were concerned about the SPR and oil storage overflowing due to demand destruction. Now we have the exact opposite problem, too much demand and not enough supply. ## **What Happens if the SPR Runs Dry?** Don’t wait till then to reexamine your portfolio. There are plenty of opportunities out there, even in a bear market plagued with uncertainty – as long as you know where to look. I do. At Katusa Research, all my subscribers know my thoughts on the market, and where I’m putting my investment dollars to work. As a fund manager for 25+ years, I’ve learned the hard lessons in tough bear markets. I’ve got my wish list handy, and I already know what price I’d be willing to pay for each company on it. With *Katusa’s Resource Opportunities*, you’ll be able to see exactly which moves I’m looking to make in the energy and commodity markets – [with the exact analysis I use to make the decision](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa --- # Wipeout Charts - URL: https://katusaresearch.com/wipeout-charts/ - Type: article - Published: 2022-07-15 - Updated: 2022-07-14 - Author: Marin Katusa Historically speaking, the bond market is usually ahead of the stock market when it comes to trends. But with the past decade of low-interest rates, money chased any sort of yield which caused a lot of risk across the board. We can see that visually from the large drop in the bond market over the past few months which is greater in both dollar amounts and percentage than the previous 3 major market corrections as seen in the chart below. The Wilshire 5000, the broadest market gauge, is down 25.4% from the peak. This means that the amount of paper wealth that has vanished comes to $12.5 trillion (and over $14 trillion if you include crypto “assets”). **The greatest liquidation in bonds EVER… From both a total dollar amount and percentage drop, is upon us.** Take a look… ![Wilshire 5000] And here we have the macro bulls crowing over the $2 trillion of so-called “excess savings” on household balance sheets. They’re looking on as most Street economists do… in a *static* instead of a *dynamic* framework. It’s why they never catch the turning points in the business cycle. ![Fed TCycles] **Right now, we’re on the cusp of what may be the biggest market changes in resources in the last 50 years.** - The Fed fired its bazooka and is raising rates by levels not seen since the 1970s - Tech and crypto companies are leading a meltdown in the markets. Many are down 50-80% from their peak. And the contagion is spreading - Market sentiment and indicators are nearing extreme fear levels This tells me that right now, we’re entering an era of incredible change… AND opportunity. One major change will be the psychology of not just government leaders but investors, business management teams, and everyday citizens. I think we are going into a market of a more de-globalization economy—and a focus on re-domestication of supply chains. - **It’s a time when my subscribers and I have been preparing for… for a long time.** It’s part of my “alligator” investment strategy – taking profits when everyone else is celebrating greed (like we did in 2021). And to stalk stocks and wait for an optimal time to pounce. That time is now. As we’re seeing, the world is going through a time of great change and upheaval. Geopolitical turmoil… international trade and energy wars…stagnating first-world economies… and some of the fastest rising interest rates in decades… It’s all setting the stage for some of what I believe are the greatest investment opportunities we’ve seen in a generation. **That’s why I published my special report, “[5 Ways to Recession-Proof Your Portfolio](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMqyqur7i9gzRaCnRr8oJHBwhOh7MSxfj7joRC4KEvz5Rrpiiv5K17bG7bJF9XxDzZd6vlD-2FIEu0SjtIdGnCq3iH92UYYgMgdizxMrO5iJTt2yNQGc1bTbKshZqho7XDH9RF-2F04dThGtXrB1kaPcZUnvWZOk_uL1DQLb5tYBX8EPsdA-2BdTMmbxE1Wj3Fa-2F839JsUrdXhY-2FKCn9ODqp-2FWB4S58vbIQlHvGuGj9glqUPgqjrVifAzv4FqnWX0iMbJHrXAcU6vFRO74dh23UoCeHzbBHU4Zpb0ZLb6arsmxL4n9hcc9kgM-2B0ww8YGsVseWS2QJ3-2B8TaBkqezKL2zOsxWyVeQnOYenTl5PS8eprmsoiis2aBwoCH-2FnWr49swlpr-2B3PClzN8E-3D)”.** These are some of the best companies in the world that I want to own in today’s markets. Here’s why… - They are the best among their peer group. - They are tier-one assets - They are trading at levels not seen in a LONG, LONG TIME. - They will pay me to wait out the recovery - And if they recover, they could recover sharp and swift **Preparation for Crisis is Key…** And we’ve been getting a lot of reader and member feedback during these unprecedented times… *“Congratulations on your first prediction for 2020 coming true early – I’m now reading your 2020 review a bit more carefully given the credibility of your analysis. Keep up the good work. It works like this that makes me glad I subscribed.”* ***-Kelly I.*** *“I think I found if not the best, for sure one of the top places to start investing in stocks, and at the best time. Thank you again.”* ***-I.M.*** *“I love your newsletter — it’s making me money! Thank you!”* ***-Michael B.*** *“KRO is far and away the greatest resource newsletter out there. I have had exposure to others, and **there is no comparison**. What Marin personally puts into KRO has no equal elsewhere.”* ***-Mark B.*** *“He is our Prometheus! He levels the playfield for us retail investors and has patiently educated us on how to become successful investors… we don’t care about daily market fluctuations.”* ***-Calvin W.*** And if you’re interested… I want to help you through this historic time in the markets. And show you how to potentially make some of the biggest gains you’ve ever seen in your life when this is all over… [Click here to read my full report on how to Recession-Proof Your Portfolio](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMrIMqgFkizNZDZ4mqBZDbm0COiEryRv7ooWLK6CrvybAXZ0m0FjvTYygWQ2m6cimmxzz91R31Es-2Bbekzvn6LwVKW-2Fvb6NcvqPysR3tPn6PUg-2BLVouxiChttps://katusaresearch.com/wp-content/uploads/2025/07/Placeholder.pngieohPb1-2B1-2B96j2SOxjU12qiM2loQ3dvJy6l__uL1DQLb5tYBX8EPsdA-2BdTMmbxE1Wj3Fa-2F839JsUrdXhY-2FKCn9ODqp-2FWB4S58vbIQlHvGuGj9glqUPgqjrVifA0szQ3EGUMPvDWJ9-2BsOZotyCfwAiZOd4oY012Bo6jydKR75ZKPu2HcreliTswRrvkeinuW1rfMXxpD8gyQonSj2VEia1cIGUgx7Cj5ErDIIsGon7tUE8lc-2Bu9-2B8YbLQ-2FwwyQSG8Hf1SlrdppYwztB40-3D). The deadline is fast approaching – don’t be a minute late. Regards, Marin Katusa **P.S. **If you missed my original emergency broadcast, you can rewatch it for the next 24 hours. [Click here to view it](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMomsY6QpVL2BPdBKlLAQFfyeurPPWODXE-2FkP9BayoXYPxXdtaOZNeddMpECMygvqh4wdV0VouI1SU7DxZRVNWHIuzBW9L1g8ZijNJxU16E-2BNh6iwo1ocxOV-2FSc7FYrljjvSaR9u-2Fjv6CsbiCfucrEClbaR5_uL1DQLb5tYBX8EPsdA-2BdTMmbxE1Wj3Fa-2F839JsUrdXhY-2FKCn9ODqp-2FWB4S58vbIQlHvGuGj9glqUPgqjrVifA2upQDf9LJ0-2BfHb99tOCwBL8FkksmVfzQul-2BIJye-2BJjey7IaSne5cb7gUZvkM-2BzlbzH6eTDP0fzFr7PeMo-2FXIJcUJG-2F1QP6ofys7ZjwZQzHqCxQ1mO7mOGgi05Dup-2FGuCrrNeRhNA-2B2LYqTDUcj7u2g-3D). --- # Critical Market Moments - URL: https://katusaresearch.com/critical-market-moments/ - Type: article - Published: 2022-07-08 - Updated: 2022-07-07 - Author: Marin Katusa Don’t let a dead cat bounce fool you… What we’re seeing now is the prelude to carnage. Never have the markets had such a shock where economies and critical supply chains have all stretched to critical mass. Every new day seems to bring increased panic and downside. ![MK Urgent Briefing] Maximum loads are tested daily – at airports, hospitals, and grocery stores. “Back to normal” post-pandemic is proving a challenge. Add inflation that a whole generation has never experienced to that – and you have major failure points. **Market Meltdown** On a comparative basis to this market melt, only the 2008 crash compares. The charts look eerily similar, and a meltdown seems imminent… ![Dow Jones Index] Investor sentiment is cratering and market confidence indicators have tanked. The **“Misery Index”** is an index created using the monthly inflation rate plus the unemployment rate. It’s another indicator one can use for the sentiment. “Highs” are a sign of increased misery caused by high inflation and/or high unemployment…in other words when the indicator is high, that signals trouble. And the indicator is approaching levels last seen at the peak of the pandemic and the depths of the Global Financial Crisis… ![US Misery Index] This means that novice investors have all but thrown in the towel. But we haven’t even seen widespread capitulation… YET. **Over the past weeks, stocks have been declining rapidly…** The percentage of S&P 500 members hitting new 52 weeks lows peaked at 43% in June. These are eerily like previous major declines such as the Tech Bubble bursting in 2000 and the Global Financial Crisis of 2008. ![SP 500 Index] **And the Ultimate Gauge of Sentiment…** Google search and news outlets are writing negative and “bear market” articles near the record 2020 levels. ![Bear Market] **This is Going to be Painful** And difficult to digest. **The worst is not yet over, and we are coming to the critical moments…** You can feel it everywhere. It’s easy to talk about being a contrarian but now that it’s time to step up to the plate – many investors are paralyzed. Wall Street analysts, major banks, and investment bankers are downgrading stocks faster than at any time since 2008. I know of many funds that are on the edge of insolvency. I should know – they call me to buy their shares off them. The phone calls I’m getting tell me we’re not yet at the **Critical Market Moment****.** That’s the time when shit hits the fan. True capitulation. The response around the globe to the economy, supply chains, businesses, and workers is unprecedented. **Deflation, Not Inflation** Take your cue from the commodity markets. - **Copper** sank 6.5% last week and is down 19.3% from the early-March high. It has collapsed to a 2-year low. - **Aluminum**? Try -36%. - **Nickel**? How about -47% - The **CRB metals** index is down 16.5% from the highs. - The **food price** index has slumped 9% — **wheat** has tumbled 19% from the highs! - Now **oil prices** have joined the fray, with WTI down nearly 12% from the highs to $103 per barrel; - **Energy stocks**, which lead the oil price, are now suddenly in an official bear market (-20.7%). - **Lumber** is down 60.3% and steel rebar is down 25%! And everyone still has inflation on the brain! **BEWARE of What’s Coming…** This is true Alligator Investing… Waiting in the wings, cashed-up, for opportunities that come around once in a decade. Or once in a generation. But putting money in the wrong place, or for the wrong time period – and you will lose. The truth is that investing in these times is very difficult. And I’ve now seen a few crashes in my career – and navigated my portfolio through the storm. **I want you to know that the whole team at Katusa Research is burning the midnight oil.** **We’ve prepared to act when the real crisis hits.** For example… Back when the Fed cut rates on Sunday, March 15th, 2020… I messaged my top analyst that we had to get to work immediately that day. Things would start to unravel quickly. Later that night I sent a very important alert to my subscribers detailing what I see this happening to the major commodity sectors. If you were in the room with me, you could’ve made some quick and swift scores. If you were on the sidelines, it was too late. You had to be in the room with me when the **Critical Market Moment** happened. Since that alert, there have been many major market changes. As a member of *Katusa’s Investment Insights*, I want you to be aware of what’s happening right now… and what could happen next. **I am publishing a special emergency briefing: Tuesday July 12th at 9am PST.** In the morning I will send you a private link where you can view this presentation. **I’m going to go over everything you need to know in this market meltdown:** - An examination of **past major US recessions big winners/losers** - How **inflation and rising interest rates can affect your portfolio** - **Which sectors are going broke** and which sectors are attracting mind-boggling capital (even if a recession hits) - Which group of stocks to focus on for a potential slingshot move upwards in a recovery - **The asset class I’m most bullish on** and why you should be too - The **name and ticker of one of my biggest holdings**… just for watching In short: If you’re like most people, you might be sitting on the sidelines right now… or worried that a market crash could wipe out your earnings… And you’re right. But when this crisis hits, the market will present vast opportunities for investors that are ready. Regards, Marin Katusa --- # How Far Can Mining Stocks Fall? - URL: https://katusaresearch.com/how-far-can-mining-stocks-fall/ - Type: article - Published: 2022-07-01 - Updated: 2022-06-30 - Author: Marin Katusa Stocks can shoot up and make you wealthy beyond your dreams. And drop hard even while the underlying metal price hasn’t moved. Mining stocks are highly cyclical in nature, which is what attracts investors to the space. A steep 50% dive can be followed by a 500% rise. Some stocks mint millionaires. But in reality, most are losers for investors. **However, because of cyclicality… massive amounts of share trading and capital are required to put in tops and bottoms.** You may have heard of the terms stock *“consolidation” *or *“digestion”*… In a previous edition of *Katusa’s Investment Insights*, we profiled a **Dark Market Secret – called [Shareholder Turnover](https://katusaresearch.com/dark-market-secrets/)**. It’s a tool to help you understand when and how a stock can be put in a bottom or top. You can run any number of analytical tools, add trendlines or your favorite indicators and try to confirm data. But in the end… - **The bottom comes when investors throw in the towel and have no more shares to sell.** - **And the next major up-move comes when a new firehose of the capital comes rushing in.** This applies to tech, crypto, mining, energy, and every market sector. Once you’re prepared, you’ll see the markets as they truly are: powerfully cyclical. So today we’re going to apply Shareholder Turnover to select stocks. The Dark Market Secret you’ll learn today is one you won’t find on stock screeners. Or nearly any newsletter you pay for. ## **The “Share Turnover Ratio” of Major Miners…** Below is the share turnover ratio for **Newmont**, **Barrick**, **Freeport-McMoRan**, and** Pan American Silver**. These 4 companies have been around for over 20 years and have been excellent bellwethers for the sector over that time. ![How Far Can Mining Stocks Fall?] Volume was exceptionally light back in the late 90s across the board and highly illiquid. Yet today’s volume ratio is even lower than that correction. ## **The Dollar Volume Ratio** An even better apples-to-apples comparison uses the **dollar volume ratio**. - **The formula shows the amount of capital required to take a stock from its *high point* through to its *low point*.** This is important because it shows the actual amount of capital required to turn over the stock and the “time required”. ![How Far Can Mining Stocks Fall?] Again, this ratio points out that *if* we are in a structural shift, we are nowhere near out of the woods yet. Like we did for [technology and bank stocks here](https://katusaresearch.com/dark-market-secrets/), the share price performance of these mining stocks is shown throughout the past downturns. - **Relative to the past downturns, there is a lot more pain on the way *IF* we are in for a long bear market.** ![How Far Can Mining Stocks Fall?] Here is an example of **Newmont** from 1995 through to today… This puts the cyclicality and turnover requirements in perspective. Relative to the past 2 cycles, the dollar volume turnover ratio is nowhere near a level that would suggest a bottom. ![How Far Can Mining Stocks Fall?] What I find interesting about this is that since 1995, the bull market turnover ratios (19x & 16x) are considerably larger than the bear market turnover ratios (9.5x and 12.4x). ## **The Key Take Home…** - **Every new bull market needs more capital to come in than was previously wiped out in the bear market.** This intuitively makes sense. The point of the above analysis is to show what can happen in a global recession to share prices. If the global economy experiences continued bouts of elevated inflation, it’s reasonable to expect a further slowing down of the global economy. It’s possible we move beyond the stagflationary environment into a serious deflation and even potentially a deep deflation. None of these outcomes are good for investors. If the global economy experiences a sharp but quick recession, the rate of turnover could be less. That leads to the critical question: ## **Where is the New Capital Going to Come From to Buy Mining Stocks?** Millennials are not buying mining stocks at the same rate as they are buying crypto, NFTs, and tech stocks. (Or dumping them as of late…) Over the last 30 years, the Baby Boomers’ capital was the largest flow of capital towards mining stocks and that generation is now transitioning and preparing for retirement. Most boomers have had negative experiences with mining stock performance and are no longer willing to take the high-risk nature mining stocks. With that comes de-risking their portfolios. Here is the part where I will anger most investors in the junior mining sector… ## **Level Up: The Game Has Changed for the Flow of Capital** That means to attract the capital, a mining company must be large enough in size and meet the liquidity metrics required by trading algorithms designed by the big quant and passive funds. And the metrics of the company are changing in real-time. That means not just financial metrics like MCAP, EV, earnings, etc… but ESG metrics which I have covered in many past editions. Where the primary asset is located, and where the head office is located matter. **Here’s a quick checklist…** - If you don’t have an ESG or [net-zero plan](https://carboncredits.com/), you’re swimming upstream. - If you’re not listing on a tier-one exchange, you’re like an indie band playing the endless pub circuit in front of a handful of bartenders. - If your primary asset is not in the U.S., the major capitalized passive index funds can’t buy the mining share. - If the company is not listed on a major U.S. exchange the large U.S. index funds can’t buy the shares. - If your mining company is run by a geologist who runs 6 other deals out of his Vancouver or Toronto office with projects not in the U.S.—the index funds won’t buy the mining company shares. I will never be a popular mainstream analyst, especially among the “rounder” mining companies whose lifelines are the brokerage firms in Canada. **But one of the gold companies in our portfolio is up nearly 500% in the past 2 years because it met the above criteria.** And that’s in a market where most gold mining stocks are down 50-70% from their highs. I believe this stock will go much higher and I’ve already placed a big bet on another company in a similar jurisdiction, with a tier-one asset. And I believe – in due time – the passive funds will come and scoop up shares in this gold rush story too. If you want to get my in-depth research and know which company’s I own (and at what price) – consider becoming a member of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). You’ll find in-depth examples of shareholder turnover charts and data on many of our KRO portfolio companies. And in simple terms that any investor can understand. (Leave the hard part to our talented team). It’s going to be a bumpy road ahead in the markets. Arm yourself with the best information. Keep it simple. Less is more and focus on the big score. Regards, Marin --- # Crypto Contagion - URL: https://katusaresearch.com/crypto-contagion/ - Type: article - Published: 2022-06-24 - Updated: 2024-10-16 - Author: Marin Katusa History rhymes. Investors will always chase what’s hot (including pixelated images of gorillas valued at hundreds of thousands of dollars)… Then immediately think* “just get me out!”* when it’s not. The common-sense indicator never fails. It’s been a tough couple of weeks for most market sectors, but for crypto especially. And there’s one major question… ## **How Far Will Crypto Chaos Spread** If you aren’t in the know, here’s what the chart for Bitcoin looks like year-to-date: ![Crypto Contagion] The Bitcoin market has been in freefall since late April when it last traded above the $40,000 waterline. ## **Bitcoin’s Bear Markets** Like many other volatile asset classes, bitcoin’s highs and lows will leave even the most diamond hands HODLers sweating. This current swing is no different. Bitcoin is down 68% in this recent downturn. Anyone who has levered up in crypto for more than a day-trade is on the verge of liquidation. So, let’s put Bitcoin’s historical “corrections” or crashes into perspective… ![Crypto Contagion] If history is any indication, both the duration of the bear market and the severity of the decline aren’t finished yet. The red arrow pointing to “here” is where the current price drop is relative to the other 4 major price drops in Bitcoins history. ## **Have Fun Staying Getting Poor** Bitcoin has always been a volatile asset. The constant battle between diehard HODLers and naysayers has seen Bitcoin jump over 600% before falling by 70% in just the last 2 years alone. Tell tale signs of market tops are always evident in the rear-view mirror and in hindsight. But I’ve seen my share of bull markets and what accompanies them… - Laser eyes - Shaming anyone not “in” with lines like “Have fun staying poor” - Displays of Excess (bragging of Lamborghini’s, boats, celebrities at parties and events) I was reminded of the time a senior member of KR went to a conference and was invited to a VIP dinner during the cannabis boom. Executives of a company that just raised $20 million were spending lavishly on dinner and magnum bottles of vintage wines. *“Everyone was congratulating each other, but all they had was investors’ money and nothing tangible to show for it. Or in the pipeline,”* he told me. The industry spiraled soon after. Sound familiar? ## **The Stablecoin Spiral – Are Stablecoins Really “Stable”?** There was a series of events that played a major part in Bitcoin’s most recent downturn. It’s related to something known as “stablecoins”. It’s a fairly old innovation on the cryptocurrency timeline, with the first ones launched all the way back in 2014. - **A stablecoin is any cryptocurrency that’s pegged to a different asset. Like a real currency, commodities, or even another cryptocurrency.** A simple example of a peg would be the former gold standard. Back in the post-WWII era, under the Bretton Woods system, the U.S. Dollar was pegged to gold. You could convert an ounce of gold to $35 USD, and vice versa. Stablecoins operate under the same idea. **One of the most popular stablecoins, is Tether, also known as USDT.** Every Tether coin is backed by one U.S. Dollar, giving it a 1:1 peg with the currency and stabilizing the price of USDT at $1 USD. In theory, this means that a Tether holder can convert their coins for dollars at any time. This low-price volatility, combined with the guarantee of an asset backing the coin, has made stablecoins very popular investments. - **Tether, the leading stablecoin, regularly out-trades Bitcoin itself in terms of dollar volume.** Recent events, however, have caused investors to rethink just how stable these stablecoins really are… ## **The Wrong Way to the Moon** The first sign of trouble came in early May, when the stablecoin **TerraUSD** and its sister currency **Luna** crashed: ![Crypto Contagion] As a brief background, TerraUSD was an algorithmic stablecoin. Though its value was tied to the U.S. Dollar much like USDT, the way it did this was much more complicated than a simple peg. Terra’s sister coin, Luna, was used to keep the price of Terra in check. By selling off Luna to create new Terra coins or vice versa, the price of Terra was maintained at the $1 USD mark. Thanks to an algorithm designed by the coins’ developers. **This algorithm broke down last month catastrophically**. Previously, almost 75% of the total circulation of Terra was held in a lending and borrowing system known as the Anchor Protocol. Holders of Terra were rewarded for parking their coins in the Anchor Protocol with a fixed 20% interest rate. **A 20% yield is a red flag on the commonsense indicator**. Rumors that Anchor was changing their fixed interest rates to variable ones, however, triggered massive withdrawals of Terra. As more and more people decided to sell their Terra, this caused the supply of Luna to shoot up. The oversupply led both Terra and Luna to a price crash. This vaporized $40 billion of market value and left many hopeful crypto investors empty-handed. - KEY LESSON: Beware of markets that can get illiquid FAST. ## **The Contagion Spreads** Shortly after Terra’s initial drop, widespread worry over the situation would spread to the other stablecoins. And not even Tether, the poster boy of the stablecoin market, was spared: ![Crypto Contagion] Despite a supposed 1:1 backing to the U.S. dollar, Tether fell as low 95 cents in the wake of Terra’s collapse. It was a clear sign that crypto investors had their confidence in stablecoins shaken. And just last week, Tether’s peg was tested once again… Two major crypto firms, **Celsius** and **Binance**, froze client withdrawals. The fresh wave of fear that followed this news would again cause Tether to briefly slip to $0.9812, well outside its usual trading range of $0.999-$1.001. On top of this, there’s major concern over Tether’s fiat currency backing… It isn’t held solely in cash but also partly in things like commercial paper (unsecured short-term debt). This is alarming to stablecoin investors. ## **If Tether Cracks – LOOK OUT** This isn’t a new issue – Back in 2021, Tether was banned from and fined $18.5 million by the city of New York for lying about their cash reserves. The office of New York’s attorney general found during their investigation that Tether had not been fully backed by U.S. dollars 1:1 at several points in 2017 and 2018. Tether has refuted rumors about the composition of its commercial paper holdings and has committed to eliminating all corporate debt from its portfolio. But it’s clear that investor faith in the stablecoin is not as solid as it used to be. And if what happened to Terra were to happen to Tether… One analyst has said it would be like a ‘Lehman Brothers moment’ for the crypto markets. ## **Those Who Fail to Learn from History…** As one Reddit user so eloquently pointed out, right now the crypto markets are “speed running” through the late 19th and early 20th century of banking. Ponzi and pyramid schemes, the slow shift towards fractional reserve banking, uninsured and unregulated banks, exit scams, and bank heists… It’s the Wild West all over again in the crypto markets, only it’s playing in fast forward. Bitcoin’s current situation is a far cry from what the author of the S2FX model ([here’s my unbiased take on it](https://katusaresearch.com/the-fedcoin-what-bitcoin-doesnt-want-you-to-know/)), who rode BTC from $69k all the way down to $20k, thought it would be. In fact, the loudest voices stopped pounding the table on S2FX in their recent Twitter posts. Now there’s more talk of alternative trading indicators and models, as well as proper portfolio allocation. **But as I constantly have to remind my haters – I’m not blindly bashing crypto**. All I’m trying to say is that with all the hype and baseless optimism surrounding the crypto markets… You need to be careful with your money, and selective with your investments. That’s how I manage my own portfolio. And if you want to see exactly how I’m preparing to deploy my capital in these times of uncertainty, [click here to get my premium newsletter](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). It details how I stay defensive with my own money… When most others are losing their heads with greed and fear. Regards, Marin --- # Natural Gas Nightmare - URL: https://katusaresearch.com/natural-gas-nightmare/ - Type: article - Published: 2022-06-17 - Author: Marin Katusa Last week, a fire broke out at the Freeport natural gas terminal located in Quintana, Texas. Thankfully, no injuries occurred, and there’s no risk to the surrounding area, either. But in the wake of this incident, U.S. natural gas prices… ![Natural Gas Nightmare] Fell! This might seem surprising to you. Wouldn’t a natural gas facility go out of commission cause prices to go *up*, not *down*? Here’s the catch. What went out of commission wasn’t just a regular natural gas facility – it was an **LNG** **export terminal**. One of just seven such terminals in the entirety of the U.S. - **With that export terminal out of commission for at least three months, about 1/5th of total U.S. LNG export capacity is gone with it.** Thus leaving about 2 billion cubic feet of gas per day stranded at home. ![Natural Gas Nightmare] This is good news for Americans. That gas being stranded on home soil is the reason why U.S. gas prices pulled back last week. But for Europe, which has already been seeing higher gas prices in the wake of the war in Ukraine and sanctions on Russia the opposite is true. ## **Gaslighting: The E.U. Just Can’t Quit Russian Natural Gas** There’s been a lot of strong rhetoric from Europe over the past several months as the situation in Ukraine has dragged on. Unfortunately, many people say what they’ll do. But not many people do what they say. In May, Russia cut off its gas supply to any E.U. customers who weren’t willing to pay their bills in the Russian currency, the Ruble. Poland, Bulgaria, Finland, and the Netherlands have seen their supplies of Russian gas dry up after refusing to bow to Putin’s demands. But plenty of other customers from countries (like Germany, France, Italy, Hungary, Austria, and more) have opened ruble accounts with Gazprombank. Or even negotiated some form of alternative payment scheme. These new arrangements may comply with the letter of the law when it comes to the E.U.’s sanctions on Russia. But they certainly don’t follow the spirit of the law. ## **Getting High on the Supply** The E.U. has been happy to impose harsh sanctions on Russian oil and coal. But they’ve been much more skittish when it comes to Russian gas… **![Natural Gas Nightmare]** - **Russia supplies around 40% of the E.U.’s demand for natural gas.** That’s why the E.U. can’t afford to completely cut Russia off just yet. They’re simply too important for the E.U. to get aggressive with sanctions on natural gas. ![Natural Gas Nightmare] This uncertainty sent natural gas prices rocketing sky-high at the outset of the war. Though prices have since pulled back to pre-war levels, they still remain very elevated when compared to historical price levels. Even before the war in Ukraine, low inventory levels, supplier shortfalls, high electricity prices, and a colder winter had all contributed to record highs in natural gas prices. Russia’s actions only served to further exacerbate a problem that was already there. ## **Back at Home, Things Aren’t Rosy Either** Keep in mind… When I mentioned that U.S. natural gas prices fell in the wake of the news about the fire at the export terminal in Texas… - **U.S. natural gas futures prices are still up more than double from the beginning of the year.** The recent pullback didn’t fix the natural gas pricing situation at home – it was more of a brief respite. We’re not quite at all-time highs for natural gas prices at the Henry Hub, which were set at $15.78 back in 2005. That said, the outlook for natural gas prices remains high. The U.S. Energy Information Administration expects domestic gas prices to stay about where they are for the foreseeable future, holding around $8.71/MMBtu for the 3rd quarter of 2022. This would be going into winter, which traditionally sees upticks in natural gas prices due to seasonal heating demands. Lower inventories, increased foreign exports, and heightened domestic demand as gas-to-coal switching become less and less available are all to blame. But while this doesn’t sound like great news for consumers, trouble has always ridden hand-in-hand with opportunity. I’ve been following the natural resource and energy markets for over two decades now. And although the past few years haven’t been kind to oil and gas companies, the world isn’t ready for them to go the way of the dinosaur just yet, as the E.U. is clearly showing. **Our eyes are on select targets in the energy industry, and I have capital ready to pull the trigger at prices that I like.** If you want to know what moves we’re making… You can see all of my research on oil and gas and even the exact companies I’m planning to buy in my own portfolio, **[by clicking here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)**. Regards, Marin --- # Dark Market Secrets - URL: https://katusaresearch.com/dark-market-secrets/ - Type: article - Published: 2022-06-10 - Updated: 2022-06-11 - Author: Marin Katusa Stock market bottoms are hard to spot. You can run any number of analytical tools, add trendlines or your favorite indicators and try to confirm data. But in the end… - **The bottom comes when investors throw in the towel and have no more shares to sell.** - **And the next major up-move comes when a *new* firehose of capital comes rushing in.** This applies to tech, crypto, mining, energy, and every market sector. It’s going to be a harsh reality and truth. Once you’re prepared, will see the markets as they truly are: Powerfully cyclical. And the Dark Market Secret you’ll learn today is one you won’t find on stock screeners… Or nearly any newsletter you pay for. ## **It’s Called Shareholder Turnover** Every publicly listed company has a shareholder turnover. For example, some investors from the private rounds look for exits when the company goes public. There are other shareholders who may have been riding a speculative momentum and want to sell out when that catalyst materializes. Every investor buys a stock for a specific reason and understanding the “nature” or emotion of an investor is nearly impossible. For example, during a recession or when a bubble “pops”… - The shareholders who are borrowing funds and using leverage (aka margin) get under pressure and are forced to sell. They are forced to sell because the value of their collateral posted has also declined with the market, but the amount they have borrowed has not changed. The margin calls trigger selling because the holder of the shares must sell the shares to meet the margin call (hence Katusa Research always says never use margin). This in turn will cause selling pressure and result in the trigger effect. ## **Why is Shareholder Turnover Important Right Now?** Right now, I think it is a safe argument that many investors are spooked at the potential of a* structural shift* in the markets. Why is this the case? A few key reasons: - **Rising interest rates** – leads to increased borrowing costs and slower growth rates - **Political uncertainty/war **– leads to investors “de-risking” aka reducing positions - **Rising Inflation **– leads to higher input costs and declining corporate profits Those who have been reading my editorial for some time will know that I am a contrarian investor. When there is blood in the streets and no one else can finance companies, that’s where I shine. So, given that the market has been whacked recently, is this the ***True Bottom***? ## **Time to Jump in or Just the Tip of the Iceberg?** Let’s look at past major structural shifts in the market to see how trading and volumes today compare to the Tech Bubble in the 2000s and the Financial Crisis in 2008. The first way we will examine “where we are at” is through the share turnover ratio. ![Dark Market Secrets] Let’s use **Amazon (AMZN)** during the tech bubble as the first case study. ![Dark Market Secrets] As the tech bubble popped from 2000-2001, the total volume of Amazon shares traded during that time period was 4.3 billion. The average number of shares outstanding during this time period was 357 million. So, using our formula above: 4,300,000,000 / 357,000,000 = 12. - **This means that Amazon shares traded 12x the total shares outstanding in the company.** The next chart shows this *Share Turnover Ratio* for other household name companies in the Tech Bubble and Financial Crisis. More importantly, shows what the share turnover ratio is in real-time right now. ![Dark Market Secrets] This metric suggests that to put in a true bottom, a lot more stock is going to need to trade. ## Depth Finder: The Dollar Volume Turnover Ratio Taking the analysis a step further, I’ll show the Dollar Volume Turnover Ratio. ![Dark Market Secrets] This is important because it shows the actual amount of capital required to turn over the stock. The ratios change slightly from those in the chart above, but the big picture remains the same. - **More buying and selling activity is required to put in a bottom *if *this is a structural change in the markets.** We can look at the real-time example in Amazon for both the bull market melt-up in 1998-1999 and the crash from 2000-2001… Dollar Volume accelerated throughout 1998-1999 as dollar volume traded 17x the average market capitalization of Amazon through the period. Then as the bubble popped, shares declined precipitously. Dollar volume was 13x the company market cap through the 2000-2001 period. ## **![Dark Market Secrets]** ## **Let’s Check Dollar Volume Share Turnover with Some Big Names…** The next chart shows this dollar volume analysis for **Microsoft**, **Amazon**, **Apple**, **JP Morgan**, and **Bank of America** through each of the last 2 major declines. ## **![Dark Market Secrets]** ## **Profit and Loss** The true economic impact of the structural shift is shown through Profit and Loss. The share price performance of the past 2 major structural shifts has been wealth-crushing. Past results are never a perfect indicator of future returns but for many stocks, the current share price decline is nothing like those witnessed during the Tech bubble or the Financial crisis. ![Dark Market Secrets] That leads to the critical question… ## **Where is the New Capital Going to Come From?** Amazon faced a similar issue back in the 2000s… But as we know it today, Amazon has attracted an enormous amount of capital from passive funds and drove its share prices to all-time highs. If you’re a commodities investor or a crypto investor you have to ask yourself the question: “Where is new money going to come from?” Many sectors are exhausted and rotating. **So, what new up-and-coming sector is money flowing into right now?** Two major ones: One you see in headlines and trends right now, and that’s oil stocks at multi-year highs. And the other is a sector you’ve probably never heard about outside of Katusa Research. It’s Carbon and it’s [attracting boatloads of capital](https://carboncredits.com/carbon-credits-volume-increase-prices-rise-2035/). And no one is talking about it. So if you’re late to the rotation and didn’t get defensive late last year, consider becoming a subscriber to [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). In the latest issue, we put all of our portfolio companies through the Share Turnover tests. Have you done the same with your stock holdings? Regards, Marin --- # Market Pulse Check - URL: https://katusaresearch.com/market-pulse-check/ - Type: article - Published: 2022-06-03 - Author: Marin Katusa Stock market valuations are consistently in limbo. They’re either too high or they’re too low. Rarely if ever are markets priced “just right”. With all the uncertainty in the world today, let’s take a deep dive into the current market internals. As the chart below shows, despite the brief blip resulting from the COVID-19 pandemic, the stock markets have since gone right back to business as usual. ![Market Pulse Check] At the same time, however, there’s still a general feeling of unease in the air. Among the unease, you have war in Ukraine, food supply issues, and high inflation all casting their shadows over the economy. This makes it a great time to revisit some of our favorite market valuation charts. After all, the data never lies. ## **1. S&P 500 Price/Earnings Ratio** The first chart we’ll look at is a valuation analysis. It’s the historical performance of the S&P 500 compared to the *1 year forward Price/Earnings ratios *of its constituent companies. The P/E ratio compares the price (the market valuation) of a company to its actual earnings. - The higher the ratio, the more overvalued the company. - The lower the ratio, the more undervalued it is. ![Market Pulse Check] The overall market selloff early this year did impact the S&P 500, which is now down 13% from its all-time high set at the end of last year. - **P/E ratios have fallen as a result. And the current average forward P/E ratio for the S&P 500 is 16.7x.** Over the past 25 years, this ratio has averaged 15.6x through the various bull and bear markets. Given that the current ratio of 16.7x is still higher than the historical average, that would suggest that the S&P 500 is overvalued when compared to the historical trend. ## **2. Put to Call Ratio** The next indicator is the Put to Call ratio. Simply put, the ratio compares *the number of Put options purchased by traders* on the derivatives markets to *the number of Call options purchased.* - **When more Puts are being purchased than Calls**, the ratio is greater than one. And there are more traders with a negative outlook on the markets. - **When there are more Calls being purchased**, the ratio is lower than one. And there are more traders with a positive outlook on the markets. Below is a chart of the Put to Call ratio going back to 2000… ![Market Pulse Check] Note that the historical average (purple line) is actually 0.83 – which is lower than 1. - **In other words, historically speaking, traders tend to have an optimistic forecast for market performance.** This makes sense, as most analysts believe we have yet to reach peak global economic growth. Over the past several months, the Put/Call ratio has hovered between its historical average and one standard deviation above the mean. This pessimistic position taken by traders matches the negative performance of the markets in the same period. Recently, however, the Put/Call ratio has pulled back to 0.81, as indicated by the gold star at the end of the chart – which is just under the historical average. - **This means that traders are just starting to feel optimistic about the markets again.** ## **3. The Buffett Indicator** This indicator comes straight from the Oracle of Omaha himself, Warren Buffett. He once claimed this indicator to be “probably the best single measure of where valuations stand at any given moment” in a December 2001 article in* Fortune* magazine. Buffett has since acknowledged the limitations of the indicator, given its simplicity. Still, it remains a very popular market indicator, particularly for the U.S. markets. The Buffett Indicator is very straightforward… - **It’s simply the ratio of total U.S. stock market capitalization (represented by the Wilshire 5000 index) to U.S. GDP.** Ever since the Global Financial Crisis of 2008, when the Buffett Indicator dipped below 60%, the indicator has consistently stayed well above 100%. While the outbreak COVID-19 pandemic saw the indicator drop back to the 100% mark, it shot right back up to over 200% at the end of 2021 – right before the big market selloff saw the indicator drop back to near pre-pandemic levels. Below is a chart that shows the indicator back to its initial construction back in 1971. ![Market Pulse Check] As you can see, the Buffett Indicator has historically continued to trend upwards. This means that investors are consistently looking further into the future and pricing in more “blue sky potential”. After the mega stimulus packages post-pandemic, this pushed the ratio to all-time highs, and for the mathletes a +3 standard deviation move. Right now, with the indicator well above pre-pandemic levels, it is suggesting that investors are still looking through rose-colored glasses and awarding big premiums to equities. If investors were truly fearful today, the indicator is at or below pandemic levels. ## **4. Volatility Traders are Salivating** After years of slumber, the volatility trade is back in full force. War in Europe, rising interest rates, inflationary concerns, and stagnating economic growth are all music to the ears of bears and volatility traders. The volatility index is a gauge created through S&P 500 option pricing expectations over the next 30 days. - **When uncertainty is elevated, premiums for options increase which leads to an increase in the Volatility Index (VIX).** You can see the massive spike in March 2020 when COVID rocked the world. Global stimulus packages reduced uncertainty as the Fed had the back of the markets, and thus crushed volatility. Now with interest rates rising and the Fed taking its foot off the stimulus gas pedal, uncertainty is back. Below is a chart which shows the VIX over the past 5 years. ## **![Market Pulse Check]** ## **Putting It All Together** There is no crystal ball for the stock market. To anyone who thinks they’ve got it figured out, I wish them luck and will send you the documents for the next bridge purchase. The market is ever-evolving and changes instantaneously and right now, there’s a lot of uncertainty in the world. It is a trillion-dollar game of cat and mouse. **Now is the time to revisit your portfolio’s shopping list to figure out which investments are still worth your dollar.** Or you can have the shopping list provided to you. At Katusa Research, all my subscribers know my thoughts on the market, and where I’m putting my investment dollars to work. As a fund manager for 25+ years, I’ve learned the hard lessons in tough bear markets. I’ve got my wish list handy, and I already know what price I’d be willing to pay for each company on it. At [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/), you’ll be able to see exactly which moves I’m looking to make – with the exact analysis I use to make the decision. Regards, Marin Katusa ## **Big Ideas We’re Covering Now** Get up to speed on where Marin sees huge opportunities. Below are the most important trends and opportunities we’re tracking right now. [**![Market Pulse Check]**](https://www.youtube.com/watch?v=uj1hRD1P29U) **Before You Buy ANY Oil Stocks, READ THIS** Love it or hate it, oil is a lifeline to international trade. In turn, it provided incredible economic growth and investment opportunities around the world. Full details on this [link here](https://www.youtube.com/watch?v=uj1hRD1P29U). [**![Market Pulse Check]**](https://www.youtube.com/watch?v=x5e8q7S5SVk) **Market Signals: Cash, Buffett, and Gold** Volatility traders are pricing in more risk, and many are turning to cash. Full details on this [link here](https://www.youtube.com/watch?v=x5e8q7S5SVk). [**![Market Pulse Check]**](https://carboncredits.com/tesla-regulatory-carbon-credit-sales-jumps-116/) **Tesla Carbon Credit Sales Jump by 116%** Tesla beat 1st quarter income expectations with more than double previous quarters’ carbon credit sales. Full details on this [link here](https://carboncredits.com/tesla-regulatory-carbon-credit-sales-jumps-116/). [**![Market Pulse Check]**](https://www.youtube.com/watch?v=vSl09xoHCKE) **The Rise of America** Get your copy of Marin Katusa’s new book ***The Rise of America ***at Amazon [Canada here](https://www.amazon.ca/Rise-America-Remaking-World-Order/dp/154452143X) or Amazon [US here](https://www.amazon.com/Rise-America-Remaking-World-Order/dp/154452143X/). And also in [Barnes & Noble](https://www.barnesandnoble.com/w/the-rise-of-america-marin-katusa/1139432835?ean=9781544521435) or any retail book store near you. --- # Before You Buy ANY Oil Stocks, READ THIS - URL: https://katusaresearch.com/before-you-buy-any-oil-stocks-read-this/ - Type: article - Published: 2022-05-27 - Author: Marin Katusa Hydrocarbons have been a pillar of economic growth for the last century. And you can argue that the pace of globalization could not have occurred without oil and gas. Love it or hate it, oil is a lifeline to international trade. In turn, it provided incredible economic growth and investment opportunities around the world. While I am pro-decarbonization, I am not suggesting that we eliminate all oil and gas production immediately. - **The world is not ready for a 100% oil and gas-free world.** One day, yes. But not today and not any time soon. Oil and gas producers are under fire to change, especially the largest integrated oil and gas companies. Seemingly every week there is a new headline about **Shell**, **Exxon**, **Chevron**, or one of the others either facing new scrutiny or under fire from another ESG group. (And they’re paying major money to de-carbonize by purchasing and investing in [decarbonization projects](https://carboncredits.com/chevron-first-ever-carbon-capture-project-offshore/)). This week, we’re putting that to the test. So, if you own oil and gas stocks, you’ll want to pay close attention. We’re in the first inning. And this report is just the tip of the iceberg. ## **Back to Basics: Emissions Intensity for Oil, Gas, and Refinery operations.** Here’s a chart that shows the amount of greenhouse gas produced per barrel of oil equivalent produced or refined. You can see that natural gas production emits the highest amount of greenhouse gas; methane is a key reason for this. ![Before You Buy ANY Oil Stocks, READ THIS] Now let’s get deeper… ## **Integrated Oil Company Analysis** The largest emitters in the oil and gas world are the world’s *integrated producers*. These companies extract oil and gas from reservoirs, refine it into everyday use products like gasoline and petrochemicals. Then they sell those refined products further downstream or to end-users. - The next chart shows the **Scope 1, 2, and 3 emissions** for the world’s largest integrated oil producers. ([Click here to understand scope 1,2,3 emissions quickly](https://katusaresearch.com/carbonomics/)). You’ll recognize many of the names in the charts as they are some of the world’s largest oil companies. ![Before You Buy ANY Oil Stocks, READ THIS] We’re focusing mainly on the Scope 1 and 2 emissions because these are the most quantifiable today. But, if you note (now in red) the enormous Scope 3 emission levels of **Chevron**, **Exxon**, and **Shell** you see the complete emissions picture – and how massive it is… ![Before You Buy ANY Oil Stocks, READ THIS] Intuitively this makes sense. These companies provide enormous amounts of oil and refined products combusted in gasoline, used in petrochemicals, and burned for power generation. All of which are applicable to Scope 3 emissions. So how does a net-zero world affect the bottom line of these companies? Glad you asked… ## **Let’s Apply our Carbon Tax to These Scope 1 and Scope 2 Emissions…** If you’re going to take home anything here, take this: - **You will see the annual carbon tax liability is in the BILLIONS for most of these oil companies.** Several of these companies use internal carbon prices of $25 to $50 per tonne, which assists in long-term capital planning decisions. For consistency, I used the same. ![Before You Buy ANY Oil Stocks, READ THIS] No question, these are big bills. To put this in perspective, let’s compare this tax hit to earnings. We can use the annual carbon tax paid relative to EBTIDA (*Earnings before Interest, Taxes, Depreciation & Amortization*). Because this is easily measurable across all companies. Below is a chart that shows a $50 carbon tax liability as a percentage of forecasted 2022 EBTIDA for the integrated group. **![Before You Buy ANY Oil Stocks, READ THIS]** - **With the exception of Equinor (who has been well ahead of the curve in emission reductions), a $50 carbon tax would be a considerable hit to company earnings.** **Suncor** is the big loser in the group and will be most impacted by a carbon tax. Canada’s carbon tax is already $50 per tonne and going higher, this is bad news for Suncor. ## **Key Takeaways** I don’t know if we will see a global carbon price (we should it would accelerate the process) but I do believe national carbon taxes will become the norm. Due to rising carbon prices ([we follow price action here](https://carboncredits.com/)) and carbon taxes, expect many companies to revise cash flow forecasts and asset values. - **Be smart with allocating to countries that do not have a carbon tax yet.** This may lead to unfortunate surprises for those who have not modeled a carbon cost. We’ve done a deep dive on many major commodities and companies – including what their carbon liabilities will be. Many will find it difficult. Few are positioned to thrive. As an investor, if this is not on your radar, it needs to be quick. Regards, Marin Katusa **P.S. Subscribers to my premium research service – [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) – are aware of how big we expect the Carbon sector to become.** And how to steer clear of not just oil, but gold, silver, and base metal companies that will be hit with major carbon liabilities. Do yourself a favor and [check it out](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). --- # Market Signals: Cash, Buffett and Gold - URL: https://katusaresearch.com/market-signals-cash-buffett-and-gold/ - Type: article - Published: 2022-05-20 - Updated: 2022-05-19 - Author: Marin Katusa It’s an old saying for a reason… Whether you own mining stocks, technology, or even utilities, the classic market saying “Sell in May and Go Away” is in full force right now. According to Bank of America, Cash levels among investors hit the highest level since September 2001. ![Market Signals: Cash, Buffett and Gold] Record cash levels indicate that investors are piling out of stocks and into the safety of cash. With inflation high, and fears of economic growth slowing, “stagflation” as the economic term is coined is a real concern. We have long touted the US dollar as my currency of choice. - **Cash is a position. It allows you to take advantage of situations and opportunities, like fire sales that come up from time to time (and we’re close).** In both bull and bear markets, it is uber critical to [consider it a legitimate position](https://katusaresearch.com/the-panic-play/) in your portfolio. ## **Volatility Traders are Pricing in More Risk…** You’ve probably heard of the **VIX**. The Volatility Index (VIX) is a measure that uses S&P 500 option activity to price how much the market is expected to fluctuate over the next 30 days. From 2012 through to the COVID pandemic, we were in ultra complacent mode. Fueled by a highly complacent Federal Reserve, near-zero interest rates propped up equity markets and provided a tailwind to the markets. We can see this sense of complacency through the VIX. Using a 12-week moving average smooths the data and shows a very clear trend of minimal volatility over that 2012-2020 period. Volatility is now on the rise again… As the market has awoken from its complacent slumber, many investors realize that buying equities based on* “hopium” *may not be the best decision. ![Market Signals: Cash, Buffett and Gold] However, we’re not anywhere near peak levels seen during the 2008 GFC or the 2020 March Panic. Which means there’s room for more pain if it comes. ## **Use Volatility to Your Advantage** In short, [panic equals opportunity](https://katusaresearch.com/theory-of-relativity/). Investors with cash can capitalize on weaker hands – buying up high-quality assets and cheap valuations. This is exactly what legendary investor Warren Buffet just did. - **Berkshire Hathaway was a net buyer of equities through the first quarter of the year, buying up $41.5 billion in stocks.** Professional investors have a toolkit of indicators, both financial and technical to help them make the best decisions possible. One of the many indicators I use is the ratio of the *S&P 500 to the S&P Global Commodities Index*. It truly shows the cyclicality and crushing power of bull and bear markets. I like it because it shows *relative strength*. - When the ratio is very high, it means commodities are expensive, *relative* to the equity market. - When the ratio is low, equities are seen as expensive, *relative* to commodities. And we’re seeing a noticeable uptick… ![Market Signals: Cash, Buffett and Gold] Now, you could make the case looking at that chart, that it “looks like” commodities have turned the corner. The devil is truly in the details though. If the equity market collapsed, and commodities remained even, the ratio would increase. Yet commodity investors wouldn’t have made any money, though they would have lost less than if they played in the equity market. ## **The Energizer: Buffett’s Inflation Bet** The ever-conservative Buffett was a big buyer during the first quarter of the year. As the ultimate value investor, *when he buys* it’s a good signal, but *what he buys* is even more valuable. After all, not all stocks and sectors go up together… According to the most recent [13-F SEC filing](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001067983&owner=include&count=40), Buffet has increased his positions in energy stocks. All while selling pharmaceutical businesses. - **Long energy, selling pharma – that’s a bet on inflation.** Pharma is going to see increased costs and it may be harder to pass those costs on to the customer. This will result in lower earnings. In addition, higher interest rates mean higher costs of capital and debt for pharma, which can slow down corporate growth rates, which will in turn directly impact share prices. Oil on the other hand will be able to pass on some of those costs (though not all) while reaping high selling prices. - **This pharma / oil trade is a replica of the buy relative strength, sell relative weakness displayed in the S&P 500 vs Commodities ratio chart above.** ## **When Will Gold Glitter?** Diving deeper, one will see that not all commodities are receiving the same support. Given the political unrest and inflationary concerns, gold *should* be performing well. But it is having a very tough go, as the US dollar continues to rip higher. Gold is hovering near $1,800 per ounce and has broken below the 200-day moving average. If the 50-day moving average crosses below the 200-day moving average, this will form the infamous “death cross”, a bearish technical pattern. ![Market Signals: Cash, Buffett and Gold] ## Defense Wins Championships At Katusa Research, my style is very different than most others you will find. Regardless of whether they are professional fund managers or self-proclaimed experts on YouTube and TikTok. In fact, many don’t like my style. The reason? I bet with my own money and I have a long-term approach. Some find it uncomfortable that I talk about my own book. But my subscribers and readers (and me!) wouldn’t have it any other way. This means that sometimes I am very defensive and other times I am very aggressive. Normally at the exact opposite time, others are. - **In the March 2020 pandemic crash**, I was a buyer of electricity providers and natural resources. We crushed it. - **Last year**, we sold large portions of our gold positions near the peak, just as everyone was piling in. As you can see, we go against the tide a lot of the time. I’ve been in this business for 20+ years, with many scars to prove it. And right now, I am being highly tactical. This is a spooky market and I do not think all the risk is priced in at this point. We’re keeping a close eye on fast, flash crash-type opportunities in the market. If you have cash ready and want to get a leg up, consider becoming a member of my premium research service, [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). It’s a personal research and opportunity journal – detailing what I’m doing with my own money. If you want to give yourself an edge, [learn more here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). Regards, Marin Katusa --- # The Panic Play - URL: https://katusaresearch.com/the-panic-play/ - Type: article - Published: 2022-05-13 - Updated: 2022-05-12 - Author: Marin Katusa The global rout in stock markets has erased $11 trillion in value in just 5 short weeks. For good reason… - War in Europe - Global inflation - Central bank tightening - Lofty valuations …All set us up for a crash. And it’s all happening in real-time. In the United States, the S&P 500 is getting close to bear market territory. As of this writing, it’s down 19% from its 2021 high. ![The Panic Play] Thanks in large part to massive stimulus packages in the US and abroad… Valuations were becoming extreme and approaching dotcom valuation points. Below is the 1-year forward price to earnings ratio for the S&P 500. - Analyst Tip: Recall while it is common to use “trailing P/E” this metric uses the last 12 months of earnings, which is useless. It’s because the stock market doesn’t care what happened *last* week, it cares about what will happen *next* week. ## **![The Panic Play]** ## **Now that Prices and Earnings Matter Again…** The average Price/Earnings Ratio since 1990 is 15.2x. This means that the market capitalization of companies in the S&P 500 trades at 15.2 times the earnings of companies in the index. - The higher the ratio, the more overvalued the index or stock is. - The lower the ratio, the cheaper or undervalued the stock or index is. Given all the uncertainty in the world right now, it seems plausible that the S&P 500 should reflect that and should trade at best on par with its historical average. Though one could certainly make the case it should be trading significantly lower. ## **Investors around the world are getting defensive…** One way we can look at this is through the ratio of put options purchased to call options purchased. Investors who are bullish buy ***calls***. And those who are bearish typically buy ***puts***. - When the ratio is less than 1, it means more call options are being bought than puts and suggests the market is optimistic. - If the ratio is greater than 1, it suggests the market is pessimistic. The chart below shows the ratio of puts purchased to calls purchased for US, Japanese and European markets. ![The Panic Play] Around the world, investors are buying more puts on average than usual, with all 3 major markets seeing more put buying than the 10-year average. ## **Follow the Money Flow…** Diving under the hood of the S&P 500, we can look at the sectors which are receiving the most dollars invested right now. - **Again, we can use the forward-looking P/E ratio as a clue.** In the chart below you can see the massive spikes in P/E for the consumer discretionary sector. This is composed of companies that provide products to consumers which they don’t need to sustain themselves. Contrary to the consumer discretionary is the consumer staples segment, which includes companies that produce goods which we need on a regular basis. - **Today you’ll see that the discretionary group has been crushed, as expectations of future spending on non-required goods falls.** On the other hand, consumer staples are seen as a “safe haven” and money is flooding into the segment. Pushing the P/E ratio up to its highest levels since the dotcom bubble popped. ## **![The Panic Play]** ## **What are Investors Buying Right Now?** For this, I’ve taken a lot of heat…Insults… Social media slander… But I don’t care. I’ve said it many times and got laughed at. But proven correct: the US Dollar remains a haven. And I believe will remain so for at least the remainder of the year. The US Dollar is up 6.4% for the year versus other major currencies. **![The Panic Play]** - **I’ve always said, cash is a position. And this is a trend I expect to continue.** Whenever I say that I get the counterargument that cash is “losing to inflation”. That’s true. But the amount of share price destruction is greater and without cash, an alligator cannot pounce on opportunities. Just like in the past crises and attempted recoveries, never bet against the Federal Reserve or the U.S. Dollar. The U.S. Dollar has and remains my currency of choice and it’s where I keep the bulk of my cash. Yes, even though I’m Canadian. ## **But Marin, Bitcoin Fixes This…** Other “stores of value” such as bitcoin have taken it on the chin. I have no qualms with bitcoin and consider it an asset class, but I see it more as a risk-on asset, rather than a risk-off. This is coming to fruition here as it is flirting with a long-term support point at $30,000. Will it hold? We will see, but things don’t look good in crypto land… Just like junior resource exploration stocks that go illiquid, if Mother Bitcoin drops further, many cryptos (and even NFTs) could get illiquid fast. ## **![The Panic Play]** ## **Stagflation** Stagflation is a topic I have addressed multiple times to my premium subscribers and see this is a continuing trend in the near to medium term. - **Stagflation is a deadly combination of above-average inflation coupled with below-average economic growth.** Doesn’t this sound familiar to what we have today? Sure, does to me. But don’t get stuck into a framework. Right now, though, inflation around the world is high and well above the target levels of central bankers. Economic growth is slowing due to the war in Europe, supply chain issues, a stronger US Dollar, and COVID outbreaks in China. To combat this, bankers are going to try to raise rates and pull back on the flow of “money” to slow inflation. This is a standard play in the playbook. However, what is not in the playbook is weening the world off the [Financially Transmitted Disease](https://katusaresearch.com/financially-transmitted-diseases/) known as ZIRP or zero-interest-rate-policy. The global markets for the past decade are used to or let me put it differently, addicted to massive amounts of cheap or even free capital. This era has ended, and many businesses and individuals are not set up to survive a plethora of rising interest rates and a rising US Dollar. ## **At Katusa Research we follow Warren Buffett’s two rules:** - Don’t lose money - Don’t forget rule #1 Our focus is to practice alligator investing discipline and how to keep your head while others are losing theirs. We’ve come to a crossroads in many markets and the most important thing is to only own fundamentally valuable companies and to have cash available as attack capital. If you were caught off guard in this recent correction… Want to add some defense to your portfolio, or are looking to gain an edge over the long term…consider learning more about my premium research service, [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Stay safe and solvent, And remember, the markets can stay irrational longer than you can stay solvent. Marin Katusa --- # Violent Charts - URL: https://katusaresearch.com/violent-charts/ - Type: article - Published: 2022-04-29 - Updated: 2022-04-28 - Author: Marin Katusa This is the single most important chart in the world right now. IF this is the beginning of a VIOLENT move upwards, commodities are about to get very expensive… ![SP Commodity Index] You’ll see that, relatively speaking, **commodities are the cheapest they have ever been compared to the S&P 500.** There’s nowhere to go but up. You might be thinking, “Yeah, but it *feels *like gold is already getting pretty high close to $2,000.” But by all metrics… gold remains at historic lows. **How You Can Make a Killing… Even If You “Missed Out” on the First Gold Bull Rush** The gold market has always moved in cycles—from dramatic boom to overnight bust, and eventually back again. So far in this “boom,” gold has barely risen 20 percent from its floor. That’s not even close to the minimum required to qualify for a true “bull market” over the past century. The *smallest *gold run-up in the past 90 years was 45 percent—more than *twice* the current gain. Every other rally was far, *far *bigger: - From 1972–1974, the rally yielded a 100 percent gain. - From 1978–1980, another 100 percent gain. - Then from 2007–2010, a 67 percent increase in the price of gold. ![Gold Bull Markets Current] As you can see from the chart, when gold is ready to rise, it *takes off*. **Every single one of the years in the date ranges above saw an increase of more than 20%.** That’s how you know the gold rally has barely just begun. Normally, when Marin Katusa finds a great opportunity, he doesn’t run into the market and buy at any price. Instead, he stays patient and waits for great prices. Marin “stalks” the stock. Waiting for the market to mark down the merchandise he wants to buy. And if it takes him weeks or months to accumulate at the price he wants, so be it. That’s just how the resource market works. In fact, Marin published on one company for years patiently waiting for it to become cheap. - **After years of patiently waiting, his target price to buy was reached in 2020—he published and did exactly what he wrote.** I watched him make a fortune and then shortly after, published what he calls a *Katusa Free Ride* for everyone. And now collects a free dividend at no cost base. This company was and is the world’s largest company in its specific sector. **I’ve watched him operate likes this in the market for years and years…** And seen first-hand how he’s built a fortune even in bear and sideways markets. Think about it… You can’t go online without seeing record prices in Lumber, Wheat, Nickel, and Zinc prices go through the roof.… Commodities are attracting capital. LOTS of it… Because of rising geopolitical tensions and war… **The Rush to Safe Havens is On** This sets up the US dollar to continue to dominate the world as a reserve currency. It is at times like these where all the cards are put on the table. Where is the true safe haven? You aren’t seeing people rush to Rubles, Yen, or Euros. They are rushing into the dollar and gold. Both of which have appreciated sharply since the conflict began. This is a world he’s described many times before where we can have **both** a strong US dollar and strong gold prices. **The Crowd is Paying Attention** The number of mining companies in the S&P 500 will increase… which means an increase in the flow of capital into the sector. At the end of the Cold War, there were 20 mining companies in the S&P 500. Today there are 2. ![Metals and Mining Index] *Sure, you could buy gold bullion…* It’s independent of government-controlled financial systems. Your money will be relatively protected from currency wars. *Sure, you could buy gold-backed ETFs…* They offer a little more leverage and can give you some quick profit when gold starts to rise. **But when gold starts going up… Gold stocks tend to go up a *lot*.** **On Tuesday, May 3rd Marin Katusa is going to release his brand-new, gold special report.** It will detail FIVE powerful reasons gold could enter a great bull market. And he’ll show you the best way to boost your returns right now by opening up his “Core 4” gold stocks portfolio. You’ll want to pay close attention because this isn’t something he does often. Mark your calendar. Regards, Anthony Ford Publisher, Katusa Research --- # Are Gold Stocks TOO Cheap vs the Gold Price? - URL: https://katusaresearch.com/are-gold-stocks-too-cheap-vs-the-gold-price/ - Type: article - Published: 2022-04-22 - Updated: 2022-04-21 - Author: Marin Katusa Political turmoil in Europe pushed the *risk off *button and sent havens like US Dollars and gold higher. Gold is knocking on the door of $2,000 per ounce [for the second time](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMrpJOY6mvkAzFUcnq6E1mM8v31vNzDiWq2TC2-2BpOA0hEeZ34iHd4Owvt1D-2FPghAYz2EMsTQR4OEtbb85IncVYHOPZVOrY95BqfYtyq6qWLWcXTeDccpqEGV6-2Fxcv6Hleb9kXsSY179BSMfQvpNZ5krRhHER_uL1DQLb5tYBX8EPsdA-2BdTMmbxE1Wj3Fa-2F839JsUrdXh1vsAZhwXWl-2FKyFxTTR2T6Y2QVnGT6Hw-2BdYiE0hh-2Fgo-2FwPLMwNCbwtIodaun7uunvtxpBt9q1pW0ym6Dk-2FrySRpPG8HsrecJFUzyhl5kztmymJUSigjLC2SUW-2BS0mUzI-2FLGYI06yOamQzShDLZ5OWG5556m4lAPAZcfNmjOqTnTK3hk9imi1s2IG7m-2B-2F-2F-2Fi44-3D) and we’re witnessing the third shot at a major breakout above $2,000 per ounce. **![Are Gold Stocks TOO Cheap vs the Gold Price?]** ## **Gold Stocks vs The Gold Price – Too Cheap?** We’ve received numerous emails about why gold stocks are not performing as well as the metal itself. If you’re confused, you’re not alone. On average, gold stocks are up a higher percentage than the metal. But it’s true, gold stocks *“should”* be higher given the leverage to rising prices. There are a few reasons gold equities have not responded according to expectations for $1,950 gold. - **Institutional investment in the gold sector drives large share purchases that bring prices up or down.** The “paper gold” market (which consists of ETFs backed by gold) has seen billions of dollars of inflow. But the miners have not seen the same capital inflows. That means the money is going for direct exposure to gold. Not exposure via gold mining company shares. The chart below shows the historical institutional fund flow for all of the physical gold ETFs, including **GLD**, **IAU**, and **GLDM**. **![Are Gold Stocks TOO Cheap vs the Gold Price?]** - **You’ll see that March 2022 represented one of the largest net buying of gold-backed ETFs since gold ETFs came into fashion in 2008.** The question really is… How good are the pros at timing their big buys? ## **Follow the Money: Gold Fund Flows** Since 2008, the average positive net fund flow was just shy of $900M per month. There have been 6 times since 2008 where fund flow buying in the month has exceeded $5 billion. Let’s compare the price action of gold based on a very high conviction ($5B+ in monthly fund flow) versus 2x average flow (for convenience let’s call this $2B per month). ![Are Gold Stocks TOO Cheap vs the Gold Price?] Over the short term, the difference is minimal or perhaps even less in favor of big buys. But over the longer term, the very high conviction buys do outperform. ## **No Stress? The Passive Way to Own Gold Stocks** In reality, there are a small handful of individuals who possess the technical and financial acumen necessary to beat sector-specific ETF. It’s a key reason why ETFs have become so popular. These sector-specific ETFs provide exposure to the commodity or risk factor an investor is looking for, without having to get your hands dirty. Gold miner ETFs are no exception to the role. - **Key Takeaway: Capital that flows passively into the gold miner sector is a fraction of what goes into the physical gold market.** Below is a chart that tracks this fund flow creation and redemption activity for ETFs. ![Are Gold Stocks TOO Cheap vs the Gold Price?] Comparing the fund flow of physical gold-backed ETFs versus the miners is an incredible difference. You’d think that they’d trade in similar directions. But that’s not the case. If you look at the cumulative fund flows side by side, the difference in investor appetite is incredible. - **Big funds haven’t been buying gold miner ETFs, but they have been buying physical gold ETFs.** The chart below shows the cumulative fund flow for the paper gold market versus the gold miner stock sector, starting in January 2017. ![Are Gold Stocks TOO Cheap vs the Gold Price?] Since January 2017, the ETFs that provide exposure to gold miners have seen a net *decrease* in flow of funds. Meanwhile, ETFs that hold direct exposure to gold has added $40B. Since the COVID pandemic: - **Paper gold ETFs have seen inflows of $23.5 billion** - **The miners have seen outflows of over $1 billion.** **This should have contrarian investors salivating.** That last chart shows that the risk appetite for gold miners just isn’t there right now. The speculative money that historically chased gold stocks (especially the micro caps) is likely caught up in crypto’s and NFT’s. That said, I don’t see the geopolitical landscape getting any better in the short term. Which should mean that safe-haven assets will continue to see strong bids. - **My premium research subscribers in [Katusa’s Resource Opportunities](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMqH2qjsokLmG83Skm5K1Pipihicx5dtHcfxomA1-2FE9gn1-2FnjIt09qYVgHxxkLVvUnGdsvykL2t4Z8J6ATskxQpM3Hb3t4mF73LqTCpP1aHZJTYroNMP85UmsilzjuQYTSCsheJlly7wSOnrqEJM8aE3k6_B_uL1DQLb5tYBX8EPsdA-2BdTMmbxE1Wj3Fa-2F839JsUrdXh1vsAZhwXWl-2FKyFxTTR2T6Y2QVnGT6Hw-2BdYiE0hh-2Fgo3I9B6vgy8PMvPB7WpwaYDT-2BvQ-2FP05xyqXPI2hpHrWkAoCqBSCd-2FYjvBD1SeAYlFsY9tKEd5-2B6UJop-2BYXYciufelkg85IDj3SN6g3y1JXCi-2BddwMZeWBZyw70BGwBZcmpdZtb0QW83e63cOujaCuwRg-3D) and I continue to be well-positioned.** I’ve crafted a portfolio of a handful of gold stocks for the coming bull market and we’ve recently seen profits as high as 4 times our money. Keep your eyes open on your inbox… **Because in the coming weeks, I’m going to release a detailed gold report to you. It details what I see happening in the precious metals market… Including some “Gold Core 4” opportunities I’m betting millions on.** I have been in this industry for over 20 years with the scars and knowledge to prove it. I believe tensions will continue to build but eventually unwind in Europe. This will lead to some major moves in the markets. Some industries will capitalize, and others will be decimated. If you are looking to give your portfolio an edge and want to get an inside look at where I’m putting my own money, stay tuned for the report in the first week of May (or earlier). Regards, Marin --- # Meet the “Portfolio Manager of the Billionaires” - URL: https://katusaresearch.com/meet-the-portfolio-manager-of-the-billionaires/ - Type: article - Published: 2022-04-18 - Updated: 2022-04-14 - Author: Marin Katusa You’ve probably never heard of him… But today, I’m going to be introducing a very special individual that is one of the most accomplished investors in the precious metal sector. For years, he has been connected to some of the biggest commodities rainmakers on the planet. But more importantly, he’s just a great guy and uber smart. I sat down and recorded an interview with **Warren Gilman**. Warren manages the money for some of the world’s richest people including** Li Ka Shing **and **Andrew “Twiggy” Forrest**. So, I thought it would be interesting to interview Warren on why the “Manager of the Billionaires” is buying more of – and is a large shareholder – of one particular gold stock in the KRO portfolio. In his own words… *“We’re trying to create another billion of value in the next two years, but from a base of an incredibly liquid stock, which no one else in this sector in our peer group can match. No one.”* **In this interview, Warren Gilman you’ll find out**: - His thoughts on the price of gold equities vs the gold price and why it’s the “perfect storm” - Why and where Warren is deploying capital in the gold sector - The “Gilman Doctrine” on protecting the downside and keeping upside exposure - Why investors are still overlooking geopolitical risk and what to do - The name of a gold stock Warren and his firm Queens Road Capital is buying right now – and more importantly… - Why he believes there’s “big exposure to upside” with this stock [Click Here to watch the full interview](https://youtu.be/EaWY7i0IrXw). Regards, Marin Katusa --- # Oil Importance in the Russian “Land of Fire” - URL: https://katusaresearch.com/oil-importance-in-the-russian-land-of-fire/ - Type: article - Published: 2022-04-08 - Updated: 2022-04-07 - Author: Marin Katusa To understand oil prices and production you must understand the importance of oil in Russia. The modern oil industry was born in an area known as *“The Land of Fire”* in the Russian Empire. Back in 1846, the world’s first modern oil well was drilled on the Apsheron Peninsula near modern-day Baku, Azerbaijan. That was 13 years before Drake drilled Titusville well in the U.S.A. Called the Bibi-Heybat oil field, it laid the foundation for the newly found “black gold”. In 1899, Tsar Nicholas was in his first decade of rule over the Russian Empire… And Azerbaijan (then part of the Russian Empire) led the world in the production of oil that year – producing half of the world’s oil. Little did Nicholas II understand how oil pricing dynamics would lead to the +300 year rule of his family’s dynasty over the Russian Empire. - **By the turn of the 20th Century, the Russian Empire was the world’s largest oil producer. The Russian oil fields in Baku alone were producing 230,000 bopd while all of the U.S. was producing 183,000 bopd.** Nicholas II found out what happened firsthand with the boom-bust cyclicality of the oil market and wasn’t prepared for the eventual 1917 Revolution where he and his family were killed. Then the communists took over and the nationalization of its oil companies took place. The interesting thing about the Revolution of 1917 was that foreign capital didn’t leave Russia… Out were the Rothschilds and Nobels and in were the Rockefellers **Standard Oil** of New York (later known as Mobil). ## **Russian Oil Post World War 2** In the economic post-Second World War boom, large oil deposits were discovered in Russia. The increase in Soviet oil exports led to a decline in world oil prices and was one of the reasons the **Organization of the Petroleum Exporting Countries (OPEC)** was formed in 1960. The chart below shows Russian crude oil production since 1960. ![Oil Importance in the Russian “Land of Fire”] To this day, Russia remains one of the largest and most powerful oil players in the world. As the Russians invaded Ukraine, sanctions began to pile up on Russia and its banks. - **It’s estimated that 3 million barrels per day of Russian oil could be impacted by these sanctions.** This fanned the flames on an already undersupplied oil market. And sent the price of crude oil skyrocketing back towards all-time highs. Below is a chart for Brent Crude oil, which is the most widely used international benchmark for pricing crude oil. ## **![Oil Importance in the Russian “Land of Fire”]** ## **Russian Discount** While the price of global crude oil has soared, Russian oil prices have cratered. The key Russian benchmark for crude oil, known as the ***Ural***, has fallen to a record discount versus Brent Crude oil… ![Oil Importance in the Russian “Land of Fire”] Contrary to the Urals discount to brent which is at or near record lows, share prices of oil stocks are soaring to levels unseen in years. Whether you’re a small-time junior oil producer or **Exxon**, all companies are reaping the rewards. The **XOP** ETF is a basket of North American oil producers and is up nearly 350% since April 1, 2020. That’s far outpacing the S&P 500 and Nasdaq on a post-covid recovery comparison. ## **![Oil Importance in the Russian “Land of Fire”]** ## **Don’t Always Hedge Your Bets** A potential big trend you are going to see now is oil producers going “unhedged” as companies will begin to believe that high oil prices are here to stay. It’s common for oil producers to lock in fixed prices for some or all of their oil production in the coming 3-24 months. In the United States, 30-40% of oil is hedged for 2022. This strategy works well for the banks which provide loans to the oil companies based on these “locked-in prices”. However, when prices surprise the upside or the downside in a major way like they have, it negatively impacts the oil producer. Especially so when oil companies bet on prices staying within the forecasted range and sell options to earn additional income. This is known as a 3-way collar and has penalized the oil industry before when prices cratered from $100 per barrel to $30 per barrel in the span of 18 months. Now with prices rising above expected prices, many oil companies have “sold calls”. If you have sold an oil call option, you are obligated to provide the buyer with oil at that specified price. If you’ve sold an oil call option at $75 per barrel, and the oil price is now $100, you are out $25 minus any premium you sold the call option for. **If you’re going to be a serious oil investor, you need to have a firm grasp on your company’s hedging strategy, or else you could be way off base.** It could lead to projecting far higher cash flows and share prices than what is reported. Deep dive analysis, extensive due diligence, and outside-the-box thinking are what differentiate Katusa Research from the pack. Natural Resources have been my sole focus for over 20 years. [If you are looking to give your portfolio that next leg up in commodities research and opportunities, click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa --- # “From Bar to Barley”: Net Zero Cleared for Liftoff - URL: https://katusaresearch.com/from-bar-to-barley-net-zero-cleared-for-liftoff/ - Type: article - Published: 2022-04-01 - Updated: 2022-04-21 - Author: Marin Katusa There are major movements happening behind the scenes in the carbon markets. You wouldn’t know it because of the recent price corrections of the EU ETS and Voluntary Markets (NGEO and GEO), caused by the Ukraine and Russia crisis. ![Carbon Market Performance] While a calm breath was needed from fast price spikes ([especially in the EU market](https://carboncredits.com/))… I’ve never in my career seen a coordinated regulatory framework accelerating at this pace between world governments and major corporations. **Carbon Markets are Moving FAST** Secretary of the SEC –** Gary Gensler** – [recently made a major announcement](https://carboncredits.com/sec-carbon-emissions/) that his department is looking at climate disclosures. With new guidelines potentially coming this year and, in his words, *“It’s essential we get this right.”* - **I don’t think 99.99% of investors understand how this could have a massive ripple effect on every single publicly listed stock in North America**. Companies will have to create new departments to deal with coming “Climate Accounting” in their financial statements. And it’s coming quicker than you think. According to The Washington Post… “Under a ground-breaking new rule, the SEC is expected to propose… **hundreds of businesses would be required to measure and disclose greenhouse gas emissions in a standardized way for the first time.**” The article goes on to reveal… **“The move could mark the most sweeping overhaul of corporate disclosure rules in more than a decade**, and could put the United States on a closer footing with other countries set to begin mandated emissions reporting over the next three years.” Tick. Tock. The alarm is set. Fortunately at Katusa Research, we’ve prepared for this over the last 18 months. But, I must say, that I’m shocked at how fast things are changing and getting implemented. We’ve modeled many major commodity companies in the energy and metal sectors and what the effect of showing Scope 1 and 2 emissions will be on their bottom line. Some companies will be fine, and others will be in big trouble. **From ‘Barley to Bar’** Major tech darling companies like Tesla, [Facebook](https://carboncredits.com/frontier-investment-carbon-removal-technologies/), Apple, and Microsoft aren’t out of the woods either. However, they’re much more ahead of the game than many resource companies. Tesla recently announced its [carbon credit sales jump](https://carboncredits.com/tesla-regulatory-carbon-credit-sales-jumps-116/) by 116% to $679 million. They’ve outlined net-zero plans and spent a lot of capital. - **For example, in 2021, Apple set aside a $200 million fund for reforestation projects.** The Restore fund will focus on managed forest properties, in which tree-planting activities will become equal to the estimated lifetime carbon emissions produced from charging iPhones. Like Apple, **Microsoft** is also aiming to recruit the help of its suppliers and customers through a **climate innovation fund valued at over $471 million.** The fund will help the company improve its global development technologies to streamline reducing, capturing, and removing carbon. Most of the carbon emissions produced by the company come from indirect carbon emissions commonly associated with the manufacturing and the production of its products. - **In 2021, Microsoft emitted 14 million metric tons of carbon, and 13.8 million of it came from indirect carbon emissions.** Even liquor giant **Heineken** is not immune… One of the largest liquor companies in the world, Heineken set an intermediate goal to reach net-zero emissions in production by 2030. And reduce their value chain by 30%. Their plan is called *“Brew a Better World… From Barley to Bar”.* ![Heineken Annual Report 202] **First, The Storm** According to the **Glasgow Financial Alliance for Net Zero (GFANZ)**, $130 trillion has been mobilized for net-zero targets around the world. That’s a mind-boggling number… Nearly $16,250 per living person on the planet today. These are staggering figures. - **Decarbonization is a global movement that governments, companies, and individuals around the world are buying into.** ![Decarbonization] These days it is nearly impossible to find an asset class that is not already widely available for purchase, sale, or consumption worldwide. Markets these days are deep, well-integrated, and for the most part highly efficient. That wasn’t always the case though. **Rewind to History** In 1611, the Dutch East India Company became the first publicly-traded company on the Amsterdam exchange. In the late 1700s, merchants would gather to sell securities in New York, initiating the creation of the New York Stock Exchange. Soft commodities like rice, grains, and salt along with gold and silver have been bought, sold, and traded in markets for centuries. Oil started small also. Oil is now a multi-trillion dollar a year market. - **I believe that the voluntary carbon market has the ability to grow from a sprouting $1 billion market to a $5-$10 billion market or more, over the coming decade.** Now… could you imagine being a part of the oil trade in its early years? This is the stage I believe the carbon markets are at right now. **The Next 24 Months Will See Incredible Sector Growth** The adoption curve is real. - ***Network effects*** are already in play with hundreds of public companies announcing their net-zero plans. The rules, regulations, opportunities, and pitfalls are being created before our very eyes today. If you don’t understand the market, the players involved and the direction the market is going, you could lose your shirt, house, and everything else. That said, newly created sectors also generate enormous opportunities to create wealth. With any new commodity or sector, thousands of rounders will crop up overnight. Hundreds of legitimate companies will spring up, too. Only a small handful will actually make it to the big time. 10 percent of your investments make 90 percent of your gains. What if you knew which 10 percent those were—and you could put money into them? **Franco-Nevada** and **Silver Wheaton** were the two set-it-and-forget-it gold stocks in the early 2000s, owing entirely to their streaming and royalty business model. And I think I’ve found the next Franco and Silver Wheaton in the carbon sector. **Subscribers to [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) know exactly what I’m talking about.** We’re early. Very early. This is going to be a wild ride. Regards, Marin --- # The Rate Rise Era and the Dragon - URL: https://katusaresearch.com/the-rate-rise-era-and-the-dragon/ - Type: article - Published: 2022-03-25 - Updated: 2022-03-23 - Author: Marin Katusa Before it’s time to be an Alligator, we must understand the Dragon first. According to released data, China is not facing the same inflationary pressures that Europe and North America are experiencing. The common perception for the West is to not believe Chinese data because it’s from China. But upon further research… - **I will argue the government of China has done a much better job controlling inflation than the U.S. which is about 500% higher than China’s.** Let me explain… As I discussed in [*The Rise of America*](https://riseofamerica.com/) last year, Xi Ping and the CPP took on the Chinese tech titans (like Jack Ma). And cracked down hard on companies and their profits. In almost Putinesque fashion, you can keep the company, but half goes to the state. And make sure your profits do not in any way put any pressure or risk on the National agenda. This kept prices down. The government also cracked down on shadow banking which slowed the velocity of capital within speculative sectors such as real estate and commodities. Aggressive government intervention in releasing government stockpiles of commodities (oil, copper, etc.) has also tempered any supply issues and price inflation in the near term. ## **Chinese Food** Food makes up 20% of the Chinese CPI index. This will be hard for most to understand, but food prices were lower in China during 2021 than they were in 2020. And thus far in 2022, food prices are lower than in 2021. The chart below is the month-over-month change in food prices in China. As you can see, prices have been continuously falling and just last month fell 6%. ![The Rate Rise Era and the Dragon] Pork is the main protein in China and pork prices are significantly lower than the 2020 pandemic highs. Vegetables and eggs are higher, but overall, the decrease in pork has reduced food prices overall year over year. The government of China also did not go as wild with monetary stimulus as the U.S., Canada, and E.U. Combine that with aggressive lockdowns and weak domestic demand, and the inflation situation is lower in China than in the U.S. or Europe. ## **Here’s Why China Matters to Resource Investors** When the Dragon sneezes, the resource sector goes into cardiac rest. It’s all about the velocity of capital. And the government of China has really clamped down on Chinese companies purchasing and investing in foreign mining and energy assets. That means less capital flowing into these sectors. Now, let’s talk mining… Cost increases have been dominant across almost operating mines. In 2020 I wrote about the coming Crossflation pressures we would see in many resource projects. Almost all operating mines are experiencing building delays and many new mine builds are seeing cost blowouts which are not returning the expected shareholder returns. - **Higher diesel prices and supplies are putting significant upward pressure and will continue to do so for the rest of 2022.** All of that has been known for the last 12 months—none of this was a surprise. The market is currently risk-off when it comes to the precious metal equities (that means the actually mining companies). The market sell-off and capital going *risk off *results in capital leaving the gold ETFs. This results in the ETFs selling their mining share positions to meet redemptions and rebalance their weights. ## **If you are thinking it’s Alligator Time, you are right…** (IF YOU’RE NEW, [click here to learn why we call it alligator investing](https://katusaresearch.com/the-way-of-the-alligator/)). We now have specific alligator investing targets, not sector-wide. I will explain what this means below. With all stocks getting hammered or stale… There is no need to increase your risk exposure when advanced, producing companies are trading at a discount to their Net Asset Value. But, I am very interested in getting shares of the top-quality mid-tier and majors that are trading at valuations near historic lows. The only exploration gold stocks I want to own are ones with district-scale potential, advanced assets, management with skin in the game, and major near-term catalysts that re-rate the stock share price upwards. - **For example, we have 4 such stocks in our [Katusa Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) portfolio that have immense upside.** I will detail in as much detail as I can what I plan on doing with my own money and show the value propositions. ## **The Era of Rates: Stormy Waters** The Fed will have to react to the higher-than-expected inflation while juggling market pressures and the looming 2022 midterm elections in November. If inflation continues to rise and affects the bottom line to American citizens by mid-2022, the Fed will have no choice but to become reactionary at that point with multiple interest rate increases to tame inflation. Some argue the fed needs to go heavy upfront with the interest rate hikes. Others are waiting for the Fed to ease slowly with their rate hikes. With either option, the odds favor further correction in US equities. Currently, the market is seeing the most aggressive put buying and positioning since the depths of Covid in 2020. - **In February, over 1,500 companies listed on NYSE and NASDAQ hit 52-week lows. That is the highest number since the covid lows.** ![The Rate Rise Era and the Dragon] More importantly, the flow of funds from the sub $100B to the +$500B is at its highest rate since the lows of Covid. Since the start of the year, the Volatility Index (VIX), which uses S&P 500 option pricing as a gauge to determine volatility… Has averaged a daily change of 0.87% while soaring over 10% in a single day on 9 separate occasions. To put that in perspective, the 5-year average daily change is less than 0.42%. - **This means that volatility so far this year is over 2x higher than normal.** This gauge suggests that investors are starting to get nervous about their over-leveraged positions, and for good reason. There is no shortage of political turmoil, inflationary concerns, or loose money flying around. I am not calling it a top on the markets, but I do believe there is more attention being paid today, than at any time in the past 12 months. Investors have begun to realize that the US Federal Reserve is going to continue raising interest rates and taper their asset purchases. Just last week the Fed raised their fund’s rate by 25 basis points to 0.50%. - **The near-zero interest rate and high fiscal stimulus environment, (which I call [financial heroin](https://katusaresearch.com/financially-transmitted-diseases/)) are not coming to an immediate stop.** But governments are going to try to slow it down. By slowing the injections of cash and rising interest rates, the U.S. Federal Reserve is going to try to contain inflation. This is a situation faced by central bankers and governments of most developed nations. It is safe to say that we are entering into the next phase of this “fiscal experiment”, and these are unchartered waters. ## **Rate Rise Ready** Over the next 12 months, market participants (based on the prices they are currently willing to pay for Fed Interest Rate Futures) are expecting up to 6 interest rate increases and potentially a policy rate of 1.70%. Below is a chart which shows the current expectations for the US Federal Reserve policy rate. ![The Rate Rise Era and the Dragon] While an interest rate of 2.2% may not sound like a lot, I believe it is going to impact trillions of dollars worth of assets and liabilities. In turn, this rate decision will ultimately affect the decisions of other central bankers and the performance of nations’ currencies against the US dollar. ## **Back to the Future** If history is anything like the past, most of those other economies will not have the economic strength to absorb many interest rate increases. In today’s world capital is very mobile and moves rapidly across different asset classes around the globe. Investors are always looking for the highest return on their capital from [carbon](https://carboncredits.com/the-ultimate-guide-to-understanding-carbon-credits/) to [uranium](https://katusaresearch.com/the-nuclear-shift-in-the-uranium-narrative/). - Nations with higher interest rates and strong economies attract investor capital, which in turn increases demand for the currency. - Nations who cannot raise rates or see their economies falter in the face of these interest rate increases will ultimately see their currencies decline in value versus those who have strong economies and currencies. **This ultimately leads to a stronger US Dollar.** Focusing specifically on the interest rate movements over the next 12 months, I believe it is highly likely that most developed nations will attempt to raise rates. This means the United States will lead the way and then Canada, Australia, and potentially the EU will have no choice but to follow. As you can see the downtrend in rates is very clear, but there are periods where there are consistent increases in interest rates. I believe we are on the cusp of central banks implementing one of these steady sets of increases. ![The Rate Rise Era and the Dragon] This will have a profound impact on asset valuations and [the cost of capital](https://carboncredits.com/walmart-issues-2-billion-green-bonds/) associated with building and holding these assets. ## **What to Do?** Patience. This will not be a quick correction like we saw in 2020 when covid shocked the markets and the U.S. Federal Reserve came to the rescue. The Fed will not inject stimulus like it did during Covid. Both mining and energy sectors are going to feel the impact of these rate increases. **Subscribers to my premium research service – [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) – are following alongside me in real-time…** As I prepare my portfolio and picks… **For the high inflation situation, war, and rate hiking cycle that’s staring us now in the face.** The headwinds are here. Are you prepared? Marin Katusa --- # With All Eyes on Russia, Don’t Forget the United States’ Most Powerful Weapon – SWAP Lines - URL: https://katusaresearch.com/with-all-eyes-on-russia-dont-forget-the-united-states-most-powerful-weapon-swap-lines/ - Type: article - Published: 2022-03-18 - Updated: 2025-07-23 - Author: Marin Katusa SWAP Lines are a cunning strategy. And the current global shift in geopolitics will lead to the first major implementation of SWAP Lines due to war, as opposed to a global financial crisis. Warren Buffett once famously stated that derivatives are financial weapons of mass destruction. But SWAP Lines are far more destructive to a nation when factoring in the politicization of Sovereign Reserves. For those who think Putin will be able to break the U.S. Dollar’s reign of global dominance, please pay attention. - **Right now, the Federal Reserve satisfies the global demand for U.S. Dollars while maintaining the USD’s title as the planet-wide currency king.** With one brilliant move, it has divided the world up into allies and non-allies of the U.S. Today, everyone needs the stability of the USD in a world turned upside down with economic turmoil. Granted, that stability may only be relative to other countries’ own currencies. But American allies have to deal with that reality. They know it. And the Fed knows it. - **That’s why the Fed has created a path to access U.S. Dollars for government-identified *real* allies of America.** And it has denied access to those identified as unfriendly. **It’s Critical That You Understand This** And when you do, you’ll be miles ahead of almost everyone else. The U.S. has put a system in place where all but the most die-hard anti-American nations will want to be included among the friendlies. In fact, many will do anything to make the list. How do they do this? Through SWAP lines. Never heard of them, then you’re not alone. For the most part, whenever I bring up SWAP lines, I’ve found myself speaking in a vacuum. I haven’t come across one person in a hundred that knows about them. And that includes business executives, politicians, or even bigshots in the financial industry itself. Most investors are not even cognizant of the program’s existence, much less aware of its significance. But given how important SWAP lines are to the global economy, every investor should understand them and how they work. **What Are SWAP Lines?** First things first, here’s how the Fed explains swap lines [on its own website](https://www.federalreserve.gov/monetarypolicy/bst_liquidityswaps.htm): - If you **have** access to a US swap line, you are what I call a **+SWAP** Line Nation. - If you **don’t have** access to a swap line, you are a **-SWAP** Line Nation. **SWAP Lines Are a Financial Lifeline for Nations** In the wake of any global panic, the most recent example being the pandemic… Many central banks request that America provide financial assistance to at least alleviate the stress caused by a lack of U.S. Dollars. SWAP lines have provided that relief and will continue to do so. They are, literally, lifelines. And they are also debts. - **All those dollars borrowed must be paid back in US Dollars, with interest, also requiring dollars.** It’s ingenious because demand for the U.S. Dollar breeds further demand. And this will be proven to be even more true during a global power realignment like what’s happening right now. It will be paramount for nations grappling with inflation to enter the favored group capable of exercising swap lines. Here’s a list of the nations that have access to U.S. Dollar SWAP lines (as of now): Countries outside the group—the negative swap line **(-SWAP) **nations—will struggle to access U.S. dollars. **SWAP Lines are Important for Politicians and Investors** The result of how this program is set up is that countries receiving SWAP lines will follow any stipulations they are asked to follow. They’ll have no choice. Suppose you want to be blessed with a SWAP line from the U.S… In that case, you must be careful not to antagonize the hand that feeds you. This means not aligning in any way with nations designated as non-friendly and agreeing to follow any restrictions, such as sanctions, that the U.S. government puts on. The struggling nations that require emergency access to U.S. Dollars, and can’t get them… - **Could engage in the expropriation of foreign-owned assets as the world recession deepens.** For example: Last year Papua New Guinea revoked Barrick Gold’s social license. Several months ago, Barrick gave the PNG government a 51% stake in the mine. Now the mine is back in production. The PNG government is not the only nation flexing its muscles… - **New left-wing President Boric of Chile starts his reign and Chile is amidst altering its tax code which could see miners be taxed up to 75%.** - **And just recently, Kyrgyzstan seized Centerra’s Kumtor gold mine.** It’s either that or face crippling depressions or revolutionary uprisings of their citizens (or both). So, American businesses with operations in these places had better beware ([and so should their investors](https://katusaresearch.com/the-importance-of-dollar-swap-lines/)). **SWAP Lines Will Always Defend American Interests** As global unrest progresses, there may be more nations that will be granted SWAP lines. But don’t forget, SWAP lines will always defend American interests. Make no mistake, this is big business and even bigger power… The last time that foreign central banks took down that amount from U.S. SWAP lines was at the height of the 2020 Covid Crisis. The SWAP lines worked during the 2008 Global Financial Crisis and prevented a complete worldwide financial meltdown. Same thing during the 2020 Covid Crisis. But this is just the tip of the iceberg. Few want to be shut out, and around eighty-five nations have applied for U.S. SWAP lines. Currently, 14 central banks have been approved, with the E.U.’s technically representing 27 nations. In fact, Indian Prime Minister Narendra Modi has publicly confessed to having “SWAP line envy.” To be approved, all those countries must solidify their positions as U.S. allies by falling into line with our policies. Think they will? Yep, me too. And with Russia’s military attack on Ukraine, the allies (with SWAP Lines) and those that want access to SWAP Lines of the U.S.A. will be tested. **More Nations Will be Added** Over time, I expect these critically important SWAP lines to be increased and more nations to be slowly added. They’ll be subject to the terms set by the U.S. government—both financially and geopolitically. But they’ll accede. As monetary and fiscal policy are blending into one, it’s just a matter of time before the President uses SWAP lines as a big geopolitical leverage hammer. SWAP lines are that important, and they will dictate global alliances and policy. So, pay attention to them. Because I promise you, they will have an impact on companies, investments, and ultimately, the very fabric of our world. - **If you have a producing asset in a Negative SWAP Line (-SWAP) country, you MUST prepare for potential setbacks and for things to go wrong.** It’s about properly understanding and pricing in risk. Something that has become overlooked in the resource sector. **SWAP Lines and Your Portfolio** Key Points: 1. I believe nations who have existing SWAP lines won’t screw with foreign operating entities (American companies) to the extent of the **–SWAP** Line Nations. 2. I still expect higher taxes in all countries as it’s the only thing politicians across the world have executed effectively throughout time. This means mining assets in **+SWAP** Line Nations won’t nationalize their gold mines, copper mines, etc. Those nations won’t screw with America. 3. Nations with existing U.S. SWAP lines won’t put Forex (FX) restrictions on the foreign (American) companies operating there. **–SWAP** Line Nations may do so, and many have already. This will cause less (and in some cases prevent) those U.S. Dollars in –**SWAP** lines from being sent back home as dividends to the owners of the company. **Know the plan. Read the playbook.** And most of all, be prepared. You can get my team and me to do the heavy lifting for you through my premium research service – [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/). I’ll tell you exactly what I’m doing – where I’m investing – and how you can follow. Regards, Marin Katusa --- # MELT UP: Gold, Commodities and a Crude Awakening - URL: https://katusaresearch.com/gold-commodities-and-a-crude-awakening/ - Type: article - Published: 2022-03-11 - Author: Marin Katusa It is perhaps the most euphoric or catastrophic 2-word phrase an investor can hear. Commodity and stock futures have maximum allowable limits for price appreciation or deprecation. It is an attempt to avoid catastrophic blowups to investors who are on the wrong side of the trade. - **Only under the most volatile of market conditions do we ever see “melt-up” or “meltdown” scenarios.** We are seeing these scenarios in real-time right now. I just came back from a site visit in Mexico and just before that I was at the largest institutional mining investment conference in Florida. Billion-dollar fund managers, family offices, hedge funds… you name it. Plus, the most important natural resource companies were there. All trying to strike big deals for the coming year. It’s the “who’s who” of the investment and natural resource worlds colliding. The deal room this year was extra spicy because of the Russia vs Ukraine situation. Commodity prices are soaring as tensions between superpowers escalate. ## **The Rush to Safe Havens is On** This sets up the US dollar to continue to dominate the world as a reserve currency. It is times like these where all the cards are put on the table. Where is the true safe haven? You aren’t seeing people rush to Rubles, Yen, or Euros. They are rushing into the dollar and gold. Both of which have appreciated sharply since the conflict began. This is a world I’ve described many times before where we can have **both** a strong US dollar and strong gold prices. Gold has spiked higher over the past 2 weeks. Up close to $250 and hit as high as $2,067 per ounce. **We are paying close attention, and have loaded up on the best gold stocks in [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) portfolio.** ![MELT UP: Gold, Commodities and a Crude Awakening] ## **Global Energy Prices Soar** Oil has ripped nearly 60% higher this year. **Brent crude**, which is a key European benchmark oil price has now taken out most of its previous resistances. It is within striking distance of its all-time high set back in August 2008. ![MELT UP: Gold, Commodities and a Crude Awakening] ## **Why is Crude Oil Rising?** The reason why oil is soaring right now is because Russia is one of the world’s largest oil producers and exporters. - **If Russian companies are for the vast majority shutout of SWIFT banking facilities, it effectively reduces to zero any oil that would normally be routed to western countries.** This represents millions of barrels of oil in an already tight market. The United States banned all oil, natural gas, and coal from Russia into the United States. President Biden has urged all other nations to do the same but acknowledges that many cannot do so (like Germany) without some time to secure alternative sources. President Biden did not include uranium in the import ban. - (Note for further reading: I discussed many of these issues in my 2014 book, [‘The Colder War’](https://www.amazon.com/Colder-War-Global-Slipped-Americas-ebook/dp/B00H7JE8BY).) I know this will sound absurd, but the U.S. has already given sanction waivers to Rosatom (Russia’s largest uranium company which owns Uranium One). When the major media outlets finally understand the absurdity of this strategy, things will change. ## **Uranium Interest…** Elsewhere in the energy market, uranium has caught a bid. It broke $50 per pound for the first time since 2012. As I have written about many times, the Former Soviet Union produces half the world’s uranium. As utility companies look to avoid doing business with the FSU, this is going to spike spot prices. Just like with avoiding Russian oil, new uranium can’t just be created out of thin air and this has and will continue to spike prices. **This is the big wild card****.** Nations will start voluntarily rejecting Russian nuclear fuel, the way Sweden has. Sweden only has 6 operating reactors, but that alone has taken the spot price from $43 to $47 in 3 days. More nations will be pressured by their citizens to follow Sweden’s lead of voluntarily avoiding Russian uranium and commodities. This will have upward price pressure on the uranium spot and long-term price. One would think that if Russia continues its advance and increase the land grab—the energy flow would be a sacrifice E.U. would have to make once they secure alternative sources (time frame: 12 months). Keep an eye on uranium as the mainstream narrative continues to [shift towards this carbon-neutral fuel](https://katusaresearch.com/the-uranium-frenzy-is-on/). - On the topic of net-zero, how does the war affect the Carbon markets? **VERY BULLISH for Carbon Credits.** Here’s why… Because the flow of Russian natural gas could be slowed significantly. The switch to coal (to make up for the difference) will replace natural gas for electricity generation. Coal emits much more CO2 than natural gas. Meaning the utilities will have to offset those emissions. The transition to green and non-Russian fossil fuels is years away. We are very early to the carbon bull market. - **If you want to follow carbon prices and breaking news, [this is a free resource with live price feeds](https://carboncredits.com/carbon-prices-today/).** What about other commodities making major headlines… ## **Metals Markets Rip Higher** We are seeing this in the nickel market in an even more aggressive fashion. Russia is one of the largest nickel producers and on the fear of not being able to ship products, prices are soaring. - **In the most extreme move in nickel’s history, prices soared 90%, leading to the largest per dollar gain in the contract ever.** ![MELT UP: Gold, Commodities and a Crude Awakening] This is going to have massive ripple effects on the steel industry, which utilizes 70% of the world’s nickel production every year. Elon Musk and company won’t be happy either as nickel is a core ingredient in many of the EV batteries built today. ## **Right in the Breadbasket** Even local markets are feeling the effects of the conflict. - **Wheat traded in Chicago’s Mercantile Exchange is up 70% and has gone “limit up” in 6 straight sessions.** Last week alone, wheat prices surged over 40%. ![MELT UP: Gold, Commodities and a Crude Awakening] Wheat is just one of many “soft commodities” which are being bid up aggressively. Russia and Ukraine are large suppliers of grains, vegetables, and fertilizers. Food prices around the world are already high and are likely heading even higher. ![MELT UP: Gold, Commodities and a Crude Awakening] As food prices go higher and GDP growth slows due to this conflict, stagflationary concerns in Europe seem to be a scenario that is worth preparing for. ## **The Crowd is Paying Attention** The number of mining companies in the S&P 500 will increase… which means an increase in the flow of capital into the sector. At the end of the Cold War, there were 20 mining companies in the S&P 500. Today there are 2. ![MELT UP: Gold, Commodities and a Crude Awakening] Expect this to change: The Colder War. We are amidst truly ugly and challenging times. Russia appears to be pot committed and tensions are going to continue to escalate. I play the cards I’m dealt and there will be many generational opportunities in the coming months – if you have cash ready to put to work. You can follow along to see exactly what I’m doing, and what positions I hold. It’s all within the pages of [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Fortune favors the bold. Don’t get scared now. Regards, Marin --- # The Colder War is Heating Up - URL: https://katusaresearch.com/the-colder-war-is-heating-up/ - Type: article - Published: 2022-03-04 - Updated: 2025-07-23 - Author: Marin Katusa A potential massive run on Russian banks, which host over $1 trillion in assets, is just the tip of the iceberg. Western governments have imposed economic heavy sanctions on Russia for its actions involving Ukraine. This led to a massive collapse in the Ruble and Russian stock markets. Below is a chart showing the collapse of the Ruble vs the US Dollar…![The Colder War is Heating Up] - **The prohibition of Russia’s use of the global financial transmitting network SWIFT has frozen up more than $640 billion worth of Russia’s assets.** *“There is a new cold war underway, driven by a massive geopolitical power shift to Russia that went almost unnoticed across the globe.”* I wrote that all the way back in 2014, in my New York Times bestselling book – [The Colder War](https://www.amazon.com/Colder-War-Global-Slipped-Americas-ebook/dp/B00H7JE8BY). I wrote in my book that Putin forged trade agreements with many other countries. He doesn’t care anything about the politics, religion, or culture of a particular nation. [![The Colder War is Heating Up]](https://carboncredits.com/) As a result, he’s embraced such diverse international pariahs as theocratic Iran, Assad’s Syria, and socialist Venezuela. He’s cut deals on all sides, everywhere from China to Israel, from Algeria to Brazil. And it’s always about energy. ## **Energy Prices Continue to Soar** So far, western country sanctions on Russia have not targeted energy-related businesses. Sanctions have targeted broader trade activities and impacted the Russian Central Bank. However, Europe and the West have not ruled out tougher sanctions to target energy-related businesses. This has sent energy prices from soaring in Europe though on expectations of future supply crunches. Dutch natural gas prices, a key benchmark in Europe soared nearly 50% in a single day. ![The Colder War is Heating Up] For now, the Nord Stream pipeline which transports Russian natural gas to Europe remains open and flowing at full capacity. However, this can change in the blink of an eye. Remember, Russia’s top priority is to maintain order in its own energy markets, and then if there is anything left, sell excess natural gas to Europe. This puts Europe between a rock and a hard place. **Policymakers don’t want more dependence on Russia, but power prices at these levels are not sustainable for their citizens.** Thermal coal used as a fuel source for electricity generation has ripped higher and has taken out previous all-time highs set last September. ![The Colder War is Heating Up] ## **Dollars, Pipelines and Power Struggles** This power struggle between the West and Russia is only going to further solidify Russia’s ties with China. - **Is it just a coincidence that this week, Gazprom took another step towards signing a massive natural gas deal with China?** This week Gazprom announced the signing of a deal with China to build a pipeline through Mongolia that could send 50 billion cubic meters of gas annually to China. It’s roughly the same size as Nord Stream which currently supplies natural gas to Europe. - **This is on top of the $400 billion 30-year deal which sends 38 billion cubic meters of gas to China via the Siberia Gas Link.** These deals are crucial for the Russia-China relationship because these transactions will be settled in Yuan or Rubles, not US Dollars. **Shell Oil **and **BP Plc**, two of the world’s largest and most powerful oil companies have withdrawn from Russia. **Equinor **is expected to follow suit and likely** TotalEnergies** will as well. BP was one of the first western oil majors to establish a presence in Russia after the USSR collapsed in 1992. Now BP intends to write off $25 billion in assets based in the country. ## **Pay Attention to the Details…** Between all the attention-grabbing headlines and fog of war, the details become important. As always, the devil is in the details. These BP Russian assets only represent 5% of the company’s EBTIDA. This shows the move is highly political in nature, but not a massive hit to cash flow. At Katusa Research we follow international energy markets very closely – and wait like patient alligator investors for share prices to come to us. Right now, I’m focused on a handful of energy stocks and watching price action closely. Anticipating that we’ll be able to pick up shares in any market sell-off that might come in the next few months. Subscribers to [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) will see exactly the moves I’m making in real-time. Fortune favors the bold. Regards, Marin Katusa --- # Copper Pureplay Exposure - URL: https://katusaresearch.com/copper-pureplay-exposure/ - Type: article - Published: 2022-02-25 - Updated: 2022-02-24 - Author: Marin Katusa If you get a few glasses of scotch into a wealthy fund manager… They’ll tell you that one of the key things they look for in an investment opportunity is something called “pure-play exposure”. - **Pure-play exposure means an investment’s performance is determined by a sole characteristic. ** The financial returns associated with a pure-play investment are not diluted by other unwanted characteristics. Take a company like **General Electric**. GE derives its revenue from power, appliances, renewable energy, aviation, and even hydrocarbons. A company like GE is known as a conglomerate. With such diverse revenue generation capability, it would be nearly impossible to find a single return determining characteristic or risk factor for GE. On the other hand… A specialized commodity producer’s return performance is going to be guided mainly on the revenues made from that commodity. Assuming management meets expectations, the economic return should be guided by the commodity. That’s an example of a pure-play investment. That’s equivalent to nearly two full years’ worth of emissions from all energy production around the world. Pick the right commodity and you give yourself the best-undiluted chance of making a big score. ## **Copper Tension and Demand** Identifying an early trend in the commodity space can unlock vast fortunes. And this is why I love the commodity business. - **The biggest trend I see in the investment space these days is **[**global decarbonization**](https://katusaresearch.com/carbonomics/)** – with eventual Balance Sheet reporting of carbon footprint and liability of all publicly listed companies.** But there are very few pure-play ways to get exposure. You might think you’d need to be invested into some element, with an unpronounceable name, far down the periodic table which is only located in a tiny corner of the planet. But that’s not the case. - **Did you know that the average generator in a wind turbine needs 1,900 pounds of copper? ** - **Or that the average electric car requires 150 pounds copper? ** Solar panels, power lines, high-efficiency laundry machines…you name it, they need copper. And A LOT of it… By 2030, the market is poised to grow to over 30 million tonnes of copper consumption annually, representing more than 30% growth through the decade. ![Copper Pureplay Exposure] Copper represents a fantastic way to get pure-play exposure to economic growth and global electrification. ## **Copper Prices are Booming** I’ve [written many times in the past](https://katusaresearch.com/copper-signals/) that for the copper supply to increase, prices would need to go up, *substantially*. - **The world needs a lot of copper…but it won’t get it for $3 per pound. ** This is coming to fruition now. Copper prices have been rapidly increasing since the pandemic began in March 2020 and are hovering just under all-time highs today. Take a look… ![Copper Pureplay Exposure] I do believe copper prices – in the long term – can still rise higher. It seems like a textbook setup of long-term demand growth, coupled with a tight supply outlook. ## **Copper Prices are Rising, But Stock Valuations are Not** You would expect that with prices near all-time highs, valuations would be equally rich. This is not the case right now. Below is a chart which shows the forward-looking estimates on a rolling basis for EV/EBITDA That stands for: **E**arnings **B**efore **I**nterest, **T**axes, **D**epreciation, and **A**mortization relative to **E**nterprise **V**alue). - When the EV/EBTIDA ratio is high, this can demonstrate a company or sector is *overvalued* relative to peers. - When the EV/EBTIDA ratio is low, it can show that a company or sector is *undervalued* relative to peers. ![Copper Pureplay Exposure] You can see that in 2021, the market was pricing in a lot of growth for the sector. That’s because share prices had climbed much higher than expected cash flows. Today, those expectations have been revised lower and the market is projecting lower prices and less growth. This comes at a time when it is clearer than at any time in the past decade… …the world is going to need a lot more copper. ## **Copper “Peanut Gallery” Analysis** As a total side point… I want to warn everyone interested in the commodity business about what I call the **Peanut Gallery**. Those are people who have opinions (whether paid for by their masters or their own) but are unblemished with success. - **Simply put, they have zero tangible success in actually building anything of value in the commodity space.** OK, Katusa – what have you done then? Having to stand up for myself, just google the deals I’ve been part of. In the copper space specifically, I was one of the original four founding directors of **Copper Mountain**, which eventually became the 3rd largest copper mine in Canada. I was incredibly fortunate to sit beside the legendary **Jim O’Rourke** for over 13 years and watch and learn how a master goes about building a mine. Everything from design to exploration to permitting to dealing with all stakeholders to building the mine on time and budget. - **Doing**** is so much more of a learning experience than reading and judging from afar. ** In the early years, I was the largest individual investor in the company. And I learned first hand the difference between ‘Skin in the Game’ and “Paid Suits’. - **Million-dollar lesson: Always bet on people with skin in the game.** So, when you read some analysis or opinions—ask yourself, “*what has this person actually done in the space*”. Back to my point now… ## **Copper’s Crux: Copper Supply** It is getting harder and harder to discover new world-class mines. Making the situation even more challenging is that many of the world’s largest copper mines are getting older, mining lower grades, and are located in politically risky jurisdictions. This trifecta sets the stage for a long-term boom in copper prices. ## **Skate Where the Puck (and MONEY) is Going…** Right now, my team is laser-focused on the [decarbonization investments](https://katusaresearch.com/the-adoption-rate-of-this-obscure-commodity-will-be-the-fastest-of-all-commodities/). Renewable energy, electric vehicles, and carbon offsets all play major roles. - **I believe governments around the world are going to tax the high polluters and use that cash to subsidize the switch to greener economies.** Trillions of dollars are going to be invested into the decarbonization sector over the coming decades. Re-read that sentence above 3 times. And prepare accordingly. Because *Carbonomics* is going to become a pillar of every single industry. **Now, if you want to get an independent unfiltered opinion and a piece of the action…** **Consider becoming a subscriber to my premium service – **[**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)**.** The commodities and carbon bull market haven’t even started. But for many sitting on the fence… It will be too late, very soon. Regards, Marin Katusa --- # Research Feed - URL: https://katusaresearch.com/research-feed/ - Type: page - Published: 2022-02-23 - Author: Marin Katusa --- # Commodities, Wars and Elections in 2022 - URL: https://katusaresearch.com/commodities-wars-and-elections-in-2022/ - Type: article - Published: 2022-02-18 - Author: Marin Katusa As important as technology and drill results are… **Jurisdictional risk** is one of the most important factors to watch in your stock portfolio. I have discussed this in detail with the [+SWAP Line vs. -SWAP Line Nation concept](https://katusaresearch.com/swap-lines-are-one-of-the-most-important-things-youve-never-heard-of/). Few analysts truly account for it in their models. Why? Most of the time they are trying to “please” the company and institutional salesmen with favorable write-ups rather than buying stock personally. For example, do you think a North American publicly listed company with an asset in Russia or Turkey has the same discount rate as an asset in Nevada? Well, believe it or not, that is the case… With almost every published analyst from the big banks applying the same 5% discount rate for a project in Russia or Turkey as in Nevada. Flat out—that’s just insane. You don’t need an advanced degree in math to know that analysis is wrong. Having traveled around the globe, worn bulletproof vests, rode in armored cars, and most importantly invest my own money at the same time and price as my research… **I can assure you I take jurisdictional risk more seriously than any other analyst or banker.** I know it sounds “sexy” and “adventuresome” to go to some exotic place to explore for oil, gold, or other commodities like copper and uranium. It makes for fantastic marketing to sell newsletters. But where your asset is, your money is. And the world is changing in warp speed before our eyes. ## **The War Machine is Firing Up** The American news is flooded with one of its go-to news reports: Russian military movement. Because of my 2014 New York Times Bestseller called ‘The Colder War’, I’ve had a flood of media requests to comment on what will happen next. I’ve stayed quiet on purpose. Here is my public response for the first time… I believe Russia is going to continue its campaign with the intent of exposing the weaknesses not just in the economic, political, and military between Europe and the U.S… But to show Europe, the U.S., and the world’s Russia’s place in the hierarchy of a balanced world. It is in China’s best interest to support Russia in this endeavor. And President Putin has the political power within Russia to execute this plan. ## **Fact, Fiction, and Tax Revenue** Investors have long looked for sexy places that could offer big returns The fact is, in the last 20 years in the business, the biggest scores were NOT in those exotic high-risk jurisdictions [but in **+SWAP** Line Nations](https://katusaresearch.com/the-importance-of-dollar-swap-lines/). The latest gold mine in Zimbabwe, or the most incredible mine in Russia… - **There is a false contrarian narrative out there that preaches high-risk jurisdictions are where you need to go to make high returns.** I call total bullshit on that. - Fact: Mining projects generate enormous amounts of tax and royalty revenue for nations while employing hundreds or even thousands of residents. These are highly sought-after, high-paying jobs in comparison to most other forms of employment within the communities. In many regions, these large mineral or hydrocarbon endowments are fiercely fought over between companies and governments. That rarely makes the newspaper. In many places around the world, governments would rather - Raise taxes and even nationalize the mine, - Seize control of it, and - Run it poorly …Versus assume a minority stake and let a world-class operator run the mine. ## **2022 Election Watch** In 2021 there were numerous key elections which effected and continue to affect mining operations in Chile, Peru, Zambia, and Ecuador. In Chile and Peru, we have seen major fights between governments, unions, and mining companies. - **Chile and Peru are two of the world’s largest copper producers.** These governments want to increase their takes of revenue from mining either through increased direct ownership or through higher taxes and royalties. And they will. Similar situations have arisen in Zambia. Higher royalties and government ownership reduce the upside of the shareholders of the company operating the mine. That means lower cash and lower valuations for shareholders. So, I have highlighted these nations many times as higher-risk jurisdictions. Ecuador is attempting to move in the other direction, recognizing the wealth creation of mining activities and encouraging foreign investment. **In 2022 there are a handful of notable elections which I will be keeping a close eye on…** That’s equivalent to nearly two full years’ worth of emissions from all energy production around the world. ![Commodities, Wars and Elections in 2022] The Australian election is important because the nation is a very large producer of precious and base metals, along with uranium and natural gas. All these industries are carbon-intensive, given the push towards decarbonization. **Any new carbon tax legislature on emission caps or restrictions could pose higher costs to miners****.** Mining in the Philippines continues to be challenging under the current government. In the past, the government-imposed restrictions on new mines, though those have been recently lifted. Open Pit mines were banned but at the end of December, this was redacted. I expect Duterte to remain in power, which makes the nation risky and will continue to be a **-SWAP** Line Nation. Colombia, Papua New Guinea, and Angola all are **-SWAP** Line Nations and host large mineral endowments. Historically all three nations have had positive environments for extractive industries, but none are **+SWAP **Line Nations. Or regions which I deem to be particularly safe compared to other mining-friendly jurisdictions like Canada. ## **Brazil Watch** Brazil is a very important mining nation, and it has a USD SWAP line making it a **+SWAP **Line Nation. Brazil is rich in iron ore, gold, copper as well as oil. The nation was rocked by COVID-19 and citizens are unhappy with the government. Current Brazilian President Jair Bolsonaro has faced all sorts of issues within his cabinet and across the economy. The far-right leader is now hospitalized due to complications from a stabbing in 2018. The nation’s previous President (2003-2010) Luiz Inacio Lula da Silva or “Lula” has made a strong comeback in the polls and has now overtaken Bolsonaro by a wide margin. A Lula win would be beneficial for the Brazilian economy as many global leaders dislike Bolsonaro. If you forced me to pick today which way Brazil will go, I would say Lula takes the election. This is something I am looking into further as some of our KRO portfolio companies have assets in Brazil. Lula during his last tenure was very pro-mining. I will continue to watch the polling for all these elections closely as they have major implications for our investments. It’s one of the many hundreds of items our team is watching and factors into due diligence. **If you don’t have the time, consider learning more about Katusa’s Resource Opportunities.** And you can lean on us to cut to the chase – and [watch me put my own money on the line in every opportunity we write about](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin Katusa --- # How Small Investors Can Hit It Big in Private Placements - URL: https://katusaresearch.com/how-small-investors-can-hit-it-big-in-private-placements/ - Type: article - Published: 2022-02-04 - Updated: 2022-02-03 - Author: Marin Katusa After seeing it first-hand 20 years ago for the first time… I was blown away by the results of one particular investment tactic. It was my first real insight into how well-connected investors *really* gain wealth. As I found out nearly 20 years ago – and have repeated many hundreds of times since then – there is, in fact, a secret advantage to it. I’m going to share with you today one of my favorite ways to invest: **Equity Financings** and **Private Placements**. It’s a little-known investment that’s usually off-limits to regular investors. Even though they’re publicly issued, these investments are essentially “invitation-only” and fill up fast. **I was hooked since the first time I found out about it in the early 2000s…** You’ll almost never hear private placements discussed on CNBC. And you’ll never see their ticker symbol pop up on YahooFinance, MorningStar, or anywhere else. They’re completely off the radar of people that even pay close attention to the markets. And I should know. I’ve been featured on Forbes, Yahoo!, CNN, Bloomberg, and many other outlets, because I’ve been a leading financier in the resource industry for nearly 20 years. Not once have I ever seen private placements mentioned. I’ve never even been asked about them in any of the interviews I’ve done. - **It’s why many people tend to think they’re only available to “insiders” or wealthy investors.** But as I’ll show you – it’s actually easy to tap into them… …once you know how. It’s a way to amplify your wealth and profit in these situations… And when it hits, it can really change your life for the better. Here’s one recent example… **Just under 10 months ago, we sent an alert to our subscribers about a private placement opportunity in a secret ESG commodity sector…** **That I was going to be the lead order of.** (Like my new financing project – which I will announce on Monday, Feb 7th)… In that ESG financing, we got shares… As well as “*2 for 1 shares*” with the upside kicker. We call this the “Katusa Warrant.” Within 6 months of the financing, the company went public in the summer of 2021. Shares of that CAD$0.75 private placement went public and attracted a lot of attention. **The share price rose to $3.30 for a return of 342%**. But you got an ADDITIONAL share in the private placement with the upside warrant kicker – what we call the *Katusa Warrant*… **This boosted your total return (shares + warrants) to 586%**. That’s nearly a 6-bagger and all your shares were listed and free-trading. Let’s see how that looks on the chart. You can see how the upside kicker amplifies the return when the stock moves up… And I believe it’s just getting started… The company will be listed on a major U.S. exchange by mid-2022 and that should attract a lot of new buyers… As the sector starts to accelerate further and grow multiples higher than its total current market size. This is how you REALLY make money in the markets… and why private placement financings can be so lucrative. **Tomorrow, I will go into detail on warrants…** Specifically, the *Katusa Warrant* – one of the most powerful *upside kickers* in the world. It’s a way to amplify and supercharge your wealth and profit in these private placement financings and deals. Regards, Marin Katusa Chairman, Katusa Research P.S. Private placements and warrants are one of the true insider secrets of the financial world. They offer the opportunity to make 10, 20, even 50 times your money in a single stock. A private placement can turn a modest investment of $25,000 into half a million dollars. If this style of investing is new to you – or you’ve never had the chance to participate in a private placement – [click here and download my free report,* Katusa’s Quick Guide to Private Placements*](https://subscribers.katusaresearch.com/wp-content/uploads/2022/02/Katusas-Quick-Guide-to-Private-Placements-FV.pdf). And make sure to keep an eye on your inbox tomorrow. --- # Breaking Gold News - URL: https://katusaresearch.com/breaking-gold-news/ - Type: article - Published: 2022-01-28 - Updated: 2022-01-27 - Author: Marin Katusa Dear Reader, Like clockwork, I’ve seen this time and time again. Some companies make MAJOR moves when NO ONE is paying attention. And then a massive rerate happens on the critical milestone. This happened to our holdings on the first-ever report I published on Katusa Research. It featured Newmarket when the company merged with Kirkland Lake because of the Fosterville mine. - **Only 12 months later, the stock was a ten-bagger on its way to becoming a 50-bagger.** Now, as a shareholder of this company I will discuss today… I’m biased and I follow every single move the company makes. So when a press release from this company caught my attention, I called the CEO up immediately when news broke. **David Garofalo** is CEO and the brains behind **Gold Royalty Corp (GROY:NYSE).** I am writing this on my own and the company did not pay me in any way to write this up. I’m doing this because I believe in the company. Less than 12 months ago, the company went public in the US on the NYSE. No small feat for a gold company, in a lacklustre gold market at the time. In that time since being public… They have been the #1 performing public royalty and streaming company. And that includes the big boys like Franco Nevada and Wheaton. David Garofalo has been the most active CEO in the gold space, announcing transaction after transaction. Including one of the largest operating gold mines in Canada. Gold Royalty is now the fastest growing gold royalty company in the world when it comes to major assets, in politically stable jurisdictions, like Nevada and Quebec. # **Gold Royalty Corp’s Next Major Moves…** The company is gearing up for a strong flow of news in 2022. First, they just announced a dividend. One of very few gold companies to do so. In my books, this is a sound indicator of good cash flow and management. So many mining executives talk about returning capital to shareholders… David Garofalo is walking the talk by actually delivering on what he said he would do. Today I have an interview with David Garofalo that you don’t want to miss. **You’re going to see an exclusive 1 on 1 interview… With an experienced gold executive… Who has been directly involved in over 10 major mine builds during his time as CFO of Agnico Eagle and CEO of Goldcorp.** And I want everyone to pay attention to what this is about. First of all… I have never seen, ever in my career, a management team execute at such a pace. - FULL DISCLOSURE: I Marin Katusa am a severely biased, shareholder of Gold Royalty (GROY.NYSE). And you’ll learn more about why in my exclusive interview with David Garofalo. If that bothers you then do not buy the stock. In this interview you’ll learn: - What David and the team at GROY will continue to do in 2022 to be the #1 performing (share price) public gold royalty and streaming company. - Why billionaire mining legends like Eric Sprott, Rob McEwen, and Jimmy Lee own stock (hint: they’re bullish) - Why he sees the gold price going to $3,000 - The significance of the Malartic Mine transaction and what that means for anyone that owns shares of Gold Royalty (GROY.NYSE) - Why the company announced a dividend and what that means for shareholders [**Click here to watch the interview with David Garofalo**](https://www.youtube.com/watch?v=CeKqvvps54g) Regards, Marin Katusa [**P.S. Click here for a link to the interview transcript**](https://katusaresearch.com/wp-content/uploads/2022/01/GROY-Jan-20-2022-Transcript.pdf) --- # The Fedcoin: What Bitcoin Doesn’t Want You to Know - URL: https://katusaresearch.com/the-fedcoin-what-bitcoin-doesnt-want-you-to-know/ - Type: article - Published: 2022-01-21 - Updated: 2022-01-20 - Author: Marin Katusa In December 2020, I wrote about a popular Bitcoin pricing model that was getting a lot of traction, the S2FX model. At the time, Bitcoin was on a tear and the sky was the limit for price expectations. And this popular model which promised investors the moon and more for Bitcoin prices caught the attention of crypto HODLers everywhere. I’ve never seen a math model garner so much enthusiasm. This model – [as I broke down in detail in my article](https://katusaresearch.com/the-bitcoin-gurus-are-using-a-flawed-formula/) – was fundamentally flawed. Naturally, at the time, I got a lot of hate for breaking down the math and exposing the fundamental mathematical flaws with the model the way I did. No good deed goes unpunished. I stand by my original conclusion, which was – an asset pricing model based solely on supply, without consideration for demand, is fundamentally flawed. ## **As for how the S2FX model is doing these days?** ![The Fedcoin: What Bitcoin Doesn’t Want You to Know] Not so hot. As you can see from this recent post on the S2FX author’s Twitter, it continues to serve as a poor predictor of Bitcoin prices, despite what the logarithmic Y-axis might lead you into thinking. Logarithmic axis is the autotune for charts. The difference between what Bitcoin is trading below and what the price should be according to the S2FX model is at its biggest difference in the history of the model. That’s not good. The price of Bitcoin has rallied back to just above the $43,000. Currently, Bitcoin’s actual price is trading more than 80% lower than what the S2FX model predicts its price should be, which is around $240,000. - **On the flip side, if you’re a believer in the S2FX model, then there’s no better time than now to load up.** This would be no different than a gold bug publishing a flawed framework stating the gold spot price should be $9,000 ounce today but was at $1,800 in the open market. To be fair, Bitcoin has until 2024 to hit the $288,000 price level predicted by the model… but I’m not holding my breath. **Full Disclosure**: I do own Bitcoin and other crypto assets in a fund I’ve invested into. And many employees in the Katusa Research office own Bitcoin and other assets. To me, the crypto market is just as speculative as the junior resource exploration market. Whether you are speculating on a geologist with a box of crayons and some ideas or a computer programmer manipulating ‘0’s’ and ‘1’s’; it’s all ultra-high risk. Cryptocurrencies are complicated assets with many unique benefits and drawbacks. To simplify Bitcoin’s pricing to a model dependent solely on a single supply metric does it a great disservice. And on top of that, there’s one major elephant in the room nobody’s been talking about yet… ## **The Coming Coin to Rule Them All?** Say what you will about them, but blockchains and distributed ledgers are here to stay. And there’s no question about it: they will become increasingly employed as nigh-unhackable record-keepers. Not only that, but thanks to how they can’t be duplicated or forged, they can also be used to create digital currencies. Bitcoin is an obvious example. It’s been around since 2008 and doesn’t look like it’s going anywhere. - **In fact, mining for new Bitcoin now consumes 4 times more electricity worldwide than the total yearly amount used in Switzerland.** The field is still in its infancy, and who knows how it’ll play out? But a lot of very bright minds are involved, and a lot of capital has been invested. Suppose cryptos do go mainstream and become legitimate currency alternatives? (Now I know some crypto heads will argue with me on this one – *“Bitcoin is already a legitimate currency alternative!”* But if I can’t go out and do my grocery shopping, fill up my tank, and grab a burger and fries all with the same currency, it’s not a legitimate alternative. And yeah, I’m well aware there are apps that you can use, but it’s nowhere near mainstream.) - **But for this thought process, let’s live in a future Bitcoin is a legitimate, widely used mainstream currency…** Bitcoin transactions would actually boost the velocity of U.S. dollars outside of the Fed. They will also return the concept of privacy to commercial transactions. There are a lot of upsides, and potentially, a lot of money to be made from them. However, there are also some major obstacles. If you want to invest in Bitcoin and other cryptocurrencies, you ignore these challenges at your own peril. It’s far better, then, to make sure you understand these obstacles so you can make informed decisions when it comes to these types of investments. I’ve discussed a few of these in my #1 Bestseller, [‘Rise of America’](https://www.riseofamerica.com/). ## **#1: Government Regulation** The first and biggest obstacle to the widespread adoption of Bitcoin and other cryptocurrencies is the government. - **The government does not like competing currencies, and none but the dollar is recognized as legal tender that must be accepted in trade.** So far, Washington has not moved to ban or even regulate the likes of Bitcoin, and that’s at least in part because it would be so difficult to do. Bitcoin resides on a blockchain distributed across thousands of nodes (computers). It was specifically designed so that no bad actors can gain access to and modify the chain. That doesn’t mean the authorities won’t come after Bitcoin someday if it becomes perceived as a genuine threat to the government’s monetary monopoly. An effective clampdown will be difficult, but by no means impossible, and that’s something every investor should be aware of. You need not look any further than China to see what happens when a government decides it’s had enough of cryptocurrency. ## **#2: Massive Pollution** Another major obstacle facing crypto is the incredible amount of pollution created by the crypto mining companies. I’ve been shocked at how investors haven’t connected crypto coins to their horrible environmental footprint. Especially with the institutional investors and millennial investors who focus on ESG. It’s relatively easy to follow on the blockchain where each coin was digitally minted, and all institutions should avoid “dirty coins.” This should also help eliminate bad actors who have set up crypto mining farms that don’t follow the highest environmental protocols. - **(If you aren’t sure what farms in the crypto sector are, crypto farms are nothing more than a large number of computers—in the tens of thousands—in one large area, all connected, working towards creating coins.)** Mining operations with poor environmental footprints would never be accepted in the gold, mining, or energy sectors in North America by investors. Why is it being accepted in the crypto sector? The crypto universe should mandate a transition to clean. If the big oil companies can, so can the crypto world. ## **#3: Lack of Acceptance** Acceptance is also an ongoing issue. The viability of all money is a matter of faith. When people have faith in a currency, it endures; if they lose that faith, it can collapse in a heartbeat. For Bitcoin to truly succeed, people have to endow it with value by having faith that it’s “real” money. If that’s going to happen, it will have to show more stability than it has at present. Making a deal in Bitcoin means assuming the risk that tomorrow it may be worth only half of what it’s worth today—as has happened all too often with Bitcoin. Few people want to take that risk. The flip side is that it can also rise steeply in price, and frequently has. So, I think it’s probably safe to say that many Bitcoin owners are in it merely as a speculation. The volatility will have to decrease before it can truly become a store of value or a currency for buying things. Remember that any appreciation in Bitcoin’s value doesn’t exist outside of its relationship to a national currency like dollars (or euros, or yen, or whatever). You profit from Bitcoin only when you convert it to something else. And now to the big one—few want to discuss. ## **#4: The Development of “Fedcoin”** As if these three obstacles weren’t enough, there’s another one that looms even larger. For some time now, it’s been rumored that the Federal Reserve has been toying with the idea of creating its own blockchain and using it to market its own cryptocurrency. Let’s call it Fedcoin. This would be a highly logical government response to Bitcoin. - **You don’t have to ban or regulate something if you can introduce a competitor that wipes it out. That’s what Fedcoin would do to other cryptos.** It would see immediate and widespread adoption because it would have an insuperable advantage over other coins: it’d be legal tender, especially important to those on universal basic income. Expect the government to make it mandatory for companies that receive any support from the Fed bond-buying program to accept only Fedcoins. Once again, China serves as the perfect example. What did the Chinese government do last year after they banned all crypto mining and cryptocurrency transactions? You guessed it – their central bank pushed their own cryptocurrency to fill the gap, the digital yuan – or digital RMB (renminbi). And now, the Chinese government is advocating for more widespread use of its own digital currency by strongarming major domestic tech companies Tencent and Alibaba, who have been forced to add support for digital yuan transactions to their own WeChat and Alipay platforms. For years now, China’s national lottery has already been paying out winnings with digital yuan – imagine how widespread adoption would get if the government forced citizens to, say, pay taxes and receive tax returns only in digital yuan. Yes, there would still be some diehard privacy lovers who would shun Fedcoin in favor of some other crypto. But the great bulk of the population would opt for the convenience of the government’s offers. **There’s a Long Road Ahead** Could Bitcoin or another crypto develop into a genuine currency that’s accepted by merchants everywhere? Does it make sense to invest in Bitcoin and other cryptocurrencies? The answer to both questions, at least for now, is perhaps. For that to happen, though, Bitcoin will have to overcome all the hurdles laid out here. If it can’t, it will lose its value as an investment opportunity. I’m not going to tell anyone not to invest in Bitcoin; however, I am going to tell you that you should pay attention to how these challenges affect Bitcoin and other cryptocurrencies. To do anything less could potentially be a very costly mistake. Regards, Marin Katusa P.S. If you want to learn where I’m putting the bulk of my money in the markets – [click here to find out about my premium research letter – Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). --- # Currency Crunch - URL: https://katusaresearch.com/currency-crunch/ - Type: article - Published: 2022-01-14 - Updated: 2022-01-18 - Author: Marin Katusa Did you know a three-letter region is home to one of the world’s oldest and most stable currencies? - It has existed for centuries - It’s never changed its status - It has never debased itself. Sounds like a monetary system we could all take a page out of, right? The ***rai stone***, created from limestone and shaped like a hollow disc can be found on the Micronesian islands of Yap. Created centuries ago, these discs represented currency on the island. Approximately 6,000 of these discs are known to exist scattered around the Micronesian islands. Contrary to Roman or British currency which saw their currencies be “clipped” during hard times as citizens shaved off portions of their coins for the true metal value, in Yap, the discs rested peacefully. Not only that, because the discs were heavy, transfer of the discs between holders was completed orally. Where the stone sat was irrelevant, including one instance where a disc was lost at sea yet became part of the “money supply”. The clipping of coins for their value led to the debasement of monetary systems. While we don’t “clip” our coins today as there is almost no metal value in them or in the banknotes we carry, nations have been debasing their currencies at a torrential pace. Central Banks and governments debase through monetary actions, known as expansive monetary policy. ## Shocking World Money Supply Growth Did you know that over the last 20 years… If you took all the currency created in the world and converted it to US Dollars… the money supply would have increased by 5-fold? That’s equivalent to nearly two full years’ worth of emissions from all energy production around the world. ![Currency Crunch] Looking at this chart only tells half the story. To truly grasp the impact of expansionary monetary policy, let’s look at the currency expansion as its local currency… And then see the *relative* effect of that monetary expansion against other currencies. ## **Breakdown: The Turkish Lira** Let’s look at the Turkish Lira, which I highlighted in my Amazon Best Seller *[Rise of America](https://www.riseofamerica.com/).* In the next chart, you’ll see the enormous expansion of money compared to the United States. What many investors fail to realize is that currency performance is measured *relative* to another currency. - **Key drivers in the performance of currencies are monetary policy and expected economic stability.** This chart shows the money supply expansion in Turkey compared to the United States. ![Currency Crunch] And this is the impact of all this money being created. ![Currency Crunch] - **This 8x increase in money supply and political instability has had a huge impact on the world’s view of the Turkish Lira.** ## **The Russian Rubles are Running…** In a similar fashion, you can see this situation unfolding in Russia. A highly expansive monetary policy is *relative* to the United States… ![Currency Crunch] Again, we see a similar chart pattern arise in the Ruble – US Dollar currency pair. ![Currency Crunch] ## **Exotic Currencies and Riches** Many investors are drawn to the emerging and frontier markets because they are exotic, in the early stages of development, and ripe for potential investment. While that is true, there are huge risks associated with those emerging nations. Many investors will consider company-specific risk and maybe a few will consider the government risk. But most forget the *currency risk*. The table below shows the performance for a basket of emerging market currencies versus the US Dollar. ![Currency Crunch] As you can see… - **Unless you were dialed in on the currency move, or highly sophisticated and hedged the risk, your investment profits were massively at risk.** Unquestionably our new era of Quantum Economics, ZIRP and NIRP (Zero & Negative Interest Rate Policy) coupled with gigantic stimulus packages have set us down a treacherous debasement path. This is a situation I see continuing well into the future. ## **Katusa’s 2022 Currency Watchlist** Here’s a list of currencies you must keep an eye on as an investor. If your stocks hold cash, assets and projects (especially in the first 4 bullets), there are big currency risks: - Turkish Lira - Chilean & Peruvian Pesos - Brazilian Real - Euros and Pounds - Canadian, Australian, US dollars With debasement being a theme seen around the world investors and speculators are often in search of the next “rai stone”. ## **From Stone Disks to Bits** If you ask an economist what criteria something must be to qualify as money, they will respond with 3 checklist items. - Store of value - Medium Exchange - Unit of account Whether you like it or not, we exist in the world of digital everything. Payments, artwork, and some would argue, currency. Over the last 5 years, Bitcoin has become a dominant force in the global markets. And is now considered by many to be a major asset class, just like stocks, bonds, and commodities. Bitcoin has become a true competitor for investor capital much to the chagrin of many precious metal and gold standard bugs. ## **Bitcoin’s Next Move** It has been a rocky start for BTC *holders* with bitcoin falling nearly 10% so far this year, making it the worst performer out of major asset classes. But we all know that can change in a flash in the crypto world. Especially when $1 Billion USDT is transferred to Binance in the span of a few hours. Below are several key technical levels for Bitcoin. ![Currency Crunch] As we flip the calendar to 2022, I expect fiat and digital currencies to remain a highly volatile asset class. Many gurus and dollar haters continue to beat their chests that [the end of the US dollar is here](https://katusaresearch.com/the-dethroning-of-the-us-dollar/). It’s the same song they’ve been singing for years now. Time and time again they have been proven wrong. ## **The Katusa Pipeline is About to Get *Supercharged*…** Right now I am working on 2 of my biggest ideas to date. These are deals that I will personally be investing millions of dollars into. A subscriber to my [premium research service – the KRO](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) – will have the opportunity to learn about and access these deals, and they are one’s which I assure you no one else in the industry knows about. - **If you want an edge into 2022, [click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) and get on the list BEFORE these get announced behind the paywall.** Because if past alerts are any indication… There won’t be room for everyone. Regards, Marin --- # Commodity Heatmap - URL: https://katusaresearch.com/commodity-heatmap/ - Type: article - Published: 2022-01-07 - Author: Marin Katusa We have flipped the calendar to 2022. Whether you crushed it or got crushed in 2021, it’s time to sharpen your pencils, refocus, and prepare to capitalize on new opportunities. ## Katusa Commodity Heatmap As many of you know, commodities are cyclical. Large price moves normally come in waves and the big winners rotate as the economy changes. - When the economy’s *expanding*, base metals and industrial commodities do well. - When the economy’s *stagnating* or declining, precious metals act as stores of value. Below is a table which shows you the annual percentage return for select major commodities. While very basic, it provides a great overview of what was hot and what was not in the past five years. That’s equivalent to nearly two full years’ worth of emissions from all energy production around the world. ## ## Gold’s Mild Year After a strong and profitable 2020, gold and gold miners struggled in 2021. Bullion was down 4% while many miners saw their share prices decline by over 20%. Inflationary conditions are driving expectations of interest rate hikes, which has put pressure on gold prices. Further putting pressure on gold and contrary to the outlook of many gurus… The U.S. dollar remained strong in 2021. With the U.S. Dollar DXY Index appreciating 4.70% for the year. - **As I have said many times, don’t fight the Fed or underestimate the power of the U.S. dollar.** Gold miners themselves faced supply chain issues and cost increases were seen across the industry. In addition, many mining stocks were victims of tax-loss selling and closed out the year near 52-week lows. - **However, even in a somewhat gloomy environment, at current gold prices of $1,800 per ounce, [gold miners are incredibly profitable](https://katusaresearch.com/the-gold-circus/).** I expect 2022 to be a whipsaw year for precious metals with considerable volatility. I recently added to my favorite gold holding. [Click here to find out what it is…](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) ## Uranium Heat Uranium and uranium stocks had a banner year in 2021. Physical uranium was up 40% on the year – its best year in over a decade. The other yellow metal soared higher as physical buyers loaded up on uranium for immediate delivery, and uranium stocks soared as well. A basic basket of uranium stocks returned +80% last year. - **KRO subscribers were positioned in the number 1 uranium stock, which returned more than +200% in 2021.** In 2022, I expect uranium to remain volatile with lots of opportunities for potential upside. The current situation with protests in Kazakhstan could bring a shock to uranium prices. The country is the world’s largest producer of uranium. To the uranium market, Kazakhstan is like Saudi Arabia, Russia, and all of OPEC to the oil market. The Kazakh state-run operation Kazatomprom is the world’s largest, lowest-cost uranium miner in the world. - **Kazatomprom produces over 40% of the world’s uranium.** Another key driver in 2022 will be new European legislation which may allow nuclear power to count as a “green” investment. This would allow nuclear power producers to receive lower-cost financing for new builds and for refinancing current operations. I also believe that the players within the spot market will continue to buy up any available pounds. The billion-dollar question is if/when utility participants begin to lock in contracts at prices above $40 per pound. It hasn’t happened yet but perhaps their hand will be forced this year. ## Copper Copper soared to record prices in 2021 as demand outstripped available inventory and supply. - I provided several free reports on copper over the years that explained why copper prices would soar—and 2021 was the year the copper price went a lot higher. Copper demand surged last year as economies reopened, electric vehicles were produced and renewable power plants were built. As I wrote in my free article [Copper: The Big Squeeze](https://katusaresearch.com/copper-the-big-squeeze/), the world is going to need a lot more copper as it electrifies. Copper producing regions continue to face scrutiny over labor and ESG issues. Strikes at many major operations caused production shortfalls. It would not be unreasonable to assume additional societal unrest in these major copper-producing regions in 2022. - **Our top copper stock return in *Katusa’s Resource Opportunities* has given us an incredible 3,048% return since it started trading. That is over 30 times your money**—yes you read that right!**** This isn’t a typical return… But it’s a spinout company with an incredible asset and management where we got shares for free. ## Carbon Attention Carbon credits and emission permits were incredible performers in 2021. The European Allowance permit, known as the EUA, was up 146% for the year. - “Green” carbon credits generated from nature-based offsets climbed **125% in 6 months of trading**. - The “white” carbon credits utilized by the airline industry for offsetting rose **246% for the year**. Katusa Research is at the cutting edge of the carbon markets. I’ve hired more staff specifically for carbon, and I myself am laser-focused on it. - **KRO subscribers [who bought positions in my carbon recommendation](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) are sitting on well over 270% gains in less than 6 months.** The amount of deal flow and investment opportunities in the sector right now is unlike anything I have ever seen in any other market segment. Perhaps the best thing about this market is that it’s literally being further developed and improved every day. This creates even more opportunities for investors of all sizes. I don’t think there’s anyone in the industry who puts in as much due diligence effort as I do. Months of due diligence go into every idea. Relationships with management teams are cultivated over years. You simply can’t replicate this type of experience using market scanners or social media stock picks. **I have two brand new ideas coming down the pipe for my subscribers…** We are amidst one of the most exciting markets I’ve ever been a part of in my 20+ year career as a professional fund manager. If you don’t want to miss out on any of my ideas, investments, or research – [click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin --- # A Peek Into Katusa’s Inbox - URL: https://katusaresearch.com/a-peek-into-katusas-inbox/ - Type: article - Published: 2021-12-31 - Updated: 2024-10-09 - Author: Marin Katusa I’m sure he was a bit surprised when I responded to his email at 11:15 pm from my office late last Thursday night. I’ve been on the road, many meetings and dinners. And I had a lot of items to catch up on. So, late nights are nothing new. But because I run my own shop and make my own rules, I make sure there is no barrier between subscribers and me. I read nearly every email that comes through the inbox. Aside from tens of thousands of words of encouragement and fantastic testimonials from subscribers, there are the odd disgruntled people. And if I can’t respond to you personally (deep in due diligence or traveling to a site visit), a member of my team at Katusa Research is always happy to oblige. This includes my partners, the analysts, and the excellent customer service team. And when someone comes out with feedback about my service, integrity, and dedication to my life’s work, I don’t dismiss it. First, I seek to understand and then I respond. Now, I feel I need to cover a few items that I keep getting questions about from both old and new readers. **So below, I’ll address 5 of the most common emails we get in the inbox.** They will help you keep your investing frustration in check. And to stay the course en route to successful investment scores in what are turbulent markets. Here are 5 main points you need to print and staple to a wall: ## **1. Being overweight in any one portfolio position is a recipe for disaster** Never put more than 10% of your speculative portfolio into any one stock. In the past, I know I haven’t entirely followed that rule myself, but you can only get real success in speculations with risk mitigation and by letting your winners ride (think Northern Dynasty and Alterra as recent examples). Putting all your eggs in one basket could pay off in a big way (if you’re absolutely correct), but you’re exposing yourself to greater risk. I didn’t always follow this rule. It’s no secret that in the past I put as much as 35% of my net worth into one stock. But the global financial crisis and heart surgery knocked sense into even the thickest of skulls. If your speculative portfolio is worth $50,000, don’t put more than $5,000 into any one company. Especially if this is a small-cap company. - You can [read more detail about position sizing here](https://katusaresearch.com/biggest-key-safely-speculating-natural-resource-stocks/). But just as important as position sizing is, so is the next rule… ## **2. Never buy your intended position in a stock all at once. Buy in tranches.** I’ve met many, many successful traders and fund managers all over the world. I’ve yet to meet anyone (or any software algorithm) that has mastered timing a stock perfectly, on a consistent basis. So, take the risk out of timing by buying your desired position in tranches. - If you have $5,000 to invest (from your 10% allocation to 1 company), then split that up into tranches. - A good rule of thumb is 4 equal 25% positions (so in this case, 4 positions of $1,250). If you are *really* excited about the stock, buy your first two tranches. Then sit back and wait for Mr. Market to give you a sale and buy more of the stock at cheaper prices. This way, if the stock rises, you’re along for the ride. If it goes down, you can scoop up shares for a discount. Again, I learned this rule by actually improving my purchase techniques with time. It took years to build up my Alterra position. I also plan on doing the same with my number one conviction story right now. I have to buy in tranches to accumulate a position and I have to sell in tranches too. Start to buy your position in tranches and the issue of timing your entry and exit perfectly will not weigh so heavy on your mind. - You can [learn more about buying in tranches right here](https://katusaresearch.com/the-investors-biggest-problem-and-his-worst-enemy/). ## **3. If an investment causes you to stress to the point you can’t sleep – sell.** If you are overly distracted by any of your positions and it causes stress, discomfort or you’re losing sleep… Sell enough stock to alleviate the situation. Life is too short to worry about a stock position. Enjoy the present and have fun. If your stress level is high on a continual basis and is becoming intolerable, then you have to reflect on one of two things: 1) You’re over-invested, or 2) Speculating just isn’t for you. If it’s the latter, that’s OK. Life is short, do things you love and you will not just have fun but be successful. You’ve now come to the point of self-awareness and what works for you. If you’re mortgaging the house, playing with vacation money, or your kids’ tuition, then you’re playing with fire. Only speculate with money that won’t change your lifestyle if you lose 100% of it. ## **4. Give your speculation some time to play out** Being patient and investing like an alligator is extremely difficult. Over my nearly 20 year career, I’ve seen many people (including myself) become impatient and make irrational moves. I have made many mistakes. But I have learned from each mistake. These are all lessons I share with my readers, and there are many. Over a 15-year career as one of the largest financiers in the resource market, I’ve learned a lot from the many mistakes I have made. One such mistake I’d like to share is actually betting right, but the lack of patience can cannibalize successful speculation. Being impatient has cost me a lot of money. Here’s an example from personal experience: I met an analyst on-site in early 2006 and we bonded. Site visits do that at times, especially when the plane is stranded in an unexpected 4-day snowstorm that no one was prepared for. We stayed in touch over the years. He moved on from the firm he was an analyst within 2008 and joined Verde Potash. I believed in this individual and without doing a site visit I purchased 4 million shares at CAD$0.25. I trusted him, knew of his strong technical background and the company was trading at a discount to cash, so I was getting the management and the project for free. The company had C$0.29 cents cash per share, so I felt good about my $1 Million bets. I had many meetings with management and then I planned to do a site visit of my own to the main asset in Brazil. (2009 was crazy for me as I spent over 300 days on the road and gained 40 pounds as a result of bad habits such as drinking beer with geologists at night on the road, and not working out regularly. But you would be amazed how much market intel you get from drunk geologists at midnight). Anyways, Verde Potash management laid out a specific time frame and business plan that they assured me would hit if I stuck it through with them. Well, the first milestone was delayed. Then the second. Remember, early 2009 was a very rough market for resource stocks. I didn’t have the time to go out to the project and see for myself. But a close and trusted friend of mine (thanks Miles!) stated he knew the project and that it wouldn’t work. I was skeptical after that and frustrated with management for missing the milestones. I lost sight of the main reasons I’d taken the position in the first place. Then the third milestone was missed and I sold. I netted just under a 100% gain. You would think a near double isn’t bad in a very tough market. But I screwed that one up. As it turned out, I missed an enormously greater score. Within 14 months, the stock was trading north of C$10 a share. Were the delays management’s fault? No. I was impatient. Even though nothing changed, and I trusted management, I let one friend’s perception of the project change my view. I continue to learn from my own mistakes (and try to learn from others I respect in the industry). I continually remind myself that, if the specific reasons for investing in a company are still valid, and I trust management, I shouldn’t let non-management time delays sway me to abandon my position. Shit happens. We try to learn and better ourselves and become better investors. ## **5. Crystallize a profit using the Katusa Free Ride Formula** When you have a profit, risk mitigation is key to protecting your downside and leaving the opportunity of huge upside available to you. Remember, you don’t just buy in tranches, but you must also sell in tranches. The most efficient strategy (and one I use all the time), is to use the Katusa Free Ride Formula. ![A Peek Into Katusa’s Inbox] So to **D.T.** who sent in that email on that Thursday that made me reflect, thank you. And after I replied to you, your response email a day later was one I want you to know that I truly appreciated: - *“You were right, I wanted to know whether or not you were the real deal and your email would suggest you are.”* We’re just two alligators on the same side of the fight and on this journey together. And I have A LOT of ideas coming down the pipeline in early 2022. I think this will be one of the most exciting years in a long, long time. Because the opportunities I see in the commodities and carbon markets are going to reach a fever pitch. And you will want to be in on the ride. [Click here to learn how to become a member of my inner circle](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) and join Katusa’s Resource Opportunities. Regards, Marin --- # The Insurance Disaster Trade - URL: https://katusaresearch.com/the-insurance-disaster-trade/ - Type: article - Published: 2021-12-23 - Updated: 2021-12-20 - Author: Marin Katusa To the 1 in 1,000,000 investors, like the alligators reading this… It will be the start of some of the most critical talks in the global markets. Many investors and historians could very well point to November 2021 as the catalyst date that put **World War Zero** into motion. The 2021 United Nations Climate Change Conference, also known as COP26, wrapped up. Held every year, this conference is where climate targets are set, countries are held to account, and companies are forced to comply. - **In 2022 and beyond, the most recognized institutions, universities and the media will be in overdrive reporting climate and net zero news.** Expect all media and the news cycle to highlight reports that the global oceans, on average, are 30% more acidic. And global temperature is 1 degree Celsius warmer than before the Industrial Revolution. Which has resulted in a 70% decline in the population of mammals, birds, fishes, reptiles, and amphibians. To add urgency, the media will highlight that the rate of change of ice loss in the Artic is 300% higher than last decade. It took mankind 250 years to produce and release 500 billion tonnes of CO2eq into the atmosphere. At current rates of emissions, it will take less than 40 years. Now I will share the statistic that got the wheels turning in my brain… - **1 in 50-year climate events occurrence will increase 38.9 fold.** This one line in the IPCC report caught my attention in a big way. I had to re-read the whole section many times to fully grasp the significance. Because the news is the marketing machine for this… ## **The Insurance Greenaissance** Before you jump to conclusions and opinions, you must know that the statistic above is very important. Backed by enough evidence and math, the results will directly affect the way the insurance sector does business. - **The insurance sector (as a whole) is one of the largest pools of capital (non-govt) in the world and the largest provider (non-govt) of capital for infrastructure projects globally****.** 2017 was a banner year of losses for the insurance companies: - **$140 Billion in climate-related infrastructure losses****. ** Dr. Stokes, testifying in front of Congress in September of 2021, stated that the cost on the US alone in 2021 would be $500 billion due to climate and weather disasters. Another well-known insurance group, **Lloyds of London** (over 300 years old and operating in 200 countries—they are survivors!) published their calculations… They believe their numbers prove that the 20cm rise in sea level at the tip of Manhattan, compared to 1950 water level, increased the insurance losses from Superstorm Sandy in 2012 by 30% in New York alone. In addition, over $500 Billion of coastal US property could be below sea level by the year 2100. These stats are all a major risk to the insurance companies’ operations. ## **You DO NOT Have to Agree With “Climate Change”…** Agree with the published data or not. It’s presented by the top firms in the world and the biggest insurance companies in the world have taken note. But it’s not just politicians that had their say at COP26. Let me explain… The Bank of England (Central bank of the UK) is the force behind UK being a global insurance powerhouse. This editorial isn’t about insurance or actuarial science. (That’s the math that can calculate with incredible accuracy when we will each die when the insurance premiums are written). **So please bear with me with on some minutia – that will really shock you.** And help you understand where the flow of capital will be going over the next decade. ## **The Insurance Market 101** The UK is the single largest market for non-life insurance in the world (7% of global insurance premiums). These premiums are written through the London Market with almost 85% undertaken in the UK by insurers who are themselves part of groups headquartered overseas (read: everyone is connected and not an island). UK domiciled insurers rank 4th globally in written premiums and manage almost $2 Trillion in assets. The insurance business is so big that it will depend on open international insurance markets. Hence, sector reform and legislated reform will become a key factor in redirecting/investing/lending trillions of dollars of managed insurance assets towards reducing the impact on the climate. **Meaning *to have access*, one must *abide by the rules*.** In addition, large infrastructure projects, real estate assets, and other assets, etc. will have to meet the criteria of the insurance companies. **OR** risk the potential of not meeting the coverable criteria by the insurance company because of their carbon footprint and emissions. **It would be the equivalent of an obese smoker who has had a heart attack that doesn’t qualify for life insurance. **Too bad, so sad. Without a plan to reduce the corporations’ carbon footprint, their portfolio of assets may not qualify for insurance coverage. *SPONSORED CONTENT* [![The “Insurance Disaster” Trade]](https://carboncredits.com/) Would you invest in such a company, for example, a REIT if the portfolio of buildings did not have insurance coverage? Perhaps, but at a much lower valuation because of the risk of uninsured assets risk. ## **The Net Zero Movement Will Spare No One** The central banks and large insurance corporations [are all getting behind a NET ZERO movement.](https://katusaresearch.com/carbonomics/) It all comes down to the cost of capital. - **Over $88 TRILLION dollars** (WOW!) from just the financial world (insurance, pension, and specific government plans, etc.) has already lined up to commit to allocating that capital to projects/companies/assets that meet the criteria of reducing the carbon footprint. **I want everyone to think of the magnitude of this amount of capital.** The total annual global energy spend is less than $2 Trillion. This is over 44 years of global annual energy this decade. In addition, the IEA recently came out and stated that the energy spend needs to at a minimum double to meet the agreed-upon goals of Paris 2015 COP. Over the past 6 years, *decarbonization* went from a cute idea to what will become [the most highly sought-after investment theme since the late 90s tech boom](https://katusaresearch.com/the-adoption-rate-of-this-obscure-commodity-will-be-the-fastest-of-all-commodities/). Through a concerted effort, corporations and governments around the world used the 2020 pandemic as an inflection point to move from an unsustainable emissions trajectory to a sustainable pathway. The prizes and penalties for decarbonization success and failure have never been higher. You’ll see below that since January 2020, the number of companies with net-zero commitments has tripled. ![The Insurance Disaster Trade] These commitments are not backed by some fluffy long-term guidance. Financial commitments to back net-zero targets have soared 18-fold to $88 trillion in the past 18 months. The corporations have committed with their balance sheets. ![The Insurance Disaster Trade] Some of you may still not believe in this whole “climate change and decarbonization world”, and that’s fine. Close friends of mine (like Doug Casey) have publicly stated as much. I’m not here to change your beliefs. I am here to present a very strong investment proposition, backed by a strong narrative, that has the potential to make us a lot of money. I’m not here to change your views on climate. I believe you subscribe because you want me to provide the best investment ideas. For me to do that, I must keep learning, keep evolving, and get exposed to as many possible deals that I can assess and analyze. I can never give up on a financing structure that I believe will work… and take on all forms of adversity that in the end will present unique financial opportunities to you. Once all this effort and risk is applied, I then present the best ones for your investment decision. **I do this in my premium research service – ****[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)****.** And it’s read by everyone from novice investors to some of the most prominent family offices and fund managers in the world. The largest and most powerful investment institutions in the world are heading in the direction of decarbonization. And I believe the UK government will make a big commit this COP 26 and even go as far as to start legislation towards a decarbonization framework (making it law). **This movement will impact all your investments** - This was a big talking point in the last chapter, **The Forbidden Chapter**, in my book, [**The Rise of America**](https://www.riseofamerica.com/). Corporations that are not willing to make changes simply won’t attract new investor capital. Worse, many current investors will be forced to sell out. Companies who don’t want to play by the new rules will face much higher costs of capital which in turn will render them obsolete and uncompetitive. Aggressive shareholder activism will continue for those companies who don’t want to play ball. Again, the cost of capital goes up for those not willing to make changes. This is the new normal. Regards, Marin Katusa --- # Golden Alpha - URL: https://katusaresearch.com/golden-alpha/ - Type: article - Published: 2021-12-17 - Updated: 2021-12-16 - Author: Marin Katusa The beautiful thing about the stock market is that there is a never-ending source of opportunity. Trillions of dollars are constantly on the hunt for one thing: alpha. Alpha is known as the return of a portfolio over a benchmark. - **Searching for the next source of alpha can lead to massive profit windfalls for hedge fund managers and their clients.** These sources are exploited as fast as possible and the investment strategies which reap this alpha are treated like wartime trade secrets. Today the stock markets are supposed to be efficient. This means that stock prices accurately reflect publicly available information. Sometimes, however, there are exceptions. When these exceptions last for long periods of time, they are known as market anomalies. ## **The “January Effect” is a Market Anomaly** For many years, stock market returns in January have consistently been some of the strongest returning months. Market timers can use this to their advantage and improve return performance by buying strategically at turning points. The gold market is no exception and as you’ll see that there are some large gains to be had. Below are all the monthly returns for physical gold since 1989. As you can see, on average, January reports the strongest gains. ![Golden Alpha] Exposure to gold producers leverages the return potential over just buying physical bullion. If nothing else, January 2022 will have the benefit of being the first month post tax loss pressure from a rough year—just like 2021 was for the gold producers. It makes sense then if you’re looking for an edge in the gold market… - **An investor should examine the January effect on the returns for gold focused stocks.** Higher gold prices should translate to higher share prices. And as you will see in the chart below, the profits and losses are magnified… ![Golden Alpha] Using a very basic market timing strategy of buying on the last day of November and selling the last day of January can capture the “January Effect” very well. Below are statistics for the period 1996-2021. Over 50% of the trades are profitable, while the average win rates and largest wins are considerably higher than losses. - **Average Win** + 17%, Largest Win +41% - **Average Loss** -10%, Largest Loss -21% - **Total Return from strategy** +141% ![Golden Alpha] ## **Silver Season Trading** Don’t worry silver bugs, I didn’t forget about you before Christmas. For all the silver fans out there, I’ve got a few stats that you can use at your silver bug Christmas party this year. The January effect is even more pronounced for silver. - **Clocking in at an average +2.73% return, January is the largest profitable month on average for silver. ** ![Golden Alpha] Starting in 1996… Using the same simple strategy of buying silver on the last trading day of November… And selling silver on the last day of January leads to impressive gains: - **Total Trades** 26, Profitable Trades 19, Unprofitable Trades 7 - **Average Win** +10%, Max Win +23% - **Average Loss** -8%, Max Loss -13% - **Total Return from strategy** +299% Like in gold, exposure to the silver producers leverages the return potential. Unlike the HUI Gold Bugs Index, there is no “silver bug” equivalent, so I created one. Below is the index and the associated performance for the January effect. Again, you’ll see the gains and losses are magnified. ![Golden Alpha] Using the same buy in November, sell in January approach, the returns are very high. - Average Win +21%, Max Win +49% - Average Loss -11%, Max Loss -23% - Total Return from strategy +600% ## **What The Gold and Silver Commitment of Traders are Saying…** You would think with this type of predictable performance, we’d begin to see positioning in the non-commercial group in the Commitment of Traders report. But so far there has not been any noticeable spike. Below is the net positioning, (longs minus shorts) for the non-commercial group for gold. ![Golden Alpha] And here is the net non-commercial positioning for silver. ![Golden Alpha] As inflation expectations continue to rise around the world, [central bankers find themselves in a tough spot](https://katusaresearch.com/are-inflation-indicators-turning-against-the-fed/). - **Slowing the spigot of cash at just the right pace is nearly impossible to gauge. ** The market has become incredibly reliant upon asset purchases and supportive central bank actions. Aggressive moves to curb inflation and slowing or entirely removing asset purchases risks the market being able to adequately support itself. Whereas allowing large stimulative asset purchases and near zero rates creates long term inflationary risks. *SPONSORED CONTENT* [![Golden Alpha]](https://carboncredits.com/) **I’ve never been one to make predictions simply because January is the next month in the calendar.** I position myself and subscribers in anticipation of major macroeconomic events. I do believe that 2022 will provide large amounts of volatility, which creates major opportunities. And as all my subscribers know… We’ve been very selective with our [favourite deep value best of breed gold positions](https://katusaresearch.com/the-gold-circus/) that we believe will result in above market returns. They have in the past, and we expect our framework to continue delivering above market returns. Global economies have proven to be resilient but what happens when central banks begin to slow asset purchases is yet to be seen. Subscribers and I have begun to slowly accumulate positions in favorite stocks. - **One of my largest investments (where subscribers bought at the same prices alongside me) just hit a new all-time high.** And I think it’s just getting started. Stocks on our tax loss hit list are also all getting closer to getting filled… While my latest core investment continues to surge higher on a major macroeconomic theme. (Note: This is something critical to every single portfolio). It’s alligator time in the gold sector. If you felt like 2020 was a tough year for your portfolio and you want to give yourself an edge in 2022 and beyond, **Katusa’s Resource Opportunities** could be for you. [Click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) Regards, Marin --- # Climate Tokens and The Never-Ending Squeeze - URL: https://katusaresearch.com/the-never-ending-squeeze/ - Type: article - Published: 2021-12-10 - Author: Marin Katusa If you’ve been paying attention to carbon prices, you’ll know that they’ve been on a tear. In the wake of COP26, carbon prices skyrocketed – capping off what has already proven to be a record-setting year for the carbon markets: With prices having more than doubled since the beginning of the year, the carbon markets are looking to finish strong for 2021. And they show no sign of stopping. COP26 drew lots of attention to the carbon markets (especially with the developments regarding [Article 6](https://katusaresearch.com/carbon-catalysts-watch-article-6-at-cop26/?kiiemail)). But it wasn’t the only catalyst. After all, prices were already trending upwards even before the U.N. climate conference in Glasgow. One of the other forces helping drive up the demand in carbon credits came from a different buzzword entirely: crypto. ## **Disruptive Finance: Blockchain Finally Going Green** Earlier this October, the [Klima DAO Protocol](https://www.klimadao.finance/?kiiwebsite) (a form of tokenized carbon offset) hit the markets. As a tradeable token, Klima DAO is backed by actual verified carbon offsets. By their own protocol, each KLIMA token represents at least 1 tonne of carbon offset already held in the Klima DAO treasury. In other words, to issue tokens, Klima DAO needed to buy up lots of carbon offsets. And they did just that… - **Klima DAO purchased just under 12 million tonnes of verified carbon offsets purchased from the Verra registry in a month and a half since their initial launch.** Depending on the mix of credits and how the mark to market valuations are accounted for… the total value of Klima DAO’s offset purchases may exceed US$100 million. That’s a decent chunk of money given that the total tracked value of transactions in the voluntary carbon markets last year was $473 million. ## **Everybody Wants a Slice of the Green Pie** Of course, Klima DAO alone doesn’t explain the whole story behind the meteoric rise in carbon prices either. After all, the protocol only launched on October 18th (shortly before COP26). If you look at the transaction volume in the voluntary carbon markets this year, you can see they’re rising by A LOT, year over year… Their holdings look impressive on paper, but you must keep in mind… - **Klima DAO’s purchases represent ~4% of the total transacted volume on the voluntary carbon markets in 2021 to date.** So far this year, transaction volume in the voluntary carbon markets is already up nearly 60% compared to last year. It’s not likely that they’ll be continuing to accumulate offsets at the same pace, either. But that could change quickly. Klima DAO – and other crypto coins that we know that are starting up – have the ability (and demand) to issue millions of more tokens before they need to go back to the carbon markets to buy more carbon credits. The reason why I brought up Klima DAO is because they too belong to a new sector driving demand in the carbon markets: ## **Carbon Investors AND Speculators** Take a look below at the breakdown of carbon credit purchases by the industry as of this October 2021: Currently, the 3 biggest components are the industrial, finance, and energy sectors. Industrial and energy carbon credit users are very easy to understand. After all, industries like steelmaking are heavy emitters, as are fossil-fuel power plants. The large share held by the finance industry is for a different reason altogether. Banks like **HSBC **and **Barclays** aren’t exactly companies you would imagine to be big polluters. Financial companies aren’t only buying these credits to retire for themselves, though, but also as investment assets. - **Expect the financial industry’s share of carbon credit purchases to grow even larger.** Article 6 will help in the standardization of the carbon markets which is required. Besides the financial industry, you also have plenty of other players looking to carve out their own portion of the prize. Klima DAO would be one such example – but they’re just the tip of the iceberg. And if this is what is needed to put the fire to the ass of the polluters and start decarbonizing as the price of pollution goes up, so be it. Bring more on. Plenty of businesses and retail investors are now also looking to the carbon markets for investments that are [both rewarding as well as ESG-friendly](https://katusaresearch.com/a-guide-to-esg-investing-and-how-much-money-is-at-stake/?kiiemail). ## **No Longer the Best Kept Investment Secret** You can think of the recent jump in carbon prices as the “first leg” of the carbon credit bull market. **Think of it like Bitcoin back in late 2016.** Right now, the general public has just gotten their first whiff of this new investment trend – but to be perfectly honest, it’s still in its infancy. Our contacts and what we’re seeing in the Voluntary Carbon Market (VCM) is showing nothing short of explosive month over month – and year over year – growth. **With Article 6 working its final details and standards, we’ve just started the first inning for a fully standardized global carbon market****.** It will take many months… If not years, for the voluntary carbon markets to fully develop the framework and systems needed to facilitate regulated trading worldwide. But that’s OK… **Because it means there’s still plenty of time to get in before the markets* really* take off.** There’s already a fundamental, proven demand for carbon credits… driven by legislation backed by nearly every country in the world. Universal consensus from governments, elites, top public and private companies are coming out saying that the market **needs** to grow bigger… If we’re to have a snowball’s chance in hell of meeting the climate targets they’ve set. My subscribers and I have already found the perfect investment to bet on the coming surge in interest and money in the carbon markets. **It’s one of my largest holdings and one of the best performers. And I’m looking to add much, much more.** Many subscribers have already made as much as 450% gains and many have tripled their money in just a few short months… This is high risk and high reward, the best type of asymmetrical opportunity that I like to target. The best part is that there’s still plenty of room for this company and sector to grow. And plenty of time to lock in a position. If you want to get the best opportunities in the commodities, energy, and carbon sectors… **Consider signing up for my premium newsletter service, [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail).** Every month I’ll share with you exactly how I plan to put my own money to work… To make the best of this once-in-a-lifetime investment opportunity in the carbon markets. Regards, Marin --- # What’s the Greenest Energy Source? The Answer Will Shock You - URL: https://katusaresearch.com/whats-the-greenest-energy-source-the-answer-will-shock-you/ - Type: article - Published: 2021-12-03 - Author: Marin Katusa If I were to ask you, “What’s the greenest, lowest carbon source of energy?”… What would your answer be: Hydropower? Wind? Solar? Those are all good answers. Renewable energy sources are some of the best around when it comes to environmental friendliness – nobody is disputing that fact. And they will all play extremely important roles in our future energy mix. But while they may be among the best, they’re not *the* best. So, what **is** the greenest, lowest carbon source of energy? ## **If You Want Green Energy, Go for the Green Rock** The United Nations Economic Commission for Europe (UNECE) recently released a new report that caught my attention. It details the entire lifecycle of the various electricity generation options available to the European countries. Based upon their extensive data collection and calculations, they’ve crowned **nuclear power **as the king of green energy. Nuclear has the lowest average emissions through its entire lifecycle: ![What’s the Greenest Energy Source? The Answer Will Shock You] *Source: Life Cycle Assessment of Electricity Generation Options, UNECE (Oct 2021)* Now if you’re familiar with nuclear energy… You’ll know it’s not as simple as digging up rocks from underground and chucking them into a reactor. Besides the actual mining operation required to get at the uranium (which is often buried deep) you also need to refine the uranium from the ore. This is to turn that raw uranium ore into useable fissile material. That’s before you get to the nuclear reactors themselves, which tend to be fairly complicated and costly to build. And don’t forget the disposal of the radioactive waste at the end either. On top of all that, you need to factor in the transportation required to get all the materials from Point A to Point B. Yes, you might be thinking… - *Surely with all that taken into account, there’s no way nuclear energy still comes out on top… right?* But as expected of the UN – they don’t do things by halves. Every aspect of the power generation lifecycle for every source has been considered. And everything listed above was taken into account when they were calculating the lifecycle greenhouse gas emissions of nuclear power. Don’t forget – it’s not as if renewable energy sources are magical cure-alls to the green energy problem either. Hydro dams can have a devastating impact on local ecosystems with their large reservoirs. Which – by the way – also generates carbon dioxide and methane from the decomposing vegetation submerged underneath the waters. While all power generation requires copper for cabling and infrastructure, solar power needs more of it than any of the others for all the extra electric equipment. Wind power is relatively more reliant on steel and chromium in the construction of turbines. And of course, there’s no escaping the emissions from transporting all the materials involved in building up all these power sources, either. Nuclear energy isn’t the only source of power generation with “hidden” carbon emissions in its lifecycle – it just gets the worst press. ## **Low Emissions Aren’t the Only Thing Green About Nuclear Energy** From an environmental impact point of view, greenhouse gas emissions are just one part of the picture. Climate change is at the forefront of everybody’s mind right now when it comes to environmental friendliness – but there are other factors to consider as well. - Land and water use, - Ecosystem impact, - Negative effects on human health, - Consumption of non-replenishable resources… There are lots of dynamics at play when it comes to considering, and quantifying, the total impact of a power plant. But when you tally up all those metrics, look who shows up again? ![What’s the Greenest Energy Source? The Answer Will Shock You] *Source: Life Cycle Assessment of Electricity Generation Options, UNECE (Oct 2021)* When considering all of the lifecycle impacts, and not just the greenhouse gas emissions, nuclear still comes in third. That’s just behind smaller-scale hydro plants and almost on par with tower-type concentrated solar plants. That’s still damn good. Especially when you consider that hydropower plants are much more restrictive in terms of where you can build them. It should be clear that nuclear power wins on just about all fronts, besides marketing. For all the NGO’s, climate champions, and advocates, take note: - **Over the past half-century, nuclear power has mitigated around 74 gigatons of CO2 emissions.** That’s equivalent to nearly two full years’ worth of emissions from all energy production around the world. The UNECE has gone as far as to say that: - **International climate objectives will not be met if nuclear power is excluded.** I don’t think it gets any clearer than that. ## **Uranium Is the Cool Kid Again** With nuclear power coming back into vogue, that means [the uranium frenzy is on](https://katusaresearch.com/the-uranium-frenzy-is-on/). The last uranium bull market saw explosive returns for those who played their cards correctly. **Now that we’re on the cusp of another run-up in uranium, you’ll want to make sure you’re backing the right companies.** After all, for every success story the last uranium bull market saw, there was a failure that was forgotten about. Thousands upon thousands of acres of land were snatched up – much of it little more than moose pasture in vaguely the right area. When the world finally realizes that nuclear is the only option they have left if they want to meet their climate change objectives, they’ll turn to uranium. And when that happens, the exact same story will play out again – Johnny-come-latelies will pile onto the uranium bandwagon, leaving you to sift through the rubbish to find the gems. It’s a story I’m intimately familiar with. **And I’m ready to do it again, this time with my *****[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)***** subscribers along for the ride.** Regards, Marin --- # Are Inflation Indicators Turning Against The Fed? - URL: https://katusaresearch.com/are-inflation-indicators-turning-against-the-fed/ - Type: article - Published: 2021-11-26 - Updated: 2021-12-01 - Author: Marin Katusa Fed Chairman Jerome Powell gave [his speech](https://www.federalreserve.gov/newsevents/speech/powell20210827a.htm) at the annual Jackson Hole Economic Symposium… In the months leading up to the conference, he noted the sharp run-up in inflation. However, he relaxed concerns and suggested that these high inflation figures were “transitory”. Meaning it would only persist in the short term by pointing to 5 different indicators. Based on those five indicators, Powell stated that he expected inflation to return to the Fed’s target 2% rate over time. It’s now been 3 months since Powell took his stand, and yet inflation has gone in the exact opposite direction. - **In October, the annual inflation rate in the U.S. shot up to 6.2% – the highest in over thirty years.** Opinions on Wall Street are still divided on whether or not we’ll see the return of the dread specter of stagflation that haunted much of the ‘70s. But there’s one thing that every analyst can agree on: Powell’s “transitory” isn’t going to be quite as short as most would like it to be. And to see why, look no further than the same 5 indicators that Powell referenced when he gave his speech: *SPONSORED CONTENT* ## [**![Are Inflation Indicators Turning Against The Fed?]**](https://carboncredits.com/?sl=kiiemail%2F) ## **Indicator 1: The Absence of Broad-Based Inflation Pressures** The first data point Powell pointed to when making his case against inflation being around to stay… Was that inflation was primarily being driven up by the prices of a narrow group of goods and services that were directly affected by the pandemic and the reopening of the economy. The most recent data for October, however, paints a different story. With many different types of goods showing remarkable price increases over the past 12 months: ![Are Inflation Indicators Turning Against The Fed?] There are now a wider array of goods driving inflation up. Beef, for instance, is up 20.1% since the same time last year. ## Indicator 2: Moderating Inflation in Higher-Inflation Items You’ve no doubt noticed that many goods and services that were impacted by the pandemic rocketed up in price. But have since moderated somewhat in the wake of the recovery. For example… Used vehicles prices were up 45.2% earlier this June. But have since improved to a somewhat more reasonable 26.4% price increase. Commenting on this, Powell specifically mentioned that inflation in durable goods other than autos had slowed and was expected to fall – which would help lower overall inflation in turn. ![Are Inflation Indicators Turning Against The Fed?] However, the most recent quarterly data from the U.S. Bureau of Economic Analysis shows that not to be the case… with another 2.3% increase in durable goods prices from July through September. Recent increases in the prices of durable goods continue to reverse a decades-long downwards trend that began in the mid-’90s. And it’s still unclear as to when exactly this trend will resume as Powell expects it to. ## **Indicator 3: Wages** At the time of Powell’s speech, there was little evidence of wage increases that would threaten excessive inflation. Citing broad-based wage measures like the employment cost index and the Atlanta Wage Growth Tracker, Powell noted that the increases in wages matched the Fed’s long-term inflation objective. ![Are Inflation Indicators Turning Against The Fed?] More recent data from the same sources Powell was referring to shows that wage increases have only continued to grow. The quarterly Employment Cost Index saw a record jump in the quarter ended September 30th. - **The Atlanta Wage Growth Tracker (3-month moving average) also broke past the 4% mark for the first time since just prior to the Global Financial Crisis.** At this rate, it’s quite likely that rising wages will continue to act as an inflationary pressure for the months ahead. ## **Indicator 4: Longer-Term Inflation Expectations** It may sound like a self-fulfilling prophecy of sorts, but what people think about inflation can be just as impactful as the rate of inflation itself. When people think high inflation is on the horizon, they’ll stock up on durable goods and look for higher-paying jobs. On the other hand, companies will look to trim costs and raise prices. And these actions can lead to further inflationary pressures. So, [managing inflation expectations of the people](https://katusaresearch.com/debt-ceiling-cinema/) is very important to the Fed as well. ![Are Inflation Indicators Turning Against The Fed?] How does the Fed monitor consumers’ expectations? The University of Michigan’s monthly consumer inflation expectations survey is one of the sources of data the Fed relies upon to check what the people think about inflation. Unfortunately, for the last several months in a row, this survey has consistently shown that people are still expecting inflation in excess of 4% in their future – for the first time in over a decade. This should come as no surprise either. Inflation is driving up prices across a broader base of goods and services, and hence becoming much more visible. ## **Indicator 5: Global Disinflationary Forces Over the Past 25 years** Powell closed out his segment on inflation saying in the last 25 years, most advanced economies in the world – not just the U.S. – had kept their rates of inflation at or below the 2% waterline. He attributed this to a number of global disinflationary forces, driven by: - Changes in technology, - Globalization, - Demographics, and - Central bank policy But things aren’t exactly rosy elsewhere in the world either. Canada saw a near 20-year high inflation record in October. And it was a 10-year high in the UK. Over in the Eurozone, inflation hit levels not seen since the GFC. ![Are Inflation Indicators Turning Against The Fed?] And while China may look like it’s doing fine, that 1.5% rate is a 13-month high for China’s CPI. China’s numbers also hide a more concerning figure… - **China’s Producer Price Index (PPI), which tracks the cost of goods when they leave their factories jumped to 13.5% for October, up from 10.7% in September.** It’s a warning sign that rising prices might soon be getting passed on to consumers both domestic and abroad. As inventories get depleted and replacement costs rise, China might soon be seeing the exact same inflation woes already dogging Western economies. It’s hard to say whether this will significantly weaken the global disinflationary forces that Powell spoke of. But the cost of imported goods going up certainly won’t help lower inflation. ## **How Short is “Transitory”?** With most of Powell’s indicators now going the wrong way, it’s clear that the inflation we’re seeing isn’t going to go away by itself anytime soon. Plus, policymakers and economists tend to view monetary and fiscal policy on the timescale of years. So, “soon” to them probably isn’t the “soon” you’d like to hear. Many commodities around the world are still [suffering from supply and demand imbalances](https://katusaresearch.com/copper-the-big-squeeze/), in many cases brought on by the coronavirus pandemic. But as the Chinese would say… you can’t spell “crisis” without “opportunity”. (For those of you who aren’t in the know – the Chinese word for “crisis” includes the character for “opportunity”). While the coming months of high inflation might mean more expensive groceries and fill-ups at the gas station… It might also mean the chance of a lifetime for your investment portfolio. To learn more about the market forces at work in our global economy… As well as the best way to leverage your portfolio to profit in both good times and bad… - **Consider learning more about my premium newsletter, *****[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*****.** Every month, I outline market sectors that are flashing signals to pay attention to. Including companies that I’m buying. And where I’m putting my own money. Regards, Marin --- # The Gold Circus - URL: https://katusaresearch.com/the-gold-circus/ - Type: article - Published: 2021-11-19 - Updated: 2021-11-26 - Author: Marin Katusa Over the past 3 weeks, gold has perked up, rocketing nearly $100 per ounce. But is gold “ready” for its next leg higher? Like it or not, gold has been in a downward trend for over a year… Lower highs have come with lower lows, leading to 12 months of falling prices. Right now, the $1700-$1750 per ounce level remains a key short-term area of support for gold. You’ll see that after its recent rise, prices are right smack into the resistance trendline. But to truly understand if gold is ready to go higher, one must look deeper than support and resistance. ## **War of the Words: “Transitory” Inflation and Gold** As I have mentioned many times, we are in [an era of quantum economics](https://katusaresearch.com/quantum-economics-negative-interest-rates-and-financially-transmitted-diseases/) with ultra-low interest rates and a strong US Dollar. - **Blame it on the global supply chain, Central Bankers, or politicians, inflation has been running hot. ** Regardless of whether this is “transient” or here to stay, it is making investors and the US Federal Reserve, uncomfortable. In my book, [The Rise of America](http://www.riseofamerica.com), I discussed a phrase I coined called “CrossFlation” and that is exactly what has been playing out. So, what does the U.S. Fed really think? I think if you got a few glasses of vino into Jerome Powell off-camera… He would admit that they have underestimated the supply chain issues which are a key root in today’s inflationary pressures. I don’t have a crystal ball for inflation, and neither does the Federal Reserve… But what I do know is that gold and commodities have the potential to perform very well in an inflationary environment. Let’s look into why this is the case. The Consumer Price Index (CPI), which many uses as a barometer for inflation continue to soar. The Fed’s preferred measure of Core-Personal Consumption Expenditures (PCE) while a lower absolute number also shows rising costs across the economy. - **Rising prices combined with near-zero interest rates create a “negative yield” in real terms. ** Today “real” yields are -1.14%, within striking distance of all-time lows. ## **Real Yields and Gold** There is a simple yet very powerful relationship between real bond yields and gold ([more on that here](https://katusaresearch.com/gold-are-you-scared/)). Gold has a storage cost, bonds have virtually no holding cost. So, if both are safe, you’d pick the one with the free storage cost. - **However, when bond yields are negative like they are today, bonds now have a “storage cost” which is higher than gold’s storage costs. ** You can see in the chart below the powerful relationship that is exemplified. If real yields stay low or go lower, there is a strong supporting case for gold. ## **Gold Stocks are Up, But Well Below 52-Week Highs** The prices for gold equities are rising… And miner-focused ETFs are up double digits the past month – while the number of companies trading close to their 52-week low has plummeted. This is a simple sentiment indicator that I like to keep on my radar. ## **Mining Cash Flows Go BRRRR…** Mining is a very tough business, so being able to take money off the table and recycle it at lower prices swings the risk-reward in the investors’ favor. Many “gurus” mocked me for selling heavily across our portfolio when gold breached $2000 per ounce last year. That’s fine, I don’t work for anyone other than myself and my subscribers. Taking profits last year in the gold has allowed subscribers and me to be positioned like alligators – and to redeploy those gains and cash at prices well below where we were selling. My favorite gold stock has more gold in reserves and resources plus a better production profile than it did last fall. Yet share prices are down 40% from where I sold last year. The current gold market is exactly the gold market for alligators. It’s the type of market where if you know what you are doing – and avoid the noise – the potential for big scores in de-risked companies is very probable. Another gold position for subscribers that acted on an alert I sent has multiplied five-fold for all of us… - **Subscribers to my premium research letter – [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kii) – are sitting on a 500% gain over the last year, even as gold has corrected from last year’s highs.** Not to mention, among all the crypto and tech hype… Precious metals producers are printing money at a fever pace. **The chart below shows the cumulative free cash flow generation for North American precious metals companies.** You can see that for a decade straight, the industry was a black hole for capital. Now, the sector has strung together multiple massive quarters and bolstered battered balance sheets. Miners today are laser-focused on efficiency and cost control. Technology today allows for optimized mine plans and ore sorting, which lowers production costs per ounce. The average all-in sustaining cost per ounce produced for senior and mid-cap gold producers is $1,100 per ounce. Today’s gold price is $1850, leaving $750 per ounce in potential free cash flow. These are incredibly healthy margins for gold producers. As I mentioned, subscribers and I have been begun to gobble back positions we took profits on last year in the gold space. - **In just 3 months, one of our gold stock tranches is up 31****%, and gold only went up 7.5%** I still see tremendous upside for all our core precious metals holdings. And you have only seen a whiff of what’s coming in the ultimate gold and commodities bull market. If you felt like you missed out on some great opportunities in 2021… And want to give your portfolio an edge in 2022 – consider learning more about what I’m focused on in the KRO. Every month I put together a research journal full of data that everyone can understand – and opportunities that you can take advantage of… today. It’s called the KRO, and there’s a reason it’s read by some of the most prominent family offices, professionals, traders, investment bankers, and brokers in the world. You [can learn how to unlock access to it right here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). If you know, you know. Regards, Marin Katusa --- # Copper: The Big Squeeze - URL: https://katusaresearch.com/copper-the-big-squeeze/ - Type: article - Published: 2021-11-12 - Author: Marin Katusa Earlier this year I highlighted that it was about to get [spicy in the copper market](https://katusaresearch.com/dr-copper-signals-bull-market-is-on/). There were several signals that were flashing that made me pay attention. For example… - Inventories were declining, - The EV mania was in full force, - Economies were starting to reopen It was only a matter of time before generalist investors connected the dots. And now the mainstream investor, along with the Reddit/TikTok/Twitter finance *gurus* are making the case for moonshots. But the actual substance to the sizzle is this… ## **The World Needs a Lot of Copper** Today, copper and copper producers are up over 30% on the year, recently taking out all-time highs set back in 2011. ![Copper: The Big Squeeze] Much to the irritation of the gold and silver bugs who have had a tough year and waiting for their day in the sun… Copper producers have done very well this year. ## **![Copper: The Big Squeeze]** ## **Copper 101** Copper is a key input into construction and infrastructure projects, power lines, appliances, and vehicles. - **So, as you might expect there is a positive relationship between copper demand and macroeconomic growth. This is why it is affectionately known as Dr. Copper**. Below is a chart which breaks down copper demand by end-user. ![Copper: The Big Squeeze] Economies are reopening, infrastructure investments are being made, and citizens are doing their best to get back to some form of normalcy. Ultra-low interest rates and highly accommodative central bank policies have incentivized enormous amounts of capital to be put to work. ## **Copper Supply and Demand 101** Previously I highlighted the world’s ability to warehouse less copper, which I believe is part of the general decline in inventories. The Amazon “just in time” delivery approach is a cost saver to producers and downstream manufactures, so it works when the economy is fully efficient. But right now, due to the pandemic, it’s not. - **We’ve all seen the pictures on the internet of bare aisles in grocery stores or hardware stores…the same thing is happening in the copper market.** As a result, demand is beginning to outstrip available supply and inventories are falling in a big way. Shown below is the total amount of copper held in inventories at major exchanges around the world. ![Copper: The Big Squeeze] The general decline is obvious. But the steep drop this year is considerable, as supply chain bottlenecks have made it challenging for manufactures to get supply. - **This has led to a heavy collapse in copper inventories most notably in London where we’ve seen inventory levels decline by over 40% since mid-September.** ## **![Copper: The Big Squeeze]** ## **Get to Know the Copper “Cash” Contract** Copper for immediate delivery, known as the “cash” contract is at its all-time high relative to copper contracts for future delivery. The difference between the 2 contracts is known as the “spread”. In the copper world, the most referenced spread is the cash contract to 3-month delivery. This compares the price of copper today, to the price of copper 3 months from now. - **When short-term copper demand is very high, prices for copper today will be higher than prices for copper tomorrow. ** Right now, this spread is at an all-time high… ## **![Copper: The Big Squeeze]** ## **Elon, Electrify Me** What the world is finally beginning to understand is that copper is directly linked to electrification. Electric vehicles, charging stations, wind turbines, and new transmission lines, all need copper and lots of it. For example, an electric vehicle needs over 150 pounds of copper. Conventional power production requires approximately 2,204 pounds of copper per megawatt. So what about renewables? Glad you asked… - **R****enewable technologies require 8000+ pounds of copper per megawatt. ** As the world goes towards net zero, ESG and “greener”. It will require a LOT more copper out of the earth. ## **![Copper: The Big Squeeze]** ## **We’re Still Early to The Copper Story** And the runway is growing longer… Last Friday, US lawmakers passed an infrastructure spending bill totaling $550 billion. - Fiscal stimulus packages globally are estimated to be trillions of dollars over the coming decade. So it’s safe to assume that Doctor Copper should be a beneficiary, including copper stocks (which have been on a tear the past 12 months). One of the copper companies featured in my premium research service exploded out of the gates from $1.40 all the way up past $14.50 this summer. That’s a 936% profit for people that bought shares at $1.40 in the first days of trading. **But for subscribers to *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)*, the effective gain was A LOT HIGHER…** For subscribers that participated in a special deal I published on, the effective cost basis for these shares was 50 cents. **That’s a 2,800% return:** ## **Skate Where the Puck (and MONEY) is Going…** Right now, my team is laser-focused on the decarbonization theme. Renewable energy, electric vehicles, and carbon offsets all play major roles. I believe governments around the world are going to tax the high polluters and use that cash to subsidize the switch to greener economies. **In next month’s premium report to subscribers of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)*…** **For the first time ever, ****I will release a mega list of companies and the calculated impacts of carbon taxes on each company.** This granular assessment allows us to look for big winners and avoid overnight balance sheet destruction and massive impairment charges of some well-known names. If you want the list along with all my top investment ideas and research, [click here to learn how to become a subscriber](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin --- # Carbon Catalysts: Watch Article 6 at COP26 - URL: https://katusaresearch.com/carbon-catalysts-watch-article-6-at-cop26/ - Type: article - Published: 2021-11-05 - Updated: 2021-12-01 - Author: Marin Katusa Article 6 is the key. Without a defined and agreed upon outcome for Article 6, the whole point of COP 26 (and all 25 conferences before this one) was a waste of time. The Conference of Parties (COP) will need to stop the talk and deliver action. **Which Way Will Carbon Credits Go?** That’s what Article 6 is all about. Within the framework for global emission reduction in the Paris Climate agreement is a specific principle that is snarling up the ratification process. Known as Article 6, it pertains to carbon credit ownership. Specifically, who gets to apply for the carbon credit against their emission level. Here’s an example: Let’s suppose **Microsoft** wants to offset its carbon footprint for a server farm in the United States. It goes out and buys 1 million carbon credits which were produced from a carbon offset project in Brazil. Since Microsoft bought the credits, it should get to reduce its emissions, right? But the offset is located in Brazil. So should Brazil get to reduce its emissions as well? What about the United States which has now seen its emissions drop due to the purchase of the offsets from Brazil? Apply this scenario to hundreds of millions of credits… across 190+ nations with different tax regimes and carbon reduction plans… and you can see how this starts to get complicated very fast… ## **Choose Your Adventure: The Fork in the Road** There are 2 schools of thought on how to approach this dilemma, and essentially what Article 6 needs to finalize. - **Both the private entity who bought the credits** and **the host country where the carbon offset is located** can both claim emissions reduction. Verra, the world’s largest issuer of carbon credits by a wide margin, supports this view. - **Only a single entity can claim emissions reduction**, making them a one-time use. This means that only the host country or the buyer could offset emissions. Gold Standard, the world’s second-largest issuer of carbon credits (though well behind Verra) supports this view. Gold Standard’s model relies on “donations” to fulfill corporate pledges and offset programs. ![Carbon Catalysts: Watch Article 6 at COP26] I believe Verra is correct when it states that forbidding host countries from counting the credits in their territory and used by private companies as emission offsets would slow down the deployment of carbon projects. - **The core issue with Option #2 is that it disincentivizes corporates and host countries working together.** A host country would forbid any project generator other than a domestic state-owned offset generator to design and build offsets. All the credits generated would have to be sold domestically (meaning lower prices based on supply and demand) and go to nationally determined contributions. It would essentially prohibit any international investment into offset projects. The primary buyers for carbon credits, globally, have been international companies with global carbon footprints. ## **Let’s Review The Options in More Detail…** Under the Gold Standard model (Option 2) Corporations from outside the host country would “donate” to the offset generator but would not reap the emissions offset benefit. It’s hard to see how that framework works in a global finance setting like we live in today. Forget the fact that government works much slower than the private sector and leaving it up to the governments would likely mean we’d fall even further behind our emission reduction goals. If the Carbon market goes to Option 1… Which suggests that both the buyer of the credit and the producer of the credit can both count the emission reduction, I don’t see a major change in how the market will unfold and we are positioned well. If there is a black swan event and Option 2 is selected it makes things more challenging. Credits issued under Verra would likely have to be sold in the country where the credits are certified which would result in lower prices for carbon credits and more importantly, lower demand for carbon-reducing projects. A 3rd option is that a revised international carbon market governed by the UN or IMF is put into place. Under this framework, it would allow the transfer of currently verified credits from a recognized organization such as Verra or Gold Standard, and these credits could be onboarded onto a UN or IMF international trading framework. - **A global minimum price floor in the $50-$150 per tonne**** range could then be set by the governing body.** This would allow the politicians to feel like they have control while still allowing the private market the opportunity for price discovery and market development. This would build upon the Clean Development Mechanism which was the precursor to the Paris Agreement. ## **The Future of Carbon Credits** It is incredibly rare to be on the emerging frontier of market development. Mainly because most markets have already been around for decades. - **The past 12 months have represented a once-in-a-generation opportunity and [I still believe we are very early to carbon](https://katusaresearch.com/the-commodity-every-company-will-be-forced-to-buy/). ** There are many highs and lows to come. Pre-internet revolution, access to information and deals meant a big potential arbitrage opportunity. As the internet made information more readily available, that arbitrage opportunity disappeared. For example, when the collapse of the Soviet Union happened, there was incredible potential for foreign companies to buy state-owned enterprises. The ones with access to information were able to make the right valuations and made fortunes. Most in the west avoided the Russian and FSU state auctions because of the corruption, but when the wall in East Germany came down, the compliance and governance of West Germany were applied to all state-owned enterprises. Very little corruption happened as a result and East Germany was properly brought into the modern world of finance and the region thrived. - **The opportunity today in the ‘War Against Carbon’ (or as John Kerry calls it, World War Zero) is the single biggest financial opportunity I have seen of my lifetime. ** [And](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)[I have my money invested right where my mouth is](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)[.](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) Even with so much technology and information readily available, so few people are aware of the opportunity present. ## **Carbon From 30,000 Feet** Sometimes it is helpful to think about things at a 30,000-foot view, rather than under a microscope. If you speak with almost any commodity producer on the planet, they’ll tell you it is very common to pre-sell current production using futures contracts. And it is equally as common for them to lock in hedges for things like currency exposures or electricity prices. - **Futures contracts**** provide deep liquidity and price transparency with the ability to settle millions of dollars in a single transaction over nearly any time frame.** Today, over 90% of the carbon market is settled in the spot market. This means very few carbon offset developers or carbon credit buyers are using the futures market for exactly what it is designed for. Furthermore, as you’ll see in the chart below, the vast majority of trading is conducted outside of an electronic trading platform. ![Carbon Catalysts: Watch Article 6 at COP26] This year, only 30% of those spot market voluntary carbon market contracts were settled on an electronic exchange. Most carbon transactions today are brokered, and relationship-driven rather than companies logging into a platform to transact like stocks. Price discovery is non-existent. This will change. The carbon market will evolve to a place where - A company can build its capital budget for the year, - Predict with reasonable accuracy what its emissions will be (scope 1,2,3 [see description of emission scopes here](https://katusaresearch.com/carbonomics/)), and then - Go out and buy an offsetting futures contract for those emissions in an electronic marketplace. ## **Carbon Write Downs** Last year, I started talking about the cost of carbon emissions to a projects Net Asset Value. That means one must assess and be able to evaluate the cost of pollution to one’s project over the life of the project. **Yet, we still haven’t seen a single analyst report showing the impacts of such write-downs to specific company valuations.** And in true Katusa style… On December 1, 2021… We will be publishing the carbon write-downs on many of the most followed and well known resource companies in the world. Whether you like my style or not is irrelevant. This math is what is coming to all the balance sheets in the coming years, and you can position your portfolio ahead of the pack. - **After a year of diligent work—Katusa Research will make this information available to all subscribers of [Katusa’s Resource Opportunities (KRO).](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) ** Luck is being prepared when opportunity knocks. I’m knocking, pay attention and position your portfolio to benefit from the coming carbon write downs. Stay safe, Marin Katusa --- # Ringside at the Uranium Battle Royale - URL: https://katusaresearch.com/ringside-at-the-uranium-battle-royale/ - Type: article - Published: 2021-10-29 - Updated: 2021-10-28 - Author: Marin Katusa *“There are decades where nothing happens; And there are weeks where decades happen.”* -Vladimir Lenin The “other yellow metal” has been on a wild ride for the past 2 months. And the price appreciation of uranium has carried a lot of uranium company share prices with it… - **One of the Katusa picks was up as much as 1,500% at one point. And subscribers to **[***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)** were holding the stock.** Here’s why… Uranium on the spot market finally crossed the $50/lb hurdle for the first time since 2012. ## **The Uranium ATM Machine has Awoken the Sector** **S**prott **P**hysical **U**ranium **T**rust (SPUT) has given the whole sector a giant wake-up call. **SPUT** is a publicly-traded investment trust which is a buyer and holder of physical uranium. You can think of it like the ‘GLD’ ETF in the US which provides investors exposure to physical gold without having to store gold itself. The SPUT provides passive exposure to uranium. It provides a way for generalist fund managers and investors to gain exposure to uranium price movements – all without having to buy a miner and take on extra risk. - **Through a technique called an “At The Market” (ATM) facility, the company conducts unit issuances on demand. ** So, if a family office or large buyer wants to buy 1 million units of the SPUT, these units can be created and sold to the investor. The family office gets $1 million worth of SPUT units. And the cash goes to buy more uranium. Transactions are done at or above NAV, so there is no dilution to current owners of the trust. The ATM facility can be up to 1x the NAV of the trust. With the current NAV of the trust around CAD$1 billion, it means that the trust can issue up to CAD$1 billion in new trust units. - **Since the ATM program began in late August, the trust has taken in nearly CAD$900 million and purchased over 15 million pounds of uranium from the spot market during that time. ** Below is a chart which is tracking the daily activities of the trust. ![Ringside at the Uranium Battle Royale] To link uranium prices to the trust, below is a chart of the price impact created through this buying activity. ![Ringside at the Uranium Battle Royale] As you can see the SPUT has sent the price of uranium up 65%, nearly $17/lb higher by clearing out this spot market inventory. ## **Now SPUT will have competition from the UK…** Yellowcake Uranium has announced intentions to purchase 1 million pounds from Kazatomprom at $47.58 per pound. And 2 million pounds from Curzon at $46.32 per pound. The current spot price of uranium is $47.25 per pound. Math Matters The SPUT has raised nearly CAD$900 million ($725M USD). - **That $725 million worth of spot market inventory buying has increased the sector market capitalization by $18 billion. That is a 25x multiple. ** Talk about a return on investment! ![Ringside at the Uranium Battle Royale] Taking this one step further we can see the direct impact this is having on uranium stocks. ![Ringside at the Uranium Battle Royale] ## **2 Years and 700% Gains: Uranium Price History** Uranium had a dark decade post-Fukushima in early 2011. - **In 2019, the KRO started making noise by backing the first royalty and streaming uranium company in the world. ** We followed up by publishing a “[faux short report](https://katusaresearch.com/the-absolute-worst-things-youll-read-about-uranium-a-katusa-short-report/)” for Uranium showing that we would do the homework for the shorts. And if there was a way to still make money in that scenario—what that company would be. It’s ironic how many people didn’t actually read the report and only cut out and sent along with the “short report” part. I got a lot of hate because it was seen as “Marin is anti-uranium”. Nothing could have been further from the truth. And all who spread that false message should be avoided. The irony of that was at the time I was the largest financier of uranium globally. After publishing that report I personally backstopped the pre-IPO and IPO financing, which was the largest IPO of the year for mining in the world that year. Katusa Research subscribers got in at the same time and price alongside me. There were almost 18 months where nothing happened with the share price. Lots were going on with the company. Then within the span of a few weeks, everything changed. - Investors were piling into uranium. - **Wall Street Bets** and **Reddit** were on fire with Uranium short squeeze posts. - **Twitter** and **YouTube’s** algorithm were full of uranium news and alerts filling up everyone’s feed. The bullet train was on. Out of nowhere. Or was it? Not really if you were prepared. Remember, luck is being prepared when the opportunity presents itself. And we were prepared. Hence, we were “lucky”. - **Subscribers who invested alongside me in the IPO had the opportunity to be up 700% in 2 years. ** Year to date the warrants which came for free in the IPO are up a staggering 1,500%. Not everything worked out this way and the risks were high. But deals like this are the definition of the “Katusa Advantage” I do my best to provide. - [Side Note: Thank you to all of you that wrote in with kind words and comments on the (some extraordinary) gains you made on the uranium stocks we profiled. Those words are exactly what gets me fired up to find the next big idea and research until the late hours of the night.] So, what’s next? Glad you asked… ## **The Potential Black Swan – Winter is Coming** I think Europe could have a very cold winter—and with that reliance on Russian reliable and cheap natural gas will be at the forefront. Boris Johnson, the Prime Minister of the U.K. has “promised” the U.K. citizens he will keep the lights on this winter. We all know what happens when society must depend on a politician. Answer: nothing good. Putin will do what Putin does and optimize this need for natural gas with political leverage. But the nuclear utilities will take notice if this happens and will pay up to the Kazakh demands. Europe could get hit with a cold winter and very high electricity prices. And this would be the ideal framework for the Kazakhs to ask a high price for a long-term supply of uranium. **If you own shares in the best uranium companies, you’re prepared for what’s coming.** If you don’t, then [consider becoming a subscriber to *Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail) to get the names of our favorite uranium stocks that I’m holding for a bull market run. After a dormant few years… I think the fun is just getting started. Regards, Marin Katusa --- # The Commodity Every Company Will Be Forced to Buy - URL: https://katusaresearch.com/the-commodity-every-company-will-be-forced-to-buy/ - Type: article - Published: 2021-10-22 - Updated: 2021-10-29 - Author: Marin Katusa Imagine for a moment that every major corporation in the world had to buy a specific amount of gold every year. Oh – and global governments were going to *increase the price of gold* over time… …and continually remove gold from the public supply. You’d invest in gold in a heartbeat. It’s a no-brainer, right? Pay close attention to this: - **Substitute “Carbon Credits” for “gold,” and that’s *exactly* what’s unfolding right now behind the scenes.** The plot started back in the late ‘90s, when many of the world’s largest governments ratified the Kyoto Protocol. It was a tiny experimental step toward helping countries lower carbon emissions. All over the world, little pockets of the protocol have been popping up. You’ve probably heard of them as “cap-and-trade.” Whatever they’re called, they require corporations to purchase carbon credits to cover emissions. Right now, there’s: - The EU Emissions Trading System (ETS), the largest regional carbon market in the world - A massive statewide cap-and-trade program in California - Similar schemes in Tokyo, Quebec, and New Zealand - And a new country-wide ETS launching in China this year **Demand from those programs has fueled massive growth in the carbon credits sector.** - In the EU alone, **carbon credit prices have risen more than 500%** in the last four years. But there has never been a worldwide system for the sale and purchase of carbon credits. Until now. **In just one month, the little Kyoto Protocol will be transformed into a massive, global system.** For the first time in history, there will be a unified worldwide marketplace for the exchange of carbon credits. And nearly every major corporation in the world will be forced to lower their carbon emissions—or buy carbon credits. Here’s the thing. The ten largest carbon-pricing systems in the world currently only cover about 5.5 gigatonnes (GT) of emissions… just 10% of the global total. So, by itself, a global ETS would be enough to massively jolt the carbon credit market upward. **COP26 is about entire *countries *buying massive amounts of carbon credits*.*** Participation in the newly established global carbon market will be compulsory for countries that cannot lower their carbon emissions enough to meet their Paris Agreement commitments. As you probably already know, **that includes… nearly every country in the world.** Think for a moment about what will happen when the world’s largest economies come online in the new program. Suddenly, 50 GTs of emissions will need to be covered by carbon credits for countries. And *another* 50 GTs will be needed for companies in those countries. ## **It’s Simple Math: Demand Will Rise by at Least 20x** So mark my words. When Kyoto goes global, it’s going to be a nuclear bomb for the carbon market. And remember, they’re going to get squeezed from the other end, too. The key feature of emissions trading systems is that the number of carbon credits *decreases* over time—even as they’re getting more expensive. **It’s going to trigger the same runaway pricing as lumber in 2020… only for a decade straight.** Private investors can’t make money from ETS schemes—yet. But you can invest in the Voluntary Carbon Market (VCM). Right now, the whole market is *only* worth around $1B. **Due to the actions taken at COP26, the VCM is expected to be north of $160B by 2030. ** Re-read those 2 lines again… This is *exactly* like investing alongside Warren Buffett at the very beginning of his career. But you’ve got to take advantage of it today. We’ve written a comprehensive report that outlines *precisely* what you need to know about **COP26**, **carbon credits**, and the **VCM**. **Most importantly, we give away the best way to invest in this explosive market**. Tomorrow morning, you’ll discover the “rocket fuel for carbon credits.” If you want to know where they’re headed next, do not miss it. And how you can set yourself up to profit. Regards, Marin --- # The PLAN to Save the World on October 31st - URL: https://katusaresearch.com/the-plan-to-save-the-world-on-october-31st/ - Type: article - Published: 2021-10-21 - Author: Marin Katusa Every major event in world history has a tipping point… …a door that can’t be walked back through. **We’re facing one *right now*. In less than a month, we’ll be on the other side of the threshold.** And that single step could be one of the best opportunities you have to grow your wealth in your lifetime. For those paying attention, what’s happening is all quite obvious… You’ve noticed the growing drumbeat of climate-related news. Every major and minor natural disaster now makes front-page headlines. Devastating flooding across Europe, the U.S., and China… extreme heat waves around the world… wildfires in Italy, Turkey, and Greece. *Siberia* has more square miles burning than every other wildfire in the world combined. ## **We’re literally watching the world burn…** …and as usual, the powers-that-be have a “plan.” In 2015, 191 countries signed the Paris Agreement. They legally bound themselves to decreasing emissions by a certain amount over the coming years. And to conduct regular check-ins to ensure progress. Theoretically, the cuts would limit warming to 1.5ºC and keep us from the worst parts of global warming. Only none of the countries really followed through. Back in February, the UN published a report stating that current global ambition is “very far” from meeting the Paris Agreement goal. As of that report, seventy-five countries had submitted their updated emissions plans for 2021. It was estimated that altogether… - **The plans would reduce emissions by (*drumroll please*) 5%. And it would take 20 years.** Meanwhile, the effects of climate change—and their publicity in the news cycle—has only worsened. **Which means that for many of these countries…** ## **October 31, 2021, is Judgment Day** That’s when COP26, the first checkup for countries that have signed the Paris Agreement, begins. Part of the conference is a “ratchet mechanism,” which requires countries to increase their pledges to cut emissions. But many developed countries are moving in the opposite direction. Brazil, Mexico, Australia, and Russia have all kept their targets the same or *decreased *them. China, responsible for more than a quarter of global emissions, is barely raising its targets. At the same time as the world is an inferno, major countries are walking away from the responsibility to do something. Fortunately, there are several “police” countries at the COP conference. And they’re ready to take any action necessary to hold countries accountable. ## **“*Ultimately, there is going to be nowhere to hide at COP26” *** – COP26 president Alok Sharma A full-scale war is going to erupt at the conference: Countries that have successfully cut emissions will be at the throat of those that haven’t—or won’t. Why am I explaining all of this to you? Now, large-scale wars tend to spawn new global reserve currencies. You had the Anglo-Dutch Wars… the French Revolution… WWII… and now the Global War on Carbon. This new global reserve currency will be different than any that has come before. It won’t be the Chinese Renminbi. And it’s not Bitcoin. Most people haven’t even heard of it. But it will up-end every area of your life: - Every product you buy… - The stocks you invest in… - The car you drive… - Even the meals you eat… As with any new currency, there will be fortunes to be won and lost. **This is the kind of investment that the biggest currency traders in the world would chomping at the bit for.** **…If they knew about it.** In fact, this marketplace could be the greatest wealth creation mechanism ever invented. The world is weeks away from walking through that door, and there’s nothing you can do to stop it. The choice you have to make is whether you want to make a fortune off of it. Regards, Marin P.S.: Tomorrow, I’m going to outline what the Environmental Defense Fund calls **“rocket fuel” for this new currency.” If you want to know where they’re headed, don’t miss this.** --- # The Greenaissance and Modern Day “Dirty 30” - URL: https://katusaresearch.com/the-greenaissance-and-modern-day-dirty-30/ - Type: article - Published: 2021-10-15 - Updated: 2021-12-01 - Author: Marin Katusa You’re living through one of the most pivotal times in the financial markets. I’m not talking about volatility… Nor am I talking about crashes. Influencers and the madness of crowds can move mountains previously thought to be extinct (AMC is a perfect example). And today, the voice of the shareholders matters now more than ever. Like I wrote previously… Exxon is a perfect case study. One of the world’s largest oil producers had its board of directors defeated by a small but outspoken fund. And this example [is just the tip of the iceberg](https://katusaresearch.com/carbonomics/). - **It’s just a matter of time before the U.S. SEC mandates all publicly listed corporations to disclose their carbon emissions like they do their financials.** On July 28th, 2021, new SEC Chairman Gary Gensler [expressed his views](https://www.youtube.com/watch?v=xjSk7wWJG6o%20)) on the subject. I’m sure many of you didn’t even notice. But I did. And you should know what impact such a move would have on the financials of all publicly listed companies. ## **Coming Soon: Mandatory Emissions Reporting** The next step is for corporate valuations to include the cost of carbon emission reduction and offsets in their valuation models. This will be the basis for all ESG investing and green bond participation. Probably the most clever moment in my career was being the first in the finance industry to incorporate the cost of carbon offsets and carbon footprint reduction costs into the project and corporate valuation NAV and IRR models in 2019. I was initially mocked by the brokers and analysts at the brokerage firms (they’re called *brokers for a reason*—because they’ll make you a little more “broker” after you do business with them). In the next few years, expect major financial valuation write-downs across the board. Subscribers to [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) know we’re ahead of the curve on this… And have already created our list of companies that we will avoid for that reason. So, who are some of the names to keep an eye on? Let’s get to it… ## **Market Size: Breaking Down the Dirty 30** Currently, 33% of global carbon emissions are created by 30 corporations… ![The Greenaissance and Modern Day “Dirty 30”] Next, let’s break the list down between +SWAP and -SWAP Line nations. And of course, we have to incorporate political risk into all of our analyses. The** +SWAP** Line Nation Big Dirty CO2e emissions list includes 14 corporations that makeup 10.09% of global CO2e emissions: ![The Greenaissance and Modern Day “Dirty 30”] A very important aspect of the above list is that of the 14, only **PEMEX** is state-owned (meaning no shareholders other than the state). 13 of the 14 are currently publicly listed which means shareholder votes matter more now than ever before. - Those votes have been cast and the management and board have been directed to lower emissions. Exxon is a perfect example. The** -SWAP** Line Nation Big Dirty CO2e emissions list includes 16 corporations that makeup 22.88% of global CO2e emissions. ![The Greenaissance and Modern Day “Dirty 30”] Only 4 of the 16 (25%) Big Dirty in **-SWAP** Line Nations are owned by shareholders. The other 12 are state-owned. - **Just over half of the world’s Dirty 30 are public. Those companies are the ones that will face public scrutiny and shareholder revolts if they don’t clean up their act… *literally*. ** Relying on technology that’ll get invented 30 years from now doesn’t solve the immediate problem. For corporations, both a short-term and a long-term approach to decarbonization is necessary. Carbon offsets provide an immediate emissions abatement which sets a path forward for the company. In fact, I’d say they’re mission-critical to many publicly traded companies today. Especially those in hard to abate sectors. Even if we assume *only* 50% of the Big Dirty public companies in +SWAP Line nations attempt to reduce their emissions by 50% by 2035… - **That alone is an over 10x increase in offset demand in the voluntary market.** Let’s take this a step further, as the math matters. In the steel, cement, and oil industries, 24% of CO2e emissions globally are controlled by shareholders like me and you. That group currently emits over 8.4 billion tonnes of CO2e emissions annually. ![The Greenaissance and Modern Day “Dirty 30”] Reductions are coming in a big way. Whether you personally agree with the change or not is irrelevant. It’s coming. So, prepare yourself accordingly. ## **“Greenium” – The Green Premium** Investors around the world are rewarding companies with a “greenium”. Greenium is the combination of higher share prices and lower costs of debt. These greeniums will be magnified in heavily polluting industries. Below is a chart which shows the average coupon payment made by companies in the dirty sectors (oil, steel, and cement). You’ll see that today, those companies pay much higher coupon rates for debt. However, because green and sustainability-linked bonds are issued at lower coupons, these heavy emitters can reap these cost savings. Lower priced debt improves the company’s income statement and should result in improved valuations, leading to higher share prices. ![The Greenaissance and Modern Day “Dirty 30”] You can see that globally, ESG debt issues significantly lower coupon rates. I’m not saying that all the dirty debt will become completely ESG friendly. I’m simply saying that it’s reasonable to expect a 2% decrease in coupon rates for dirty companies going net zero. And this would still be well above the average coupon payment of regular non-ESG debt. This decrease in interest payments equates to $120 billion a year in cost savings for those companies. - **Just based on these savings alone, this has the potential to add over $1 trillion in market capitalization to the sector over the coming decade.** ## **![The Greenaissance and Modern Day “Dirty 30”]** ## **$800 Million Real-Time Case Study** Recently the government of Canada announced that it’s putting up CAD$400 million of taxpayer money to help ArcelorMittal switch its steelmaking facilities from Blast Oxygen furnaces to Electric Arc Furnaces. By switching to Electric Arc furnaces, ArcelorMittal believes it can reduce its emissions by 62.5%. But this is the second foray into financing emissions reductions by the Canadian government. The Canadian government also awarded $420 million to Algoma Steel to convert to Electric Arc Furnaces. Now let’s assume every government in the world will be as generous as Canada’s and finically contribute to the steel sector’s emission reductions. Globally, the steel industry emits 8% of all CO2 emissions, which equals 2.88 billion tonnes of CO2. Assuming everyone converts to Electric Arc furnaces, steel-related CO2 emissions will fall by 1.79 billion tonnes, implying an annual emittance of 1.1 billion tonnes of CO2. - **To get to Net-Zero, the steel sector still would need to offset 1.1 billion tonnes of CO2. ** - **This means the Voluntary Carbon Market (VCM) would need to grow by nearly 3x just to cover those residual steel emissions. ** Below is a chart which shows the progression from today’s emission levels, to the reduction through conversion to Electric Arc furnaces and the final requirement to get to Net Zero. **![The Greenaissance and Modern Day “Dirty 30”]** **This is JUST the steel sector. AFTER Government subsidies.** The takeaway here is this… Even if the government gets massively behind all the heavy emitting industries to help them transition, enormous amounts of carbon credits will still be required. If you still think climate change is b.s… that’s totally fine. **But don’t get left behind when the [carbon markets take off without you](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/).** You’ve been warned. Regards, Marin --- # Debt Ceiling Cinema - URL: https://katusaresearch.com/debt-ceiling-cinema/ - Type: article - Published: 2021-10-08 - Updated: 2021-10-07 - Author: Marin Katusa If you feel like you’ve seen this movie before, you’re not wrong. The big question is this – is debt now irrelevant? It might sound crazy to think about, but in a world of near-zero interest rates, does debt really matter anymore? Right now, down in Washington D.C., politicians are squabbling over the debt ceiling: ## **Should The Debt Ceiling Rise, or Not?** If there’s no agreement, theoretically the U.S. government could run out of money by the end of the month. It would lead to immediate credit downgrades and missed payments by the U.S. government… Can you imagine the carnage? Below is a chart showing this projection. ![Debt Ceiling Cinema] **Will it happen? Not a chance.** Really though, all this talk about the debt ceiling is just posturing. We all know it’s going to go up. Because let’s be real – there are 2 things politicians love: [spending money they don’t have](https://katusaresearch.com/trump-doesnt-pay-taxes-why-should-you/) (debt) and spending taxpayer dollars (your money). Most of Washington couldn’t hold a candle to the Wall Street Fixed Income departments when it comes to managing debt finance, but that’s beside the point. The debt ceiling in the U.S. and around the world will continue to trudge higher. And why not? - **At today’s ultra-low interest rates, the cost of funding said debt is near all-time lows.** The chart below shows the relationship between the Federal Funds interest rate, the budget deficit to GDP, and net interest payments relative to GDP. As you can see, the substantial decline in interest rates outweighs the extra debt taken on to stimulate the economy: - Budget deficits are going up, but the cost of funding that deficit is going down. ## **Get Stimulated** You would think that having enormous amounts of cheap capital in the system would create a highly stimulative economic environment. A picture is worth a thousand words, so let’s look at a chart on this idea. The chart shows current and future net interest payments as a share of GDP. - **It’s forecast that over the next 5 years that net interest payments, as a share of GDP, will be some of the lowest on record.** Lowest on record. And from a politician’s standpoint, that means more room for debt. As GDP recovers and trudges higher post-coronavirus, interest payments remain low thanks to ultra-low rates. This allows the government increased financial flexibility and spending power if they so choose (and they will). Big, but Cheap. However, both you and I know that there’s no such thing as a free lunch. Eventually, the chickens will come home to roost. ## **Debt to GDP is One to Watch…** As you see in the previous chart, by 2030 interest payments are forecast to be back at 3% of GDP, That’s the same level as it was in the late ‘80s and early ‘90s. A central bank buys bonds from the government to inject capital into the system. And when the economy begins to overheat it sells bonds to pull money out of the system. In September, the U.S. Federal Reserve outlined its plans for tapering its bond purchases. This means the Fed will begin to slowly rein in the amount of capital it’s injecting into the system. This type of policy is still considered highly accommodative, but the world we now live in is used to extreme amounts of financial heroine (I call it [Financially Transmitted Diseases](https://katusaresearch.com/financially-transmitted-diseases/)). It’s not just the U.S. that has such accommodative policies in place either… Europe, Japan, Canada, Australia, and of course China are all running highly expansionary policies. These accommodative policies are fanning the flames of a global economy that’s rapidly transitioning away from under-capacity to overheating. ## **Commodities Heating Up… and Crossflation** Last week [we showed you](https://katusaresearch.com/commodities-rising/) how natural gas and coal prices are skyrocketing. Ditto for uranium recently. Real-time data analysis using commodity prices or food inflation paints a far more drastic inflation picture. After all, commodities are the backbone of everything we build and consume on a daily basis: ![Debt Ceiling Cinema] I don’t know how often Jerome Powell or Janet Yellen go grocery shopping themselves, but if they do, they’ll notice that prices have gone up. A lot. It’s simple math that if the prices of inputs go up, some or all of that cost is going to eventually get passed on to the consumer. Here’s a chart of the IMF’s World Food Price Index. As you can see, post-pandemic, the index is up 40%. ![Debt Ceiling Cinema] These high input costs, which translate directly to higher food prices, are now impacting the consumer’s bottom line. The following chart shows the price of chicken in the United States, up 20% since the pandemic: ![Debt Ceiling Cinema] A true story: I asked my local butcher why they didn’t have any beef tenderloin the other day. His response? *“We stopped carrying it because it’s so expensive that no one is buying it.”* In my book [The Rise of America: Remaking the World Order](https://www.riseofamerica.com/), I wrote about “Crossflation.” It’s a term I coined to describe how some parts of the economy would see inflationary pressures while others would see deflation. Technology continues to play a deflationary role, while input costs such as oil drive up the price of all commodities which is inflationary. The global capital markets are at an incredible inflection point. - **I’ve just sent a note to my [KRO](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail) subscribers this week on how to get in on the largest investment opportunity I’ve ever come across.** This isn’t some rinky-dink dice roll exploration play on a metal you’ve never heard of… This is the biggest, most de-risked wealth changing opportunity I’ve seen in my career. There are tens of trillions of dollars being invested into this sector, but right now it’s still flying under most investors’ radars. If you want a shot at financial freedom… And the ability to protect yourself and your loved ones no matter where food prices, or other basic commodity prices, end up… **Consider a subscription to my [premium research service (the KRO)](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail) to learn more**. Regards, Marin --- # Before Market Open… - URL: https://katusaresearch.com/before-market-open/ - Type: article - Published: 2021-10-04 - Updated: 2021-10-02 - Author: Marin Katusa This is a rare email and opportunity not 1 in 1000 investors get access to. You’re about to get a first-hand account from an absolute mining legend. He has created billions of dollars in shareholder value. And his companies have created tens of thousands of jobs. But before this mining legend accomplished all that… Rio Tinto was in a predicament. There was an operating mine that produced 50% gold and 50% silver. The problem was the mine got ZERO value for the silver production. Rio Tinto hired a well-respected banking firm to figure out how to unlock value from the silver portion of the production that was getting no value from the market. The bankers concluded no royalty could be made to unlock value that would be attributable to the owners. However, the alone accountant read the banking report to Rio Tinto and came up with a novel idea in the middle of the night. He came up with the plan to create a new entity to put a STREAM on the silver production. - **That was the inception of a $21 Billion MCAP company called Wheaton Precious Metals. ** The accountant that pulled off the first streaming transaction and built an empire around that financing model eventually became very well decorated: - The chair of the World Gold Council, - a Canadian Hall of Fame Member, and - The founder of GoldCorp which he merged with Newmont to become the world’s largest gold producer. **Ian Telfer**** is to Gold Mining what Elon Musk is to Cars** Ian telfer shared how it was no easy endeavor. Even the biggest silver bugs in the world at the time, like **Eric Sprott,** didn’t quite understand the streaming model nor did they think it would work. Fast forward 6 years from the inception of SilverWheaton, and Eric Sprott’s #1 silver stock was Silver Wheaton (Called Wheaton Precious Metals today). For the first time ever, Ian Telfer shares why he is backing one particular gold stock… Not just financially but with his time and effort. Because he believes it will be the next big company in the precious metal Royalty and Streaming sector. This time, Ian won’t have to wait 6 years to get Eric Sprott onboard… He has already backed the deal alongside his former partner at Sprott, Rick Rule. - **In addition to those three titans, Jimmy Lee, Rob McEwen, Doug Casey, and Warren Gilman have all written large checks and backed this superb management team.** **In this exclusive 1 on 1 video I just recorded with him…** **Ian Telfer** shares in this video the trials and tribulations in building both GoldCorp and Wheaton Precious Metals. What he thinks will happen next with the price of gold and what he is doing with his own money. Do your portfolio a favor and watch this video, it will definitely be worth your while to learn from one of the living legends in the game, Ian Telfer. [**Click here to watch the exclusive interview**](https://katusaresearch.com/iantelfer) Regards, Marin Katusa --- # Commodities Rising - URL: https://katusaresearch.com/commodities-rising/ - Type: article - Published: 2021-10-01 - Author: Marin Katusa Getting on the right side of a bull market can change your life forever for the better. Recently, subscribers to my premium research service, [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail) (KRO), had the opportunity to be part of a stock that – at its peak – was up over 1,547% last week since our entry. (More on that later). In fact, over a dozen subscribers wrote in that they made 6 figures on that trade in less than 22 months. Hundreds of others have sent in positive comments to us on the gains they made on just a few of our most recent recommendations. – and we’re truly grateful for all the kind words! Fortunes like that are made making risk adjusted bets for asymmetric gains. Risk Adjusted bets for Asymmetric Gains: doesn’t that sound good and sophisticated? Do you know what that even means? Let me explain. Getting cocky and over leveraging can lead to financial ruin in all markets. Before you invest, you must understand the mathematical risks associated to the position and the upside of the gain for the risk you are taking. And then determine, does the pay off warrant the risk. Right now, the commodity market is incredibly volatile with some sectors nearing their yearly lows. Meanwhile, other sectors are firing on all cylinders with no signs of slowing down. Let’s get you up to speed on what I am watching closely right now. ## **Gold Action** Gold dropped below $1,800 per ounce last week and hit as low as $1,732/oz which sent precious metal stocks abruptly lower. - **A simple indicator I like to use is the percentage of companies trading new 52-week highs and lows for the sector.** As you can see from the chart below, the number of companies near 52-week lows has jumped to nearly 50% in the span of a few months. ![Commodities Rising] The gravitational pull towards the 52-week lows has caused the gold producers and developers to far surpass the declines of bullion. I have long said that strong balance sheets, scale and margins are rewarded in the gold sector these days, which is proven by the significant underperformance of the junior producers. Furthermore, passive funds love exposure without operating risk, which again is proven through the royalty group’s dominant outperformance. ![Commodities Rising] The KRO subscribers have been positioned in both the number one performing precious metal royalty company and the number 1 performing energy royalty company in the world. Considering gold is down 5.4% in September, our precious metal royalty company is up over 25%, and the most liquid and most traded royalty company in its peer group. Heading in the opposite direction of the precious metals market is the energy market… ## **Watch For Europe’s Cold Winter: The Colder War** Natural gas, oil, coal and uranium have been on a tear. Energy prices are soaring around the world. Underinvestment and supply bottlenecks have sent the prices of natural gas and coal skyward in rapid fashion. - **Natural gas inventories in Europe are low and in true Putin fashion, Russia has yet to play all their cards and has left Europe in a tangle.** Watch **Gazprom** very closely and you will see Putin making some strategic geopolitical moves this winter. If it is a cold winter, this will further drain natural gas inventory levels and send the prices of natural gas and coal higher. You can see that natural gas prices have soared in Europe in response to these low inventory levels. ![Commodities Rising] Soaring gas prices mean that it can be economically viable for the socialist green Europe to burn coal to generate electricity. Which is precisely what they are doing. The price of coal in Europe has gone up 150% this year and is now selling at a 13-year high. Australian Newcastle coal is up 250%, flirting with 2008 highs. Low Chinese stockpiles coupled with a political fight with Australia has sent domestic prices up 100% for the year while stockpiles remain low. This week China’s state electricity council stated they would procure coal “at any price”. You can see the price rises in coal below… ![Commodities Rising] There are multiple derivative affects of high natural gas and coal prices. For one, industries which use natural gas as an input such fertilizer producers are seeing their input costs skyrocket. CF Industries one of the world’s largest fertilizer producers even went so far as to shut down a UK production facility. Average selling prices for urea, an ammonia-based fertilizer have increased 50% since the summer. Manufacturers will try to pass these costs on to the farmer, who will in turn pass the costs down onto you, the consumer. ## **Carbon Coming Alive** With more coal being burned we are seeing the price of pollution go skyward. You can see this through the lens of the European Union Allowance permit, which is compliance market carbon credit. This year we’ve seen prices soar by 80% and by 20% just in the last month. ![Commodities Rising] **Note:** **Many people are asking where to get Carbon prices. **The best free resource is [**www.carboncredits.com**](https://carboncredits.com/) and their Carbon Pricing Dashboard. In North America, carbon is getting more attention… This week** CIBC**, one of Canada’s largest banks completed its first successful transaction facilitating a trade between the Nature Conservancy of Canada and a UK commercial bank. I do believe this is just the tip of the iceberg for the carbon market. Net-zero targets have soared, with over 3,000 companies and over $88 trillion now committed to net-zero emissions. Take a moment, to consider the magnitude of that dollar figure and the significance of the number of companies pledging these targets. - **KRO readers can look forward to an in-depth outlook on where the puck is going in the carbon market in the coming October issue.** The KRO was the first newsletter in the world to cover the carbon sector and subscribers are sitting on triple digit gains already. ## **Uranium Breather** Elsewhere in the baseload power sector, life is being breathed into the uranium market. Uranium prices touched $50 a pound; a level not seen since 2012. The **Sprott Physical Uranium Trust** continues to build its uranium stockpile and chew up spot market inventory. To date the trust has raised in excess of CAD$500 million and acquired nearly 10 million pounds of uranium in the spot market. ![Commodities Rising] This major move in uranium has sent the share prices of many uranium stocks ripping higher. And KRO subscribers have been positioned in the number 1 uranium stock year- to-date… ![Commodities Rising] The commodity markets are experiencing incredible volatility these days. Markets are moving quickly and its critical to stay on the cusp of what is happening if you want to be successful. I’ve been laser focused on the natural resource sector for over 20 years. Spent millions of dollars and learned painful lessons on patience and especially what to avoid. As a professional fund manager, I’ve had had countless big wins but I’ve learned many hard lessons along the way. **Right now, I believe I am on the cusp of some very big scores just like our big bets in uranium…** **And we are very, very early in one of the most exciting sectors of my lifetime.** It all comes to ahead in exactly one month from today, where World War Zero will start. I get it that not everybody can afford my research. I come from humble roots, was a teacher early in my career and that’s why I go out of my way to provide research for free. Here are two very valuable research reports that paying subscribers have had access too. - The exclusive interview between me and a gold legend – [**David Garofalo.**](https://www.youtube.com/watch?v=rM8HmLfShA4) - Your Education Primer on the Royalty Business – [**featuring Gold Royalty Corp (GROY.NYSE)**](https://katusaresearch.com/immediate-release-gold-royalty-groy-nyse-report/) Use them. They are valuable and they may help you make money. Regards, Marin Katusa --- # BREAKING: Watch Marin’s Interview - URL: https://katusaresearch.com/breaking-watch-marins-interview/ - Type: article - Published: 2021-09-22 - Updated: 2021-09-23 - Author: Marin Katusa Yesterday I broke the news to all of you… readers of *Katusa’s Investment Insights*. “Marin, this is going up multiples.” That was the line that David Garofalo, the CEO of **Gold Royalty (GROY.NYSE)** told me at a dinner recently. He had my full attention from that point on. **David Garofalo (CEO) and the team at Gold Royalty (GROY.NYSE) have pulled off one of the best royalty acquisitions I’ve seen in years in the space****.** Today you’re going to see one of the top managers in all of the gold mining in an exclusive 1 on 1 interview with me. And I want everyone to pay attention to what this is about. - First of all, I have never seen, ever in my career, a management team execute with this much precision and time. - Secondly, they’re going after a royalty on Canada’s largest producing mine that’s already in operation, talk about de-risked. **FULL DISCLOSURE**: I Marin Katusa am a severely biased, large shareholder of **Gold Royalty (GROY.NYSE)**. If that bothers you then do not buy the stock. I continue to be a buyer of the stock. And you’ll learn more about why in my exclusive interview with David Garofalo. In this interview you’ll learn: - Why I believe this project is severely de-risked - Why billionaire mining legends like Eric Sprott, Rob McEwen, and Jimmy Lee have acquired more stock and have agreed to a share lockup (hint: they’re bullish) - The significance of the Malartic Mine transaction - The potential of a “Double Bump” and what that means for anyone that owns shares of **Gold Royalty (GROY.NYSE)** It’s not often that I release an exclusive report behind our $3500 paywall. Or a full-out member-only conversational video for KRO subscribers that features someone of David Garofalo’s pedigree. But you’re getting a seat at the table, so you can see the kind of depth and opportunities we uncover at Katusa Research. **[Click here to watch the interview with David Garofalo.](https://join.katusaresearch.com/vsl-gold-royalty-corp/)** Best, Marin Katusa Founder, Katusa Research Details and Disclosures Katusa Research, Marin Katusa and its directors, employees, and members of their households directly own shares of the following Companies which are described in this publication – Gold Royalty Corp (GROY.NYSE). Therefore, Katusa Research is extremely biased. All publications of Katusa Research represent only the opinion of the respective authors and not of the company. Gold Royalty Corp did not review this report or articles. The information in the publications of Katusa Research do not replace and are not to be taken as individual needs geared professional investment advice and is for informational purposes only. This report and information are neither explicitly nor implicitly to be understood as a guarantee of a particular price development of the mentioned financial instruments or as a trading invitation. Every investment in securities mentioned in publications of Katusa Research involves risks which could lead to a total loss of the invested capital and—depending on the investment—to further obligations for example additional payment liabilities. Katusa Research does not guarantee that any of the companies mentioned in this newsletter will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect. All information published in publications from Katusa Research is based on public filings and news releases. --- # [ALERT] Gold Royalty Corp - URL: https://katusaresearch.com/alert-gold-royalty-corp/ - Type: article - Published: 2021-09-21 - Updated: 2021-09-23 - Author: Marin Katusa David Garofalo (CEO) and the team at **Gold Royalty (GROY.NYSE)** are pulling off one of the best royalty acquisitions I’ve seen in years in the space. The pace at which this team move reminds me of mining legends like Ross Beaty, Lukas Lundin, and Robert Friedland. This is *exactly* how those guys ran their massive scores during the early years—only *faster*. In fact, **Gold Royalty (GROY.NYSE)** is moving a lot quicker than even I expected. And I don’t expect anything less than lightspeed with companies I’m involved with. The details get a little complex, but trust me—it’s worth it… **FULL DISCLOSURE**: I, Marin Katusa, am a large shareholder of Gold Royalty Corp. Thus, I am extremely biased. And that’s why I’m buying more shares. So, let’s get right to it… **KATUSA ALERT:** **The is the single best assembly of gold mining legends I have ever seen** Here’s how it went down… On September 7, **Gold Royalty Corp** (**GROY.NYSE**) announced a 3-way merger with Golden Valley and Abitibi Royalties. Why? Canada’s largest producing gold mine at 700,000 ounces a year is called Malartic, which is located in the province of Quebec and is ranked as the #1 mining jurisdiction in the world. It’s owned and operated by Agnico Eagle and Yamana. - **Agnico is a top 5 gold producer in the world and David Garofalo was the CFO at Agnico while it created its first few gold mines in this region.** Abitibi owns a 3% NSR over the Odyssey Underground Portion which is the next portion of the Malartic gold mine. Currently, the mine is an open pit. Phase two is underground. The grades are incredible, and it will be the largest underground mine in Canada when in operation. Now we want you to connect the dots of the billionaire investors in the gold space… The two companies merging with Gold Royalty are majority-owned by some of the largest players in the gold markets: Eric Sprott, Rob McEwen, and Jimmy Lee. If you’re not familiar with them, let me put faces to these names… - **Eric Sprott** was the largest shareholder of Kirkland Lake, the best performing major gold producer since 2015. - **Rob McEwen** is the founder and CEO of Goldcorp, which got a $10 billion buyout. He backed New Found Gold at $0.50 two years ago… and it hit a recent high of $13.50. - Then there’s **Jimmy Lee**, a brilliant billionaire investor you’ve probably never heard of. When silent, self-made billionaires like him make huge bets, watch closely. Each of these men has signed up for hard lock-ups with their Gold Royalty shares. In other words, instead of cashing in, they’re doubling down. They clearly see the “double bump” re-rate potential in the share price. **This is Better than Our First Entry** When GROY went public, we had a lot of emails of subscribers asking when they could buy stock. We said to be patient. - **Now the largest shareholder of Gold Royalty (GROY.NYSE), Eric Sprott has acquired more stock just under the current trading price of $5 per share.** The shares are very liquid and list on the New York Stock Exchange (NYSE). Patterns To Success There are certain things the ultra-successful do that the rest don’t. When it comes to investing, the ultra-successful always start with the management team. Second, is a world-class portfolio of projects that they can buy below its true value. That is exactly why Eric Sprott, Rob McEwen, Rick Rule, Doug Casey, Jimmy Lee, Ian Telfer, Warren Gillman, and many other incredibly successful and rich gold investors are not only shareholders but also acquiring shares now. - This transaction, when closed and completed, makes Gold Royalty Corp a top 10 Global precious metal and royalty company. That is just the start, the company has only been public for less than 6 months. Other than the Big 4, no other royalty or streaming company have a tier 1 asset like a 3% NSR on a portion of the largest operating gold mine in Canada. - **With this transaction, Gold Royalty (GROY.NYSE) has 72% of their NPV coming from the two best jurisdictions globally in mining (Quebec and Nevada).** The rest in Alaska (3), Idaho(3), Oregon(3), New Mexico(2), Ontario(19), North West Territories(5), Brazil(4), Peru(1), and Columbia(3). Post this transaction, the company will have 6 royalties on producing assets, 7 royalties in development with near-term cash flow. This puts it at the top with MCAPs under $1B. **Size Matters** After this transaction, the new co-market cap of **Gold Royalty (GROY.NYSE)** will be about $500million. - **With that, index funds will be required to purchase more shares as per their rebalancing index rules. ** In addition, other funds that are required to hold royalty companies will realize that **Gold Royalty Corp** (**GROY.NYSE**) is a vastly superior royalty and streaming company than peers with a similar market cap but nowhere near the royalties on quality assets. The flow of funds will come into **Gold Royalty (GROY.NYSE)** and I believe this newly merged entity will rerate post-close. The risk is the transaction doesn’t close: That being a larger company is willing to pay more. That is possible and in that case, **Gold Royalty (GROY.NYSE)** walks away with $15million in break-up fees for their efforts. There has only been one financing with this company and that was almost exclusively taken down by KRO subscribers and was extremely oversubscribed. I am very impressed with David Garofalo and his team thus far. Tomorrow morning pre-market open, I will send you an exclusive interview I just put together with David. You will want to make time for this interview. I show up representing the shareholders asking tough questions and David Garofalo delivers big time. I fully understand why the smart shareholders of Golden Valley and Abitibi like Jimmy Lee, Eric Sprott, and Rob McEwen signed hard lock-ups with **Gold Royalty (GROY.NYSE)** because they see the re-rate potential in the share price. **FULL DISCLOSURE**: I, Marin Katusa, am biased. I believe in the management team and have bought stock in the open market on the NYSE. I am a significant shareholder of the stock and thus very biased. I’m doing this because not everyone can afford my premium research reports and I believe in David Garofalo and the team at **Gold Royalty (GROY.NYSE)**. Go GROY Go. We will prepare a full report on the company and the breaking news for you. Regards, Marin Katusa Founder, Katusa Research Details and Disclosures Katusa Research, Marin Katusa and its directors, employees, and members of their households directly own shares of the following Companies which are described in this publication – Gold Royalty Corp (GROY.NYSE). Therefore, Katusa Research is extremely biased. All publications of Katusa Research represent only the opinion of the respective authors and not of the company. Gold Royalty Corp did not review this report or articles. The information in the publications of Katusa Research do not replace and are not to be taken as individual needs geared professional investment advice and is for informational purposes only. This report and information are neither explicitly nor implicitly to be understood as a guarantee of a particular price development of the mentioned financial instruments or as a trading invitation. Every investment in securities mentioned in publications of Katusa Research involves risks which could lead to a total loss of the invested capital and—depending on the investment—to further obligations for example additional payment liabilities. Katusa Research does not guarantee that any of the companies mentioned in this newsletter will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect. All information published in publications from Katusa Research is based on public filings and news releases. --- # Gold Stock DOUBLE BUMP Coming - URL: https://katusaresearch.com/gold-stock-double-bump-coming/ - Type: article - Published: 2021-09-20 - Author: Marin Katusa A couple of weeks ago, I went out for dinner with the CEO of a gold royalty company. He lowered his voice, leaned across the table… …and told me something you almost *never* hear from someone in his position: “Marin, this is going up *multiples*.” There are no guarantees, but I think he’s right… The ink wasn’t even dry on their last deal before they put out more news. In short, they are a commando team… I have never seen, ever in my career, a management team execute with this much precision and efficiency. But that’s what happens when the best executives in mining, who have skin in the game… Are backed by the most successful and experienced billionaires in the sector execute their business plan. Second, they are nowhere near done with their business plan. This is getting exciting as a shareholder. **Thirdly, this one gold stock (that I will reveal tomorrow)… **Is going to experience what is called the “Double Bump”. That is when the big index funds must buy the stock and the shares of the company get re-rated to its inherent and peer valuations. And everyone has a chance to become an investor at the same price as the richest gold investors in the world who have signed 3-year lock-ups on their shares. Why would the billionaires sign such a contract? Because they see the share price going a lot higher and it’s a move to show management their commitment to the deal. Talk about de-risked. - The biggest names in the gold sector (which I’ll reveal tomorrow) have done the due diligence and have made large financial investments. Now you get a chance to see what the best in the business get to see. **The “Double Bump”** There are the two words this one gold stock has that NO ONE ELSE has. Here’s how the double bump works… It implies the stock will get a re-rating, meaning the share price is expected to go higher, as explained to me by a billionaire investor and shareholder in the company. One gold titan who is a shareholder revealed something incredible… - ***“I want a double bump. I don’t want to cash out. I’ve got enough money. I want to see the potential for a re-rate.”*** When insiders don’t want to cash out… and they tell you it’s going up multiples… and they’re executing with lightning speed… pay very close attention. They know exactly what’s going on. You should too. It will be your first-ever opportunity to see the *full* *details* of a company behind the KRO paywall. So, watch your inbox first thing tomorrow morning. And fasten your seatbelts. Regards, Marin Katusa Founder, Katusa Research Details and Disclosures Katusa Research, Marin Katusa and its directors, employees and members of their households directly own shares of the following Companies which are described in this publication – Gold Royalty Corp (GROY.NYSE). Therefore, Katusa Research is extremely biased. All publications of Katusa Research represent only the opinion of the respective authors and not of the company. Gold Royalty Corp did not review this report or articles. The information in the publications of Katusa Research do not replace and are not to be taken as individual needs geared professional investment advice and is for informational purposes only. This report and information is neither explicitly nor implicitly to be understood as guarantee of a particular price development of the mentioned financial instruments or as a trading invitation. Every investment in securities mentioned in publications of Katusa Research involve risks which could lead to a total loss of the invested capital and—depending on the investment—to further obligations for example additional payment liabilities.Katusa Research does not guarantee that any of the companies mentioned in this newsletter will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect. All information published in publications from Katusa Research is based on public filings and news releases. --- # Boom Signal - URL: https://katusaresearch.com/boom-signal/ - Type: article - Published: 2021-09-17 - Updated: 2021-09-16 - Author: Marin Katusa Ultra-low interest rates and non-stop money supply growth are fueling the race to the bottom for global currency devaluation. ## **Frightening Stats** For instance, did you know that the global money supply has grown by over 5x in the past 20 years? Here’s a chart that shows global money supply growth over the last two decades: ![Boom Signal] Massive amounts of government stimulus, negative interest rates, and ultra-low bond yields around the world have paved the way for soaring gold prices these past two years… setting investors up for a run at another long bull market. The exciting part is that there’s still a lot of room left to run… ![Boom Signal] A major bull market can make any investor feel like an expert because a rising tide usually lifts all boats. That said, there are always a few boats that rise much higher and faster than the others. These are the investments that professional investors, fund managers, and billionaire resource speculators target for big wins. ## **A License to Print Money** In this crazy world we live in, there are few certainties. Frankly, anyone peddling you a “sure thing” investment should be treated with extreme caution and skepticism. But there’s one small corner of the market that’s created an incredible margin of safety for their operations, based around their profit margins. It’s a unique business model that’s been copied by some of the world’s leading companies. - **Recently, Bill Ackman – one of the world’s leading hedge fund managers – raised billions of dollars trying to break into the sector.** What’s this mysterious line of business, you ask? It’s the royalty business, and it’s applicable across many different industries. Music, mining, oil and gas, TV shows and movies, and even oil change businesses are just a few of the many industries where you can find royalties at work. ## **Happy Birthday, Now Pay Up** Have you ever heard the song “Happy Birthday?” Of course, you have. But what you probably didn’t know is that the royalties on the song brought in over $50 million to its owners, most recently Warner Music, just from it being used in movies and T.V. Yes, the Happy Birthday song, the same one you’ve been singing since you were a kid, used to actually be under copyright owned by Warner Music and cost $25,000 each time it was used. Songwriting brothers George and Ira Gershwin wrote an entire catalog of hits between 1920 and 1937. - **Today, their heirs make around *****$8 million per year***** in royalties from songs written nearly a hundred years ago.** More recently, Michael Jackson’s estate was paid $750 million to buy out 50% of his collection of music royalties. Here’s the strange part of that story: the bulk of the song royalties weren’t even his. Michael Jackson bought the rights to over 4,000 songs, including 250 Beatles songs. ## **The Royalty Blueprint & Case Study** Pioneered in the 1980s by two Canadians, **Pierre Lassonde** and **Seymour Schulich **started the [first gold royalty company in the world](https://katusaresearch.com/dinner-billionaire-wine-connoisseur/), the original Franco Nevada. They built the company on the simple framework of “exchange cash today, for a share of tomorrow’s production”. Below is a chart which shows the “old” Franco Nevada’s incredible rise from CAD$0.21 per share and a market capitalization of CAD$2 million… To the eventual buy-out by Newmont for CAD$2.5 billion at over CAD$33 per share. **That’s an incredible 15,614% return…** ![Boom Signal] Following the exact same blueprint as the original Franco Nevada, a “new” Franco Nevada went public in 2007. - **Over the last 14 years, the stock has appreciated over 1,100% while gold has gone up 130%.** This should help further highlight the tremendous potential offered by investing in world-class royalty and streaming businesses. By now, it should be very clear that gold royalty companies make for excellent investment opportunities. The only question left is: which one to invest in? ## **Royalties and Streams Are Best Made in Hated Markets** Two years ago, I was pounding the table on a company I was buying a lot of. It was in a sector (uranium) that was cheap… it was hated… and no investor or media company wanted to go near it. That’s when alligator investors like me spend MONTHS doing our due diligence. Except there were hardly any other investors. This worked to my advantage. Subscribers and I were able to position ourselves in a royalty company that was a first mover in the uranium industry. - **Fast forward 20 months later and my subscribers and I are up over 701% on that investment as of this writing.** Most importantly, this isn’t some illiquid nano-cap—it’s listed on the BIG U.S. exchanges. Primetime. And the party’s just getting started. That was one corner of the resource sector where there was NO competition. I get a real kick out of the poser gurus on social media who would send out messages in 2019 saying “Katusa failed” with his uranium play. To all the haters, just look at the score—and nobody is doing better than the Katusa subscribers. Nobody. Was it high risk and was patience required, yes. Nothing is ever guaranteed. But if you’re not a subscriber to my premium research letter, you’re probably wondering what the next big score will be… Well, you’re in luck. **Imagine if Bill Gates, Jeff Bezos and Elon Musk all backed a company in the tech sector.** How badly would you want to be an early investor? – I know I would. Setups like this don’t happen often. And they’re definitely not like clockwork, but when you spot them, be prepared to act. Because – if I’m right again – I’m convinced it will be another big score. Regards, Marin --- # The Uranium Frenzy is On - URL: https://katusaresearch.com/the-uranium-frenzy-is-on/ - Type: article - Published: 2021-09-10 - Updated: 2021-09-09 - Author: Marin Katusa Nuclear energy is carbon neutral, powers 1 in 5 homes in America, and is the cheapest operating source of baseload power in America. After 10 years in a brutal bear market, uranium prices have roared to 6-year highs. Bloomberg headlines are rolling and YouTube and Twitter algos are blasting uranium stories on everyone’s feeds. Even WallStreetBets (of AMC and GameStop fame) is in on the action, having alerted their members. Here’s the deal, uranium stocks are at multi-year highs. ## **So pop quiz: What has changed in the uranium market to jumpstart this frenzy?** - Are utilities finally waking up and buying physical uranium in the market again? - Are nuclear reactors finally going to get the credit for being the only net-zero baseload power option? - Or is someone trying to corner the market? If you answered C, you’re right. But I’ll add that it’s C *with* a radioactive twist. I’ll explain all the details from the perspective of the largest financier of uranium from 2017-2019. And from someone with a Rolodex of the largest players in the uranium sector, globally. ## **The New Player in Town: Cornering The Uranium Market** The company formerly known as Uranium Participation Corp was renamed and repurposed as an investment trust. Its name today is the **Sprott Physical Uranium Trust** and it has now become the largest buyer of physical uranium. How are they doing it? It’s a technique called the ATM or At The Market financing. - **An *At The Market* (ATM) facility allows the company to conduct financings on demand. This capital then is used to buy up physical uranium in the spot market.** Below is a chart which shows the cumulative ATM financing during the last ten days of August via the Sprott ATM facility. ![The Uranium Frenzy is On] The spot market price traded at $40.25 per pound earlier this week. These levels haven’t been seen in 6 years. Investors are taking notice and it’s become the hottest commodity and dominating the news cycle. Going back to the ATM money available to Sprott … all the cash raised is then used to buy uranium in the spot market. The relationship is very clear… **![The Uranium Frenzy is On]** ## **Uranium Stocks are Spiking Higher** I don’t think there is a single uranium stock that has not appreciated in the last 2 weeks. Out of the 50+ uranium names I follow, none have negative returns since August 2021. **![The Uranium Frenzy is On]** ## **So, What Comes Next?** The initial size of the Sprott ATM is CAD$300 million. This means they can issue up to CAD$300 million worth of the trust’s stock, which in turn represents CAD$300 million of physical uranium buying power. Sprott has tapped into $230M thus far of the $300M facility. - Given the rapid success, my guess is the team at Sprott will likely try to size up the ATM to CAD$500M or the maximum amount allowable without a shareholder meeting (time is of the essence). This could mean hundreds of millions of dollars worth of uranium buying. - But, how long will it take for Sprott to get approvals from the regulators to reload their ATM financing? - In addition, for Sprott to go “Prime Time”—they will need to list on a major US exchange (something I’ve been talking about for years). And I’ll bet my old partner, Rick Rule (who is the brainchild of this at Sprott) that a major U.S. Listing doesn’t happen before U.S. Thanksgiving. Regardless, I applaud the Sprott team for their efforts, strategy, and execution—well done! It’s a significant tailwind for the uranium market. The goal is to get the uranium trust listed in the US where it can go after the really big money. The catch there is getting listed is not a flip of the switch, this will take months to sort out. Whenever you have lawyers involved, you can expect a process of over-promise, overcharge, and under-deliver. Expect time delays, as it’s part of the training lawyers get during their articling (Billing Success 101). To all the overzealous lawyers, I’m kidding, but seriously, your industry needs a serious wakeup. [![The Uranium Frenzy is On]](https://carboncredits.com/) In the meantime… ## **Options Watch: The YOLO traders are coming** Known as WallStreetBets on Reddit, this group of traders infamously created chaos in the markets earlier this year with their Gamestop (GME) and AMC Inc (AMC) short squeezes. It brought hedge funds to their knees. It looks like some of them have begun to buy deep out of the money call options. Call options for September 17th which expire in 10 days with an exercise price of $35 now have an Open Interest of 139,163 contracts. - **Over 50,000 contracts were purchased in the past few days. Making it the largest open interest of any Cameco option contract.** Each option contract represents the right to buy 100 shares of Cameco at $35 per share. Contracts were bought for pennies, rendering it the exact type of trade the WSB crew makes. Someone has to sell these traders the call options, banks or option dealers will “hedge” their risk through buying Cameco stock in the open market. Once this WSB engine gets going it is hard to stop, as proved in GME and AMC. The one Achilles heel of the WSB group is most trade on retail platforms which won’t have access to the Canadian exchanges which is where most uranium stocks trade. In addition, only a few uranium stocks have options available for the YOLO trade. ## **How High Can Uranium Prices Go?** The unique part of the uranium market is that [demand is virtually inelastic](https://katusaresearch.com/uranium-just-made-a-stealth-surge/). Utility companies need to buy uranium to fuel their reactors, regardless of cost. - **Whether uranium is $45 per pound or $450 per pound the cost per kilowatt-hour difference is a rounding error compared to a similar price pop in natural gas or coal.** - **For example, a 1000% increase in uranium price will result in a 24% increase in electricity generation from a nuclear reactor.** A similar 1000% increase in natural gas will result in a 720% increase in electricity generation on average for the utility. The Utilities know this, and so do you now. Team Sprott and WallStreetBets Crew, feel free to quote our math**.** Now, uranium has seen some incredible swings over the last 90+ years. Both major bull markets in uranium saw prices for yellowcake skyrocket **by over 10-fold**. ![The Uranium Frenzy is On] You would think the mega booms [and busts](https://katusaresearch.com/the-absolute-worst-things-youll-read-about-uranium-a-katusa-short-report/) would attract enormous amounts of capital to the uranium market. Not to mention the fact that close to 20% of America’s electricity comes from uranium. But in fact, it’s nearly the opposite. The uranium market is tiny. It’s a mere fraction of its precious metal or base metal miner peer groups and is dwarfed by its older cousin oil and gas. **![The Uranium Frenzy is On]** ## **Enter The Passive Funds** In the last Uranium cycles, the Passive funds (which were a fraction of the amount today) had no way to play the general uranium price with Liquidity. The uranium ETF option was a joke and wasn’t a true proxy to the uranium price, and didn’t have the liquidity required to meet the passive funds’ criteria. The miners were debt-heavy and not an ideal option. But Sprott provides a platform for Passive funds. And today, Passive funds exceed the amount of capital managed than Active Funds. That means, algos and computers manage the buying and selling. And when those algos start buying, watch out. ## **Uranium Returns Can Be Explosive** When uranium heats up the moves in uranium stocks become extremely explosive because there are so few ways to play the space. In the bull run from January 2004 through June 2007, many uranium stocks soared hundreds of percent. Cameco, the world’s largest publicly traded producer went up over 300%. While smaller speculative plays soared thousands of percent. ![The Uranium Frenzy is On] Year to date, myself and subscribers have been strategically rotating in and out of uranium names. We’ve locked in several good “base hits” and are sitting on a year-to-date gain of over 150% on our largest position. The uranium market is one of the most hated and loved sectors out there. ’ve made my share of thousand percent gainers. In fact… - One of the uranium stocks I and my subscribers to *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)* had, **was up as much as 860% here in 2021**. And we got those shares FOR FREE. “Impossible” you might think. But hundreds of people had the same opportunity with this uranium stock (and even a copper stock that’s gone up over 1000% they got for free, too!). Here’s a sample of what a few of our subscribers wrote to us after their winning uranium profits… From Ken M., *“Very pleased with this one and your overall service. Up 250% to date!!* And Bobby M., *“I believe the bull market in Uranium is still in its early innings. Subscribing to Katusa Research…has been one of the best financial decisions I ever made.”* And Kevin B., *“I got a little squeamish when this stock had tripled, and so I sold enough to cover my initial cost (a free ride) and kept the rest. I did this just before you sent your subscriber alert about the stock…next time, I might wait a little longer before I lose my nerve and start to sell… It paid for my subscription, and then some!”* And from Calvin W., *“Thank you! Not only because you help me make a lot of money, most importantly, Marin and every one of you set up a role model for us – what a decent person should be. It’s truly my honor to (be) a member of the Katusa Research family.”* I’ve been to all the major projects around the world and have contacts at the highest levels of the market. I am the only resource analyst and investor who was asked by the ‘World Nuclear Fuel Market’ to give the keynote speech at the Paris 2015 Conference, where the utilities meet with the producers and traders to lock in their purchases. While on stage, my joke was that the conference reminded me of a high school dance… But rather than the boys on one side of the hall and the girls on the other side, we had the Americans on one side and the Former Soviet Union members on the other. The Russians found my comment funny. Previously, I laid out the absolute worst case for uranium and proceeded to make significant bets and investments accordingly. **We even did an interview with an executive of the world’s largest uranium producer** and a *major* player in the uranium markets (who never does interviews with people in the west) – back when NO ONE was talking about uranium. [You can watch it right here](/guides/resource-market-millionaire/), for free. Our patience and bets are being rewarded in real-time. Because this squeeze is unlike any other I’ve seen in my career. Fasten your seat belts. And thank you to all the alligators for believing in me, you deserve every profit you will make, well done, and stay safe. Marin P.S. if you’re not a member of *Katusa’s Resource Opportunities*, [click here to learn all about what we do](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail). --- # Every Last Molecule – Oil Market Update - URL: https://katusaresearch.com/every-last-molecule-oil-market-update/ - Type: article - Published: 2021-09-03 - Author: Marin Katusa He’s arguably the most powerful man in oil, and made a colossal declaration… Recently, Saudi Arabian Energy Minister, **Prince Abdulaziz bin Salman**, vowed to drill “every last molecule” and be the last man standing in the oil world. It’s a bold statement in a world that has become fascinated with hydrocarbon reduction. Calling consensus building amongst his OPEC counterparts and Russia a “state secret and art” Abdulaziz has orchestrated an impressive return of oil prices since the 2020 pandemic with prices gaining nearly 40% year to date. This sent the shares of oil producers rocketing higher, many of which are up 50% or more this year. - **KRO subscribers took double digit profits on one oil stock earlier this year. **[**Click here**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)**to learn how to become a member.** Global oil production growth has remained muted, while global oil consumption has continued to improve. This has led to a tighter oil market which has strengthened prices while stabilizing national and corporate balance sheets. Designed by Abdulaziz, last year OPEC and Russia implemented a massive 9.7 million barrel per day production cut in an effort to thwart massive declines in oil demand and to support crumbling oil prices. Below is a chart which shows the historical production of OPEC and Russia. ![Every Last Molecule – Oil Market Update] The production cut worked and upon the initiation of global vaccine rollouts, oil demand increased while oil inventories around the world began to decline. - **Today the world is undersupplied by approximately 1 million barrels per day.** It’s a far cry from pandemic demand levels in March-April 2020 when the market was oversupplied by 20 million barrels per day. The chart below shows this dramatic shift in imbalances. ## **![Every Last Molecule – Oil Market Update]** ## **Let’s Look at Oil Inventory…** Inventory levels fall when demand is greater than supply. Barrels normally held in inventory are released to the market to soak up the excess demand. - **Global crude oil inventory levels have declined by over 200 million barrels, and it is forecast that over the next 3-4 months an additional 100 million barrels could leave storage tanks.** Below is a chart which shows this mega build up in global crude oil inventories followed by the subsequent decline after the production cut. ![Every Last Molecule – Oil Market Update] You’ll notice in 2022+ inventory levels are forecast to rise and likely peaking between 2.9 and 3 billion barrels. Inventory levels in this range indicate a normalized market when compared against demand considerations. This can be shown through the ***Days of Demand*** indicator which is the ratio of crude oil inventory levels to crude oil demand. ## **![Every Last Molecule – Oil Market Update]** ## **Peak Demand + Peak Supply = Peak Nonsense** You will find a lot of extreme sentiment in the oil market these days. It seems that every day there is both “peak demand” and “peak supply” hysteria. So, who’s right? Probably neither side. Simply put, if we removed all fossil fuel consumption today, the global economy would crash to a halt. Will we eventually wean ourselves off hydrocarbons? Absolutely, but it requires slow methodical change, not flipping a light switch. Electric vehicle adoption continues to improve and that is a key driver for future oil consumption. Though for the next 5-10 years, EVs won’t displace more than a few million barrels per day of demand globally (1-2%). ## **Don’t Forget: The US Shale Factor** The concept of peak supply is heard just as often. Many questions whether the US shale revolution can continue, or can the Saudi’s really produce enough oil to supply the market? For years I’ve said to never underestimate US shale. - **It takes roughly 6 months to bring a US shale well from initial spud to commercial production.** This creates an incredibly flexible production environment and allows producers to make decisions over much shorter time frames than offshore oil producers or state-owned national oil companies. Shale is a mature industry now, which means the focus has changed from a “grow at all costs” approach to one of disciplined capital spending and free cash flow generation. As a mature industry, the years of 20%+ production growth are gone, likely to be replaced with 1-7% annual production growth. Other segments of US crude oil production will likely tread water. Alaskan production has not grown in 5 years, while the Gulf of Mexico (GoM) is only up a smidge. Current oil prices do make economic sense for increased shallow water production in the GoM… but most of this production is controlled by the mega oil corps **(Exxon, Chevron, BP, Shell).** As you may know, those companies are under [so much environmental scrutiny and forced changes](https://katusaresearch.com/carbonomics/) that it is unrealistic to expect large growth in offshore oil. Thus, it’s unlikely to see the GoM oil production rise significantly. - **Most if not all US oil production growth will come from shale, rather than conventional sources.** OPEC and Russia have considerable excess production capacity which can and will begin to flow back into the markets. Starting in August 2021, the group will collectively increase production by 400,000 barrels per day. Each month for the rest of the year, the group will add an additional 400,000 barrels per day to the market. The goal of this slow, disciplined approach is to try to keep oil prices sustained near the $70 per barrel range. ## **How Much Oil Can OPEC and Russia Bring to the Market?** The current OPEC excess capacity is over 8 million barrels. The largest contributors to future oil supply are Saudi Arabia, Iraq, UAE, and Kuwait. Iran has the capability to also add 2+ million barrels per day of supply but this hinges on their Nuclear deal with the US. Furthermore, Russia has at minimum 1 million barrels of additional capacity available. ![Every Last Molecule – Oil Market Update] Even if you exclude any of the smaller OPEC nations citing poor infrastructure, just the core group of Saudi Arabia, Russia, U.A.E, Iraq and Kuwait provides nearly 6.5 million barrels of spare capacity. This is enough to satisfy the incremental global demand growth for several years. ## **Huff & Puff** You will hear a lot about ‘Huff & Puff’ technology in the coming years in the oil patch. Contrary to what many may try to sell you on, it’s not new technology. In the U.S. you will start to see more oil produced through Enhance Oil Recovery techniques. Specifically, this “Huff & Puff” technology which uses CO2 injection to pressurize the formation and bring oil to the surface. - **This CO2 injection is eligible for a tax credit under the 45Q tax code.** I’ve done a lot of number crunching this and I don’t see (barring some new breakthrough that is many years away) the carbon credit cost being less than USD$40/t in the most optimistic model in oil patch. That gives us some framework at what price oil companies will be forced to pay for offsets. And if you’re not factoring that into your investment portfolio yet… you’re going to fall behind. Subscribers to the KRO – my premium research service know the oil companies I’m targeting and how I’m playing the Net Zero world in a big way. - **I’ve actually found a company that where the CO2 used to produce its oil is equivalent to taking 8 million cars off the road for a year.** Members have the ticker and all the info – [click here to get on the list.](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail) Regards, Marin --- # Theory of Relativity - URL: https://katusaresearch.com/theory-of-relativity/ - Type: article - Published: 2021-08-27 - Updated: 2021-09-03 - Author: Marin Katusa From its source on the Tibetan plateau, the Yangtze River winds its way 3,900 miles through China and terminates near the mega-city of Shanghai. The Yangtze is one of the world’s longest, most powerful rivers. For more than 2,000 years, it has played a key role in Chinese history as a source of drinking water, a crop irrigator, and a transportation network. Although the Yangtze has supported lives, it has ended many others. In 1931, torrential rains caused the Yangtze to flood its banks. This wiped out crops and lead to the deaths of an estimated 3.7 million people, making it one of the deadliest natural disasters in history. **In 1954, another round of flooding resulted in the deaths of more than 30,000 people.** In the early 1990s, the Chinese decided to harness the Yangtze with a huge dam. At over 1 mile long and almost 600 feet tall, the **Three Gorges Dam** is the largest hydroelectric dam on earth. It cost more than $30 billion to build and produces awesome amounts of electric power. It’s also a key part of the Yangtze flood-prevention system. To this day, the Three Gorges Dam stands as a monument to mankind’s ability to harness powerful forces and direct them towards productive means. But there are incredible risks with such structures and power. We’ve harnessed rivers like the Yangtze. We’ve harnessed the power of the atom to produce nuclear energy. So as an investor, why should you sit in fear of volatility… instead of joining in mankind’s legacy and harnessing its extraordinary power to build wealth? ## **This Could be a Landmark Moment for You…** To most investors, “volatility” is a bad word. It’s like a habanero pepper in your oatmeal. You don’t want to see it in your sensible, conservative investment mix. The talking heads on financial television bemoan volatility. Mainstream headlines make it sound like a terrible thing. And this brings up one of the greatest lessons you can ever learn about the financial markets…. one of the true keys to market mastery. - **Great investors and speculators treasure volatility.** As a professional investor, I love volatility. I owe much of my success to this “dirty word’ of the financial world. In fact, I believe it’s a landmark moment in an investor’s career when he/she realizes that, much like a powerful river, volatility can be harnessed, directed, and used as a tool. *When that realization happens, a world of huge opportunities opens.* ## **Many of these opportunities will come from the extremely volatile commodities market.** If you know how to harness this market’s volatility and put it to work, you can make extraordinary returns in stocks. - **You can make returns in 10 months that most people wait 10 years to make.** Why? Because more so than any other asset, commodity prices move up and down in huge boom and bust cycles. They exhibit what’s called “extreme cyclicality.” One year, the price of a commodity like oil, silver, or copper can skyrocket 75%. The next year, it can fall 50%. In other words, it can be very volatile. ## **Take crude oil for example…** Below is a chart of crude oil’s price movements over a 20-year period starting in 1997. As you can see, one of the defining traits of this market is extreme volatility… the tendency to boom and bust. Volatility isn’t the exception in this market… *it’s the rule*. Moves of 40%… 50%… and 60% took place in less than 24 months. ![Theory of Relativity] I’m not “cherry-picking” crude oil to show you an unusual example. ## **Here’s Copper…** …during the same period through to its incredible rise in 2021. (More in last week’s missive on ([Copper Signals](https://katusaresearch.com/copper-signals/)). ## **![Theory of Relativity]** ## **And Lumber…** Lumber prices are highly cyclical, with multiple 100% rises coupled with 50% or greater declines. The largest move came recently with a massive 539% spike, since then prices have cratered over 72%. ![Theory of Relativity] Wondering why your cup of coffee has gone up in price? Coffee has had several massive swings over the past 20 years. ![Theory of Relativity] Here’s sugar: ![Theory of Relativity] And here’s corn: ## **![Theory of Relativity]** ## **Hot Commodities** Given their volatile nature, it’s not uncommon for commodity markets to soar hundreds of percent higher in just a few years. Their massive price moves create massive opportunities. For example, during the 2008-2009 financial crisis, the share price of Canada’s largest diversified miner, **Teck Resources**, plummeted from CAD$50 per share to under CAD$4. It then soared back to CAD$40 per share and beyond within 12 months (a gain of more than 1,400%). ![Theory of Relativity] Most financial advisors will urge you to avoid volatile markets like the ones I’ve described. I agree with them. Armchair investors have no business trying to navigate these rapids. These folks are best served by regularly buying shares in low-cost index funds, settling for average returns, and getting on with their lives. - **But what if you’re willing to do extra work to earn extra returns? What if you’re interested in being better than average… like 10 or 50 or 100 times better than average?** Well, then you might consider learning how to harness the commodity market’s volatility and using its extraordinary power to generate wealth for you. I could fill a book on how to harness and volatility and profit from it, but I believe that ultimately, you need just three key mental assets to make volatility a wellspring of capital gains for the rest of your life. ## **Asset #1: Learn to appreciate a good crisis** Boom. Bust. Echo. Repeat. The March meltdown of 2020 due to Covid was a prime example. That’s the nature of a volatile market. And while booms can be great, you must learn to appreciate the busts as well. You need to learn to appreciate a good crisis. That’s when you sow the seeds of big bull market gains. As I state in my educational essay [An Investment Secret You Might Not Want To Share With Friends:](https://katusaresearch.com/investment-secret-might-not-want-share-friends/) Markets are rational most of the time. They price most assets correctly most of the time. But when emotion levels go off the charts – like they do in a market crash – emotion completely overwhelms reason. During crashes, terrified investors sell assets with no regard for their underlying values or ability to produce cash flow. This creates an environment where the price of assets becomes “unhinged” from the value of assets. This, of course, means you can buy bargains during a crash. If you can keep a level head while others are losing theirs, you can buy at fire-sale prices. When most investors hear about a crash in a market, their instinct is to sell or completely avoid that market. But if you’re interested in profiting from volatility, you must develop an instinct to buy into those kinds of markets. You must learn to run towards crisis. A crisis is about the only time you can buy valuable assets at extreme bargain prices. ## **Asset #2: Ability to ignore the desire to be part of a crowd** Eighty thousand years ago, being part of a crowd helped you survive. **Since there is “safety in numbers,” members of pre-historic tribes were less likely to get eaten by predators or killed by rival tribes than those who wandered alone.** Sound familiar today? To this day, being part of the family and social groups promotes happiness and longevity. - **However, in the investment market, your herding instincts work against you. Doing what everyone else does is sure to make you a loser.** Said another way, don’t wait in line to buy assets. If you do, you are sure to overpay. Think of how the public piled into tech stocks right before the 2000 crash… or how the public piled into real estate right before the 2007 – 2009 crash. To harness volatility and make it a source of profits, you must learn how to ignore your desire to be part of a crowd. After an asset suffers a bust, nobody wants to buy it. The lack of buyers means asset prices get very cheap. You’ll have little competition to buy the assets. The headlines will be terrible. If you tell the average guy what you’re buying, he’ll look at you like you’re crazy. These are all signs you’re doing the right thing. Buying undervalued, hated assets is a lonely endeavor… but it’s extremely rewarding. ## **Asset #3: Ability to sell and ring the cash register** This might be the most difficult mental asset of all to acquire and put into practice. This is because it’s easy to fall in love with a position that has produced big paper profits for you. Once you learn how to buy extreme bargains during times of crisis, you’re bound to have some massive 100%+ winners in your portfolio. It’s easy to fall in love with a stock that doubles or triples in value. Seeing it in your portfolio will make you feel good. The winning stock can become like a family pet. And who wants to sell the family pet? Trust me… you do (but we are not talking literal family pets, we will leave that to the politicians like Andrew Cuomo). Extremely cyclical assets like commodities and natural resource stocks should be approached with a “rent, don’t own” mentality. You must be willing to sell these assets after they appreciate in value. It’s only a matter of time before they bust again. Remember, you don’t make money until you sell. Your “pet” is just a piece of paper. Don’t fall in love with it. It won’t love you back. To get an idea of what life can be like for a natural resource stock – and why you should take a “rent, don’t own” approach to them – have a look at this chart of **Range Resources **from 2005 – 2017. Range was one of North America’s largest natural gas producers. Range shares boomed 489% from 2005 – 2008… then busted 64%. Range shares boomed again from 2011 to 2014, gaining 185%. After that boom, shares fell 78%. When resource stocks like Range boom, speculators can make big money… but only if they sell. ## **![Theory of Relativity]** ## **In Summary** If you’re new to the markets, it’s easy to get scared of volatility. The media certainly makes it out to be a bad thing. But I’ll state again for emphasis: *I believe it’s a landmark moment in an investor’s career when he/she realizes that, much like a powerful river, volatility can be harnessed, directed, and used as a tool. When that realization happens, a world of huge opportunities opens.* Many of these opportunities will be in the volatile commodity markets. If you learn how to harness this volatility and put it to work, you can make it a source of huge capital gains for years to come. Regards, Marin --- # Copper Signals - URL: https://katusaresearch.com/copper-signals/ - Type: article - Published: 2021-08-20 - Updated: 2021-08-26 - Author: Marin Katusa Overshadowed by crypto stocks in the past 12 months, many copper stocks have quietly skyrocketed higher. And for good reason… A regular gasoline passenger vehicle requires 20-50 pounds of copper. Battery-powered vehicles (like a Tesla) require over 150 pounds of copper. With news stories about surging Tesla and electric vehicle sales, investors are bidding up the prices of the best copper companies. One such stock many of our subscribers own, which we were first to publish on in our premium newsletter – the **[KRO](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMqlKvaHjWHPnOfh4q-2BgeuxvoU5D-2BlL1NitoEUw1pgYjoWYwf7Cx8rPhUptoyoBfRLy10tiHnO0rXfpJbdeiWio3rA8snaHTO6mdCmfyhUPatweWXR8Gvc-2B5t1E5ITo76RhHnQsrzwwfs6z5Ezjgth2Q_IVR_zgzxDKT2OcndXpKQ9OfRN02T8DGFnuyFbxL06p7Z025hibfOBjJYei03bYwn3Hl-2Fgj0grhMpV9P2-2B4uZBzfk-2B92aKSerUi0yPGMto3QOhUhXew41BDRpWjLWgd-2FTAfNOaxfbqQK-2Bg2jzxGLzQx7USRgI-2Fb8ZD6wdh1HD04SN86f-2B50Z9KP-2FTmQRLn8v-2BA-2BmekPWmbU1sohctSLEyt2QPsg-3D-3D)**[** **](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMqH2qjsokLmG83Skm5K1Pip-2BwkC0zv6ekAO2oGfS-2BtSpUMbAglW1IKJ8yrs5rp-2BsllHjYlP7wPshcO9FNocrwtApLkRQcVbQPqwYCecmnH77rVgTv56vGo69eQQaV-2FCtpRN8mQxGLFR0etBBJzkESBKAaTV_zgzxDKT2OcndXpKQ9OfRN02T8DGFnuyFbxL06p7Z025hibfOBjJYei03bYwn3Hl-2F0cr0T1UciXx7-2FOg02Afg6oGWgg3itKsUt2FSvsQY1P4ukniWsPBWKHbCrPtg4-2BSzURZWWSra05fhNGZv2NtdyXSoLSJfD-2FRjDX7xQknfji16Jz7vVk3pIf51ONx1pYn-2BaI3XtRms9DK6k1QKE995UQ-3D-3D)([*Katusa Resource Opportunities*](https://u5734527.ct.sendgrid.net/ls/click?upn=WTW5xQA0cC0AjBeK5JF6GS7IdXTqYDtKYlAAaCgsUMrYicyyb4vRF7PhaOnAwHTQcq0LgJWygNvMWujfP3-2FsQGZwhae-2F-2BSLSk36JL2YrHY4JZhkd4-2FCIzFdLwqnjI38-2F4DW64oh5d8Cf-2BPx2-2F2nXF-2F6Uwv1lUxcX9IzIqxckn5FXmoUKY1oYtYbiE-2B-2FuXKFimv4W_zgzxDKT2OcndXpKQ9OfRN02T8DGFnuyFbxL06p7Z025hibfOBjJYei03bYwn3Hl-2FTeeYRQOdDBZyy5PCj7aWUMjLSSwEcYTIVKkxC744rPufcjwKGUa5muU6jGvtwJO8X0AT7-2FoiRscCgp4d-2FI1ooXUOTv9prx-2FoF9jvB7YoQ7SSH8qBFuYd52RWjPn7JJnxSMBhFcGR7kyxw-2BFvVcQC5g-3D-3D)). **It’s a copper spinout company that rocketed to a $1.5 billion market cap from the day it went public…** - **Giving shareholders well over 1,000% returns in a year.** If you like ten-baggers, then pay attention. Another copper producer I was a founding director of and remained on the board for more than 12 years for, has risen over 800% from last spring’s market panic selloff. And twice now it’s produced 1,000% gains for investors. ## **Copper isn’t as sexy as bitcoin or even gold…** In the Olympics, you get a ‘mainly’ copper medal for placing third (a bronze medal is 93% copper and 7% zinc). But the returns can be incredible – certainly better than a third place – if you understand the market, know what to buy, and when. - **I’ll share a funny (and real) story about copper miners in the past cycle…** When the copper company I was on the board of was trying to raise $500 million to build our mine, investors in the mining sector only cared about gold and silver at the time. So, I showed the spreadsheets of how the silver byproduct from our copper mine would pay for all offsite costs (shipping and smelting) to these investors and then broke down the cash flow as a percentage of gold. Even though the mine only produced about 12% precious metal byproducts, the cash flow from the precious metals was about 25% of the total at the time. Investors loved it… - **The stock went up 20-fold and became Canada’s third largest copper producing mine.** In the last 15 years, the copper developer (with a PFS) and mid-tier producer sector went from over 100 companies to less than a dozen. Another interesting stat for those who care about the facts. ## **A Copper Price Surge** After nearly a decade of weakness, copper prices have regained their footing and now remain well above the elusive $4 mark per pound. This can partially be attributed to a small supply deficit in the first quarter, which resulted in an acceleration in inventory level declines. The bigger picture is that global economic growth expectations have ramped up, and this is driving copper higher. ## ** ** ## **The Exchanges and Days of Supply** There are three main exchanges for copper: - London - Chicago - Shanghai Each exchange reports its inventory level, which indicates copper available for delivery. Below is a chart that shows the total amount of copper held in global exchange inventories. - **It’s important to not just look at the inventory levels as a gross number but to compare it against current consumption as well.** The metric used is “days of supply”, which is global inventory levels divided by global consumption. The chart below shows days of supply for copper over the last decade. If you were to draw a basic trendline from 2009 to today, it would be downward sloping—indicating that copper’s days of supply are consistently headed lower. I would argue that this is due in part to improvements within the global supply chain. These improvements minimize the need for consumers to hold physical copper. Holding inventory has a cost, so if downstream consumers of copper can minimize holding times, they will. Declining inventories may be a factor in short-term pricing, but the long-term expectations for copper are driven by demand growth. ## **Copper demand has been a proxy for economic growth…** Expanding nations need copper for infrastructure, household appliances, and construction projects. Historically, copper demand growth has averaged between 1 and 3 percent per year. It’s hard to get excited about 1 to 3 percent growth. However, I believe the main driver for copper right now is the green future demand outlook. Political goals of “net zero emissions” require vast amounts of copper to electrify everything from power grids to vehicles. These goals have the potential to unlock considerable new demand for copper. Below is a chart that shows projected copper demand through 2030. By 2030, my current forecasts indicate upwards of 30 million metric tonnes of annual copper demand. This assumes that the world does in fact head in the direction of [net-zero emissions](https://katusaresearch.com/carbonomics/). The major growth comes from electric vehicles, smart HVAC systems, and newbuild renewable power. In total, this brings in over five million tonnes of new demand, which represents a potential increase of 25% over this year’s total copper demand. ## **Billionaire Mining Corp.** Many years ago, a billionaire tech executive asked me why I was in mining. He suggested that with my skill set, I should be in the tech sector and that I was wasting my talents in mining. I emailed this individual the announcement of Bill Gates, Jeff Bezos, and others who were making a splash into mining. But these billionaires are going to learn a very hard lesson in mining: ***“God may have created the metal, but the Devil spread it around for his own amusement, and amusement he will have in the coming years.”*** ## **A Delicate Balancing Act – Global Supply versus Global Demand** For years, the copper supply has kept pace with demand. As the world electrifies, however, more copper will be required. It’s possible that by the end of the decade, we will be in a real deficit. This creates the opportunity for sustainable long-term copper prices. The chart below compiles the supply and demand analysis from the previous pages into one basic line chart. As you will see, copper is showing signs of outpacing supply by 2030. Of course, a lot can change over a decade, but this provides a clear picture of what the roadmap could look like. ** ** - **The key takeaway is that by the late 2020s, we’re going to need more copper production.** ## **Strong Prices = Stronger Governments** While I sound like a bit of a broken record, I’ll say it again… - **As metal prices go higher, governments are going to want to increase their take. And they will.** The nationalization of resources will continue to play a central role for investors and governments. This is precisely what’s happening in the world’s largest copper-producing region in Chile, as a new royalty system is coming down the pipe. Recently a congressional mining committee approved a version of a bill that would charge higher rates during times of high prices. The original royalty agreements had a flat 3% tax on sales. The new version adds marginal rates starting at 15% on sales derived from copper prices of between $2 and $2.50 a pound and as much as 75% on sales generated from prices above $4 per pound. **At current prices, the effective tax rate would be 21.5%.** I believe we’ll see more of this type of activity in Peru and other South American nations, Southeast Asia, and even in the new mining paradise of Greenland where the billionaire technocrats are going. These regions all contain major copper producers and governments who want to “cash in” on the copper price surge. Below is a chart which shows current copper production and estimated copper production through 2026. I have separated it into **+SWAP** and **-SWAP** line nations to show the considerable reliance upon -SWAP line nations for copper. (For an introduction to [SWAP lines – click here](https://katusaresearch.com/swap-lines-are-one-of-the-most-important-things-youve-never-heard-of/).) ## ** ** ## **Katusa’s Copper Outlook** I have no doubt that there’s much potential for serious economic headwinds which could slow global growth and subsequently copper demand in the near term. Yet, copper prices and copper-focused equity share prices remain strong. The long-term thesis for copper is very bullish, and so the outlook remains bullish. Electric vehicles, infrastructure, technology – there are a LOT of uses we know of that need a lot of copper. I’m just also cautious with regards to the potential risks still present in the current macro global economy, and the high valuations many base metal companies are already getting. You can minimize your risk and amplify your upside when markets work in your favor. There are many ways to get great upside in copper without paying premium prices. I am personally doing it right now myself, alongside my KRO subscribers. If you don’t have the time to check for yourself which companies can offer this in the resource sector, don’t worry. Consider becoming a subscriber of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiblog), and you’ll be able to follow exactly what I’m doing. Regards, Marin --- # Gold: Are You Scared? - URL: https://katusaresearch.com/gold-are-you-scared/ - Type: article - Published: 2021-08-13 - Updated: 2021-08-12 - Author: Marin Katusa It was a stunning Sunday selloff that got my attention… Within minutes, I sent an email to my team at Katusa Research to standby on alert. Gold bullion cratered in overnight trading on Sunday, falling over $60 per ounce in a matter of minutes, breaching $1,700 per ounce. Some are blaming it on thin overnight trading due to the Asian holiday, while others are justifying it with recent economic data. **Regardless it’s an uncomfortable feeling for gold bugs…** **Watching gold and gold stocks fall while the rest of the market roars higher.** Many of you have seen this song and dance before. Trudged through trenches and held on through bleak times. A large number of investors are new to the sector… And it’s the first time you’ve got that white towel firmly in your grips. This investor was drawn in by last summer’s rapid gold price ascent and the incredible gains gold stocks returned in that rally. ## **That was then. This is now…** While it can change in the blink of an eye, out of all the major asset classes (many bitcoin enthusiasts will remind you), gold is the worst year to date performer. ## ** ** ## **Weak: What is Causing the Gold Price Decline?** One major seller in thin holiday trading aside… The real driver of gold prices right now is the state of the US economy and the outlook for growth and inflation. Strong U.S. employment data released Friday played a pivotal role in the recent price action for gold. - **The labour statistics point to improving conditions, which indicate a stronger and healthier economy. ** In theory, a stronger economy should require less financial heroine, meaning less stimulus and money printing from the government and central bank. For the record, I don’t think the Fed intends on changing its key accommodative policy stance anytime soon. However, as an economy strengthens it incentivizes investors to buy growth over protection. Eventually a stronger economy could provide a catalyst for real interest rates to move closer to 0%, rather than -1.15% today. If you’re in the camp that one should earn a positive rate of return after inflation on bond investments or at least break even, then you’d be hard pressed to think gold is undervalued at these prices. ## **It’s not what you might want to hear…** But the numbers speak for themselves. The chart below shows every weekly gold price relative to US bond yields adjusted for inflation (Real Yields) since 2006. By this metric, even if you wanted to break even on your debt investments and earn a 0% rate of return after inflation, gold is overvalued by over $200 per ounce. ## **How Well Does This Gold Price vs Real Yields Model Work? ** Very well… For the mathletes, an R2 of 0.86 indicates strong explanatory power between gold and real yields. Below is a chart which shows actual weekly gold prices since 2008 and the predicted price from the model. I took a lot of hate from the Twitter crowd a few weeks ago when I said we may not like the current price action in gold, but we must respect it. As it looked like it would go lower from our analysis. That was exactly what happened. The gold market is a multi-trillion dollar a year industry. One seller for a few billion dollars on a Sunday is not going to make or break the sector in the long term. But, the fact that 1 seller can influence the price *that* significantly is a sign of short-term weakness. - **Again, respect the price action and use the information the price action provides to make investment decisions. ** ## **Comparing Gold’s Biggest Corrections** While the recent price action doesn’t look promising, these drops don’t even make the top 20 worst monthly declines for gold. Below is a table which shows the largest monthly declines for gold, and the subsequent returns 3 months and 12 months later. Back in June, gold retreated 7.7% for the month when it fell from $1906 to $1770 per ounce. It was the worst performing month since November 2016. Given the current price action, buying the dip in June likely won’t prove to be a winning strategy over the short run. Meanwhile, if August continues its trajectory, it’s shaping up to be just as bad as June or worse. That’s definitely not a stat gold bugs will want to brag about. But the scabs, cuts and open wounds are starting to pour some blood into the streets. ## **Buy the Dip in Silver?** Silver prices have struggled as well, -11% on the year and so far -9% for the month. Again, similar to gold, silver’s worst months trounce the current price action. In the next table, you’ll see the top 20 month over month declines, and the “buy the dip” model results for 3 and 12 month returns. In the short run… Like Birds of a Feather: August and Gold From Nixon closing the gold window on August 15, 1971 to the Fed injecting billions to plug the sub prime crisis on August 9, 2007; decisions by the U.S. fed in the month of August has had profound effects on gold. - A town with a population of 10,500 holds the keys to golds future success or failure… In late August the annual Federal Reserve Jackson Hole symposium will take place. It is often the place of major policy discussions and unquestionably the hot topic will be how to keep the economy running without sending it into an inflationary crisis. With the coronavirus recession behind us, it is hard to see nominal policy rates getting more accommodative rather than less. **Gold Stocks** A simple indicator I like to use is to see how many precious metal stocks above $100M market cap with over $5M in cash are at 52 week lows Vs how many are at 52-week highs and the ones in neither category. You can see that there the percentage of companies within 10% of their 52-week lows is rocketing higher. And that’s where alligators start to come out of hibernation… - I’m happy if gold goes down because it means I get to increase my positions in my favorite gold stocks at half NAV. That’s smart investing. To give yourself the most upside with least risk, you have to be a contrarian. Sell when others are manic buying. And buy when others are heading for the exits and throwing in the towel. I took cash off the table late in the summer and fall last year. I took a lot of flack for it because “gold was going to the moon”. The hate doesn’t bother me and neither does the confirmation bias. Cash is king and my subscribers and I are cashed up now and can buy when others who are overleveraged are forced to sell. **Subscribers and I recently began nibbling on my favorite gold stocks again…** Slowly and methodically, we’re building positions over weeks and months. And that is the key in this marathon to building wealth. It’s all detailed in my premium research service – [Katusa’s Resource Opportunities](https://outlook.office.com/mail/inbox/id/AAQkADkxNjVhZmU1LWE5ZDgtNDk5MC1iY2FkLTYwODY1N2YxMmUzNAAQAIYNYYI7zZFNudKHIRnx6wE%3D). In fact, there are 3 gold positions at my buy target price right now. How long they’ll stay at these price levels is anyone’s guess. But I’m buying [using my tranche strategy](https://katusaresearch.com/the-investors-biggest-problem-and-his-worst-enemy/) – and you can learn it too. Going all in and buying your entire position on the first dip is a recipe for disaster and financial ruin. It may not be as exciting as going all in, but it sure allows you to sleep better at night. Regards, Marin Katusa --- # Ticking Bond Bomb - URL: https://katusaresearch.com/ticking-bond-bomb/ - Type: article - Published: 2021-08-06 - Author: Marin Katusa In 2019 I talked a lot about Quantum Economics. What is Quantum Economics? It’s the new world we live in. Negative interest rates, high bond prices, strong US dollar, and a stronger gold price. When I was on a panel at a large resource conference 5 years ago… I stated in the coming years we would have further negative interest rates and higher bond prices. The other panelists and “gurus” stated that was “metaphysically impossible”. Well, it’s exactly what happened and we are now in an era of Quantum Economics. Be careful of following a dated “framework” by a dated guru. For example, did you know that if you bought a French or German 10-year bond, you’d lose money? Yes – yields on those 10-year government bonds are negative. Let’s turn to their neighbor, Switzerland. It’s a pretty safe country so you’d think it would be hard to lose money there right? Wrong. Lock your money up for 30 years and earn -0.192%. Yes, you’re reading that right… - **You give the Swiss Central Bank your cash for 30 years, and in 30 years they give you back less than you started with.** The chart below shows the current yields for bonds in France, Germany, and Switzerland. Everything short and medium-term duration is below zero… - **By keeping interest rates negative, the central banks are trying to create an environment that encourages consumer spending. ** Or at least that’s the hope. Given EU inflation can barely get above 2% which would be considered healthy in a normal market, things are not even close to back to normal across the pond. ## **Financially Transmitted Diseases (FTD’s)** The United States has kept with its [Zero Interest Rate Policy (ZIRP](https://katusaresearch.com/financially-transmitted-diseases/)), even in the face of skyrocketing monthly inflationary numbers. What was once perceived as an ultra-loose monetary stance is now a disciplined approach compared to Japan and the EU. And ZIRP and NIRP are critical to keeping the economy going. Big fiscal stimulus packages and ultra-low interest rates are the new normal both in the US and abroad. The combination of ultra-low interest rates and inflation leads to negative real interest rates. It is simply the yield on a non-inflation-indexed bond minus the inflation rate. As you might guess, in today’s world of zero or negative interest rates, once you subtract inflation, you are left with a negative “real” rate of return. Incredibly there is over $16 trillion in negative-yielding debt these days. The number is almost unfathomable. But that number will increase. As inflationary pressures on certain sectors of the economy pick up, more and more debt will go negative yield. In this situation, investors are incentivized to either - Spend the cash immediately, so it doesn’t lose value. - Or buy physical assets which are stores of value (like real estate, art, and gold). ## **Gold Price vs Real Yields** The next chart paints a very clear picture of the relationship between “real” interest rates and the gold price. This data goes back to 2006, where each dot represents the weekly gold price and associated real interest rate. While this is only one metric, the relationship is starkly clear…if negative real rates continue, it is likely supportive of strong gold prices. It’s not just gold that is doing well these days. The commodities boom is at full throttle, recently taking out the old 5 years high in the Bloomberg Commodities Index. Where it gets exciting is when you take a longer-term view… Here is the same index back to 2000. As you can see, we are still miles away from old highs. - **In fact, the index would need to rise by nearly 150% to get back to the old highs.** Commodities investing requires a contrarian strategy. It’s one reason why many on Wall Street shun the sector. Jumping on the meme FOMO bandwagon is a lot easier. These days, commodities relative to stocks, have never been cheaper. ## **The Chart 60 Years in the Making…** Below is a chart which shows the ratio of the Bloomberg Commodities Index vs the S&P 500 on a total return basis. It’s a ratio that illustrates the incredible cyclicality of the commodity space. When it’s on you better be involved, and when it’s off, it’s best to keep the powder dry. I’ve dedicated my entire 20-year career as a professional fund manager to the commodities space, traveling the globe multiple times over. All while building one of the best Rolodexes in the game. The natural resource sector is as much an investment into the people running the company as it is a bet on the commodity. I don’t take finders fees, kickbacks, or stock options, and no company can pay to be in my portfolio. My subscribers and I just started loading up on several of my favorite gold stocks. Subscribers to *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail) *get to find out exactly what prices I’m willing to buy and sell at before the trades occur. If you want to give your portfolio an edge, consider becoming a member and giving it a try for yourself. Regards, Marin Katusa --- # Golden Crossflation - URL: https://katusaresearch.com/golden-crossflation/ - Type: article - Published: 2021-07-30 - Updated: 2021-07-31 - Author: Marin Katusa The global “reopening” trade continues as economies surge on improving consumer demand. Let’s just hope the delta variant doesn’t shut things down in the fall again. Today we’re going to look at some current data on everyone’s favorite debate: Inflation. And then talk about what it means for gold. I get a kick out of experts, fund managers, talking heads and nearly everyone I meet arguing, debating and trying to convince others on their views of inflation, stagflation, transitory inflation, deflation and everything in between. I bet that “transitory” is the most searched economic term of 2021. Hell, even doctors are using ‘transitory’ now to explain lingering side effects from the different vaccines. Most of what you’re watching and reading is verbal diarrhea. Always question what you’re watching and reading with this simple filter – “*What kind of skin in the game does this person have*.” If you don’t have your own money on your thesis, then chances are you’re going to lose my interest quickly. Now let’s get to it… ## **Cross-flation** Around the world, inflation is the key focus. With enormous amounts of stimulus and a red-hot economy, inflation in many parts of the economy will happen. I coined the phrase in my book, “cross-flation”. In the U.S, there are two core measures of inflation. - The Consumer Price Index (CPI) and - The Core Personal Consumption Expenditure. You can argue that both methods are rather outdated, but they are bell-weather metrics that politicians and the US Federal Reserve use to help in their decisions. By either measure, inflation is evident as shown in the dramatic spike over the past 2 months… However, one should tread carefully because the baseline is data from shortly after the pandemic when economic activity was very low. So, it is easy to juice these numbers and expect inflation to be worse than it appears. The true test of how inflationary things are will come later in 2021 when Sept-Dec 2021 data is compared to Sept-Dec 2020 data. In Europe, the CPI shows a similar spike, though the 2% range would be considered healthy under normal economic conditions. Looking at sources of alternative measures, such as the IMF World Food Price Index, shows major increases in the global price levels of food. In the real world, you’re seeing everything from gas prices to luxury purses increase in price. In short, there are certainly inflationary pressures. But at this point, nothing that requires central banks to alter their course of stimulus packages and interest rate policy. ## **Golden Hedge for Inflation** Gold has long been argued as an inflation hedge. Dramatic inflationary conditions can lead to a loss of confidence in the nation which can cause a currency death spiral. This leads to a very weak domestic currency, while real assets such as gold, art, and real estate will appreciate. - **However, a *little*inflation is bad for gold. The reason is that inflation is mainly controlled through interest rate policy.** To curb inflation, central banks raise interest rates. Higher interest rates incentivize domestic and international investors to buy domestic bonds. This increases the demand for the domestic currency, leading to a higher valued currency relative to its peer nations. - **In this case, if the US Federal Reserve were to raise rates, the US Dollar would rise and because gold is priced in US Dollars, it would fall.** Do I think the Federal Reserve fears inflation and will raise rates in a big way this year? No, I don’t. For several reasons: First, the US is not back to full employment. The economy can continue to expand at an above-average pace so long as the country is below full employment. Second, the era of double-digit interest rates or even 5% money is a long way away. We are in the realm of low-interest rates (and NIRP) and these policy stances are not going away. Raising rates to 5% would cause enormous stress on the system and likely lead to catastrophic failure locally and financial contagion. ## **Will History Repeat Itself?** For the last 20 years, relative to its peer nations, the US economy has emerged stronger from economic collapses. This can be measured in many ways, such as GDP growth. And another very useful, but not so often mentioned tool is *interest rate determination*. Central banks raise interest rates when economic conditions are strong and cut interest rates when conditions are weak. As you’ll see in the next chart, through the tech bubble, the global financial crisis, and the Coronavirus pandemic the US always had the highest interest rates compared to its peers. This is especially evident since 2008 when after a brief stint, the EU was forced to cut its interest rates to zero, while the US raised rates a handful of times. As we look at the global economy, most nations are worse off today than they were pre-pandemic. For example… **Japan** cannot change from the zero-interest-rate policy it struggled with over the last two decades. The EU has negative interest rates, a struggling banking system and many highly indebted member nations. It’s hard to see them as a pillar of economic strength right now. **Canada** is a major trading partner of the United States, it will try to closely mimic its interest rate policy. Being a commodity-driven nation, high commodity prices will also justify higher rates in Canada. Given the economic outlook abroad, it is hard to see any developed economy strengthening relative to the United States. The **BRICs (Brazil, Russia, India, China)** will show strong economic growth, but none have shown themselves capable of being a responsible global leader when it comes to trade or central banking activity. ## **US Dollar Importance** - **On a global basis, I remain firm in my US Dollar position. ** There is a lot of negativity surrounding the demise of the dollar, death of the dollar, destruction of the dollar, and all other fear-driven narratives. I’m not in that camp. As I’ve said many times before: The US Dollar only has to be the strongest currency *relative *to its peers. I see no reason for the US Dollar to lose its reserve currency status. Below is a chart which shows the US Dollar versus a basket of global currencies. ## ** ** ## **Gold and Potential Headwinds** Gold has struggled for most of the year as investors have bought risky assets and sold safe-haven assets. This past June was the worst-performing month for gold since November 2016. - **While we may not always like it, we must respect the price action in gold.** Inflationary conditions are not rampant, and US bond prices have weakened sending yields higher. This puts pressure on the gold price. Below is a chart which shows the gold price versus the real return of the US 10-year bond. You will see that as real yields bottom, gold has a tendency to peak. At this time a year ago, I was pitched more gold deals, financings and projects than in the previous 3 year combined. When you start to see the “rounders” coming back into gold after being in crypto and cannabis, still flogging the same exploration moose pasture… …you know it’s starting to get a little overheated. That – along with many other underlying factors – led me to take [Katusa free rides](https://katusaresearch.com/late-nights-from-the-inbox-of-marin-katusa/) and profits off many gold positions and rotate into other opportunities with more upside in mid to late 2020. It wasn’t a popular move, which made me all the more confident about it. I like to make moves well in advance of others, to take advantage of liquidity and sell into periods of relative strength. And buy in periods of relative weakness. I anticipated a correction, which now allows me to scoop up shares at a massive discount to last summer’s prices. While gold was (and still is to some degree) retreating and consolidating, many of my subscribers to Katusa’s Resource Opportunities and I still made money on our gold picks. One such company is up nearly 5x our money in just over 12 months. And now the Way of the Alligator is working in real time and I’m methodically buying new tranches in my favorite gold stocks. If the gold stocks correct further, I am ready, like an alligator to attack. My subscribers who followed my guidance are now strongly positioned with lots of attack capital. My long-term bullish view of gold is intact. But I’ll use any weakness in the short term to build my positions. You can read the exact moves I’m making by becoming a member of my premium research letter – **[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)**. I hope you’ll join me and all the other alligators. Regards, Marin Katusa --- # The Adoption Rate of this Obscure Commodity Will be the Fastest of All Commodities - URL: https://katusaresearch.com/the-adoption-rate-of-this-obscure-commodity-will-be-the-fastest-of-all-commodities/ - Type: article - Published: 2021-07-23 - Updated: 2021-07-30 - Author: Marin Katusa Pop quiz: What do Norway, Nestlé, and NASCAR have in common? Or what about Leonardo DiCaprio, President Biden… and JetBlue? They’re all among the companies, celebrities, cities, and countries that have made commitments to curb their contributions to climate change. Or eliminate them entirely. **And they’re all using *the exact same tactic* to do so.** It’s one you’ve probably never heard of… In fact, it’s a commodity so new that it doesn’t even have an official market yet. There are no quotes or tickers on Yahoo! Finance, Financial Post or Google Finance …Pricing is almost impossible to find. But it’s on the verge of erupting onto the world stage. In a few years, even your Uber driver—will know everything about it. ## I’m Talking About Carbon Credits From here on out, the carbon credit news cycle will accelerate. And it’s going to happen at a breakneck pace. The tidal wave of government and corporate money that will create this change will put NASA and every other government body to *shame*. It’s going to create enormous, long-lasting change in how investing works. - **This is the type of opportunity that—like clockwork—comes along once in a generation.** You are getting a front-row seat to one of the most incredible emerging opportunities you will ever see. Once you’re up to speed on how the largest entities in the world plan on fighting global warming… You’ll be set to profit from them in a big way. So, let’s get you up to speed on the basics. I guarantee you will be smarter than any of your friends and colleagues by the end of this missive. ## How are Carbon Credits Created? Carbon credits are generated through emission reduction or direct emission removal. For example: carbon credits can be earned for a renewable power plant that is used to displace coal fired electricity generation. - **For each tonne of CO2 which is displaced, a credit is earned. ** Carbon credits can also be generated through removal of greenhouse gases. This is known as *carbon sequestration*. Carbon removal comes from projects such as forest restoration and avoided deforestation. These are grouped as “nature-based solutions”. Or credits are created through physical removal of carbon from the atmosphere through technology known as: - Carbon Capture & Store or - Bioenergy combined with Carbon Capture Store (known as “*negative emission technologies*”) Carbon offset projects which sequester carbon (such as reforestation or avoided deforestation) are a function of opportunity cost. This means the alternative use for the land is what partially drives the value of the offset. Land which could be used for agriculture or livestock is therefore a function of crop and livestock prices. The *Trove Intelligence Global Carbon Credit* *Supply Model* indicates that prices in the voluntary market will need to rise by an order of several magnitudes… To continue to incentivize carbon project developers. ![global carbon credit supply curve graph 2020-2050] ## **Book a Flight** If you try to look at pricing of flights on google or any online portal, under the price of the flight you will now see the amount of carbon emissions that your one seat is responsible for. This is done for two reasons… First, to start making customers aware of the amount of carbon emissions they are responsible for their flight. Second, it’s to condition customers such that when there is a cost now to negate those emissions, the customers know the reason for the cost. ## Carbon Credits are an Emerging International Marketplace The beauty about the carbon market is that it is global. Greenhouse gases migrate and emissions from one nation end up in the skies of another. It requires global acceptance and adoption to solving the problem. - **In the *Voluntary Carbon credit Market (VCM)*, a credit produced in 1 country can be applied against emissions of a company located in another part of the world. ** For example, the Bonobo Peace Forest in the Democratic Republic of Congo is one of the largest reforestation projects in the world. Credits earned from this project can be applied against emissions of a company domiciled in Europe or North America. **This creates an incredible opportunity for an international marketplace for credits. ** Below is a table which shows the total value of transactions by offset type in the Voluntary market for the past 4 years. - **Total transaction volume in 2020 is estimated to be over 3 times the volume it was in 2017…** **![total transaction value by emission offset type graph]** ## **And this is exactly what makes it such an exciting place to invest… ** All of this is building up a pressure chamber of demand in the VCM that has not yet reached a tipping point. When it does, there’s a *lot* of upside to be had. Because It’s the perfect setup for a *long squeeze *in the VCM: - *Rising emissions from a growing population.* - *Tightening government mandates on carbon emissions.* - *Increasing consumer demand for environmental responsible.* - *More transparency in emissions reporting.* - *Corporate buy-in at every level, even from non-emitting companies.* All together, this is going to result in a desperate scramble for high-quality carbon offsets, of which there are few. If you thought the rise in the price of lumber was crazy in early 2021… Just wait until you see the VCM market in five years. ## **Voluntary Carbon Market Pricing** The bad news is that since VCM is such an undeveloped market, pricing information is hard to obtain. In fact, the term “voluntary carbon market” is somewhat inaccurate. The market itself purely ad hoc. This is such a new commodity that there is no real, actively traded market. And that’s great news. Because it means very few people are actually investing in the market right now. This isn’t even hitting a blip compared to Gold or Bitcoin on Google Trends… ![carbon credit google trend interest over time] - **As an investor, you know that the time to make your bets is when NO ONE else is looking at a sector. ** To start shedding light on what carbon offsets could be worth, let’s start by looking at the price floor. Carbon offsets produced through means such as reforestation have an opportunity cost. ## **Breakneck Price Acceleration** Based on this, the* Trove Intelligence Global Carbon Credit* *Supply Model* indicates that prices in the Voluntary Carbon Market (VCM) will need to rise to continue to incentivize carbon project developers. Furthermore, how credits are *produced* gives them different base values. The table below shows the variation in global carbon credit pricing across different types of carbon offsets in the voluntary market for 2017–2019. ![emission offsets prices paid per tonne] In 2021, prices in the voluntary market have been *hot*. Prices have regularly been quoted above $7.50 per tonne and as high as $15 per tonne for high-quality credits. ## Catalysts & Opportunities in the Carbon Markets They key catalysts for the carbon market are… - **Government-led initiatives to promote the carbon marketplace.** These include establishing a global carbon price floor, heavily enforcing the achievement of NDCs, and regulating investment in carbon removal technology. All of these are heavily bullish for carbon offset prices. - **Corporate-led net neutral and net zero pledges.** Expect to see corporations race to become net zero so that they can remain competitive in the marketplace. And then watch for additional demand from erasing historical emissions. - **Demand-driven development of reporting and exchanges.** As outlined, this will include Scopes 1, 2, and 3 emissions. In the near future, it will also require highly liquid, transparent exchanges for both the compliance and VCM. This has always been the trajectory of any new commodity. Only this time, you know about it before it has achieved anything close to equilibrium. ## The Carbon Market is an Incredible Asymmetric Bet There’s so little downside—climate change isn’t going anywhere—and incredible upside. Early adopters, project generators, and holders of carbon credits and offsets can earn substantial returns over the coming years. **Very few people know about this brand-new commodity sector… yet.** **But [everyone understands it immediately once exposed](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk).** And everyone who understands… will invest, because it makes sense and its cheap to do so now. Of course, you can stay on the sidelines if you want. But before you make that decision, recall one of Warren Buffett’s most famous quotes. It goes like this: *“Someone’s sitting in the shade today because someone planted a tree a long time ago.”* Those trees are (literally) being planted *today—*all across the world. And I’m here to help you make a profit from it. To find the companies best positioned to make money from the hundred-trillion-dollar war, [**you’ll want to become a member of *Katusa’s Resource Opportunities***.](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) In my monthly newsletter, I’ll be publishing the best carbon investments that come across my desk. If you want to be among the first—and only—to know, sign up today. Regards, Marin Katusa --- # Starlink and the REAL Space Race - URL: https://katusaresearch.com/starlink-and-the-real-space-race/ - Type: article - Published: 2021-07-16 - Updated: 2021-07-22 - Author: Marin Katusa The “BDE” of billionaires is next level. Jeff Bezos made an announcement that he’s going to space via Blue Origin. Whether he didn’t want to be outdone or wanted to steal all the spotlight (clever), Richard Branson announced he was doing the same via Virgin Galactic. Only earlier. But the billionaire race to space is just a sideshow to the real race to space. Bezos and Amazon might control a significant portion of e-commerce and even tech infrastructure (through Amazon Web Servers). However… - **There is an even bigger play here: Control over the internet itself.** And it all begins right before the Dot Com boom… ## **The Battle for Global Signals** In November 1998, a new company called **Iridium** launched a brand-new satellite communications service. And just ten months later, the company filed for Chapter 11 bankruptcy. They’d failed to take into account one pretty simple fact: it requires billions of dollars to launch satellites into space. Twenty years later, Elon Musk is barging into the exact same space. Only he’s doing it Musk-style, using his now-typical (and ultra-successful) gameplan. First, he’s turned the really expensive thing into a commodity, just like he did with electric cars and rocket ships. His company, **Starlink**, is on the verge of creating satellites on an assembly line. Second, he’s his own customer. **SpaceX** needs a continually full calendar of payloads to take to space, and Starlink always needs to get satellites up to build out its network. It’s a win-win. Third, he’s leveraging the U.S. government (okay, your taxpayer dollars) to fund the entire thing. Starlink has been picking up lucrative FCC contracts to provide satellite-based internet to areas all across the United States. And fourth, the company is making a ton of money before it has even fully launched, and using that to fund future growth. - **Starlink already has $500 million worth of subscribers and reservations.** Even the founder of Iridium knows the eventual outcome: “I wish Mr. Musk well,” he said. “I expect him to succeed.” Iridium was just building a satellite phone service, but Starlink is taking that a few major leaps further. ## **Starlink wants to be the internet service provider for the *world*…** And when it’s fully built out, it will upend the world order in much the same way the internet did in the late ‘90s and early ‘00s. The Starlink concept is really simple. With a small, pizza-box-sized satellite dish, a user can access the internet from anywhere in the world. *Anywhere*. A barge in the Suez Canal… The top of Mt. Everest… The Sahara Desert… The service is currently being tested in a few countries. In true Musk fashion, they’re calling it the “Better Than Nothing Beta Test.” Already, it’s pretty great. Testers are getting better than 100 Mbps speeds. And by the end of the year, that’s expected to reach 300 Mbps. (For context, the average U.S. internet speed is <200 Mbps.) And it’s just going to keep getting better… - **Starlink’s original stated goal was 1 Gbps internet—four times the fastest country in the world, Singapore.** And they’ve promised the FCC they will provide the internet with zero contracts, early cancellation fees, and no data caps. All for the whopping price of $99. But that’s expected to come down. As Musk tweeted: - “*Starlink is a staggeringly difficult technical & economic endeavor. However, if we don’t fail, the cost to end-users will improve every year*.” Once Starlink is fully operational, a majority of internet users won’t even consider anything else. Which begs the question… ## **When and how will all of this unfold?** As of early 2019, less than 5,000 satellites *total* had ever been launched. Starlink projects that **12,000 satellites will be necessary** to provide reliable global internet coverage at ultra-fast speeds. Seems impossible, right? The first small batch of Starlink satellites was sent into space via SpaceX in May 2019. Right now, there are now nearly 1,500 Starlink satellites in orbit. *Courtesy of https://satellitemap.space/* More importantly, the frequency of launches is accelerating—from six months between the first two is now down to *just nine days between launches*. Expect that to become hourly. Yes, hourly. Further, Musk is preparing a new Starship, which will be able to haul four times as many satellites per trip. In other words… - **Starlink is going to get bigger than expected, much faster than expected, all paid for by U.S. customers through the FCC.** It gets better. The satellites will be de-orbited after three or four years. So just like Teslas, SpaceX will be able to upgrade them on a rolling basis. In an early 2021 presentation, Starlink revealed they plan to reach speeds of 10 Gbps—in part by using lasers to communicate between satellites. This isn’t about faster Netflix and porn speeds. - **This is going to revolutionize where, when, and how business is done.** And it’s going to have massive ramifications for global politics and the world order. OK, I’m going to channel President Reagan for this next title: ## **“Mr. Musk, Tear Down This Firewall”** Once the satellites are in space—remember, more than twice as many have ever been launched—there will not be room for a second internet service provider. China and Russia fear this in a big way. The Space Race was in my book, [The Rise of America](http://www.riseofamerica.com/), if you want to know more. But if Musk is successful: **The game will be over**. And the second-order effects of a single, global internet service provider will be unlike anything you’ve seen before. For example, right now, Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), Sundar Pichai (Google), and Tim Cook (Apple) wield incredible power. As you’ve seen, a flip of the Twitter or Facebook PNG switch can instantly mute someone from the world stage. - **Elon Musk is positioning himself to be the person with power over the people who have power.** Once he controls the world’s internet, he can dictate what is and is not transmitted worldwide. You can bet that major world powers and governments are watching this closely. And you’re probably aware of the so-called “Great Firewall of China,” which the government uses to determine what users can access. Russia, India, Iran, Syria, and Vietnam also have or are implementing similar programs. With Starlink, users will be able to circumvent that filter. It’s a little difficult to block all of the space. I’m even willing to speculate that Starlink will open-source the patents for the receiver dishes, just like Tesla did. Same guy in control. But all of that is* nothing* compared to the real competition unfolding. Because the world’s biggest country and the world’s biggest entrepreneur both have the same grand ambition: - **Get to Mars. *First.*** SpaceX knows the entire space launch industry is only worth about $5 billion in revenue a year. Global internet access? That’s a $1 trillion+ market… Or the size of China’s *entire* GDP in 1999. With that kind of revenue, SpaceX—and Elon—have a shot at winning this thing. Over the course of the next year, we’re going to watch a no-holds-barred fight, with Earth as the arena. Like the founder of Iridium, my money’s on Elon. And to all those who bash Elon, I ask—what have you done to make society better? Until next time, stay safe. Regards, Marin --- # Carbonomics - URL: https://katusaresearch.com/carbonomics/ - Type: article - Published: 2021-07-09 - Updated: 2022-03-15 - Author: Marin Katusa The amount of capital that has and will continue to be deployed into the Carbonomics Sector is mind boggling. It’s in the hundreds of billions and will reach the trillions. But few of the corporations that have committed to reducing their carbon emissions have *actual* plans to reach their committed targets. Billions of dollars and major company pivots are being deployed towards making net zero carbon emissions a reality. In fact, I believe Nobel Peace Prizes will be handed out for the efforts. Just recently… - **Shell, one of the biggest oil producers in the world, lost a Dutch court ruling and must now legally be responsible to cut their greenhouse emissions by 45% by 2030. ** What does that mean? Pay close attention to these next 3 lines… It means that Shell needs to buy (and/or create) over 100 million carbon credits a year for the next decade. Let’s put that in perspective… In 2020, 223 million voluntary carbon market credits were issued. Read that again: - **To meet target emission cuts, Shell would need to buy 45% of ALL the voluntary carbon market credits issued last year. EVERY YEAR.** That’s just the ONE oil giant, Shell. You can see immediately how the **Shell** ruling will have implications for climate cases around the world. And[the price of nature based carbon credits nearly tripled in 2021](https://carboncredits.com/). Is Shell just a one off? Not even close. 24 hours after the Shell court ruling, **Exxon’s** board of directors had a massive shakeup. Two board seats were won in a bitter proxy fight by an unknown climate fund called Engine No.1. Changes in climate action by the executives at Exxon are underway. Then the shareholders of **Chevron** voted, and changes will happen there as well. ## **Dirty Oil and the Green Bond Bonanza** It’s only a matter of time before other oil companies and large resource miners follow suit. But here’s my main point—it’s not a bad thing. The old guard has resisted, yet they overlook the benefits that will come from this. - **For the first time, the oil and metal miners can tap into the low-cost source of capital available in the green bond market.** A major positive will be that their borrowing costs *decrease*. [Companies who lower their carbon footprint will attract new investors](https://katusaresearch.com/the-most-misunderstood-commodity-on-earth-carbon-credits/) – who have avoided the extraction industries, that create a large carbon footprint relative to their share price… And thus *increase* the demand for their shares. By reducing their carbon footprint there are major benefits to both the cost of interest in the bond markets and the share price of the shares. It’s a real win-win. **Whether you agree with this or not, there is an opportunity to make a lot of money from this movement. ** We’re fine with others getting the credit, awards, and recognition. Alligators only care about making money while doing positive things that better society. So how much is at stake? Here’s what got me very interested… ## **The amount of money flowing into the space is simply unstoppable…** According to Bloomberg Intelligence, ESG debt issuance recently surpassed $3 trillion this week. It took 12 years to issue the first trillion dollars and 1 year for the second trillion. In the past 6 months, a third trillion has been added. - **Already in 2021, more ESG debt has been issued than in the prior year.** ![ESG Fever]Make no mistake, the ESG sector is scorching hot… Even Russian companies such as **PolyMetal** are tapping into the Green Bond market. They are doing this to reduce their cost of capital by committing to reduce their carbon footprint. ## **Are Carbon Credits a Tax?** There’s a major misconception and wrong belief that carbon credits are a tax or a tariff. They’re not. They’re an output commodity cost, and by reducing their footprint, corporations can make money. How you ask? By reducing their cost of capital and increasing their potential shareholder audience. Debt raised with an ESG focus is cheaper on average than non ESG debt. Don’t believe me? Ask the VP of Treasury of one of the world’s largest pipeline companies… Max Chan, stated its recent sustainability linked debt came in 5 basis points lower than where regular debt would have priced. **Telus**, one of Canada’s largest telecom providers, issued a sustainability linked note. And it came in 6 basis points *lower* than would be expected in the regular debt markets. ## **Scope Emissions: Going Green Is Good Business** Now let’s return to some further carbon reduction considerations. There are more than 5,200 companies with $1 billion+ market caps that are publicly listed and trade on the North American and European stock exchanges. Of those, 2,410 companies report their Scope 1 greenhouse gas emissions. ![Who actually reports their emissions?]A little background: - **Scope 1 Emissions** are the direct greenhouse gas emissions from company operations. - **Scope 2 Emissions** are the indirect greenhouse gas emissions from energy purchased by the company. Scope 1 and Scope 2 emissions are within the direct control of a company. The criteria for identifying and reporting them is well established, transparent, and consistent across industries. - **Scope 3 emissions** include the indirect emissions (not included in Scope 2) that occur in the value chain of the company (this includes both downstream and upstream emissions). These remain underreported. There needs to be more legislation and international body governance on Scope 3 emissions as they include many “grey” areas open to interpretation and debate. The chart above only includes Scope 1 carbon emissions, as there are no debates or discrepancies concerning these. - **The fact that only 46 percent of large-cap companies report their Scope 1 emissions will change. ** Regulatory authorities such as the SEC are on the case. And it’s only a matter of time before they mandate that all companies include a Scope 1 emissions report in their financial statements. Scope 2 reporting will follow, and perhaps eventually Scope 3. But reporting is one thing—action another. Currently, out of those 5,230 companies with $1 billion+ valuations that are publicly listed in North America and Europe… - **Only 457 (8.7%) companies have publicly announced some kind of plan to reduce GHG emissions as of May 25, 2021. ** ## **A Carbon Credit Windfall** This does not mean that the companies have actually achieved any reductions… Only that they are *talking about* trying to implement strategies (many of which they have not even started). Again, this will change. In the meantime, my major focus right now (aside from resources) is the hottest commodity sector right now. I believe the Carbon Credit market is in its infancy… And there is MUCH more information that I’m not sharing here in this alert to you. I cannot tell you how many calls and contacts my team and I have fielded in this emerging sector. Just as technology underpins almost every market from grocery stores to car manufacturers… Carbon credits, emission reduction and green bonds will affect EVERY industry. And [you can follow the rise in prices for various markets right here](https://carboncredits.com/carbon-prices-today/). I’ve never seen a market quite like this in my career. **And if it sounds like I’m excited and talking my own book – that’s because I am.** After taking profits and free rides in many of our portfolio positions in my premium research service – [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)**…** I have a significant portion of my net worth allocated in the Carbon sector. This is only the beginning. And you don’t get too many asymmetric shots like this. So do yourself a favor and get up to speed ASAP. Regards, Marin Katusa --- # The MOST Dangerous Trap in Every Investment Market - URL: https://katusaresearch.com/the-most-dangerous-trap-in-every-investment-market/ - Type: article - Published: 2021-07-02 - Updated: 2021-07-21 - Author: Marin Katusa What do many cryptos, cannabis stocks, precious metals stocks, and SPACs all have in common? The answer might not be obvious at a glance. But if you’ve personally invested in any of the above before… Or if you’re familiar with the story of the GameStop short squeeze… Then you might have a good idea of what the answer is already. ## **Know Your Risks** When you decide to invest in a particular stock or asset, it’s not enough to simply know what the drivers and catalysts are. You must also understand the risks. Risk management is a complicated and in-depth topic. There are many different types of risks – - sovereign risk, - time horizon risk, - market risks, and many more. Also important is this: Each investor’s risk profile is different… The single young investor with stable income and no dependents or mortgage has a much larger appetite for risk than a household’s primary breadwinner with children to take care of, college tuition fees on the near horizon, and a hefty mortgage on the house that needs a major reno. But setting all of that aside, today we’ll be focusing on a single kind of risk in particular – one that has reared its ugly head time and again to thwart the efforts of many a would-be investor. ## **I’m Talking About Liquidity Risk…** Quite often, when a particular new sector or asset class hits it big, there’s a massive run-up in prices that causes investors to pile on. And there’s no sexier story to jump onto than a small-cap company or – lately – crypto ICO. Small-cap companies are the fresh draft picks on a championship finals team, the underdog stories that everybody loves to cheer on. Compared to the senior, more well-established companies in their sector, they’re much cheaper, thinly traded, and usually have no analysts following the story… It often means that they have more room for dramatic share price moves *if *they hit it big*.* Apple isn’t going to be providing shareholders with 10x returns in a short time frame. It’s too large, its assets and revenue streams too well understood for that kind of crazy jump in valuation. But a small-cap biotech company worth pennies? They might just have the idea that’ll turn them into the next Pfizer or Moderna. Small-cap companies and sh*tcoin crypto’s are a dime a dozen, and many of them never make it past the planning stage. But when an entire sector takes off, like back during the cannabis and crypto rushes we’ve seen in the last few years, many coins and companies often get lifted up to the top by the rising tide. For instance, back three years ago, marijuana was on the up-and-up. With volume through the roof and prices flying high, things were looking good. The bankers were flying, high up on their own smoke clipping fees. But then the other shoe dropped: ![marijuana index performance and volume] - **As you can see, prices collapsed over the next few months… and trading volume dried up alongside the meteoric fall in prices.** Here’s the chart for a sample junior (small-cap) cannabis company during that same time frame: ![junior cannabis company] Though there was plenty of volume for this stock at the beginning of 2018, you can see that trade volume tapered off rather quickly. And by mid-2018 it would’ve been very difficult to exit a large position in the stock. - **Be wary of your paper gains evaporating ultra-fast when liquidity (volume) dries up.** And if you’d decided to buy in, or worse, average down, late in 2018 when volume briefly spiked up… you would’ve been left in even worse shape. Only months later, by the spring of 2019, trade volume had all but completely dried up. This hard lesson learned by the crowd in the cannabis boom was felt in early 2021 after many tech stocks experienced a liquidity freeze. ## **Don’t Get Left Holding the Bag** As mentioned earlier, this is a story I’ve seen once too many times – in [precious metals](https://katusaresearch.com/the-ultimate-cheat-sheet-for-gold-and-silver-stock-investors-part-1/), [SPACs](https://katusaresearch.com/spac-attack-what-happens-when-hot-ipos-and-financings-hit-the-market-in-tech-and-gold/), and [cryptocurrencies, and cannabis](https://katusaresearch.com/welcome-crypto-and-cannabis-investors-this-is-the-worst-thing-that-can-happen-to-a-junior-stock/), among others. Don’t fall for a bearded geo with a box of crayons, a map, and a fistful of promises urging you to “double down and average down”. In the absolute worst-case scenario, a company that needs to raise money will get its share price wiped up during a period of a liquidity freeze. The dilution that will occur to the shareholders will essentially wipe out much of the value you thought you had. A similar analogue for cryptocurrencies would be coins that aren’t being used or developed any longer – you won’t be able to find any buyers for your failed crypto coins. All too often, amateur investors experiencing their first big win will ride that paper high. (Dogecoin anyone??). They’ll look at their account statements and feel euphoric over the big numbers and triple-digit gains they see, without understanding one fundamental fact: - **Until you sell****, you haven’t made a single penny.** When it comes to my premium newsletter service, [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/), I’m not just about delivering the best stock research and picks to my subscribers. There are simple rules to ensure you do not experience a catastrophic loss. When you’re overleveraged, can’t sleep at night because of your position sizes, or hold little cash capital – you’re setting yourself up for the potential of a catastrophic loss. Unless you have a biblical tolerance for risk in crisis situations, you’ll get crushed. - **Keep in mind that 99.99% of people who can fog a mirror should not use any leverage tools for investing.** Taking a mortgage or line of credit to invest in the markets or cryptos is taking excessive risk in any sector. You will set yourself up for hardship and a lot of personal strain; even if it works out. If you are jeopardizing your standard of living for yourself or your family, don’t even consider it. There [are many ways to reduce your risk](https://katusaresearch.com/four-rules-investing-junior-stocks/) and amplify your upside. I also want to educate my readers, with best practices like the **Katusa Free Ride**: By applying the *Katusa Free Ride* Formula appropriately… You can reduce your exposure to liquidity risk – and many other types of risk – simply by taking your initial capital off the table. Here’s how it works… ![The Katusa Free Ride Formula] To learn more about managing your investment portfolio’s risk, as well as to find out what I believe is going to be the largest wealth creation opportunity of our lifetime, [consider subscribing to *Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/). It’ll be the most risk-free educational investment course you’ll ever make in your life. Regards, Marin --- # SWAP Lines are One of the Most Important Things You’ve Never Heard Of - URL: https://katusaresearch.com/swap-lines-are-one-of-the-most-important-things-youve-never-heard-of/ - Type: article - Published: 2021-06-25 - Updated: 2021-06-24 - Author: Marin Katusa It’s a cunning strategy. The US Federal Reserve satisfies the global demand for dollars while maintaining the dollar’s title as the planet-wide currency king. With one brilliant move, it has divided the world up into allies and non-allies of the US. Today, everyone needs the stability of the USD in a world turned upside down with economic turmoil. Granted, that stability may be only relative to other countries’ own currencies. But American allies have to deal with that reality. They know it. And the Fed knows it. - **That’s why the Fed has created a path to access US Dollars for government-identified *real* allies of America.** And it has denied access to those identified as unfriendly. **It’s critical that you understand this…** And when you do, you’ll be miles ahead of almost everyone else. The US has put a system in place where all but the most die-hard anti-American nations will want to be included among the friendlies. In fact, many will do anything to make the list. How do they do this? Through SWAP lines. Never heard of them? Then you’re not alone. For the most part, when I bring up SWAP lines, I have found myself speaking into a vacuum. I haven’t come across one person in a hundred that knows about them. And that includes business executives, politicians, or even bigshots in the financial industry itself. Most investors are not even cognizant of the program’s existence, much less aware of its significance. But given how important SWAP lines are to the global economy, every investor should understand them and how they work. ## **What Are SWAP Lines?** First things first, here’s how the Fed explains swap lines [on its own website](https://www.federalreserve.gov/monetarypolicy/bst_liquidityswaps.htm): - If you **have** access to a US swap line, you are what I call a **+SWAP** Line Nation. - If you **don’t have** access to a swap line, you are a **-SWAP** Line Nation. ## **SWAP Lines Are a Financial Lifeline** In the wake of any global panic, the most recent example being the pandemic… Many central banks request that America provide financial assistance to at least alleviate the stress caused by a lack of US Dollars. SWAP lines have provided that relief and will continue to do so. They are, literally, lifelines. And they are also debts. - **All those dollars borrowed must be paid back in US Dollars, with interest, also requiring dollars.** It’s ingenious because demand for the US Dollar breeds further demand. It will be paramount for nations grappling with deflation to enter the favored group capable of exercising swap lines. Here’s a list of the nations that have access to US Dollar SWAP lines (as of now): ![Countries where us swap lines exist positive swap lines nations] Countries outside the group—the negative swap line **(-SWAP)** nations—will struggle to access US dollars. ## **SWAP Lines are Important for Investors** The result of how this program is set up is that countries receiving swap lines will follow any stipulations they are asked to follow. They’ll have no choice. - Suppose you want to be blessed with a swap line from the U.S… In that case, you must be careful not to antagonize the hand that feeds you. This means not aligning in any way with nations designated as non-friendly and agreeing to follow any restrictions, such as sanctions, that the US government puts on. The struggling nations that require emergency access to US Dollars, and can’t get them… - **Could engage in the expropriation of foreign-owned assets as the world recession deepens.** For example: Last year Papau New Guinea revoked Barrick Gold’s social license. Several months ago, Barrick gave the PNG government a 51% stake in the mine. Now the mine is back in production. The PNG government is not the only nation flexing its muscles… - Chile is amidst altering its tax code which could see miners be taxed up to 75% - And just recently, Kyrgyzstan seized Centerra’s Kumtor gold mine. It’s either that or face crippling depressions or revolutionary uprisings of their citizens (or both). So, American businesses with operations in these places had better beware ([and so should their investors](https://katusaresearch.com/the-importance-of-dollar-swap-lines/)). ## **SWAP Lines Will Defend American Interests** As global deflation progresses, there will be more nations that will be granted swap lines. But do not forget, swap lines will always defend American interests. Make no mistake, this is big business… - **By April 2020, the drawdown of USD SWAPS was just under half a trillion dollars.** The last time that foreign central banks took down that amount from US SWAP lines was at the height of the 2008 global financial crisis. The SWAP lines worked back then to prevent a complete worldwide financial meltdown. Same thing now. But this is just the tip of the iceberg. Few want to be shut out, and around eighty-five nations have applied for US swap lines (currently, 14 central banks have been approved (EU representing 27)). In fact, Indian Prime Minister Narendra Modi has publicly confessed to having “swap line envy.” To be approved, all those countries must solidify their positions as US allies by falling into line with our policies. Think they will? Yep, me too. ## **More Nations Will be Added** Over time, I expect these critically important SWAP lines to be increased and more nations to be slowly added. They’ll be subject to the terms set by the US government—both financially and geopolitically. But they’ll accede. As monetary and fiscal policy are blending into one, it’s just a matter of time before the President uses SWAP lines as a big geopolitical leverage hammer. SWAP lines are that important, and they will dictate global alliances and policy. So, pay attention to them. Because I promise you, they will have an impact on companies, investments, and ultimately, the very fabric of our world. - **If you have a producing asset in a Negative SWAP Line (-SWAP) country, you must prepare for potential setbacks and for things to go wrong.** It’s about properly understanding and pricing in risk. Something that has become overlooked in the resource sector. ## **SWAP Lines and Your Portfolio** Because I believe nations who do have existing SWAP lines won’t screw with foreign operating entities (American companies) to the extent of the **–SWAP** Line Nations. I still expect higher taxes in all countries as it’s the only thing politicians across the world have executed effectively throughout time. This means mining assets in **+SWAP** Line Nations won’t nationalize their gold mines, copper mines etc. Those nations won’t screw with America. Nations with existing U.S. SWAP lines won’t put Forex (FX) restrictions on the foreign (American) companies operating there. **–SWAP** Line Nations may do so, and many have already. This will cause less (and in some cases prevent) those U.S. Dollars in **–SWAP** lines from being sent back home as dividends to the owners of the company. **Know the plan. Read the playbook.** And most of all, be prepared. You can get my team and me to do the heavy lifting for you through my premium research service – ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/)***. I’ll tell you exactly what I’m doing – where I’m investing – and how you can follow. Regards, Marin Katusa --- # Modern Monetary Theory Always Works. Once. - URL: https://katusaresearch.com/modern-monetary-theory-always-works-once/ - Type: article - Published: 2021-06-18 - Updated: 2021-06-24 - Author: Marin Katusa **Marin’s Note:** We are going to do something different with today’s missive. Today we will allow long time reader and esteemed colleague of ours (who wishes to remain anonymous), Era “the Nature Boy of Finance” Flair, our platform to make his comments. They are well thought out and his angle is worthy of consideration. | Dear Marin, Congrats on your book-making #1 on the Wall Street Journal. It’s a fantastic read. I wanted to share with you my thoughts on MMT, which you nailed in your chapter. But I feel you “held back” in your analysis. You did a great job explaining economist jargon into common sense; but I think we are a lot closer to MMT than you state, and the outcome will be much worse than you anticipate. Maybe it’s because you are rich and happy, you don’t see the world through the lens of the *Nature Boy of Finance*. There’s a virus sweeping across the United States… It’s infecting politicians at the highest levels, completely changing how people think about the new legislation. It suggests that the federal government can spend as much money as it wants. Spending will enable the government to grow the economy to its full capacity… get rid of unemployment… eliminate all student loans… Governmental policy decisions no longer need to be bound by considerations of the national debt. So, it can create multi-trillion-dollar programs like **free universal healthcare**. **Free college tuition**. And *huge* **green energy programs**. Infrastructure budgets, no problem. It’s the ultimate solution. **That magical solution is called: “Modern Monetary Theory.”** It’s the definition of a misnomer: - **It’s not modern**. It stems from chartalism, an economic school of thought from the early 1900s. - **It’s not monetary****. **It takes place almost entirely through fiscal policymaking (more on that in a moment). - **It’s not a theory****. **It’s been tried dozens of times over hundreds of years… Venezuela, Zimbabwe, Yugoslavia, Hungary, Greece, Germany… and it ended very poorly *every* time. All told, it’s more Archaic Fiscal Failure than anything. But this time it will be different, right? Yet politicians from both sides of the aisle, and economists at the highest levels, are buying in. And they’re doing so without knowing what it is. Not even the people running the show could describe MMT to you. “I have not seen a carefully worked out description of MMT.” **– Jerome Powell, Chairman of the Federal Reserve** Even people who claim to know what MMT is; don’t even agree on the basic tenets. MMT is gaining ground fast. And it’ll have profound long-term effects on the global economy. You *must* know what MMT is and how it’s going to affect you. Otherwise, investing in the future will be little more than a crapshoot. Marin as you recently published in your #1 Bestseller on both WSJ and Amazon (in the main overall category of all books in both fiction and nonfiction, not some obscure niche category), ‘[**The Rise of America**](https://www.amazon.com/Rise-America-Remaking-World-Order/dp/154452143X/)’, you broke down in great detail, in real talk, not economist jargon what MMT really is. I don’t hesitate to recommend the book so my friends can educate themselves. Here’s a basic description of the theory… *Because the United States borrows in U.S. dollars, it can always print more of those dollars to cover its debt. Under MMT, defaulting is impossible.* *Therefore, the government can run long-term budget deficits, racking up ever-more debt, without any negative long-term effects.* | Put simply, from a politicians perspective: - **The status of the USD means that deficits (and debt) are not relevant to policymaking by the United States government.** It’s a complete economic paradigm shift like we haven’t seen in forty years. ## ***Marin*: There Ain’t No Such Thing As a Free Lunch…** To understand the future of MMT, let’s take a step back. You were a teacher in a past life, and as you’ll recall from high school economics that there are two primary ways to control the U.S. economy: - **Monetary policy**: The Federal Reserve controls the level of money and credit in the economy by borrowing from and lending to other banks. - **Fiscal policy**: Congress controls the level of money in the economy through taxation and spending. Generally speaking, the job of keeping inflation in check and managing economic growth belongs to the Fed. In times of crisis, the Fed’s first tool is interest rates. Lowering rates to zero can quickly juice the economy by providing ultra-cheap credit. ![US Federal Reserve Target Rate] As you can see, interest rates have been in steady decline for close to 40 years. Globalization, technological progress, and capital deepening amongst nations swallowed up most inflationary conditions. Bouts of economic decline were met with increased rate cutting, while times of prosperity never saw the previous cycle’s high-rate watermark. In the 2007-2008 global financial crisis, the Fed’s testicular fortitude was tested. In the initial wave of the crisis, the Fed cut rates to near zero. But it wasn’t enough. So, what did the Fed do when it was backed into a corner? It created a shiny new “tool”. This “tool” was called “Quantitative Easing”, or QE for short. QE is a fancy term that refers to the Fed Reserve buying up government bonds in the open market to release cash into the economy. From September to November 2008, the Federal Reserve printed money and bought $1.3 trillion worth of assets in the open market. As you can see from the graph below, it kept buying… and buying… ![federal reserve balance sheet total assets] Between 2008 and 2014 the Federal Reserve’s balance sheet grew by $3.5 trillion. With more dollars, asset prices naturally inflated… As the American economy began to strengthen, finally in late 2016 the Fed began to increase interest rates and in 2018 began to unwind its asset purchases. All told the Fed unwound nearly a trillion dollars of the debt it had acquired. It should come as no surprise that the combination of rising interest rates and balance sheet sales led to periods of increased volatility. So in 2019, the Fed resumed the buying program. It’s never stopped since. The spike in the chart above is COVID—when the Fed picked up another $4 trillion in assets with printed money. And they’re continuing to sweep up assets, just to keep the floor from dropping out of the market. The problem with QE is that it gets less and less effective as more dollars are printed. A phenomenon known as diminishing marginal returns. So, the Fed knew that they needed to get more creative. Bill Dudley, a Princeton scholar and head of the NY Fed for a decade, said: “It’s not that the Fed can’t do more, but doing more wouldn’t do much.” Any more interest rate dropping, or quantitative easing, would just be pushing on a string. All of which sets the stage for MMT. ## **The Rise of Fiscal Unilateralism (F.U.)** We’re seeing a historic handoff of power. Monetary policy as a means of economic management is completely giving way to fiscal policy. - **Congress is assuming comprehensive control of the business cycle and the U.S. economy.** That’s the core of MMT. And it’s inevitable. - **Marin’s Note:** Granted, the current situation is FMC, which I explain in great detail in my book. But MMT is coming. Here’s what it looks like when compared to what’s been the case for the past forty years: ![old method vs fu method] Here’s why F.U. policy (government spending, taxation, and wage and price controls) seems like a much more effective way of controlling the economy… **It’s fast. **Think about how quickly you received—and spent—your stimulus check. Meanwhile Fed actions take months or years to have an effect. **It’s cheap. **As long as the Fed keeps interest rates low, Congress can borrow at rock-bottom rates. Or—more importantly—the Fed can print money, and through a convoluted mechanism, fund any bills passed by Congress for “free.” **It’s targeted. **Congress can choose specific areas of the economy based on who needs the most help. It can create massive bills for infrastructure, or send cash directly to people and businesses, instead of the money just going to big banks. Of course, all of that spending means huge, record-breaking deficits. ![regime change fiscal interest rate cuts] --- **Marin back.** OK—that was interesting. I don’t entirely agree, but that’s what makes a market. But what you should be asking—is: ## **How Do You Protect Your Portfolio?** Whether you see the world as I do or as the Nature Boy, you need to focus on rule #1: Don’t Lose Money. And Rule 2: Don’t forget about Rule #1. Rule 3: Make Money. So, what is Marin Katusa doing? I’m increasing my exposure to tactical growth opportunities along with exposure to gold and specific commodities. For example, opportunities that capitalize on the flood of money pouring into the ESG sector. - Did you know that renewable energy is now the cheapest and most cost-efficient form of electricity generation? - Or that Carbon Credits are becoming one of the most sought after investment of major smart money Fortune favors the bold but smiles upon the prepared. If you want to take the next step consider becoming a subscriber to my premium research service – *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*. Every month you’ll see how I’m positioning my portfolio for the coming [Rise of America](https://riseofamerica.com/)and all the windfalls I see coming in specific sectors. I hope you’ll join me. It’s going to be an incredible adventure. Regards, Marin --- # Gold Miners: Cash is King - URL: https://katusaresearch.com/gold-miners-cash-is-king/ - Type: article - Published: 2021-06-11 - Updated: 2021-06-10 - Author: Marin Katusa Since the start of the year, central banks have purchased over 4 million ounces of gold. April was a big month for central bank activity. Over half the amount of gold purchased in 2021 was in the month of April alone. - **In April, central banks acquired 2.45 million ounces – worth over $4.3 billion. ** Gold reserves in central banks continue to appreciate and are at the highest levels since the World Gold Council began keeping track in 2000. Take a look… But central banks aren’t the only ones bolstering their balance sheets these days… ## **Gold Producers Balance Sheets: The Healthiest Ever?** After a decade of continuously declining cash reserves, gold producers are flush with cash today. In fact, the gold producers have never had more U.S. Dollars on their balance sheets than they have today. - **In fact, over the last 15 months, at the sector level, cash reserves have more than doubled. ** Today the cash positions for North American listed precious metals companies are over $27 billion. And thanks to strong gold prices, I expect them to climb even higher. ![North american listed precious metals companies] ## **$1,850 Gold = Fat Profits for Gold Companies** This dramatic boost in cash reserves is primarily due to the current gold price and lack of new large production projects by the industry as a whole. Gold producers kept operating costs in line all through the mid-2010s when gold prices were depressed. In doing so, they’ve all now been provided with the opportunity for rapid profit margin expansion. Going back to as far as 2007, EBITDA margins have never been as high as they were in Q1 this year. ![gold producers achieve record ebitda] A delicate balance of debt and equity optimizes returns to both debt and equity holders. These improving profit margins have led to gold producers reducing debt on their balance sheets. Total debt has declined over 28%, from $40 billion in 2014 to $28 billion as of March 2021. ![precious metals sector total debt] Margins are up and debt is down, so… ## **Here’s What This Means for Gold Stocks…** Strong gold prices mean [faster payback of capital](https://katusaresearch.com/introducing-great-new-tool-gold-investors/) for miners. This improves asset valuations and supports higher share prices. Strong profit margins and declining debt profiles set the stage for gold producers to improve shareholder returns through 2 major ways: Improve alignment with shareholders through increased dividends and buybacks. - After a decade of paltry distributions to shareholders, investors will be demanding cash being returned to them instead of to corporate pockets. This is a similar situation to what we’ve seen in the oil patch over the past 12 months as companies fight to keep shareholders invested. **And eventually…** Acquisition targets. - Income that’s not returned to shareholders should be reinvested into growth opportunities (either organic or acquisition). Strong gold prices provide support for takeovers and incentivize companies to grow through acquisition. ## **Gold Merger Mania: About to Heat Up?** Transaction volume in 2021 is off to a slow start… But given the balance sheets and strong gold prices, more deal volume is likely in the second half of the year and into 2022. ![global precious metals merger & acquisition volume] And as deal volume picks up, I believe there’ll be a premium paid for [deposits in +SWAP Line Nations.](https://katusaresearch.com/the-importance-of-dollar-swap-lines/) The reason is two-fold: - **There’s less jurisdictional risk in +SWAP Line Nations.** No miner wants their mine nationalized, nor do they want to give up +25% for free to the government. As a shareholder you shouldn’t either. Today I see far more complacency with this than ever before. Yet there’s a never-ending barrage of headlines for increased royalties, taxes and government takes. - **High quality deposits are hard to come by. **Average grades are dropping and have forced miners into the **-SWAP** Line Nations. This makes those deposits located in safe jurisdictions that much more valuable. So, what’s the best way to identify which deposits – and which companies – will be at the top of each gold mining major’s shopping list? You could sift through hundreds of technical documents and spend years traveling to remote areas while completing thousands of hours of due diligence… Or you could take the easy route. As a professional fund manager focused on the natural resource space, I’ve dedicated my career to this sector. I know all the big players and have one of the best rolodexes in the game. As an example… - **A very large position in my own portfolio (and one my subscribers are up 400% on) is led by the “Gentleman of Mining”.** And he hasn’t even done a single institutional presentation. To be successful in investing you must get ahead of the curve. Another large position is backing a billionaire and serially successful resource tycoon… It’s a gentleman whom I’ve known for a decade and have made millions of dollars with, due to success on his previous deals. My subscribers know exactly what prices I’m willing to buy and sell at. At Katusa Research, I’m not just about delivering these winning stock picks to subscribers of my premium research service – I’m also about educating investors. I freely share my research with my subscribers, and always outline my exact due diligence process every time I recommend a new idea. - **Instead of loading up on the latest meme stock over at WallStreetBets for a shot at the moon, consider subscribing to *[Katusa’s Resource Opportunities.](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/)*** And you can learn about my alligator strategy of investing. Regards, Marin --- # The Most Misunderstood Commodity on Earth: Carbon Credits - URL: https://katusaresearch.com/the-most-misunderstood-commodity-on-earth-carbon-credits/ - Type: article - Published: 2021-06-04 - Updated: 2021-06-03 - Author: Marin Katusa In 2016, 191 countries, representing 97% of global carbon emissions, signed on to the Paris Agreement. Each country committed to a certain amount of carbon emissions cuts by a certain date. By the way, this has nothing to do with politics… what party you belong to, what god… or even if you believe (or not) in global warming or climate change. The Paris Agreement is a *legally binding* treaty on climate change (I’ll tell you why that’s so important in a moment). The stated goal is to limit global warming “well below 1.5 degrees Celsius.” - **Reality check: The global temperature has already risen 1 degree Celsius.** Meanwhile, emissions have barely fallen, as you can see here… ![co2 net emissions]The blue portion of the graph above shows the total CO2 emissions in the time since the Paris Agreement in 2015. In short, nothing has happened in the past five years. The longer nothing happens, the steeper the slope will have to be to hit 2030 emissions targets. And far more drastic methods will have to be used to reach the same result. ![emissions gap in 2030]As you can see from the graph above, even if *everything* in the Paris Agreement comes together *perfectly*… It still won’t even get close to the set-in-stone 1.5 degrees Celsius target. - **In short, the Paris Agreement is not enough… and *not working at all*.** Politicians fighting against carbon emissions is like bringing the calvary to a nuclear war. That’s why the effort to “decarbonize” the world is at an incredible inflection point: It’s simple. We’re on the brink of an all-out, no-holds-barred… ## **Global War on Carbon Emissions** It’s not just CO2 emissions. But also methane (which 1 ton of methane has about the 25tons the heating potential of CO2 and gets abbreviated CO2e for equivalent) and nitrous oxide (which equals about 298x the heating potential of CO2 and also gets abbreviated CO2e for equivalent). The War on Climate officially begins on November 1, 2021 at the COP26. Expect all the media and all the global leaders to bring all their arsenals to the launching of the War on Carbon Emissions. The COP26 is the United Nations Climate Change Conference in Glasgow, Scotland. Remember when I said it’s important that the Paris Agreement is “binding”? Here’s why… The Paris Agreement is the Geneva Convention of the 21st century. Only instead of protecting soldiers… it’s protecting the planet. Countries that violate the agreement will be met with similarly harsh penalties. The courts are already ruling against the big emitters…and it’s only starting. ![monumental victory shell oil ordered to limit emissions]Two things are going to happen at the conference that is a global first: It’s the first “global report card” for the Paris Agreement. In other words, every U.N. member state will have to re-evaluate their progress against their previous commitments. Current estimates are that they’ll find out they’re not even on track to limit global heating to 3 degrees Celsius (but you already knew that). It’s also the first-time nations will be required to exercise the “ratchet mechanism.” Every five years, each nation is supposed to “ratchet up” its “nationally determined contributions” to the next level to ensure even more aggressive targets are met. In short, they’re going to discover pretty fast that they need more offensive pressure to cut carbon emissions. And the race is on. The key point is this… ## **This is one of the most exciting sectors I’ve EVER SEEN** The largest public institutions like the World Bank, International Finance Corporation (IFC) or the International Monetary Fund (IMF) have all thrown their weight behind the movement… The largest pools of capital in the bond market (now called Green Bonds) have collected trillions of dollars looking to be deployed into companies that will aid in the War on Carbon Emissions. Household names like - **Apple**, - **Microsoft**, - **Disney**, - **Google**, - And even oil giants **British Petroleum, Shell, Exxon, Chevron **have made enormous commitments to “decarbonize”. That’s street talk for “investing tens of billions into trying to solve this problem”. And it’s setting the stage for what I believe is one of the biggest opportunities I’ve ever seen. This is bigger than the gold market. Bigger than the crypto market. And – potentially – even bigger than the tech market. Because if it grows at a mind-boggling pace like I believe it will – it will be a core part of every public market sector. Here is a chart which shows the path we are currently on, including emission levels projected to 2050. ![global energy related co2 emissions]Do you see how much money is at stake with this agenda? It’s absolutely mind boggling. And you’re not going to see a penny of it until you get on board. For example… The European Commission outlined its roadmap for the European Green Deal earlier this year. - **The total fiscal response by 2050 is estimated to be more than €7 trillion.** The University of Princeton estimated that the United States would require $9 trillion in capital expenditures over the next thirty years to reach net zero emissions. The dollar figures and sheer speed required to hit carbon net zero are astronomical—almost unfathomable. These types of opportunities DO NOT COME AROUND OFTEN… IF EVER. Think I’m exaggerating? Here’s another example… It took approximately 150 years for the United States to build out its current electricity infrastructure. To meet the net zero goal, the entire system needs to be overhauled in 20 years. - **Carbon Net Zero will create the largest government work projects in history—and on a global scale.** As one very connected and influential insider just told me.. ***“Every single fund manager, investment banker and family office I’ve spoken to wants to jump on board.”*** The problem is—they have no idea how. But I believe I’ve found the single best way to invest in this sector. And I published it to subscribers of my premium research letter, Katusa’s Resource Opportunities. Because imagine going back in time on the adoption curve and investing in Bitcoin back in 2011… Or buying Amazon in 1995… This will be the most important commodity of the 21st Century. Bigger than Gold. Bigger than Bitcoin. Bigger than Oil. But the absolute best part? **It is very early in this game.** I can practically guarantee you will not hear about this opportunity from anyone else. It’s one of the most important pieces of research I have ever produced. The war-era spending taking place to react to climate change will irreversibly alter the investment landscape. - **And this is going to be a major investment theme and movement for the next three decades.** There are few, if any, investment angles to play this sector right now, which is in its absolute infancy. Until now. And we’re unthinkably early. ## **Bigger than Gold and Bitcoin Combined…** This is a brand-new, little-known commodity sector which, over the last three years, has crushed the Nasdaq, gold, the S&P 500… even Bitcoin. Take a look… ## **![AssetClassReturns Comparisons]You might have heard of Carbon Credits…** Carbon credits are the cornerstone of an incredible financial revolution to help all corporations reduce their cost of capital right now: It’s The Global Race to Net Zero. Again, not 1 in a million investors knows how to play it. But as you’re watching this, governments around the world are firing up the money printing presses to react to climate change… And it will irreversibly alter the investment landscape. It’s going to make the government’s unprecedented financial response to COVID look like pennies. Of course, as with any major disruptive shift – especially one of this magnitude – there will be huge winners and losers. I’ve seen all sorts of sectors, manias and “the next big thing” in my 20 years of investing. But this could be the biggest of them all. It’s also the biggest cheque I’m writing, ever. You can either dottle around in your own echo chamber of misconceived facts and conclusions or open your mind to the beginning of the biggest financial revolution ever. It’s your future, use it. And it’s where I’m focusing a significant portion of my liquid net worth over the coming years – starting with right now. Regards, Marin Katusa --- # Watch Brent Johnson Turn the Tables on Marin - URL: https://katusaresearch.com/watch-brent-johnson-turn-the-tables-on-marin/ - Type: article - Published: 2021-05-28 - Updated: 2021-05-27 - Author: Marin Katusa **Editors Note**: *For the first time in Katusa Research history, a superstar guest has taken over Marin’s weekly Investment Insights column. Today, it’s none other than **Brent Johnson of Santiago Capital.*** You can only imagine my day. It’s filled with a number of conference calls, client calls and zoom meetings. My favorite is fielding cold calls from college students looking for employment or service providers trying to sell me something. In order to focus, I often let phone calls go to voicemail and then return the calls I want to. When I can. But there are a few people for whom I always pick up when I see their names pop up on my phone. Marin is one of those people. Before we even get to exchange “hello” and “how are you”, he’ll often say something to the effect of “I’m working on something big and I want you to tell me if or where I’m wrong.” While we are both sarcastic and like to jab at each other in person, on the phone or even on Twitter… he’s also someone for whom I have tremendous respect. Mainly because he’s a self-made man and because I know whether I agree with his take on market conditions or an investment or not – I know he’s done his homework. And when I say that, I mean he’s done his *own* homework. He’s not just repeating an idea he read on Twitter or heard on Bloomberg. And he’s done it to a deeper degree than most investors would even think about. These are not “have a hunch buy a bunch” type calls. **So I was excited when Marin called and put a great deal of trust in me last fall…** Based on previous conversations, I knew he had been working on a monumental project, but he never revealed to me exactly what it was (typical…!). He then mentioned he was writing something that would lay out some of the most ground-breaking theories of his career. But that he was going to publish it via a book rather than his usual research notes. He flattered me by asking me to read it top to bottom and poke holes in his assumptions, theories and strategies. After sending him back my comments and edits, we had another one of our calls. But this time, before we got to the “hello” and “How are you”…I can tell you exactly what I said… ## ***“You’ve Written the Book That I’m Actually Mad I Didn’t Write” *** Look, the monetary system is not moral, just or fair. Neither are the markets. They’re unforgiving, relentless and will march on with or without you or your feelings. This is an absolutely *critical* lesson for all investors to learn. It’s simple terms…it is what it is. And you can choose to believe a fairy tale world and invest in what you would like to see happen. Or you can take action and invest in the world based on how it actually is. If you’re in the camp that the U.S. is an evil empire, then expect the empire to act evil. And understand that it will use all the tools and weapons in its arsenal to maintain its position in the world. **If you follow today’s common narrative, you’d be led to think the American Empire is falling apart…** That catastrophe is only a moment away… That destruction to financial stability is imminent… And there is nothing the US (with all its vast resources) can do about it… But you’d be wrong. Marin makes the soundest arguments you’ll hear – challenging all your confirmation biases – to never bet against America. Or at least not to bet against America right now, even though it’s very in vogue and a popular idea to do so. ## **Today I’ve turned the tables and will interview Marin to cover the key points in his framework.** Many of you will be brand new to a lot of the topics he’s going to cover. And even the investors that have seen mine or Marin’s interviews in the past will know we’re at a very important inflection point… The ***Rise of America*** is coming. Whether it will be wearing a white hat that reflects its historical virtue, or whether it will remove its veil of altruism and proudly brandish the black hat of the school yard bully, is yet to be determined. But rise it will. And you can either position your portfolio and strategy to benefit from this rise, or sit by and say “this isn’t fair and shouldn’t be happening.” [Click here to watch the interview.](https://youtu.be/-VVLplQfV-w) **In this interview you’ll hear: ** - Why Marin sees “An industrial revolution, like nothing we’ve ever seen” - The coming showdown between America and China with the new weapons of war (hint: carbon tariffs and net zero manufacturing) - How the bond market and cost of capital has changed significantly for companies, and why this is dangerous for a company’s growth - How net zero, carbon footprint and carbon credits will become a major force in public markets (whether you like it or not) - How the majority of crypto investors are missing the big picture - Details on Marin’s Forbidden Chapter and how it’s critical in all of Marin’s future investment strategies Finally, people often ask me what advice I would give them in order to better understand the world and its various markets. My answer is always the same. * “Keep an open mind, do your own research, and then decide for yourself.” * And when you hear an idea or answer that you hate, ask yourself why you are having such a strong reaction? Do you hate it because it’s wrong? Or do you hate it because you just don’t want it to be that way…? I hope people will read Marin’s book. I hope they will keep an open mind. And I hope they enjoy it as much as I did. [Click here to watch the interview.](https://youtu.be/-VVLplQfV-w) Sincerely, Brent Johnson --- # America the Broken - URL: https://katusaresearch.com/america-the-broken/ - Type: article - Published: 2021-05-21 - Author: Marin Katusa Dear Reader, You’ve heard someone say some variation of this recently… “What a crazy time to be alive!” Or, “We live in interesting times”. But none of those are true. For centuries, times like these have been *the rule*. The United States has been in turmoil for much of its history: - The Revolutionary War - The Civil War - The Great Depression, - The Cold War - The Vietnam War - Natural Disaster impacts such as Hurricane Katrina. It’s a long list of stormy times. And every single one of those heartbreaking events has led to renewed growth and prosperity for the American people. But there *is* something unusual about our time: a complete breakdown of some of America’s most critical aspects. Take infrastructure, for example. In 2021, the American Society of Civil Engineers released its latest “report card” on United States infrastructure. The overall grade: C-. One in four bridges that are driven across every day in America is deficient or *obsolete*. But that’s nothing compared to other systems that are part of everyday American life. These, among others, are all in shambles: - The tax code - Medicaid - Healthcare - Education - Corporate welfare That list wasn’t just made up. It came from a senior U.S. Senator. The big problem is that the government has become so flawed and ineffective that the “C-” in each of these areas is on pace to quickly turning into an “F”. How can America turn back from a certain collision course with absolute catastrophe? Well, there could be an “enlightened” coup—as we’ve seen slight glimmers over the past two decades. Or perhaps changes in the way American democracy operates or hold a new constitutional convention to rewrite the rules. Or maybe create a new, *viable* third party… the first one in more than a century. I just don’t see any of those happening any time soon. But here is an option that is viable—one that’s uniquely American— and is most likely. It’s called a “**Sputnik moment**.” ## **Mass Chaos Always Leads to American Prosperity** On October 4, 1957, the Soviet Union launched Sputnik 1. It was the world’s first man-made satellite. When the news media greatly exaggerated the danger of the situation, the United States went into shock. One scientist wrote that the day Sputnik orbited the Earth was the day the U.S. became a “second-rate power.” But in a private meeting, President Eisenhower revealed that he knew the opposite was true. Russia has “done us a good turn,” said Eisenhower. Because with that launch, the Soviet Union had thrust the powerful American machine into action. Remarkably… - **NASA was created from the ground up in under a year.** And a decade later, the first men landed on the moon. And they were American astronauts, not Soviet cosmonauts. Within 20 years, the Soviet Union was *gone*. And the United States was the undeniable, unassailable world leader in space and the world**.** - **It’s been the same throughout all of U.S. history. America has waited until its back is up against a wall before acting.** And when it *does* act, it absolutely *crushes* whatever problems oppose it. ## **Right Now, America’s Back is Up Against a Wall** The coronavirus ripping across the nation has already resulted in major tax code changes and bailouts. It’s disrupted the education system: Home schooling has “exploded” according to the US census through to 2021. The strength of Medicaid and the healthcare system are about to meet the test of a lifetime. It might be hard to look past a market experiencing major volatility and uncertainty. - **The Colonial pipeline, the most important petroleum product pipeline in the eastern United States, was hacked for $90 million in bitcoin…** The nation is [bombarded by the media](https://katusaresearch.com/the-gun-to-americas-head/) to turn on each other, family vs family and neighbor vs neighbor. In one conflict after another… But the coronavirus has done America a good turn. Because**… this is America’s Sputnik moment**. This is what will force a healthcare overhaul, an education renovation, an economic restructuring. All in the name of not getting beat by a virus and foreign competitors. This is what will set foreign policy and domestic economy on the path toward another half-century of record-breaking growth and prosperity. - **In short, the fears of these completely *normal* times will propel the incredible success of the next.** ## **There Will Be No Return to “Business as Normal”** As Thomas Wright from the Brookings Institution wrote: “The longer the pandemic goes on, *the more the world will change*.” For the United States, that means a change in a very good way. **Because when it comes down to it, times like these are what the United States was made for. ** We’re going to see massive changes in society… in policy… in politics… and *especially* in business. Which is even more good news: - **The more the world changes, the more investment opportunities there are.** You see, investment opportunities arise when there is a difference between *value* and *perception. *And when rapid change happens, those differences are all over the place. It gets even better. Many changes that were already underway when the pandemic hit is going to be dramatically accelerated. - **The faster the world changes, the *greater* the investment opportunities are.** ## **We’re Watching History Happen in Real Time… But at 16x Fast Forward Speed…** Huge companies will buy out little ones. Companies will bring their supply chains home to the United States. Companies head over their heels in debt will quickly fade away. New sectors are being created now that will takeover the existing titans in the marketplace. And you will have the opportunity to get rock-solid companies at rock-bottom prices. Eventually, as the director of the NIAID said, “We will get over this, and this will end.” When that happens, you’ll want to be ready. Because maybe not today, and maybe not by this summer — but soon, and for the rest of your life, *America will rise*. ## **What Comes *After* the Catastrophe Is What’s Important** Right now, people are claiming that the coronavirus will kill us. If not physically, then economically. But that’s based on their limited insight. - **Yes, the Coronavirus inflicted great pain in the short term. But in the long term, it will propel the United States to historical greatness.** As a private investor, it’s easy to be distracted by the layoffs, the new jobless claims, and the case counts reports by the mass media. But while everyone else is panicking at the first signs of turmoil, great investors are looking forward. They’re looking past the coronavirus. They’re planning for a future when the United States will have once again surge far past its competition. Because time and again, America has fixed its problems *without* a regularly scheduled revolution. And America is going to do it again. Infrastructure, which we’re rapidly finding out is necessary to maintain the integrity of vital supply chains and a calm public, will be one of the first to get an upgrade. It will be an upgrade that will cost trillions of dollars… - **President Biden proposed a $2 trillion package in his 2021 plan. That’s enough to fix nearly every bridge, road, sewer, and school in the United States.** Now, with interest rates at historical lows, borrowing that amount will be far more attractive. That massive infrastructure development will need China’s levels of resources to construct: copper, iron, and oil. You don’t have to look farther than home depot to see the price of lumber rocketing higher. Or the gas pump to see that oil prices are elevated. Savvy investors are already mapping out which decimated resource stocks they want to pick up for dirt cheap. - **Because those stocks are eventually going to fly higher than they’ve ever been before.** And when the coronavirus is gone and the country has been fixed, it will be America the beautiful—once again. Regards, Marin Katusa --- # Here’s Why Swap Lines Are Critical To Your Foreign Investments - URL: https://katusaresearch.com/heres-why-swap-lines-are-critical-to-your-foreign-investments/ - Type: article - Published: 2021-05-20 - Author: Marin Katusa The implementation of swap lines is one of the most consequential financial decisions taken by the Federal Reserve in recent times. Yet few people have even heard of them. I know, because when I talk about the swap line program, I have found myself speaking into a vacuum. I haven’t come across one person in a hundred — including business executives, politicians, professional investors, and financial writers — who is even cognizant of its existence, much less aware of its significance. [**Click Here to read Marin’s full article on Forbes.com**](https://www.forbes.com/sites/forbesfinancecouncil/2021/05/20/heres-why-swap-lines-are-critical-to-your-foreign-investments/?sh=2ec044825754) --- # The Gun to America’s Head - URL: https://katusaresearch.com/the-gun-to-americas-head/ - Type: article - Published: 2021-05-14 - Updated: 2021-05-13 - Author: Marin Katusa Last week, a video from Iran showed the U.S. Capitol in flames. But have you ever wondered how the United States will *actually* end? Right now, the country faces a real, critical threat to its existence. The threat is growing – and fast. A year ago, you’d be forgiven for thinking it was COVID. However, that’s now mostly under control. (And the United States has a unique opportunity to engage in “vaccine diplomacy” with developing countries). Perhaps you might think it’s the eventual financial fallout from COVID government spending. After all, relief for 2020–2021 is expected to total *$8.9 trillion*. To put that in context: - **That’s 42% of U.S. GDP**. Roosevelt’s New Deal—the one that got us out of the Great Depression—was *only 13% of U.S. GDP*. Or you might think it’s China… with its aggressive moves to expand a military presence close to Hawaii, a possible hostile takeover of Taiwan, or attempts to gain control of the Transpolar Passage in the Arctic Circle. But no, the existential threat we’re facing is something *much* deeper. And the stakes have never been higher. If it’s left unchecked, then COVID deaths, astronomical debt, and Chinese aggression will all have the potential to beat the United States once and for all. But it’s also a problem that, if solved, gives the U.S. unlimited potential to be the *only* *superpower* in the twenty-first century. It’s a double-barreled shotgun, pointed straight at Uncle Sam’s forehead: **distrust in the media and the federal government**. To be frank, why *wouldn’t* that be the case? The government has betrayed U.S. citizens at every turn: leaving its diplomats to die in foreign countries… outright lying in national security letters… repeatedly violating its own surveillance laws… - **Even the damn *post office *has been conducting illegal surveillance (under the fun name “iCOP”), spying on your social media posts…** And *that* is why public trust in the federal government is somewhere below basement level. Fifty years ago, over 70 percent of Americans believed they could trust the government to do the right thing most of the time. Now, just 20 percent of U.S. adults believe that. And 57 percent believe government officials are purposely trying to mislead us. So, the solution to a massively screwed-up government is supposed to be a responsible media, right? ## **The Fourth Estate Is Crumbling Down…** You already know that the media is *feeding into* the problem. They’re mass-producing doctored videos and miss-edited interviews to build their social justice warrior agenda. It’s no wonder the vast majority of Americans also believe **the media is trying to convince people to have a specific opinion**. In fact, this is the first time since tracking started that fewer than half of Americans trust traditional media. The deep slide into distrust has been constant for a half-century. In 1976, 72 percent said they trusted the media. In 1998, it was 53 percent. In 2016, it was just 32 percent. - **The current level of trust in the media in the United States is below countries like Brazil and Nigeria—those bastions of journalistic integrity.** Current trust in U.S. media shares company with countries like Hong Kong and Greece. ![Share of Adults Who Trust News Media] ## **And Even the Press Knows It’s Corrupt…** Jake Tapper, the lead Washington Anchor for CNN, said people are… “…*outraged because they’re being told things that aren’t true. And that’s a disgrace for the people who are telling the lies**,** not the people who are hearing them and getting outraged*.” Another news organization gave their bottom line: - **The scarcest resource in the decades ahead won’t be oil or rare earth metals, but *social trust*.** In a 2019 survey, the low level of confidence Americans have in the federal government was ranked as a bigger problem than: - **Racism**, - **Illegal immigration**, and - **Terrorism.** Clearly, distrust threatens the existence of our democracy. Corruption can run rampant, unchecked by the press. Citizens begin to doubt government programs… and then soon enough, they begin to doubt elections too. Here’s the crucial part: - The scarcity of trust is not limited to the United States. It’s gone viral across the developed world. The United Nations says: “Public trust in government and political institutions has been decreasing in all of the advanced industrial democracies. The downward trend is ubiquitous.” Once this bandwagon goes careening over the edge of the cliff, we’ll be facing **the Global Trust Crisis**. Only instead of banks failing, it’ll be the governments of entire countries falling into anarchy. ## **The Final Branch of Government** Fortunately, there is *one* form of trust on the rise in the United States—one the framers of the Constitution never anticipated. In true American form, it is both practical and capitalist: **business**. - **Business is now the only major institution that is seen as both ethical and competent.** So the change is going to begin with shareholders demanding more from their companies, and then the Board of Directors, and then CEOs… With the government checked out and the mainstream media lying, people expect businesses to step in and fill the void. The same thought and energy used to deliver record profits will be turned towards engaging with society’s biggest problems. Hence the [spectacular rise of ESG investing](https://katusaresearch.com/a-guide-to-esg-investing-and-how-much-money-is-at-stake/). - **86 percent of Americans believe that CEOs should speak out publicly on the challenges we face.** Businesses will also play a role in fixing media and the government. They will be the guardians of information and trustworthiness. And they will lead the way on the issues of our day. Eventually, the government will begin talking straight again: giving just the facts, with empathy. And news institutions will turn to providing unbiased, reliable content. Without it, they know you will stop reading. Together, we will fight against this bankruptcy of trust. Trust in government skyrocketed after World War II when there was an incredible economic boom. The next peak after that was in the ‘60s—another economic boom. - **And the time after that is right now.** Once again, America is on the rise and many investors are quietly taking action and positioning their portfolios accordingly. **When America truly awakens, you will wish you never bet against her.** Are you ready? Regards, Marin --- # Remembering a Day the Earth Stood Still - URL: https://katusaresearch.com/remembering-a-day-the-earth-stood-still/ - Type: article - Published: 2021-05-07 - Updated: 2021-05-06 - Author: Marin Katusa On April 26, 1986 radiation alarms went off at the Forsmark Nuclear Plant in a remote Swedish village. Yet nothing was out of the ordinary at the plant, no malfunctions, no issues to speak of. The radiation must have come from somewhere else. Which would be very strange because Forsmark is located a hundred miles from Stockholm and double that from the nearest Swedish nuclear reactor. Little did the operators know that a day and a half earlier a terrible nuclear accident 620 miles away took place. ## **Chernobyl Disaster: The Days the Earth Stood Still** The Soviets initially dismissed the early allegations of the Swedish Radiation Agency and the Swedish government. It wasn’t until the Swedes threatened to go to the International Atomic Agency that the Soviets finally buckled and confirmed there had been an accident. - **The Chernobyl nuclear accident located in the town of Pripyat, now in the Ukraine, will go down in history as one of the worst events ever for the nuclear industry.** Stemming from both engineering design issues and a lack of oversight by plant operators, reactor #4 blew up. The explosion sent radioactive material soaring into the air, sending it across Europe. In the town of Pripyat hundreds of people fell ill due to acute radiation sickness, directly killing 28 citizens. It is suspected that there will be several thousand cancer related deaths due to Chernobyl radiation. The Chernobyl nuclear disaster is one of the worst accidents in history and it is referenced by many as a reason to not use nuclear power for electricity generation. Chernobyl has even been referenced as a reason to shutdown one of America’s most important nuclear reactors, Indian Point. - **The Indian Point nuclear power plant in New York powers the homes of millions of New Yorkers.** Governor Cuomo, the Governor of New York State has been a long advocate of closing down the power plant due to terrorist risks or catastrophic failures like at Chernobyl. Accidents are possible, though I’d point out, incredibly rare. But you know what? Cuomo isn’t totally wrong either. Indian Point was commissioned in the early 1960s, and frankly those nuclear reactor designs are not as safe as today’s Generation IV nuclear reactors. ## **This Doesn’t Mean it Should be Lights out for Uranium…** There are a few reasons for this. - It is the cleanest source of base load power globally. This is a fact. - Generation 4 reactors are incredibly safe, while cheaper and faster to build. This is also a fact. Let’s continue with the State of New York. Below is the current electricity generation by source. ![New York Power Mix] - **Uranium currently makes up 31% of New York’s power mix. Across the United States, uranium powers 20% of American homes.** This past week Governor Cuomo finally killed Indian Point, which is a 1,000 MW nuclear power plant. - **This nuclear power plant produces zero carbon emissions. And historically, Indian Point produced a quarter of New York City’s electricity.** Electricity production will be replaced by a 650MW natural gas facility. This is estimated to raise New York’s power sector emissions by 29%. It’s like adding 1.4 million cars to the road. ## **Political Irony at Its Finest…** New York boasts of its nation-leading climate change targets yet well over 50% of the city’s electricity comes from fossil fuels. ![NYC electricity supply] ## **America’s Brightest and Wealthiest are Investing Big into Nuclear…** Take Bill Gates for example… Did you know he started his own nuclear reactor company? While you may laugh it off as just a rich guy building a pet project, I’d suggest you take a closer look. His team has actually designed an incredible reactor. There are a handful of other companies in the sector all developing incredible Generation IV reactors. These *Gen IV* reactors are faster and cheaper to build and most importantly, they are incredibly safe. - **Generation IV reactors operate at atmospheric pressure, they cannot explode. There is no meltdown risk.** Hundreds of millions of dollars have been invested into these designs. Safety issues aside, the gigantic cost overruns and decade long build times of the old school Generation I & II reactors render them unaffordable and uncompetitive. If nuclear wants a legitimate future, it lies in Generation 4 reactors, which are competitive on a cost basis against other baseload options. - **And the progressives will love that there are no carbon emissions.** Compact cities like New York are great case studies for the Gen IV reactors where land and space is at a premium, yet so is power demand. It’s a delicate balance but one that safer, smaller and cost efficient Gen IV reactors could help solve. The most important thought leaders in the world are getting behind this movement. America’s largest utility companies like Duke Energy are getting behind these new reactor types. Even stating on the record that they will phase out natural gas plants in favor of Generation IV nuclear reactors and renewable power. It is a bold statement from one of America’s largest utility companies. ## **Prices on Pollution are Only Going Higher…** Do you know what a carbon credit is? - **Did you know that carbon credits have outperformed all major asset classes over the past 3 years?** Or that the price of an emissions credit is up nearly 50% year to date. ![Asset Class Returns Comparison] This type of asset class used to be ‘niche’. Only available to sophisticated investors or hedge funds. Soon it will be mainstream. Climate change is at an incredible inflection point in human history. And every politician in a position of major power is pushing this agenda through. - **A mind-boggling amount of money is going into this agenda as subscribers of [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) are now familiar with.** These types of inflection points represent enormous wealth changing opportunities if you know where to look. As Sir John Templeton once said… *“It is impossible to produce superior performance unless you do something different from the majority”.* Not 1 in a million investors are looking at this sector. Or if they are, they have absolutely no idea HOW to invest. That will change very soon. Regards, Marin Katusa --- # Cartel Conspiracy and the Silver Massacre - URL: https://katusaresearch.com/cartel-conspiracy-and-the-silver-massacre/ - Type: article - Published: 2021-04-30 - Updated: 2021-04-29 - Author: Marin Katusa Superior in luster, value, and perception, gold is the king of metals. Silver has always played second fiddle to its big brother. The “gentleman’s metal” has a natural tendency to go under the radar compared to gold. And it’s also likely why it’s been the target of many more conspiracies, both real and imagined. From the days of the Hunt Brothers cornering the silver market to the JP Morgan and “cartel” shorts, there’s no shortage of silver conspiracy theories. **But perhaps none are more famous than the “Silver Massacre” of early May 2011.** In 2011, the price of silver was flirting at $50 per ounce and was nearly 20% higher in the dealer market. (Gotta love those bullion dealer premiums, they make stockbroker fees look moderate). It seemed like it was finally silver’s time to shine. Then, mysteriously, silver began to fall hard in Asia unexpectedly. Silver crashed nearly $14 per ounce over 4 days, down nearly 25%… ![Silver Price Action During the Silver Massacre] During the same time frame gold dropped 5% at its lowest point. ![Precious Metals Returns May 2011] Was there suddenly no use for silver as an industrial metal? No. Did mined supply just become infinite? No. So, what happened? ## **The Silver Cartel** For years, many in the silver markets have spoken of the existence of a “cartel” in the silver markets keeping prices low. In simple terms, a cartel is formed when multiple companies in the same industry decide to collaborate to control the price of a product or service they sell. - **In other words, cartels are price fixers.** Some of the most notable modern-day cartels include OPEC for oil and De Beers for the diamond industry at its prime. And in silver, such price manipulation is reminiscent of the Hunt Brothers’ attempt to corner the silver market in 1979. For those of you who need a quick refresher… Back in 1979, the Hunt Brothers bought up so much silver that they drove the price up to an all-time high of $49.45 per ounce (around $160 when adjusted for inflation in today’s dollars). ![Historical Silver Prices Not Adjusted for inflation] And it took COMEX changing the rules on the Hunt brothers that caught them on margin and blew them up. By adjusting their margin purchasing rules for commodities, the Hunt Brothers’ stranglehold over the silver supply was broken and they lost a fortune. - **At their peak, the brothers were estimated to control a third of the entire global retail supply of silver.** While the actual existence of a current silver cartel is still a subject of debate, it’s said that there’s no fire without smoke. And boy has there been a lot of smoke on this topic. So much so, in fact, that the CFTC issued a formal statement on the subject denying the existence of such a cartel in 2004. And later conducted a five-year investigation into the matter in 2008. The investigation turned up nothing of importance, given that many believers in the silver cartel think that the U.S. Treasury and Federal Reserve are members of the cartel. Thus, the results of the investigation came as no surprise to them. So, you may be asking yourself, “Does Marin Katusa think there is a cartel?” I don’t. I know many of the “so-called Cartel” members and it comes down to this one thing: Cost of Capital. These trading desks at JP Morgan and Goldman Sachs have access to capital and at such low cost to borrow that capital… that the silver market and their heavy retail players are absolute easy prey for the Wallstreet scalpers. That’s all it is. Cost of capital. Theirs is a lot lower than mine and yours, thus they can do things to the market in size that you and I can’t. But there is a new Cartel of sorts in town… ## **Rewinding the Silver Massacre of 2011** Going back to May 2011… Legend has it that the silver cartel was going to be in serious trouble with their uncovered, or “naked”, short positions if silver surpassed $50 per ounce. - **So, they flooded the market with hundreds of millions more “paper” ounces of shorted silver.** Paper ounces, as opposed to physical ounces, are derivative instruments theoretically backed by actual physical silver. While they are in most cases, such as with Sprott’s Physical Silver Trust (PSLV), actual regulatory enforcement can be spotty, leading to the well-known phenomenon of naked short selling. In the end, silver never did break $50 per ounce and has since traded lower and lower over the past decade. Much to the chagrin of the silver bugs, the gold-silver ratio climbed steadily for over a decade, meaning that gold prices were going up faster than silver prices. Today, the gold-silver ratio is still 50% higher than it was back in May 2011: ![Gold Silver Ratio] However, there’s one major difference between then and now… ## **WallStreetBets: The People’s Cartel** Back in January when the Reddit crowd took **GameStop (GME)** to the moon… I [wrote an article](https://katusaresearch.com/sir-this-is-a-casino-shorts-and-whats-next/) about how retail investors had become a serious force for change in the investment industry. I even briefly mentioned their call to squeeze the silver shorts, an idea that had just been in its infancy at the time. In essence, WallStreetBets is looking to buy up enough silver to force the short sellers (i.e. the cartel) to cover their short positions. Thus driving the price of silver up even higher. Since their initial success, the WSB swarm hasn’t quite been able to replicate the same highs they found with GME with the rest of their stock picks. Though the recent performance of **MVIS** shows that they still have enough buying power to run up share prices by themselves: ![WallStreetBets Meme Stock Picks YTD] While GME and even AMC were, and indeed continue to be, great buys for those early WSB investors… it’s important to remember that in the end, the big guys took it in stride. Besides Melvin Capital and Citron Research, the former a single hedge fund and the latter a small research firm, Wall Street itself didn’t run into any major hiccups. - **Reddit investors may liken the stock markets to a casino, but they’ve forgotten the most important part of that analogy: In a casino, the house always wins.** Don’t forget – many of the largest brokerages, such as Robinhood, TD Ameritrade, Interactive Brokers, and more, came together to freeze buying of options and share positions in late January. This was one of the major drivers behind GME prices falling back to earth in February. And on top of that, remember how the silver cartel supposedly flooded the markets with naked short sells to trigger the Silver Massacre? They’d gladly pull the same trick again if billions of dollars were at stake. Speaking of billions of dollars, would-be squeezers should also note that the sheer size of the silver market is considerably larger than GameStop. Pre-short squeeze, Gamestop’s market capitalization was $1.3 billion. Just the silver produced each year is a $20+ billion market. - **But that pales beside the size of the paper silver market, which was estimated to be worth $2.3 trillion in 2017.** WSB has been able to move stocks with market caps in the low billions significantly, like GME, AMC, and MVIS. But, they’ve had a much harder time replicating that same performance with stocks worth tens of billions, like SLV or PLTR. WallStreetBets investors will have to dig deep into their pockets if they hope to even make a dent on the silver markets big enough for the cartel to notice. ## **The House Always Wins – But That Doesn’t Mean You Have to Lose** I wish the WSB crowd luck with their “squeeze”. However, we’ve learned from the GameStop mania that the house always wins, and that the suits will change the rules to protect their own. - **But even though the deck is stacked against the retail crowd, there are still ways to hit the jackpot.** There are methods you can use when picking stocks to ensure the greatest odds of success. Much like how one of my favorite financial players, Edward Thorpe, who was a math professor turned hedge fund manager came up with the technique of card counting to break the bank at blackjack and baccarat tables in Las Vegas. Will these methods help you win every time? No. Just like with card counting, all these methods do is help tilt the odds heavily in your favor. You won’t win every time. But your stock picks will be winning a hell of a lot more often than losing. At Katusa Research, I’m not just about delivering these winning stock picks to subscribers of my premium research service, I’m also about educating investors. - My techniques for picking winning stocks aren’t black boxes that nobody can access. Much like how Mr. Thorp wrote the New York Times bestseller *Beat the Dealer *to explain his methodology, I freely share my research with my subscribers, and always outline my exact due diligence process every time I recommend a new deal. - **Instead of loading up on the latest meme stock over at WallStreetBets for a shot at the moon, consider subscribing to *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/)*.** You won’t just be reaching the moon – you’ll be making multiple return trips. Regards, Marin --- # The World is Sleeping on Commodities – 4 Things to Watch Closely - URL: https://katusaresearch.com/the-world-is-sleeping-on-commodities-4-things-to-watch-closely/ - Type: article - Published: 2021-04-23 - Author: Marin Katusa I’ve had people from all walks of life ask me questions on this sector in the last 2 months. And the number of questions, along with the number of people asking them, is astounding. *“Have you bought Bitcoin, Ethereum, Doge, Cardano…?”* These are people fixing my hot water tank, that work as elementary school teachers… some I haven’t even talked to in years. Even the barista in the coffee shop below the office is talking cryptocurrency. And that’s never a good sign. ## **Is Crypto Mainstream Now?** On the topic of going mainstream, crypto is well on its way. You’d be hard-pressed to find someone under 60 that doesn’t know about it now. But would you go long the digital Chinese yuan? China’s digital currency is controlled by its central bank. It will give the Communist Party even more tools to monitor both its economy and its citizens. - **It also removes one of the key selling points of cryptocurrencies, which is anonymity.** Beijing is positioning the digital yuan for international use and it’ll be untethered from the global financial system. It’s a bold maneuver by the Chinese as the nation’s thirst for global power continues. Meanwhile, in North America, the walls are being broken down for crypto more slowly. **Coinbase,** one of the world’s largest cryptocurrency businesses, went public last week trading at a valuation of $100 billion. Is it just a coincidence that record highs came just as the company went public? Look at this chart very carefully – is it a coincidence that BTC reached its ATH (all-time high) just as Coinbase was going public? Bueller? Bueller? “Ah, he’s sick.” LOL ![Bitcoin prices hit all time high as coin ipos] I’m no crypto hater. In fact, as I disclosed publicly in early 2017, I invested a lot of money into a close friend’s fund that invests directly into various cryptos. I made that decision because I wanted exposure but didn’t have the bandwidth to put any time into the sector myself. So, I found the best to manage my exposure to the crypto market. If you must ask for numbers or receipts, it’s well above 7 digits. And it’s an allocation I’ve set aside for 10 years. Does that make me a HODL’er? No, I’m an [alligator investor](https://katusaresearch.com/the-way-of-the-alligator/)—that’s all. If people want to invest in a store of value that can either appreciate or fall by 5-10% a day, that’s their call. Call me old-fashioned, but I like to be able to see and physically hold my stores of value. Apparently, so do China and Turkey. Because China just approved a MAJOR amount for import to the country. - **China is importing 5.2 million ounces of gold ($8 billion worth) over the next 2 months.** And in **[-SWAP Line](https://katusaresearch.com/the-importance-of-dollar-swap-lines/)** news… Turkey is doing it the old-fashioned way and importing gold from its citizens. Just earlier this week, Turkish President Tayyip Erdogan told Turkish citizens to convert foreign currency and gold holdings into Lira. You want what the government wants—real money! Given the unrest around the world these days, it should come as no surprise that gold and silver prices remain elevated even in the face of rising bond yields. - At current prices of $1,770 per ounce**, high-quality gold producers are free cash flow machines**. - But they’re trading at historic lows—which make my Alligator senses tingle…** and it’s time to get ready**. Free cash flow yield is the ratio of *Free Cash Flow* to *Market Capitalization*. The higher the ratio, the better. And as you can see in the next chart with the bar at the very right, central banks aren’t the only ones printing money hand over fist… ![Gold Miner Free Cash Flow Yield] As you can see… - **2021 is set to be one of the best years for gold producers in the last 2 decades.** It’s why I remain long and strong the best gold developers and producers. Recently I bought millions of dollars worth of my favorite gold stock. So did my very close friend who recently did a full interview for my KRO subscribers. Our subscribers were able to get in at the same time and price. It’s one thing being close to a smart billionaire in the precious metals sector, that you make a lot of money with for both yourself and for your subscribers. But when that billionaire is a true gentleman and a nice guy, it makes the experience even more precious—no pun intended. Not to mention… My favorite way to play the electric vehicle boom is inching closer towards our buy under price. Subscribers know exactly which companies I’m targeting and what prices I’m willing to buy at. - **If you’re looking for an edge in this crazy market, consider learning about my premium research service, **[***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/)**.** ## **Copper Prices Soar – Pay Attention to Why** On the subject of the electric vehicle (EV) boom, there’s yet another commodity besides gold that’s also set for a historic run. It would be remiss of me not to mention Doctor Copper, the base metal that’s long been known to keep its finger on the pulse of the global economy. As the world electrifies, it’s going to need more copper. It’s that simple, but nobody will be getting it for $3 per pound. It was a controversial idea I put forth a few years ago… To incentivize new mine supply, copper prices needed to rise. I highlighted the growing adoption of electric vehicles and the requirements of the green energy sector as potential catalysts for the copper industry. All-in, growth well above 2-3% a year was feasible if electric vehicles took off. Below is a chart which shows projected demand for copper coming from EVs. Within the decade, copper demand from EVs will represent an incremental 30% increase in global copper consumption. ![Projected Copper Demand from Evs] Today, **copper is $4.25 per pound, up well over 30%** since I wrote that article in late 2017. Many producers have doubled or tripled since then as well, as copper demand growth became “priced in”. ![Copper Producer Index] But copper isn’t the only metal that’s getting a lot of attention due to the green energy and EV booms… ## **A New Lithium Giant is Emerging** A $3.1 billion merger between two Australian miners is set to create one of the largest lithium producers in the world. The deal between **Orocobre** and **Galaxy Resources** sent share prices of both miners to 3-year highs. The deal comes as lithium prices have begun to pop again, and they’re up 25% year to date. ![Lithium Price Index]Lithium demand is forecast to increase 10-fold by 2030 as electric vehicles become mainstream. An epic transition away from dirty electric power to clean electric power is coming. And the seeds have been planted for an epic bull market in commodities over the next decade. **These are two major themes that we’re focusing on in my premium research service.** And when one industry is on its way out the door, there will be a surge in new industries taking its place… But the best part? **We’re going to make a boatload of money being fashionably early in a couple of coming bull markets…** To see the sectors that I’m watching and companies I’m buying, [click here to learn more about my premium research](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) with *Katusa’s Resource Opportunities*. Subscribers just saw two stocks in our portfolio jump to new multi-year highs. Money is moving and rotating sectors. Are you preparing your portfolio for what’s coming? Regards, Marin --- # The Nuclear Shift in the Uranium Narrative - URL: https://katusaresearch.com/the-nuclear-shift-in-the-uranium-narrative/ - Type: article - Published: 2021-04-16 - Updated: 2021-09-02 - Author: Marin Katusa Airpocalypse: It’s morbid to think about. But one of the leading causes of death is air pollution. According to the World Health Organization, an estimated that 7 million people die every year from air pollution-related issues. Air pollution is caused by solid and liquid particles along with gases suspended in the air. By far, the largest contributor to air pollution comes from the world’s electricity generation. Namely, burning fossil fuels. - **As the world becomes more focused on reducing its greenhouse gas emissions and heading to “Net Zero” change must start with the electricity sector.** (By the way – be sure to remember “Net Zero”. You’re going to hear a LOT about it in 2021). Did you know that coal-fired power plants still make up over 30% of global power generation? ![Global Electricity Fuel Source] Coal is by **far **the dirtiest fuel to burn. It makes all the sense in the world that one of the first things governments are the world are going to do is say “no more coal”. I expect governments to force mass closures of coal-fired plants over the coming decades. However, while that sounds good on paper, how does one substitute new power generation for coal? After all, replacing 30% of global baseload power production is not something that can happen overnight. Not to mention, telling citizens to reduce power consumption by 30% is out of the question. ## **Is Nuclear Power the Baseload Solution to Save the World?** What makes it especially difficult is that coal is “baseload power”. This means that plants run continuously, with minimal shutdowns. While solar and wind power provides electricity, it is only intermittent. Power is only generated when the sun shines or the wind blows. Yes, we can store it in large batteries, but we are nowhere near global adoption at a utility scale that is cost-efficient. That day will come but it isn’t right now nor within this decade. - **If nations want clean baseload power, the answer lies in nuclear power.** Nuclear power is powered by uranium. And it produces enormous amounts of clean energy. In fact, there are zero emissions. Climate crusaders will love that, no doubt. Here is a chart which shows the carbon dioxide (CO2) emitted per baseload power source. ![Baseload Power Generation Co2 emissions] I have been actively involved in the uranium sector for nearly 20 years. I’m also the largest independent financier in uranium globally. I have been to the uranium mines that matter in the world (and I don’t know of anyone else in the industry that can claim that). ## **The “Short Report” on Uranium That Made my Subscribers a Small Fortune…** Two years ago, I wrote a short report. In fact, the CFO of one of the world’s largest uranium producers was even upset at me and shared his comments with me. I had many self-acclaimed gurus and internet trolls attack my report—They MISSED the whole point of the report. The report was about creating the worst possible scenario for uranium—and if my recommendations could do well in that framework—then I knew I had a winning portfolio of uranium stocks. So how did Katusa Research do? AWESOME! Here is the factual evidence. ![Uranium Focused Peers] All three of the investment opportunities by Katusa Research have significantly outperformed its peers. Also, Katusa Research had ZERO losers in uranium. Remember what Warren Buffett said about there being two rules in investing - Don’t lose money. - Don’t forget rule #1 We didn’t just beat the peers by a small margin, we are talking about +100% and 200% better. So, I invested millions of dollars into the company alongside my subscribers at the same time and same price… **The first recommendation is up over 301% in gains as the stock traded HEAVY volume (not some dinky exchange that trades by appointment).** Liquidity matters. - **Another impressive return we had in the sector that some of our subscribers may have got was a gain of over 200%.** I say *may have* and *could have* because our legal team doesn’t allow us to say the realities… Even though we ourselves participated at the same time and price and experienced the same gains**.** Are these results typical for every investment, speculation, or trade – no. But we’ve asked some of our most successful subscribers for feedback and here’s what they responded with: **Greg H.** wrote in saying he’s up $19,000 in profit and said… - *“I know I have benefited not only financially but educationally as a smaller investor being given the opportunity. Other than that, thank you for everything!”* **Paul E**. told us he turned $13,265 into $26,898, doubling his money… - *“I have been very impressed with everything. I have learned a lot. The analysis on the different markets and companies is light years from what I was seeing and doing. I would love to have a way my kids could learn this too. You are making me a better investor.”* Allowing stocks to “gain weight” is we’ve seen the incredible gains we’ve captured over the last 12 months. At the time, uranium equities were as hated as they came. And patient investors are now being rewarded for buying what no one else was looking at. ## **What’s Next for Uranium?** Today, the outlook for uranium is better than any time in the past decade. The reason? - **Wall Street and Capitol Hill’s understanding that nuclear power can be the source of zero-carbon emission baseload power.** Recently, rumors are circulating that European Union will be announcing that nuclear qualifies as a green investment. This paves the way for enormous funding opportunities to build smaller, modular nuclear reactors with shorter construction and permitting times. It’s a thesis that I have suggested for years… And more recently **Bill Gates** has also gotten on board with, saying: - *“Nuclear power will ‘absolutely’ be politically acceptable again — it’s safer than oil, coal, natural gas”* ## **The Nuclear Narrative is Changing** If nuclear qualifies as a green investment in Europe, it’s only a matter of time before other regions take notice. In the United States alone, there are over 200 gigawatts of coal-fired electricity generation in operation today. Coal-fired electricity powers over 25 million homes in America. This represents 23.4% of US power generation. USA has improved significantly as it was just a short while ago that 50% of America’s electrical generation came from coal. Part or all of this could be easily substituted with clean, baseload power from nuclear power plants. According to the International Energy Agency (IEA) and CarbonBrief, all coal-fired plants need to close by 2040 if we want to hit our emission reduction goals. - **This means closing 100GW of coal-fired power generation capacity every year for 20 years.**** ** If governments elect to go nuclear, it will require enormous amounts of uranium. To put it in perspective… According to both the World Nuclear Association and International Atomic Agency, there are over 440 operable reactors in 50 different countries across the world. This requires 178 million pounds of U3O8. - **Using the IEA and CarbonBrief analysis, this would mean that every 4 years, the global demand for uranium would double.** ## **Being the First is Fun** Whether you like my style or not is irrelevant. The facts are what you need to listen to. I was asked to give the Keynote presentation at the World Nuclear Fuel Summit for a reason, my research and conclusions are ahead of the curve. In the next 60 days… - **I am going to publish a never-before-seen opportunity that I believe will exceed those that I have done in the uranium space.** Subscribers to *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)* will be the first to read about this opportunity. **It’s probably the single most exciting company and trend I’ve come across in years.** Sounds like an exaggeration, I know. But when you see exactly what I’m talking about, you will likely come to the exact same conclusion. So, if you’re not doing your due diligence on things the crowd is neglecting… Then you could very well miss out on the next sector’s returning triple-digit gains down the road. Regards, Marin Katusa --- # Introducing “The Jimmy” and Where Gold is Headed Next - URL: https://katusaresearch.com/introducing-the-jimmy-and-where-gold-is-headed-next/ - Type: article - Published: 2021-04-09 - Updated: 2021-04-08 - Author: Marin Katusa [*To watch this week’s article in video format, click here.*](https://www.youtube.com/watch?v=a5OXCozCT1U&feature=youtu.be) Today I want to share what I call “The Jimmy”. One of my favorite people in the world is **Jim O’Rourke**. He is great in every way and my earliest mentor in the business. He’s someone I’ve learned a tremendous amount from. I admire everything about this great man. A true Canadian Living Legend. But he is the world’s worst seller of stocks. Even worse than Doug Casey who is the world’s second-worst seller. I’ve been close to Jimmy for over a decade—and he literally never sells. For example, Jimmy was on the board of one of the stocks we held in the early days of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) – my premium research letter. He owns a lot of this particular stock. We were chatting one day, and he said… “Marin, you said to take a Katusa Free Ride above $15.50. It’s a lot higher now. Should I sell?” “Yes Jimmy, it’s what I said and what I did personally just like I wrote in the KRO.” Jimmy is a subscriber to the KRO and is reading this right now. Did he sell? No. He said he wanted to be supportive of the deal. Now I want everyone reading this to know that not selling stock means you aren’t supportive. The opposite is true. By selling a stock the market is pricing above fair value… or pricing in future value you can have cash on the sidelines to buy when the market discounts the stock and actually support the stock. One of my major rules of investing is this: Do not fall in love with a stock or a position. Your role is to make money. ## **Don’t do “The Jimmy”** The irony is that an investor is **supportive** when they buy the stock when it’s cheap and when nobody wants it – not when its “popular”. The stock Jimmy was asking me about was one of the best gold performers in the world in 2020. Gold was rocking and the share price hit all-time highs. Taking a *Katusa Free Ride* does not in any way mean you are not supportive. It’s the smart thing to do. ![The Katusa Free Ride Formula] And now you can be supportive when your favorite resource stock breaks under its support lines… and buy it when gold, silver, copper, or any commodity is out of favor. Stocks are not your kids, grandkids, or friends. - **Do not fall in love—and guess what—the stock doesn’t even know if you love it or not.** Management teams know I am VERY supportive of the companies that I own. But they know my style and they know I’ll be there when no one else is. That’s how I made my money. It is the Alligator Way. ## **So, Marin, Where is Gold Going?** If you go back to previous missives and read my premium research… You will notice I analyze companies a lot differently than your standard broker, banker, or fund manager. For example, I always limit my Net Present Value (NPV) valuations using $1,550 gold and usually use $1400 in most cases. Think of Net Present Value as the value today of all the expected future cash flows using a discount rate and the price of the commodity to value that cash flow. I think there is a good possibility that gold gets a whipsaw pullback over the next 24 months to test the $1400-$1550 per ounce price range. Why? From a mathematical perspective… - **A very strong correlation I use for trying to see where gold prices will go is to track gold against the 10-year real returns on treasury bonds.** The real yield for the US 10y calculated by the US Fed started in 2004 and has a correlation of -0.89. - Hey Marin, “*what the hell does negative 0.89 correlation mean*?” Well, in street lingo it means that if one goes up, there is a very strong possibility that the other will go down. In 2013, when rates were negative and then bounced from -0.84% to over +0.50% gold fell over $250/oz ($1580 to $1230) or roughly -22%. If we took the same harsh correction, a correction using the current move in 10-year yields would show a target of ~$1440/oz for gold within 12 months. It’s worth noting that the move in 10-year real rates from -0.84 to +0.50 took less than 6 months. Even after that as real yields trended back towards zero and even went negative, gold did nothing for a few years (2013-2016). ![gold price vs 10yr returns] ## **GET READY – Alligator Time is Coming** So, what’s different? If the rates get too much higher, the global markets will collapse again – that is a fact. So, do I see gold falling to $1400/oz? I do not. But my opinion doesn’t matter, and I am prepared accordingly. Now, we have published this next chart many times in past KRO letters, which is the updated Technical Analysis on gold. We have consistently said that gold needs to consolidate above the major breakout from $1,375. As you will see in the next chart, mini consolidations in the upper ranges between $1,800-$1,950 have failed to hold. A key area to watch is the 50% retracement level. The 50% retracement level represents a 50% decline from the high, measured from the beginning of the breakout to the peak. In this case, the level is approximately $1,720. If $1720 breaks the next support level is $1685. - If you forced me to make a decision, I do think gold could break below $1685 and we will have an incredible buying opportunity. ![gold technical analysis] It’s important to note that gold is driven by underlying economic factors more so than technical analysis. Drivers like… - real yields on bonds, both in the United States and abroad, - the money supply, and - the US dollar …All have a significant influence over gold price movements. Another little metric I use to see is the amount of “leveraged” gold positions and [coin premiums](https://katusaresearch.com/golds-cruel-performance-should-you-be-worried/). - **Right now, the gold market has more leveraged positions, meaning funds and investors who have used leverage to buy gold and gold stocks, than at any point in the last 5 years.** So, what does that even mean? It means people are on margin and borrowing money to buy gold and gold stocks. When the price goes down, people will either increase their margin (add more money to the trade) or sell. I think most will sell as they will fear the price going lower. That will cause more selling pressure to the gold spot market and gold equities. And that would be music to my ears because my subscribers and I are well cashed up from taking Katusa Free Rides last summer on many large precious metal stock wins. If you want to see where I’m putting my money – [click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) to learn more about [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/). Regards, Marin Katusa --- # (Inflation Trick) The Indicator that Actually Matters - URL: https://katusaresearch.com/inflation-trick-the-indicator-that-actually-matters/ - Type: article - Published: 2021-04-02 - Updated: 2021-04-01 - Author: Marin Katusa The outcome leaves you baffled and confused… No matter the language or culture, magicians have performed *sleight of hand* tricks to wow audiences around the globe for centuries. The magician’s goal is to reveal a chosen reality to the audience, while concealing the real methods and actions that bring the magic trick to life. Two important factors play into sleight of hand… The first is misdirection, which focuses the audience’s attention on something of no significance, drawing all their attention away from the trick. The second factor is the slick alteration of an object or sly movement that’s nearly impossible to detect. Economists – especially those that track inflation statistics – are specialists at sleight of hand. Now you see it… and now you don’t. ## **Economic Inflation Magic ** According to TradingEconomics, the annualized inflation rate in the U.S. was 1.7% in February. But if you’re wondering just how much your grocery, restaurant, car, insurance, energy, renovation, or other bills are rising higher and higher by (especially over last year), there’s one chart that can tell you where to look… Over the last year, commodity returns were overwhelmingly positive. And many have experienced very large % increases. ![1 year commodity returns]Energy led the charge. And a lot of food-based commodities like oats, soybeans, corn and sugar have experienced large increases. With these massive price appreciations, is it feasible that prices continue to go even higher? Did we just see an inflection point where the trend accelerates and we hit supercycle status? ## **The Inflation Indicator that Actually Matters ** When you mention inflation, the first thing that comes to the mind of most investors, novice and veteran alike, is the CPI. You probably already know the CPI as the Consumer Price Index, a widely watched measure of inflation. But if you’re a resource investor… - **You should be paying attention to the Bank of Canada’s Real Commodity Price Index ** The BoC’s CPI is a commodity price index that encompasses the energy, metals, agriculture, fisheries and timber markets, all combined into 1 representative index. Below is a chart which shows the commodity price index going back to 1870. You’ll find that we’re near the lows in real, inflation adjusted terms for global commodities. ![bank of canada real commodity price index]As you can see, we have a long way to go just to get back to the previous highs… Let alone surpass them and create new highs for commodity prices in real terms. Major price movements in commodities aren’t based on “technical breakouts or breakdowns”. Instead, they’re based on supply and demand fundamentals. Answering questions like “is there enough future supply to sustain demand?” present major clues to potential upcoming moves in the commodity space. Future supply cannot be created out of thin air. It starts with long, hard and usually unsuccessful exploration activity. ## **Financing (and Making Money From) Future Demand** Math matters. Understanding the risks associated to a project and properly adjusting the valuations to reflect the real risk associated to the project is critical to be successful in mining. Like I said, math matters. And most in the business flat out suck at it. - **This is the number one mistake in the mining business today—hands down—and NOBODY is talking about, except Katusa Research.** There is no way you can price the risk for a project in the DRC or Argentina the same as a permitted deposit in Ontario or BC or Nevada. But yet, the big brokerage firms do just that. Why? Because they are in the business of selling you paper. And pesky details like risk adjusted analysis makes it very difficult for the bankers to sell paper. Below is a chart which shows equity financings for junior and mid-tier gold and base metal companies since 2008. - **You can see that financing levels are down over 50% from their highs.** ![historical junior and mid tier financings]It’s becoming harder and harder to raise money in the sector. Thus, the real critical flaws are being overlooked – as the real amount of capital that would be raised if people understood the risk would be *even lower* than it is today. Less money raised means less exploration and development work on delineating new gold or base metal mines. - **Less mines mean lower future supply. And lower future supply is bullish for long term prices. ** *Why don’t we just build more mines and create more supply*, you may ask. It’s not that easy… ## **How Long Does it Take to Build a Mine? ** Answer: A long time. If the company is successful at finding a good deposit – and many aren’t – it can take over 10 years to develop a mine from exploration. Then get permits. And then finance and the build the mine. How many gurus who talk about mining stocks have actually put their name and money to a mine like joining the board of directors? How many gurus in the mining space who write newsletters have done that? I have. I was the largest individual investor in **Copper Mountain (CMMC.TO)** when we took the company public in 2007. And was a member of the Board of Directors from concept in early 2017 exploration to becoming Canada’s 3rd largest copper producer. I retired from Copper Mountain 13 years to the day of joining. Jim O’Rourke and Rod Shier don’t get enough credit for the incredible job they did on Copper Mountain—but those who know, know. - **Copper Mountain went from idea to mine in 4 years. That’s a very rare event. It’s also a ten bagger over the last 12 months. ** Go CMMC Go! Realistically, building a mine from exploration if the management have actually found a deposit is closer to 15 years to put a mine into production. [![hypothetical development timeline]](https://katusaresearch.com/wp-content/uploads/2021/04/hypothetical-development-timeline.png)In a world where financings are dwindling and less money is being put to work on finding new deposits, projects currently in the development stage have become highly sought after. Now let’s take a closer look at the copper market… The price of copper can affect everything from the cost of plumbing in your home to the cost of an electric vehicle. Below is a chart of the Bloomberg Global Copper Producers average reserve grade. ![global copper producers reserve grade]You’ll see that even at existing mines, copper grades have fallen 50% since the year 2000. This means that… - **Miners are obtaining half the copper from a ton of ore, relative to twenty years ago. ** ## **The Big Boom** High prices are only sustainable through a boom in commodity demand. With [close to $10 trillion printed](https://katusaresearch.com/lookout-dollar-fears/) around the world, governments are doing their best to prop up and energize their economies. This much printing of money creates a somewhat artificial increase in prices. But tangible and sustainable price appreciations in commodities must come from fundamental demand and supply metrics. - **Electrification of the economy will play a key role and will be a central determinant in if this “supercyle” is the real deal…** Or if this is simply a one-year hurrah followed by a subsequent bust. I believe that this time around, a rising tide will not lift all boats. Some commodities are destined to be in bear markets forever. Substitution risk amongst commodities is incredibly high, yet it’s disregarded by many “gurus” and analysts. That’s why I’m just putting the finishing touches on a very important upcoming report: - **I will be detailing where I believe the true boom in commodities is going to be, to my subscribers. ** If you’re looking for a way to get invested in the commodity space, Katusa Research provides comprehensive and actionable advice. I’ve been in the industry for 20+ years, financed 100’s of deals and invested millions of dollars into commodity focused businesses that I believe can generate incredible returns. If you want to get ahead of the curve, [click here to find out more about](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) [Katusa’s Resource Opportunities.](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) Regards, Marin Katusa --- # Coal’s Curtain Call: How Much Money is at Stake to “Go Green”? - URL: https://katusaresearch.com/coals-curtain-call-how-much-money-is-at-stake-to-go-green/ - Type: article - Published: 2021-03-26 - Author: Marin Katusa *[Click here if you’d like to watch this week’s KII in video format](https://www.youtube.com/watch?v=fUd-iq7uLss).* This pie is huge… And there will be a piece for everyone. **The Green New Deal** is a congressional resolution that lays out a framework for weaning the United States off fossil fuels and lowering greenhouse gas emissions. The end goal sees the United States sourcing all of its electricity from renewable and zero-emission power sources. In addition, it’s aimed to guarantee new high-paying jobs in the clean energy sector. If you think this program sounds expensive… you’d be correct. To quote the Electric Power Research Institute, changing over America’s outdated electric grid could cost $500 billion. That number’s probably on the *low* side, and here’s why… Currently, the United States has approximately 200 GW of coal-fired capacity. And let’s assume this all gets replaced with zero-emission power sources. Now, coal is baseload power… which means it runs 24/7. The only true zero-emission power source which can be baseload power today is nuclear power. **Nuclear power [is one solution](https://katusaresearch.com/nuclear-winter-there-will-be-power/)**** championed by the *nouveau green*…** But by no means is it a quick solution. It takes a decade to permit, finance, and build a nuclear reactor. The reality is, no significant new nuclear power will be added to the U.S. energy mix over the next decade. Hydro can be an excellent source of renewable baseload power as well. But with hydro, your choice of locations is very limited. And not every state has the right geography to make it a significant contributor. Wind and solar will play a significant role in the coming years to complement this baseload power. But the storage technology to make them 24/7 power sources isn’t there yet. It will come, but it will take time. And when it does, the ultimate profit for investors will happen. ## **Dying Industries and A Stunning Turn of Events…** During the 20th century, the world relied almost exclusively on “dirty” fuel to produce electricity. For example… - **The burning of coal was previously responsible for more than 50% of U.S. power generation.** It was also the source of power for most of the electricity generated in countries like China and India. ![Global Electricity Fuel Source] “Dirty” fuel was attractive because it was cheap. Burning coal and other fossil fuels produced incredible amounts of energy for the cost. This cheap energy fueled amazing economic growth. It powered factories that built refrigerators, cars, trucks, computers, and televisions. It lit up hundreds of millions of homes around the world. But, as many argued, at what cost? According to the World Health Organization, over 150,000 deaths occur annually due to climate change. Agree with it or not, those are the numbers making the headlines. And an estimated 7 million people die every year from air pollution, making it one of the leading causes of death worldwide. Moving to a greener world will be good for both the planet and us. According to the University of Princeton’s Net Zero America study… - **The air quality benefits obtained from going green will avoid 200-300 thousand deaths in the U.S. over the coming decades.** It will also prevent $2-3 trillion in estimated damages. ## **What Will it Really Cost to Go Green in America?** In short, it’s going to be a big number. Below is some rough math on what it would cost just to replace the electricity currently provided by America’s coal plants… ![what does it cost to replace coal] You’d also need to develop thousands of miles of new high voltage power lines. Think of these as “electricity highways” which would transmit power across the nation. Chris Guerin, the CEO of Nexans – one of the world’s largest cable manufacturers – believes that there will need to be 20,000 miles of new high voltage cabling laid in the United States. On top of that, let’s say you also want to change all the U.S. Postal Service trucks to electric vehicles. - **Currently, there are roughly 140,000 trucks in the USPS fleet. At $50,000 to electrify per truck, this contract is worth $7 billion.** Now tack on state and municipality government vehicles… You can begin to see how these costs add up quickly. It’d be hard to argue that this Green New Deal will cost less than $1 trillion all-in. If I were a betting man, I’d be taking the *over*… When was the last time you saw a government project come in on time and under budget? As I showed in the math above, the power generation sector will see the largest dollar amount invested. But there are many other angles to cash in on the sector – electric vehicles and batteries, fuel cell technology, carbon and emission taxes, and many others that are yet to be discovered. These industries will be the greatest benefactors of the government stimulus. There’ll be no shortage of money to go around. ## **Coal’s Curtain Call** Since March 2011, the value of the Dow Jones U.S. Coal Index has plummeted 99% to a record low last August. It had only recovered 2.7 points from there before the Index was discontinued by S&P Global on September 18, 2020. Talk about an extinction. ![dow jones us coal index djuscl] This phaseout has led to major losses for investors and bankruptcies for companies. It just further proves the point that you always want to be onside with the “big” money. It’s critical to watch where big money is flowing and where it’s incentivized. Like water, capital follows the path of least resistance. Now, this fact might come as a shock to you: - **Solar power and wind power are now cheaper than energy derived from old, conventional fossil fuels.** This fact is causing tectonic shifts in the electric power business. On December 20th, 2015, sustained winds of 20 – 30 miles per hour allowed Texas to produce 13.9 gigawatts of electric wind power. It set a record for single-state wind power production… and briefly allowed Texas to fulfill 45% of its electricity needs from wind power alone. - **In 2020, 22% of Texas’ power generation came from wind.** In my recent article about the [Texas energy crisis](https://katusaresearch.com/nuclear-winter-there-will-be-power/) earlier this year, I outlined how the whole thing could have been avoided. Falling costs have allowed solar-powered electric plants to reach or exceed “grid parity” with fossil fuel plants in 10 U.S. states. “Grid parity” is when one power source costs the same as another. Investment bank Deutsche Bank predicts that solar-powered electricity will be at grid parity in up to 80% of the world’s electricity markets within a few years. I’m telling you all this to drive home an incredible point… - **Cheap, widely available renewable energy is not just some tree-hugger’s fantasy anymore.** It’s real. And it’s happening right now. Every day, more and more profit-conscious corporations are choosing renewable energy. It’s simply a better deal now. ## **This Mega-Trend Will Only Accelerate…** To be clear, I’m not saying renewable energy is the cheapest source of electrical power in every country. Some places don’t receive enough wind to make it a viable fuel source. Some areas don’t receive enough sunlight to make it a viable fuel source. I’m simply saying solar energy and wind energy have become cheaper and thus, more attractive in many countries. This means incredible amounts of clean, renewable electric power are now available to us. It means an epic transition away from dirty electric power to clean electric power. **It means a reordering of a trillion-dollar-plus industry.** And when one industry is on its way out the door, there will be a surge in new industries taking its place… Or even a new hybrid model that will allow the previous industry to survive… but in a fashion that’s checked all the boxes to be *environmental* and *social*, with proper *governance*. But the best part? **We’re going to make a boatload of money being fashionably early… Investing in the *new* masters of the clean energy universe.** To see the sectors that I’m watching in this space, [click here to learn more about my premium research](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) with *Katusa’s Resource Opportunities*. Subscribers just saw two stocks in our portfolio jump to new multi-year highs in the clean energy space. - **One ticker is up as much as 342% as of this writing.** The money is moving. [Are you preparing your portfolio for what’s coming?](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) Regards, Marin --- # Uranium on Fire and the Secret Russian Interview - URL: https://katusaresearch.com/uranium-on-fire-and-the-secret-russian-interview/ - Type: article - Published: 2021-03-19 - Updated: 2021-03-18 - Author: Marin Katusa Just over a year and a half ago Katusa Research put out a very negative report on Uranium. But not for reasons that you might think… The uranium industry was left for dead. It became the “other yellow metal”. My thinking was this: I wanted to put together the absolute most bearish and worst case for uranium. And if I could still prove that even in the worst case scenario, uranium’s future is bright then I would know exactly how to play it. I painted the bleak picture to show my subscribers to [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk), why I wrote two separate 7 figure checks for two uranium companies. Here’s what I wrote… *“Katusa subscribers heard it before investment bankers, brokers, and all other newsletter writers. I invested millions into the company at the same terms as my subscribers. I plan on making it a core holding in my portfolio for exposure to uranium.”* As of this writing… - **That uranium stock is now up 215% from our first tranche and 110% from a second position.** But in true Katusa fashion, there’s more… - **Our subscribers that invested in this opportunity alongside me got a FREE, full, five-year listed warrant that’s up 358% since it started trading.** Another uranium stock we’ve recommended to subscribers is also up 120% as of this writing, on significant volume. The sector is not just heating up right now, it’s coming alive and drawing a lot of investor interest. And for all the right reasons. It’s a zero-carbon energy source (nuclear net-zero will get a LOT more attention in the coming years). If nuclear gets accepted as a zero-carbon solution (it will with due time) to the Green Dream, massive government stimulus can change the destiny of the nuclear sector. Why? Nuclear energy is important as it provides significant base load power in North America. It powers about 23 million homes, or about twice the amount of homes in California. ## **The Secret Interview: An Inside View of Uranium Production** Everybody has heard of Uranium One. Yes, the 100% owned Russian uranium company. The largest Russian uranium producer outside of Russia. Then CEO, **Fletcher Newton**, has never done an interview with any media in the west as the CEO of **Uranium One**. But Katusa Research got the scoop. And our subscribers were the first in the world to hear a one on one interview with Marin Katusa and Fletcher Newton. This is the Katusa Advantage. And, for those who don’t know the quality of research put out by Katusa Research… You will hear, firsthand, from one of the most knowledgeable uranium insiders. This is someone who ran one of the world’s largest uranium producers, take on Marin Katusa’s views on the uranium market. Fletcher and I first met in 2015 when I was asked to give the keynote at the World Nuclear Fuel Market Conference in France. As always, my talk was a controversial one, but in time has proven correct. This is a first for Uranium One (one of the world’s largest uranium producers). And it’s a huge honor for Katusa Research to be selected by one of the world’s largest uranium producers as their first interview. The New York Times loves going after Uranium One and the Clintons. Well, for all who want to know the truth, we lay out all the facts. This is a **MUST WATCH** for anyone interested in the uranium sector. Again, I have no ownership in Uranium One, nor did Uranium One pay anything to be on the call. This was an interview based on mutual respect and for information purposes for my subscribers. And it was well worth it, KRO subscribers have made a fortune on our uranium stocks. My goal is to give our subscribers a very balanced view of the uranium spectrum. **In the exclusive interview with Fletcher Newton, you’ll learn:** - The major misconceptions of uranium - The lasting shock that the pandemic brought to the nuclear industry - Why it’s critical to see the Eastern view on uranium, and not just the Western angle - The importance of major uranium producers like Cameco and Rosatom - The major contraction in supply that the market is not paying attention to Click on the image below to watch now… [![Uranium on Fire and the Secret Russian Interview]](https://katusaresearch.com/uraniumone?sl=kiiwebsite) [Or you can click here to watch the full interview.](https://katusaresearch.com/uraniumone?sl=kiiwebsite) I hope you enjoy it. Regards, Marin Katusa --- # (Lookout) Dollar Fears - URL: https://katusaresearch.com/lookout-dollar-fears/ - Type: article - Published: 2021-03-12 - Author: Marin Katusa Let’s start with a little bit of a Time Machine. I get that my KRO service is a premium research-based report that many here cannot afford. Like those people, I started with nothing. I’ll never forget my roots and I’m proud of where I come from. It’s why I have hosted many conferences for free and also mention free stock ideas here. At Katusa Research, we look to uncover new trends and companies that are unnoticed by Wall Street. When they are, it’s time to take profits. - **Back in April 2019 in these emails, you would’ve read an article we published [that GT Gold was a prime takeout candidate](https://katusaresearch.com/australian-gold-stocks-and-the-commonwealth-takeover-part-2/). For free.** At the time the stock was trading around 90 cents. Just two days ago Newmont bid to acquire the company at $3.25. **That’s a 261% profit. Time to sell and lock in your profits.** I don’t focus on illiquid stocks. And these aren’t tiny illiquid juniors with no revenue that trade on some dinky unheard-of exchange. These are world-class businesses run by the best management teams. When we find these trends, we go big. No other newsletter writer walks the talk the way I do. I’ve been in the industry for 20 years as a professional investor and fund manager, specifically in the natural resource space. I eat my own cooking and provide my readers with the opportunity to get in at the same prices I do. If you’re looking for a portfolio reset in 2021 to capitalize on the next decade… I strongly encourage you to check out my premium research service, ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)***. Now, back to our regular scheduled Batman report. ## **All Eyes on the Dollar** The $1.9 trillion-dollar Covid relief (stimulus) bill has been passed. Last weekend, the U.S. Senate approved the Biden administration bill that includes a third stimulus check of $1,400 for American citizens. Ironically, 3 times that amount doesn’t go to the people—but rather “government” which means most of it will be squandered. Regardless, more benefits and money will be made available to families and small businesses. Officially it’s called the *American Rescue Plan Act of 2021*. However, who’s really getting rescued will yet be debated for years to come. One thing’s for sure – the money won’t be going *directly* to those who need it most. Current U.S. population estimates say there are 331.4 million Americans at this moment. - **With a $1.9T stimulus package, that divvies up to $5,732 per person. But you’re only getting $1,400.** The rest of that money will go towards state and local governments, businesses, new infrastructure, school re-openings, vaccines, and whatever else lawmakers can stuff into the final version of the Act. So, what exactly does this mean for the almighty Dollar? Let’s dive right in, because you’re witnessing history in the making. ## **The Mountain of Money Will Grow** Did you know that 21% of all U.S. dollars ever printed were created last year? If you don’t believe me, take a look at the chart below. It shows that over $4.5 trillion dollars were printed in 2020, bringing total money in circulation to over $22 trillion. ![21% of all us dollars printed in 2020] Coronavirus reached every corner of the earth and pushed every central bank and government to the brink. With that, unprecedented stimulus around the world was required. - **In 2020, over $14.5 trillion was created globally!** ![Global M2 money supply expansion] Loose monetary policy is not new. In fact, the global money supply growth over the last few decades is staggering. - **It might alarm you to know that the global M2 money supply (cash as well as easily convertible instruments) has grown 5x since the year 2000.** ![World money supply m2 adjusted to usd] ## **Chinese Money Rocket** One major source of this M2 money supply growth came from China. Through most of the 2000s, China maintained an annual M2 growth rate in excess of 15%, even briefly reaching 30% in late 2009. While their money supply growth cooled off somewhat in the 2010s, China still averaged over 10% growth a year through the most recent decade. In contrast, the annual growth of the M2 money supply in the U.S. has averaged around 6-7% a year through the last few decades, peaking at 12.5%. China’s M2 growth rate reached 25% for the first-time last year, smashing through the previous high. Loose money leads to Financially Transmitted Diseases… Yes, those sneaky FTDs. Several months ago, I wrote [how cheap money will fuel markets](https://katusaresearch.com/is-2021-the-death-of-fiat-currency/) and create asset inflation bonanzas. What we have seen in the technology sector and SPAC attack is enormous amounts of hot money driven by momentum and FOMO rather than fundamentals. Call me old-fashioned, but I like to build my positions ***before*** the valuations skyrocket. ## **The Skinny on the “Stimmy”** On the fiscal side of things, the $1.9 trillion in new fiscal stimulus, which already has the market salivating, isn’t helping. The effect of the promising stimulus is that it increases investors’ risk appetite, especially in the short term. - **The more risk appetite in the markets, the better equities tend to perform against stable currencies like the USD and Yen, AND precious metals.** Generous stimulus packages are a near-certain guarantee that equities will rally… and the opportunity cost of holding Dollars instead of equities rises accordingly, leading to a sell-off in Dollars. The chart below shows the amount of fiscal support that the U.S. government has committed to keeping the economy afloat and how the S&P 500 has responded. ![The Effects of fiscal stimulus on the stock market] The U.S. Government will continue to spend trillions on fiscal stimulus while the cost of servicing U.S. Treasury Debt remains the cheapest in history (0.8% of GDP as of Q3-20). ![The US can afford to keep printing money for now] Which brings us to… ## **The Trillion-Dollar Question:** How long is this house of cards sustainable? U.S. bond yields have rebounded sharply due to inflation expectations and future inflation uncertainty. Higher bond yields indicate that newly issued debt becomes more expensive. However, in real terms (meaning adjusted for inflation), the cost of debt is still negative. This means that it’s realistic we see the U.S. Government 10-year and associated nominal bond yields continue to climb. Historically, GDP growth rates and U.S. government bond yields were a reasonable proxy for each other. Going back as far as the 1960s, the spread between GDP growth and U.S. 10-year bonds has averaged less than half a percent. ![gdp growth vs us government bonds 10 years] The average estimate for U.S. GDP growth adjusted for inflation is over 5% for the year. So by this historic measure, bond yields should be much higher than they are today. It’s not out of the question that we see the U.S. Federal Reserve resort to a form of Yield Curve Control (YCC), [a key topic I discussed](https://katusaresearch.com/king-dollar-sounds-a-market-alarm/) as the world began to recover from the coronavirus. YCC will allow the Fed to keep long-term interest rates from rising too quickly. At the same time, it allows for low-interest rates in the short term to prop up the economy. It’s the most delicate house of cards one could imagine. ## **What Does that Mean for Your Portfolio?** It means you should have exposure to tactical growth opportunities along with exposure to gold. For example, opportunities that capitalize on the flood of money pouring into sustainability. - Did you know that renewable energy is now the cheapest and most cost-efficient form of electricity generation? - Or that growth within the sector is poised to skyrocket? Fortune favors the bold but smiles upon the prepared. Regards, Marin --- # Gold’s Cruel Performance: Should You Be Worried? - URL: https://katusaresearch.com/golds-cruel-performance-should-you-be-worried/ - Type: article - Published: 2021-03-05 - Updated: 2021-03-04 - Author: Marin Katusa It’s an alarming and uncomfortable feeling for many gold investors. As stocks continue to soar, gold notched its worst month in 4 years falling 6% in February. While a 6% down month may not feel great to your portfolio, it’s nowhere even close to some of the worst months gold has faced. You’ll see in the table below that February’s 6% drop ranks 39th in gold’s all time worst months performance. ## **Gold, Buy the Dip?** History doesn’t always repeat itself, but the numbers speak for themselves… Major declines commonly lead to higher prices 12 months out. - **You can see that out of the top 20 declines, 70% of the time, a year later, prices are higher.** You can also see that there is no need to rush out and load up the first day after a big decline. It’s only a coin flip as to whether you will be ahead or not, and the average return is only 6%. ## **Why are Gold Coin Premiums Still so High?** If you’ve called your local bullion dealer to get your hands on some physical precious metals and got frustrated, you’re not alone… While the paper market has taken a dive, demand for physical remains very strong or at least that’s what the dealers will lead you to believe. It seems like every bullion site is “a minimum of 3 weeks to delivery”. - **The premium paid for physical gold bullion over spot is at the highest it’s ever been, save for one bizarre day in 2014 in nominal dollar terms. ** Surely that’s bullish for the future? Below is a chart which shows historical gold coin premiums as quoted by many coin dealers. ![Historical Gold Coin Premiums] Sharp eyes will see a problem with this graph. It’s in nominal U.S. Dollars. A $117 per ounce premium is a bigger deal when gold is $500 per ounce, rather than at $1700 per ounce like today. Focus on the premium %, not the total dollar amount. Next, you’ll see a chart which shows the coin premium in percentage terms. This normalizes the data and allows for an apples-to-apples comparison. ![Historical Gold Coin Premiums Percentage] As you can see… - **On a relative basis, coin premiums are close to double what they normally are.** But we aren’t in “record” territory like many would lead you to believe. Since 1992, the average coin premium has been approximately 3.12% above the spot price. That’s still too high in my opinion, as you should be able to grind your dealer for 1.5%-2% premiums. Over the past 3 months, coin premiums have jumped from just over 3% to over 6%. ## **Are Coin Premiums a Leading Indicator for Gold Prices?** The only way to answer this question is through careful gold price analysis. Below is a table which shows the 12-month holding period return after the top 20 largest spikes in gold premiums. ![Top 20 largest spikes in gold premiums] Amazingly, if you just used this as an indicator it would produce incredible returns. If you bought gold when premiums were highest, you would be up money 90% of the time a year later, using that data set. But always remember, data set depends on the data *in* and the *dates* of that data. The results sounded too good to be true… So in true Katusa data math alligator fashion we dug a lot deeper. Now, recall I mentioned the average percentage coin premium is a little over 3%… Statistical analysis shows that the standard deviation of gold coin premiums is 1.59%, hence my comment that you should be able to get coins between 1.5%-2% premium range. This means that a high percentage of the time, coin premiums would fall between 1.5% and 4.7% of the gold spot price. **But we want to know what happened in extreme circumstances like today, where premiums are very high…** So, we went with a nice round 5% premium and ran the numbers. The output is in the table below. It shows the historical returns from buying gold when coin premiums are higher than 5% and holding the position for 1 year. ![Results Output] When looking at all the data, a large coin premium can lead to profitable returns, but they are not an overwhelming indicator of upside potential. - **The key takeaway****: Don’t let the dealers fleece you into thinking coin premiums will drive momentum in prices.** Now let’s turn to everyone’s favorite precious metal of the moment (or maybe with the most vocal cheerleaders!)… ## **How High are Silver Coin Premiums?** On the heels of the Reddit army, silver has outperformed gold. For the year to date, the *currency of gentlemen* (as I like to call it), is unchanged while gold is off 9%. Physical coin premiums have shot up in recent days, trending well above the average 5-year premium. Below is a chart showing the historical premium for silver coins. ![Silver Coin Premiums] ## **What’s Moving the Gold Price?** What is truly moving the gold price right now is the move in U.S. real interest rates. - **Real interest rates are interest rates which are adjusted for inflation and this indicator correlates incredibly well to gold.** Right now, many investors are getting concerned that all this money printing is going to lead to inflation which in turn leads interest rate hikes. But I have a different take on the situation… I outlined the situation in detail to my subscribers in my latest monthly issue which was just released… Along with a full fundamental and technical analysis walkthrough. Then I detailed what my top gold stocks to buy are and what prices I’m willing to put my money to work at. At Katusa Research we focus on where the puck is going to be, not where it was or is today. If you are tired of investing with the herd and want a refreshing new perspective from a guy with 20+ years of experience as a professional fund manager in the natural resource space… [Click here to learn about my premium research and investment ideas](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) in *Katusa’s Resource Opportunities*. Regards, Marin --- # Dr. Copper Signals Bull Market is On - URL: https://katusaresearch.com/dr-copper-signals-bull-market-is-on/ - Type: article - Published: 2021-02-26 - Updated: 2021-02-25 - Author: Marin Katusa There’s no better barometer of economic health than Copper. This is where it gets the nickname, Doctor Copper. [Just over a year ago](https://katusaresearch.com/doctor-copper-strikes-a-true-economic-barometer/) our models and data were flashing major warning signs in the market, with Copper the main focus. We took those warnings seriously and cautioned readers. What happened next with the pandemic shutdown rocked the global copper trade, tested supply chains, and shut down major mines. But that was *then*, and this is *now*. ## **Copper Critical** Copper is an element used in everything around you. The most obvious uses are for plumbing in houses and factories. And since copper is also a wonderful conductor of electricity, it’s used in power lines, electric motors, wiring, cars, and appliances. - **Copper’s excellent electrical conductivity – makes it a critical part of the Electric Vehicle (EV) revolution as well.** Electric vehicles require three times more copper than conventional internal combustion engine vehicles. On average, a car with an internal combustion engine uses 55 pounds of copper. A hybrid uses about 110 pounds, and an EV uses 165 pounds of copper. In addition, each EV charging station also consumes about 44 pounds of copper. And millions of charging stations will need to be built to create an infrastructure that can actually support the EV revolution. Some basic math shows that the coming electric car boom will create a super boom in copper demand. - **Legendary mining financier Robert Friedland says the price of copper will be so high in the future that “*you’ll need a telescope to see it*”**. If he’s right, shareholders in the right copper stocks stand to make a fortune. But is Robert right with his forecast? Or… is mining giant Glencore right? Or am I right? If you’re not familiar with Robert Friedland, you should be. He’s one of the world’s richest, most successful mining entrepreneurs. His first mega-mining score was Voisey Bay. Friedland’s team discovered Voisey’s Bay, a world-class nickel deposit. The discovery made Diamond Fields’ shares go from $0.25 per share to over $160 per share, a more than 63,000% gain. This single deal made Friedland a billionaire at a young age. These days, Friedland is looking to make his next big score with “Ivanhoe Mines 2.0,” his mining company that owns three world-class projects with a heavy emphasis on copper. Friedland is an incredible salesman and presenter. In recent years, he has wowed audiences with copper dust and claims that the price of copper will skyrocket over the next decade. ## **Copper’s Electric Vehicle Demand Push** A big driver of this copper bull market, says Friedland, will be EVs. - **By now, you should be aware that I believe EVs are very bullish for long-term copper consumption.** Thanks to incredible advances in technology, massive investments by large carmakers, and huge government support, electric vehicles are now starting to go mainstream. Tesla’s are everywhere. But just how much further will EV adoption go? And exactly how much copper will those EVs consume? Below is a chart we’ve put together for you compiling a lot of different data sets and forecasts. It shows how much copper the EV market will need each year based on the assumptions made by Friedland, mining giants BHP and Glencore, and Katusa Research. ![Annual Electric vehicle copper requirements]You’ll note that my forecast is very similar to Glencore’s and I’m glad to see this. Glencore is one of the smartest natural resource companies in the world. Its managers are smart and tough, and they have a lot of skin in the game. The coming demand surge will be mind-boggling According to Glencore CEO, Ivan Glasberg… - **“We will have to produce an extra 1 million tonnes of copper per annum going forward from 2021 to 2050”.** Make no mistake, producing this much additional copper will be a challenge for the mining industry which only increased its production volume by 500,000 tonnes per year from 2010 to 2019. I’m not here to sell you a copper company. Although I have a lot of experience in building a copper mine as I’m one of the original founders of Canada’s third-largest producing copper mine. I’m here to just share the data. The numbers. The facts. I’m just showing you what the numbers tell me. Granted, I always like to be conservative in my forecasts to give me and my readers a margin of safety. But here’s the point: Even if my conservative forecast is the one that’s correct, copper is going much higher over the long term. I’m forecasting that in just 5 years, EVs will consume 1.9 billion pounds of copper per year. This demand is greater than two-thirds of the annual production of Escondida, the world’s largest and most productive copper mine. While the world was focused on the Bitcoin price explosion to new heights… Commodities were quietly ripening… ## **Copper Stock Rocket** The price of copper jumped back above the $4 mark for the first time in almost 10 years. Copper extended its surge to a decade-long high as Goldman Sachs warned of a historic shortage… - “The market now on the cusp of the tightest phase in what we expect to be the largest deficit in a decade.” ![copper prices surge back to 10 year highs]Here’s why investors should care… While news headlines and social media have been closely covering every thousand dollar move in Bitcoin, resource investors were enjoying even larger returns in select copper mining stocks. ![copper vs copper miners since last march's lows]As the chart above shows, even though copper itself barely doubled from its pandemic low last March, the COPX Global Copper Miners ETF more than quadrupled, delivering **returns in excess of 300%**. And that was just for a basket of senior copper mining companies… - **Katusa Resource Opportunities subscribers had the opportunity to see 1,354% gains over their cost basis on a junior copper stock.** Many copper companies are seeing triple-digit and even 1,000% returns. If the copper price continues climbing… And the demand for copper keeps rising… The share prices of some of these stocks could rise much further yet… Just like when I made the call on **Northern Dynasty **back in 2016. Back then, copper prices had just come off a decade-long low and were barely staying afloat above $2.00. But just mere months after I recommended the company to readers of my research service, the stock soared over 700% as copper recovered past the $2.50 level. Long-time readers know that I don’t chase stocks. I [stalk them like an alligator](https://katusaresearch.com/the-way-of-the-alligator/) and wait for prices to come to what I’m willing to pay. If it means I end up standing on the sidelines, then so be it. There are always new opportunities, and I’m cashed up and ready to take advantage. But there are several ways to prepare for “alligator time”. You have to be prepared, and not get too complacent with rocket and moon memes. ## **Copper Crunch – A Lack of Big Discoveries** In addition to falling grades and rising costs, the copper industry simply isn’t finding as many large new deposits as it used to. Humans have been digging into the earth in search of copper for thousands of years. And we’ve found most of the really good stuff. Over the last 10 years, $26.5 billion has been invested globally in the search for new copper deposits. Despite all that money going into the sector, however, only a handful of new deposits have been discovered. The chart below shows how large copper discoveries have declined over the past 25 years. ## **![Annual copper discoveries]Now, Here’s a Cool Fact…** Katusa Research was the first to publish on a relatively unknown company that has made the world’s first major copper discovery in five years. Even better, **Katusa Research subscribers were given this stock for free** as a dividend from another position that also over doubled for us. Talk about winning! ## **Copper Hasn’t Reached a Peak – Not by a Long Shot…** With the scorching demand for EV’s and infrastructure spending to come, copper will continue to have a very bullish long-term outlook. Of course, that’s not to say there won’t be some near-time shocks. But we’re alligators – we wait patiently for the right time to strike. And the copper sector, on the back of the next phase of the clean energy revolution, is shaping up to be very juicy prey… If you want to see what specific sectors I’m looking at – and what stocks I’m buying – you can read all about it in one place… [Click here to learn what I’m doing in Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/). Regards, Marin --- # Nuclear Winter: There Will be Power - URL: https://katusaresearch.com/nuclear-winter-there-will-be-power/ - Type: article - Published: 2021-02-19 - Updated: 2021-02-20 - Author: Marin Katusa This week a major winter storm ripped across most of the eastern United States. It caused major electrical blackouts and endangered the lives of millions of Americans. Texas, normally home to mild to mid winters saw temperatures dip below freezing and major snowstorms hit most of the state. Demand for heat and power soared, while the grid lagged behind. This sparked major rolling electrical blackouts across the state. Texans without power were forced to warm up in cars, or run propane heaters in their houses. As the grid failed, power prices to surged from $23 per MWh to over $7,400 in a matter of days. ![Texas Day Ahead Peak Power Pricing] - **At current electricity prices, it will cost the average Texan nearly $300 a day to heat their house, that’s not including any Bitcoin mining going on.** ## **Natural Gas Surge** Alongside electricity prices, natural gas prices skyrocketed, rising from $3.16 to over $160 per MMbtu. ![Texas Natural Gas Pricing] ## **What Happened to Texas’ Power Grid?** Texas operates and manages 90% of its electricity through ERCOT (Electricity Reliability Council of Texas). - **Wind power is responsible for 23% of Texas’ electricity generation. Under normal conditions, this makes for cheap, intermittent electricity for Texas.** However, right now, roughly half the turbines are frozen, which means they cannot generate electricity. Even on a regular day if this happened there would be an issue, but during a major snowstorm where power generation is mission critical, the current system cannot handle the strain. It’s times like these which provide a “gut check” to our ever increasingly euphoric world of 100% renewable energy and zero carbon policies. It’s a kink in the design that will need a solution engineered in next generation turbine design. Don’t get me wrong… I support President Biden’s mission to decarbonize and re-electrify America. And you should too. - **#DoYourPart and #NETZERO will be major taglines of the future (yes, I have trademarks on both).** Anyways, Elon “The Green Savior” Musk has become the worlds Richest Man by doing things—saving the world, right? Whether you believe in the climate issues or you don’t, the fact is, the science is showing that it is an issue. Recall, I just mentioned Green Savior became uber rich from being part of the solution. You too can make a fortune by #DoYourPart. And you don’t even need to become a disciple of the Green Savior and convert the unholy, I mean unGreen. ## **A Coming Crisis – and Major Profit Opportunity** In my 20 years, and I’ve had a pretty good career to this point… I’ve never seen an investment opportunity as incredible as solving the climate issue. Many will have great intentions, but like all investments, *meaning* *well* won’t be enough. You need the right variables. Like a legitimate business plan, management team, cash and the know how to disrupt the world in a positive way. Love ‘em or Hate ‘em, the government is the best financial backer you can ask for—and again, The Green Savior used it to his advantage on his way to the worlds richest man. I do not mean The Green Savior as a negative connotation; I mean it with the utmost respect. I’m not comparing Elon Musk to Jesus. What I am doing is highlighting what Elon has done for the Climate Movement. - **By making Electric Vehicles and green energy cool, Elon put an electric shock into the climate movement.** So many before him tried. But Elon has captured the imagination of all generations and being the world’s Richest Man helps that movement. ## **Pay Attention to Net Zero** In President Biden’s quest for “Net Zero”, he focuses on wind and solar being the dominant forms of electricity production. While all coal fired plants will be rapidly eliminated and eventually natural gas plants are phased out as well. While this sounds good on paper, it’s not that easy… For starters, according to the US Energy Information Association (EIA) there is over 200 gigawatts of coal fired production still in operation. - **These coal plans are responsible for 23% of US electricity generation, while natural gas accounts for 38.8%.** Far behind are renewables, with wind and solar accounting for less than 10% combined. Below is a chart which shows the breakdown of power generation by source in the United States. ![Utility Scale Power Generation by Source] It’s not that simple to just “switch”… More importantly, this is baseload power, which means it can supply electricity 24 hours a day, not just when the wind blows or the sun shines. *You can’t charge your Tesla or pay for something in Bitcoin when the power is out.* **Now let’s talk about the much-disliked red head stepchild of the green movement—Nuclear** ## **Nuclear Power Play** Nuclear power is zero emissions base load power when operating. Nuclear reactors provide the same 24/7 stability of burning fossil fuels for power generation, without the harmful emissions. Below is a chart which shows the CO2 emissions for each major form of baseload power. ![Baseload Power Generation] As you can see, all other fossil fuels contribute significantly to our CO2 emissions. Making no mistake, solving the world’s electricity generation issue is a multi-trillion-dollar opportunity. ## **Why are Uranium Stocks Popping?** Uranium prices and stocks have been a terrible bear market since the early 2011s. Yet in the last 2 months, share prices have sprung to life again on the global goal of “Net Zero”. The Katusa Research Uranium Index is up over 140% year to date… ![Katusa Research Uranium Index] Uranium is a niche segment that has incredible booms and busts. Just look at the price of uranium since 1930… ![Annual Average Uranium Price] Catching one of the uranium bull markets can make even the most impressive crypto currency returns look paltry by comparison. ## **What is the Next Uranium Catalyst?** If I were part of the Biden Administration… I would be advocating for allocating a percentage of the Biden Green Agenda to nuclear power. It makes all the sense in the world to combine zero emission baseload nuclear power with intermittent renewable energy from wind and solar. Not to mention, the U.S. is already the worlds largest consumer of uranium globally for electric power. Nuclear power’s Achilles heel is the significant upfront construction cost and lengthy permitting timeline. - **Over the past few decades, the timeline for construction and construction costs has gone parabolic.** The key to success likely lies in smaller, more modular reactors which can be constructed for regional level demand. Bill Gates is getting behind this in a big way. Elsewhere around the world, nuclear reactors continue to play a role in global electricity production. Over 10% of global electricity production comes from nuclear reactors. - **Today there are 50 reactors in construction, which will take operable reactors to nearly 500 worldwide and increase nuclear power generation by 13%.** I have been investing in the uranium sector for 20 years and have travelled to all the major operations around the world. The *Katusa’s Resource Opportunities* portfolio is always going to where the puck will be, and our track record has proven that. One of our uranium picks is up 165% since we alerted our subscribers. [Click here to find out more on how you can join the next opportunity](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/). Regards, Marin --- # How Small Investors Can Hit it BIG in Financings and Private Placements - URL: https://katusaresearch.com/how-small-investors-can-hit-it-big-in-financings-and-private-placements/ - Type: article - Published: 2021-02-12 - Author: Marin Katusa After seeing it firsthand 20 years ago for the first time… I was blown away by the results of one particular investment tactic. Seeing this for myself was my first real insight into how a few well-connected investors can gain extraordinary wealth in bull markets. And make doubles, triples, and 5x their money… even in bear markets. As I found out nearly 20 years ago – and have repeated many hundreds of times since then – there is, in fact, a secret to it. A secret I’m going to share with you today. In short, they take advantage of this obscure market security – called **Equity Financings** and [**Private Placements**](https://katusaresearch.com/guide-to-private-placements/). It’s a little-known investment that’s usually off-limits to regular investors. Even though they’re publicly issued, these investments are essentially “invitation-only” and fill up fast. **I was hooked since the first time I found about it in the early 2000s…** You’ll almost never hear private placements discussed on CNBC. And you’ll never see their secret symbol pop up on YahooFinance, MorningStar, or anywhere else. They’re completely off the radar of people that even pay close attention to the markets. In fact, as far as I can tell, these deals are completely off the radar of the mainstream media. And I should know. I’ve been featured on Forbes, Yahoo!, CNN, Bloomberg, and many other outlets and I’ve been a leader in the resource industry for nearly 20 years… Not once have I ever seen private placements mentioned. I’ve never even been asked about them in any of the interviews I’ve done. - **It’s why many people tend to think they’re only available to insiders, or wealthy investors.** But as I’ll show you – it’s actually easy to tap into them… …once you know how. ## ![Fellowship Winners]How Equity Financings and Private Placements Work When companies need to raise money to do things like building solar farms, wind farms, drill for oil, explore for gold or uranium, or develop a gold mine… They often do it through “private placements”. They do this to raise money from high-net-worth investors who understand the opportunity and risks. A private placement also allows a company to sell shares to investors that are not listed on the stock exchange yet, but will be shortly. In a private placement, companies typically offer shares at a discount to the current market value. This discount is often in the 5% – 25% range. The price of shares and the dollar amount raised is negotiated in advance. For large investors, negotiating the price and the amount invested in advance is a huge positive. It means they can acquire large blocks of shares without dealing with the market’s day-to-day fluctuations. It means the share price can’t “run-away” and shoot 25% – 50% higher while a large investor is trying to acquire a position. Being able to acquire a large number of shares in a company at a set discounted price is enough to make private placements a very attractive investment vehicle for both large and small investors alike. The truth is that even regular folks can hit it big in these kinds of deals… For example, I encouraged a friend of mine, M.T., to invest in the Ryan Gold private placement we did a few years back. The result? His MBA paid in full—all from an initial investment of less than $5,000: “On Marin’s recommendation, I invested $4,800 in a private placement with Ryan Gold. He turned out to be right, and the company soared in value. I sold my stake for more than $150,000, which paid for my MBA.” Another friend of mine, M.S., got into another one of these deals. He told me: “In 2010, I got into the Bayfield Ventures private placement. **Within five months, my $2,500 investment turned into $11,080,** **a 343% gain**. I also invested in the Challenger Deep deal. **I turned $2,500 into $14,310.** My only regret is not putting more money into your ideas.” But there’s another aspect of private placements that makes them even more lucrative… Like icing on the cake. It’s a very unique “add-on bonus” that can make you significant money (as it has for me) WITHOUT any additional capital or RISK. (I’ve literally woken up some mornings, checked my brokerage account for this “add-on bonus” that I forgot I had, and it was up several hundred percent). Tomorrow, I will teach you about one of the most powerful *upside* *kickers* in the world. It’s a way to amplify and supercharge your wealth and profit in these situations… And when it hits, it can really change your life for the better. Regards, Marin --- # (BEWARE) All Eyes on Silver - URL: https://katusaresearch.com/beware-all-eyes-on-silver/ - Type: article - Published: 2021-02-05 - Author: Marin Katusa Headlines this week were dominated by manic retail investing inspired by the WallStreetBets (WSB) subreddit. I can’t believe how many text messages I’ve received in the past week regarding Reddit and the GameStop and AMC short squeezes. If you need a primer of what happened there and how it started, you can watch [my video explanation here](https://www.youtube.com/watch?v=hhW0TUBaNN8). Recently, a few Twitter users created a silver version of the Reddit post, which got up-voted (ranked higher so the community could see it) to the point that it became major news next to the GameStop post. With that, it has come a major spike in interest for all things silver – miners and physical especially. Most dealers are telling me that they are out of stock. And the Vancouver bullion exchange which is on the main floor of our office building had a lineup down the block like it was an Apple store during iPhone launch day. This is truly rare. - **But it does not mean that silver is about to shoot up to $100. ** It’s a textbook example of a crowd experiencing FOMO with a major injection. But I want to warn everyone of the dangers of confirmation bias – and this is a perfect example. You will likely find the top posts, tweets, and news stories that confirm what you want to hear: - *“Silver is going to $50, $100.”* - *“New silver traders are about to moonshot the price and stick it to the hedge funds and banks.”* Sounds great—but I have some serious reservations. Silver is a unique market because it’s both a store of value and an industrial metal. Nearly 60% of silver is used in industrial applications, with the residual 40% used in jewelry, silverware, and silver bullion. There’s certainly an argument to be made that silver is a precious metal dressed up and partying at night… and a base metal in the morning with a vicious precious metal hangover from the activities the night before. ## **Silver has no shortage of war and fortune making stories…** From the days of the Hunt Brothers cornering the silver market… to Warren Buffet buying 112 million ounces of silver calling it “for investment purposes” rather than outright cornering… To the JP Morgan short position… The booms and busts of silver have been truly exceptional, putting the testicular fortitude of even the strongest silver bugs to the test. I like silver just like any other resource investor… but I like gold more. When silver Booms, it moves fast and swift. But when it Busts and there’s no bid, it collapses just as hard… I always buy my metals during Echo’s, which [I’ve talked about in the past](https://katusaresearch.com/the-most-important-charts-for-your-gold-stocks-right-now/). ![silver boom and busts] ## **The “Wall Street establishment”** Just like the GameStop squeeze that’s been grabbing all the headlines the last few weeks, this attempt to ‘liberate’ the silver markets isn’t about fundamentals, profitability, or arbitrage. It’s about sticking it to Wall Street. Few dislike the suits more than me. I’m born and raised in East Vancouver of Dalmatian heritage. I come from an amazing family that had a lot of love and little else financially. I was lucky, I had tough older brothers that paved the way for me in a neighborhood of majority immigrants (like my parents) where literally it was dog eat dog world. Suits were only worn at weddings and funerals where I grew up. Ironically, most suits (and in a large part their trust fund children) are evolving into Champagne Socialists which I equally dislike. ## **You know the type…** They went to university (most likely were part of a frat to feel cool), pretend to care about society and the environment but drive Ford Raptors to pretend to be masculine because they lost their masculinity long ago. As they’re nothing more than eunuchs parading around as modern corporate citizens. Wow did I just say that? Hell yeah. Where I come from, you do what’s right. Regardless of if it makes you popular or not. And I’m cheering for the retail crew. I’ve been taking on the suits for years—and kicking ass. And this time, I don’t see the WSB, social media, and Robinhood succeeding on the silver shorts for the following reasons (and I published this previously to my paying subscribers): - No one is betting against them. - They lack the capital to bring the commodity futures market to heel. - The asset managers who operate silver-backed exchange-traded products (ETPs) are already way ahead of them and can change the rules legally on them. - Unlike GameStop and other companies, silver actually has a strong long-term outlook. ## **Silver Mining Stocks** One of the easiest ways for traders to play the #silversqueeze is to target the silver miners, most of which have secondary listings on the NYSE or NASDAQ. These stocks have seen heavy trading action this week: some stocks gained as much as 28%… Only to immediately fall back 20% the following day after the #silversqueeze started losing steam, essentially giving up the gains. But there are a few reasons why what happened to stocks like GameStop and AMC Entertainment won’t happen to silver miners. The chart below compares the surge in trading volumes of the five largest silver miners against the five largest companies targeted by WSB. You can see that is not nearly as much volume going into silver miners. ![top 5 silver stocks vs top 5 restricted robinhood stocks] Second, other than **First Majestic Silver** there aren’t any major institutional short positions in silver miners to squeeze. As the table below shows, short interest, or percent of shares sold short, in the major silver miners is actually quite low when compared to WSB darlings like GameStop or AMC. ![Silver Short Interest] Lack of short interest means, of course, no short squeeze. Which would take away one of WSB’s supposed driving forces behind a major share price runup. **Get to Know the Silver Futures Market** This past Monday, silver prices surged to an 8-year high of over $30/oz. While many would be quick to attribute this to WSB and the retail crowd shifting their focus from stocks to commodity futures, this was simply not the case. The very next day, silver plummeted as professional traders started taking profits and the CME raised the maintenance margins on its standard silver contracts by 17.9%. The Wall Street pros had effectively crowded out novice retail traders by stirring up price action to overbought levels and driving up volatility. The posters on WSB appeared to capitulate, warning their followers to stop trading silver futures. Unlike buying stocks, trading in commodity futures poses much higher barriers of entry to the retail trading crowd. **For silver products traded on the CME, these barriers include:** - High initial margins and maintenance margins – $15,000 for standard silver futures, for physical delivery of 5,000 oz. - The complexity of the instruments being traded and their high degree of leverage to the underlying commodity. At $30/oz. the standard contract stipulates the delivery of 5,000 oz. of physical silver of at least 99.5% purity. As a buyer, unless you offset this contract by selling an equivalent futures contract at a forward month, you’re on the hook for $150,000. - Market access is more complicated – futures can’t be traded at all on Robinhood, and they can’t be traded commission-free on most other brokerages. In short, you cannot simply open an account with a $1,400 balance and start day trading silver futures. Even the micro silver contracts have an initial margin requirement of $3,080 and a contract size of 1000 oz. These financial instruments are outside the reach of investors who don’t have at least $100,000 allocated to trade exclusively in futures. In fact, the CFTC doesn’t require exchanges to report positions held by individual traders because the dollar value of these positions makes up such a small proportion of the futures market. - **In the latest Commitment of Traders report, over 80% of the long positions were held by producers, industrial users, swap dealers, hedge funds, and the like.** As we can see in the chart below, these hedge funds, classified as **‘managed money’**, have been net long since June 2019. The CFTC reported a net increase in these spec longs positions last Tuesday, long before #silversqueeze was trending. ![Silver Commitments of Traders] The chart below shows the notional value of all the open futures contracts for silver on the Chicago Mercantile Exchange for the last 40 years. As of Jan. 29th of this year, this value was $21.4 billion, of which $9.4 billion (or 44%) was attributable to hedge funds. - **In other words, it’s the total value of the silver currently being traded on the CME.** ![National value of silver market in chicago]Note that the notional value of the futures market does not reflect the dollar value of the futures. This is because most traders who are long (buyers) never take physical delivery of the metal but instead offset their positions by selling next month’s contract. Those who are short (sellers) will avoid having to deliver the silver by buying next month’s contract. Since producers and merchants are currently on the short side of the trade, it’s the hedge funds who are going long and driving the recent surge in silver futures prices. With the value of the silver being traded on the CME and inventories worth $40 billion, retail investors would barely move the needle. This part of the battle takes place on a front that Main Street can barely even step foot into, let alone hope to win. The reason that silver can make big moves really fast is because the market cap is tiny, on a global perspective. Because of this massive demand for silver, and with the mainstream crowd (and a whole new millennial generation) waking up to the fact that silver can be a real asset, there’s a big appetite to put money into passive funds. We’ve just witnessed the largest inflows since the summer when gold broke $2,000 and silver last neared $30. And to be clear, there isn’t an excessive amount of short interest in funds like SLV, which had less than 4% short interest at the time of writing. ## **Silver Linings Playbook** Hedge funds aren’t going to get squeezed. And asset managers who run these ETPs like BlackRock or Sprott will be just fine. That is, unless the ringleaders on WSB can somehow find a way to control the silver bullion market. Where are they going to find the hundreds of billions of dollars to do that? Furthermore, it looks like asset managers are well ahead of the curve. Over a week before WSB decided to shift its attention to #silversqueeze, the guys at BlackRock, Sprott, and Aberdeen Standard, to name a few, had the foresight to add almost $600mm to their silver ETP holdings. This was the largest weekly inflow reported in the last six months. To put this in further perspective, on Jan 20th, SLV reported $500mm in daily inflows – the highest BlackRock reported in seven years. This was two days before the NYSE halted trading on GameStop Corp and the phrase “short squeeze” became ingrained in everyone’s consciousness. Nobody dislikes the short funds more than I do. I’ve openly talked about and taken on some large short funds in the past. - **But to truly cripple the shorts in the silver sector, over 200 million ounces will need to be purchased for the synthetic derivative and paper contracts to be exposed. ** That’s over $6 billion in new silver demand purchased and requested for delivery—and that’s very different from increasing the market cap of a company by $6B. To purchase the silver and cripple the synthetic market manipulators, $6B in actual silver purchases demanding delivery would be required to come in from outside sources. That’s a big buy ticket and very different than bringing in a couple hundred million dollars of buying volume to take GME from a $1B market cap to $22B market cap. ## **Don’t Forget Junk Silver…** In addition, unlike in the equity markets, even if WSB were successful with their silver purchases you can expect millions of ounces of “junk silver” to come off the shelves and hit the market. That includes anything and everything from coins to silverware, which would require new funds to absorb the new supply. And while many online bullion dealers are reportedly overwhelmed trying to keep up with the surge in retail demand, their supplies represent a tiny fraction of the bullion supply that goes through the LME and CME. On top of that, market-ready stockpiles of silver, the kind stocked by wholesalers, are 3 times the average daily futures volume. ## **Silver Can Do It All** Remember, silver isn’t just a precious metal – it’s primarily an industrial metal. In the last 10 years, the value of annual silver production has been worth anywhere from $16 billion to $36 billion – according to Metals Focus. Nearly 60% of annual global silver consumption goes towards industrial fabrication and similar uses. And less than 20% of demand is made up by investment products like bars and coins. So, even if there’s a shortage of silver coins and bullion, there’s still plenty of silver in other forms going around. There’s no doubt that retail investors, in their latest insurgent efforts, are driving up the share prices of silver ETPs and silver miners. But they aren’t the ones driving up bullion prices. I still think we’re just in the [early stages of an upcoming silver bull market](https://katusaresearch.com/is-2021-the-death-of-fiat-currency/). That was the case even before all of these short squeeze shenanigans, and my thesis remains unchanged. ## **Retail investors have proven they’re a force to be reckoned with…** So powerful, in fact, that Robinhood had to band together with other brokers and banks like Interactive Brokers, Charles Schwab, and TD Ameritrade to put a block on buying more GME stock. So much for a “free market”. As a result, all of these brokerages are facing multiple lawsuits. Robinhood, in particular, has been hit with dozens by angry WSB members. And their CEO, Vlad Tenev, is expected to testify before the House Financial Services Committee in two weeks’ time. But however that ends up settling, silver is a different beast, as I’ve explained. With the forces at play in the silver markets WSB will be hard-pressed to be able to do much more than bump silver miner and SLV prices – and in almost all cases that bump has already been reversed. WallStreetBets needn’t worry, however. Even without their help, silver is poised for the run of a lifetime. I and my [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail) subscribers are already taking on the establishment and old ways of doing things. The walls are opening up for a new generation of people and a new way of investing. The moat around opportunities formerly reserved for the ultra-connected is coming down. And our army is growing in size and capital. Everyone from college students to very high net worth family offices and all in between. Regards, Marin --- # “Sir, This is a Casino” – Shorts and What’s Next - URL: https://katusaresearch.com/sir-this-is-a-casino-shorts-and-whats-next/ - Type: article - Published: 2021-01-29 - Author: Marin Katusa There’s a good chance you’ve heard of the website Reddit. It’s an online forum where users can join communities based on their interests, like sports, video gaming, gardening… or even investing. And one of these investing communities on Reddit has blown up in a big way: ![WallStreetBets Reddit Community]Named “WallStreetBets”, this Reddit community is not a source of sage financial wisdom. It’s notorious for its “YOLO bets”, such as buying out-of-the-money call options days before expiry in the hopes of hitting it big. WallStreetBets was once the haunt of investment industry professionals looking for a place to relax and joke with like-minded people. For a time, even personas like the currently imprisoned former hedge fund manager Martin Shkreli would visit to shoot the breeze. In recent years however, and especially since the COVID pandemic, the forum has taken on a new life of its own as novice investors chasing the thrill of quick gains during the downturn piled on. Now the fastest-growing community on Reddit, these new investors have taken some of the “meme” advice offered by WallStreetBets and acted on it. - **The most famous example, and one that’s gained massive traction this week, is GameStop (GME). ** Look at this YTD chart… ![GME's Share Price and Trade Volume]What caused this insane runup in GME’s share price and trading volume? Was it some explosive news release or company results? Did they get a buyout offer? The answer is much more absurd than you’d think. ## **The Birth of the Meme that Killed a Hedge Fund** The beginnings of GME’s massive run begin over a year ago in September 2019, when a reddit user named DeepF*******Value decided to post their “YOLO” options play on GME to the community: ![DeepFValue Reddit Post]With starting capital of just US$53,566.04, DeepF*******Value decided to take a long position on GME by purchasing call options. At this time, GME stock was worth just about US$4.50. DeepF*******Value cited their reasons for making the trade as including *“…[t]he fact that it’s worth quite a bit more than $8/sh and there are numerous catalysts that could trigger a reversion to fair value over the next 18mo.”* Reactions from the community were mixed. After all, GME was a brick-and-mortar retail video game storefront (remember those?). Its performance was sagging in the face of increasing competition from digital video game sales. With most of their sales growth coming from their collectibles segment as opposed to their core video game business, some were convinced that GME would soon be going the way of the dinosaurs, much as how video rental stores did before. Over the next year, however, DeepF*******Value would staunchly continue to remain long. Even as the company traded sideways and continued to post monthly updates to the WallStreetBets subreddit. - **The company slowly trended back up and around the anniversary of their first post, DeepF*******Value would report back with nearly a million dollars in gains:** ![GME Yolo mid month update sep 16 2020]Even at this point, reactions were still mixed, with many applauding DeepF*******Value commitment but also many telling them to cash out their position. ## **Naked Shorts and The Evolution of Occupy Wall Street…** Others wondered just how such gains could be realized from a “meme” stock. Had DeepF*******Value closed their position out at this point, this would’ve ended as just another footnote in WallStreetBet’s history of YOLO options trades. But instead and much like the Bitcoin die hards, they continued to hold. And share prices continued to slowly trend upwards. There was a brief hiccup early last December when shares dropped almost 20% following a bad quarterly performance, but share prices steadily creeped up until hitting $20 on January 11th. On that day, GameStop appointed the founder of online pet supply retailer Chewy.com, Ryan Cohen, plus two other e-commerce veterans to its board to focus on growing its own digital sales segment. This was considered to be a good sign for the stock, as it was trying to evolve its business model in an effort to stay competitive. - **At this point, DeepF*******Value turned their $53k worth of GME call options into $3.2 million. ** And WallStreetBets, now having nearly 2 million subscribers, and also having seen over a year of monthly – and sometimes weekly – updates from this user, was now very familiar with GME: ![GME Yolo update jan 11 2021]However, even despite this continual growth in GME’s share price, short interest – in essence, the amount of people who were short selling the stock because they thought it would go down – stayed strong on the stock. In fact, there were more short sold shares of GME than there were actual shares of GME. This was caused by a phenomenon known as “naked short selling”, where shares that don’t actually exist are sold on the market. Usually when short selling, the shares must first be borrowed from someone who owns the stock. When naked short selling happens, firms are selling shares without first ensuring there’s stock they can borrow to cover their short positions. While naked short selling is illegal in practice, thanks to loopholes in the rules and poor regulatory oversight, naked short selling still happens in the industry. Here’s where history gets made… - **GME had the highest short interest of any stock in North America, which some of the savvier members of WallStreetBets were quick to point out. ** Some began speculating that a “short squeeze” would happen. This is where a rapid price runup would occur due to short sellers trying to cover their short positions. Members of WallStreetBets pounced. And the rest is history. ## **GameStop to the Moon** Just two days after GME’s positive news on the 11th, GME shares began climbing rapidly, first to $30, then to $40, then to $65. But it wouldn’t be until early this week when the floodgates burst open, and prices were rapidly driven up by the combination of WallStreetBets hype-fueled buying and funds scrambling to cover their short positions. - **GME shares went from $18 to as high as $470 – a remarkable return in just four short weeks.** What about the short sellers, you ask? The hedge funds who thought that GameStop stock was going to drop instead? Well, on Wednesday the 27th, two of the major short sellers of GME, Melvin Capital and Citron Research, were forced to cover their short positions at massive losses. On the other hand, numerous posts on WallStreetBets abounded telling of novice investors who were able to pay off medical bills, accelerate their savings accounts, or pay down mortgages thanks to their GME positions. In the midst of all this, hedge fund Melvin Capital desperately sought a cash infusion to help cover the losses from their now-underwater short positions. So, in came fellow hedge funds Citadel LLC and Point72 Asset Management, who pledged $2 billion and $750 million, respectively, in exchange for non-controlling revenue shares in the firm. But wait… Citadel? [Why does that name sound familiar?](https://katusaresearch.com/robinhood-trading-exposed-steal-from-the-poor-and-give-to-the-ultra-rich/) Wait a minute… ## **The Dark Side of the Moon** So far, the sentiment in WallStreetBets has been “the little guys sticking it to Wall Street”. Certainly, the general vibe seems to feel as if retail investors have “won” a victory over the big hedge funds who have turned the markets into cash cows to milk at their own convenience. However, there’s another side to the story here… If you recall from our [previous article on Robinhood](https://katusaresearch.com/robinhood-trading-exposed-steal-from-the-poor-and-give-to-the-ultra-rich/), the favored discount trading platform of WallStreetBets and novice investors everywhere, Robinhood doesn’t actually handle their own order flow. Instead, Robinhood sends their orders to a number of market maker firms who execute the trades on their behalf. - **And the lead recipient of Robinhood’s order flow, who gets over half of all of Robinhood’s trades, is Citadel Securities… part of the Citadel LLC group of companies, the same one that just “bailed out” Melvin Capital in exchange for a revenue share.** For a quick refresher, this order flow from Robinhood allows Citadel to “front-run” client orders by placing their own trades ahead of Robinhood users. And it also allows them to take the other side of the trade when it’s profitable for them. In other words, Citadel was handed information that WallStreetBets readers were looking to profit from a short squeeze on GME on a silver platter. And they didn’t know that just because it had become a hot topic on Reddit – they knew it because they could actually see the order flow and dollar volume going their way. From there, it wouldn’t take much to connect the dots and see who would stand to lose the most from those orders: hedge funds with significant short positions like Melvin Capital. Melvin Capital is not some sort of mismanaged failure of a fund. Since its inception in late 2014, Melvin Capital has been one of Wall Street’s best-performing firms. It’s grown from $1 billion in Assets Under Management from the start to over $20 billion prior to the GME run-up. And delivered over 50% returns to clients last year even after fees. So, when you think about Citadel being able to swoop in and purchase a revenue share of a historically strong-performing fund like Melvin Capital for bargain bin prices… you have to wonder… How early were they able to see the writing on the wall? Did they even accelerate the process themselves? Even when Wall Street loses, Wall Street still manages to win. ## **The Rise of Retail Investors** Of course, I’m not trying to make light of what retail investors, and WallStreetBets, have managed to accomplish. Though Wall Street still stands to profit the most from the whole debacle, countless retail investors have walked away with gains as well. And even just one month ago, the idea of retail investors being able to “take down” Wall Street hedge funds would have been unthinkable. Melvin Capital and Citron Research will survive, of course – rumors of them having to declare bankruptcy are greatly exaggerated. Melvin still plans on taking in another $1 billion in new money next month. And as Citron managing partner Andrew Left said on Wednesday *“We’ll become more judicious when it comes to shorting stocks. Doesn’t mean the industry is dead, but it just means you have to be more specific.”* This wave of investment euphoria has begun to spill over to other targets like **AMC** and **Blackberry**. **There’s even been a [call to action on the silver markets](https://www.reddit.com/r/wallstreetbets/comments/l68ill/the_biggest_short_squeeze_in_the_world_slv_silver/), to “squeeze the silver shorts” in order to trigger a new silver bull market:** I can’t deny that many people out there have made tremendous gains in GME – 685% returns in just four weeks is the stuff of legends. But I also have to offer a word of caution for those of you who find yourselves getting caught up in the hype. Even though fundamental valuation has gone out the window in this instance, I still have to say this: GameStop’s business is not worth $450, not by any metric. With fundamental valuation gone by the wayside and even technical analysis breaking down, that means the forces driving GME’s meteoric rise are purely based on investor sentiment. - **GME is only worth as much as it is because the people buying it *believe* it’s worth that much.** That’s the core of how markets really work. People buy what they think is going up. And sell what they think is going down. ## **Lessons and the Next Phase** This saga will continue. It’s the establishment vs the rebels. But, no matter how things end up, there are two lessons to take away from all this: - **Retail investors are a serious force for change in the investment industry.** They’ve proven that they can move the market in big ways, even to the detriment of multi-billion-dollar hedge funds. WallStreetBets has managed to accomplish what I’ve been trying to do with my own publication, **[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)** – put power into the hands of the retail investor. And the Katusa Army has changed the landscape of how money is raised with some of the largest financings in the resource sector in the last 12 months. - **Do Your Own Due Diligence.** I can’t stress this enough. Understand what you’re investing in, and why, before you commit your money. While GME was a win – the win of a lifetime for many – there are many would-be investors who’ve been burned on WallStreetBets in the past as well, especially when it comes to options. Even DeepF*******Value, the person who kicked off GME’s rise to prominence, had an investment thesis when they first entered into their long position all those months ago. I’ve personally [taken on short sellers before and it’s a vicious war](https://katusaresearch.com/northern-dynasty-short-sellers-just-lost-major-battle-let-retreat-begin/). And our group wasn’t nearly as big as it is today. But it gets very messy. And the game is armed with regulation, naked shorts and all sorts of tools that funds and brokerages can use. At the end of the day, educate yourself. And stay safe. Regards, Marin --- # Tik-Tok… Beware of a Bond Bomb - URL: https://katusaresearch.com/tik-tok-beware-of-a-bond-bomb/ - Type: article - Published: 2021-01-22 - Author: Marin Katusa A bull market can make an average or even rookie investor feel smarter than a Wall Street or Bay Street vet. First time investors are throwing darts at a board blindfolded and coming up with big winners. They’re putting their “Stimmy’s” (stimulus checks) to work in Robin Hood…getting free stock for signing up and watching their “stonks” rise. The thrill of big gains in stocks is juicing the loins of a whole new generation of traders and investors. If TikTok is any indicator… There has been an explosive growth in accounts picking stocks and predicting which will rise. A couple even went viral with a video showing a “sure-fire” way to make money: *“Here’s my strategy in a nutshell: I see a stock going up and I buy it and I just watch it until it stops going up and then I sell it. And I do that over and over and it pays for our old lifestyle.”* More evidence of how the hype from these TikTok investors is influencing the markets can be seen in how small caps have been performing relative to the rest of the market in the last three months: ![S&P500 vs S&P600 small caps] Big wins on penny stocks are the dream of any wannabe investor. And that surge of interest and capital has led to irrational exuberance in buying small cap junior companies. Let’s just say that if it were that easy, you probably wouldn’t be reading this right now. Because this website wouldn’t need to exist. ## **The Wall of Worry…** One of the key concerns for me that I believe could be a catalyst for a market correction is in the bond market. Over the next 5 years, a significant portion of the lowest investment grade rated bonds (Triple B) along with the High Yield or “Junk” bonds (bonds rated below Triple B) will mature. Companies will have to either repay the capital, or issue new debt to replace the existing debt. The only way this will be mitigated is if the U.S. Federal Reserve continues to expand its asset purchase program. It may have no other choice but to do so. That’s what Japan has done over the last 15 years. [![The Katusa Fellowship]](https://join.katusaresearch.com/katusa-fellowship/) It’s also what we’ve seen happen in the natural resource industry as well. I’ve previously talked about “Extend & Pretend”, [first in the oil patch](https://katusaresearch.com/important-item-analyzing-balance-sheet/), and later on [in the gold mining sector](https://katusaresearch.com/the-debt-time-bomb-amend-extend-and-pretend/)… Back then, I called exactly what happened to the oil companies. Where the worst ones went bankrupt but most managed to delay by refinancing their debt. If we expect that to be the case again here… - **We will have short windows of volatility and sharp corrections until the Fed moves quickly enough to backstop the bond market.** Then our game plan will be to do exactly what we did in March 2020, which played out exceptionally well for me and my subscribers. However, this time, I promise to try not to be too cheap! ## **Bond Whispers** The Russell 3000 Index is an index composed of the 3,000 largest publicly listed U.S. companies. It is one of the most all-encompassing indexes and it includes companies with trillion-dollar market caps all the way down to $200 million market caps. This provides a solid barometer of the required refinancing of corporate debt in the U.S. Below is a chart which shows total debt by maturity year for companies in the Russell 3000 Index. There is a wall of debt maturing in the next few years. ![Triple B Credit Outstanding By Maturity Year]And here we can see the High Yield debt maturing in the coming years… ![High Yield Credit Outstanding] The combined corporate “debt wall” could be a catalyst for a future major market correction. - **You can see that the previous years shaded in grey are *****half***** the size of the upcoming maturities.** Where it gets interesting is that on average, companies in the Russell 3000 today have far more debt relative to earnings than historical levels. This debt wall isn’t the only thing that’s on my radar, however… ## **The Buffet Indicator is Sounding an Alarm…** Warren Buffett has gone on a money-making spree in 2020. Backing big winners like Snowflake and trimming positions for a profit, Buffett knows quite well that it’s not a gain until you sell. Last week we also detailed how Buffett’s right-hand man for half a century, Charlie Munger, said that stocks will all but remain flat for the coming years. Two of the most famous investors in history might have had their simple Buffett Indicator to give them a warning. For those of you who aren’t aware, the Buffett Indicator is simply the total market cap of all U.S. stocks, divided by U.S. national GDP. In other words, it shows the historical valuation of the markets relative to the strength of the economy those companies are built on: ![The buffett indicator - us stock market to gdp] Of course, the Buffett indicator alone doesn’t tell the whole story. Given the zero, or even negative-interest-rate environments we find ourselves in, it only makes sense that people would look for their returns on the stock markets instead. Still, it’s undeniable that there continues to be a significant disconnect between the hype in the stock markets and the state of the economy right now. ## **How to Protect Yourself in a Correction** Between the unfounded optimism in the small caps… The oncoming Debt Wall of Worry… The Buffett indicator and other signals… An eventual market correction seems more and more likely with each passing day. You need to prepare for that risk. I showed [in last week’s article](https://katusaresearch.com/the-fomo-indicator-were-near-the-edge-of-playing-with-fire/), gold stocks have sold off during past market corrections. And it’ll happen again when the overall markets sell off. Oil stocks will also get hit. So, we need to think about protecting ourselves against these declines. - **The Volatility Index (VIX) is a useful tool, which we can use to “buy protection”.** The Volatility Index is a forward-looking index which is derived from S&P 500 option pricing. As market turmoil increases, the Volatility Index increases. And then as the turmoil subsides, the VIX decreases. Below is a chart which shows the VIX since 2005. You’ll see the largest spikes were in the 2008 Financial Crisis and then in March as the Pandemic took hold. ![Volatility Index VIX] Now, you can’t buy the VIX itself. But there are investment products which reflect, in the broadest sense, the same type of movement. These can provide the protection we’re looking for. The most well-known and actively traded instrument which reflects the VIX is the Exchange Traded Note ‘VXX’. The VXX is an investment product created by Barclay’s, a major European financial institution. We need to be particularly careful on timing VXX for several reasons: - As the market goes higher, the VXX will trend lower. - Due to its construction, the VXX mathematically could go to zero if there’s never any future volatility – though this is highly unlikely. Also, this type of hedge is for **ACTIVE** traders only. You can miss your payoff if you’re even one day late. I don’t recommend going this route for almost all of our readers, except perhaps the ones who glued to their screen 24/7 as active traders. Life is too short to bother with that IMO. However, for those who are active traders, why would you buy something that could mathematically go to zero? Using a small percentage of a total overall portfolio… - **VXX has the capability to offset a substantial portion of *****unrealized***** & *****realized***** losses that could occur if we had another sharp correction.** For the rest of you who aren’t active day traders, however, you can take a look at how I’m planning to protect myself and my subscribers by signing up for my newsletter, [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/)***.*** You’ll be able to see exactly what I’m holding in my own portfolio and what I paid for each position. Most importantly you’ll see how I just laid out scenarios to protect your portfolio for as much as 30% downside risk with a 1% cost. You’ll see how I’m planning to not just survive, but profit when this market sentiment bubble pops. Regards, Marin **P.S. As gold and silver positions continue to consolidate and trade sideways, the opportunity for deals with tremendous upside are coming**. If you’re not in the room, you’re not in the deal. [Click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/). --- # (The FOMO Indicator) “We’re near the edge of playing with fire” - URL: https://katusaresearch.com/the-fomo-indicator-were-near-the-edge-of-playing-with-fire/ - Type: article - Published: 2021-01-15 - Author: Marin Katusa *“It takes character to sit with all that cash and do nothing.* *I didn’t get to where I am by going after mediocre opportunities.”* – Charlie Munger I started with nothing. Granted, I was blessed to have an incredibly supportive family. But with regards to wealth creation, I didn’t have much to lean on. While most of my buddies were out chasing girls or watching football games and drinking beer in University and in our early 20s, I spent almost all my spare time searching for “more”. I didn’t know exactly what that “more” was but I stumbled along for many years in the early 2000’s searching for “it.” I devoured any and every book on investing and wealth creation from stocks to real estate to medical instruments. Once I came across “it”, I knew it was the start of the most exciting journey of my career. My mindset completely changed. And here’s the thing, so can yours. You see, by 2005 I had already established myself in the resource sector working with some very well-known names. Learning the craft was a steep learning curve, but what I will share today definitely brought the most important dimension to my investment framework. ## **I First Read It in 2005…** This book really helped me understand the thought process of Charlie Munger. It’s called **Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger.** It’s over 400 pages of brilliance in a fun and easy format. I’ve read this book more than any other book. Including my *New York Times* Bestseller, The Colder War which I re-read countless times as I wrote it and then during the editing process. At the end of the book, Charlie Munger provides a list of his favorite books. His kids think he’s “a book with a couple of legs sticking out,” so you know that books he recommends will be good. Once I got to the list, I jumped on Amazon right away and ordered every book. Not one of them disappointed. [![The Katusa Fellowship]](https://join.katusaresearch.com/katusa-fellowship/)Charlie Munger is an amazing mind. When he says you should ignore mediocre opportunities, waiting for great ones instead—you should listen to him. In a recent interview, Charlie Munger was asked… “*Do you expect the next 10 years to have lower returns than in the last 10 years?”* In one word he answered point-blank, “yes”. And he went on to say… *“The frenzy is so great, and the systems of management, the rewards systems are so foolish, that… I think in real terms, the returns will be lower.”* This is one of the best investors in history, ever. He’s navigated through many bull, bear, and echo markets and became a Billionaire. He is Warren Buffett’s guru. ![A Lens Through History - dow jones bull markets] **Is He Just an Old and Out of Touch Grandpa?** No way. Back in February 2020, he warned of “*Wretched Excess*”. And his warnings were blistering. Now, even though I am very bullish on resources and commodities, with gold and our gold stocks in particular, I am stressing everyone to be patient and not chase any stocks. Right now, stocks in the S&P 500 are the most expensive they’ve been in 25 years, except during the 1999-2000 Tech bubble. ![S&P 500] The tech world has gone parabolic over the past year as **F**ear **o**f **M**issing **O**ut (FOMO) has taken hold. ## SPAC, IPO and Deal Flow Bonanza The enormous amount of capital flooding into SPACs and IPOs is unparalleled. To show this IPO mania we can use the Renaissance IPO ETF as a proxy. You’ll see it has skyrocketed over the past 12 months soaring to new highs. ![Fomo ipo mania] I find it ironic that companies going public in 2020 post-pandemic would demonstrate more robust revenues and cash flows than any time during the past 6 years. After all, that *should *be why the IPO ETF is at record highs. Clearly, that’s not the case. The world economy shuts down yet IPOs trade at record valuations? Call me old fashioned, but that seems like a stretch to me… Let’s not forget about the FANGs index, which is composed of the largest technology companies. It has soared 150% over the past 12 months. ![Technology index FANG+] However, as the saying goes “the market can stay irrational longer than you can stay solvent”. So I’m not shorting the market, that’s not my area of expertise. I stick to what I know and have the top-performing track record in my sector by sticking to my framework. - **The disconnect between the real economy and the stock market has led to many subscribers and readers wanting additional protection.** I still believe that there is considerable uncertainty in the world. And the valuation of the global equity markets is vastly different than what the current economic situation suggests. While most equity indices are at or near record highs, euphoria continues to soar. We can measure this in different ways… One way is to look at a chart and see share prices at record highs. That’s obvious. We can also measure it using various indicators that measure the number of advancing stocks minus number of declining stocks. A third way, which is more forward looking and can really show the true euphoria or “FOMO” (Fear of Missing Out) factor is through a ratio called the “Put to Call Ratio”. ## The FOMO Indicator The Put to Call ratio measures the number of Put options purchased relative to Call options purchased. Investors who are optimistic will buy a call option, which gives them the right to purchase a stock at a specified price at a specified time. A put option works the opposite way, investors who are negative will buy a put option. - **A put option gives the owner the right to sell at a stock at a specified price by a specific date.** If we use this approach for every stock on the NYSE, it provides a good indication of which way future money is leaning. When call buying exceeds put buying, the ratio is below 1. When put buying exceeds call buying, the ratio is above 1. This ratio can be calculated every day, week, month etc. Shown below is the daily put call ratio from 1998 to today, but we’ve smoothed it using a moving average to remove outliers and help show a clearer picture with a more general trend. ![Put to Call ratio] Recall from above, the lower the ratio, the more call option buying exceeds put option buying. This means investors are very bullish. For the math fans, if you look closer at the chart, you’ll see I’ve calculated the mean, which is 0.62. But I have also calculated 1 and 2 standard deviations away from the mean. You will see that we are more than 2 standard deviations away from the mean. - **We’ve only been this far away once before in the 20+ years of this data set.** With such overwhelming positivity and confidence in the market going higher, my alligator senses really start to tingle. ## Risk Mitigation and Protection I am not saying a selloff is going to happen tomorrow, or next week. It may not happen in 2021, but it’s our duty to be prepared for one. If there is a panic selloff, we need to be protected. What goes up, must consolidate to go higher. Don’t get fooled by all the goldbug media. Gold stocks are just like any other asset class in a panic and will sell off. In fact, they could sell off harder than regular blue chips. The reason is, investors rush to sell winners to pay off losers or margin calls. So, we could actually see the precious metals stocks selloff harder on a relative basis than the generalist S&P 500. We saw this phenomenon in both of the recent market selloffs (2008 & 2020). In 2008, gold stocks bottomed out down 62%, the equity markets bottomed several months later, down roughly 50%. ![2008-2009 financial crisis meltdown] It was the same situation during the March correction in 2020, where gold stock stocks outpaced tech and the S&P 500 losses. Gold stocks were down 46% and bottomed several weeks earlier than the general market indices. ![2020 coronavirus meltdown] Whether Charlie is right, and this decade will be a loser in real terms, is something that will take time to play out. Over the next 6-12 months, we should begin to see the impact of stimulus packages on inflation expectations both domestically and abroad. - **I believe the [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) portfolio has positioned itself incredibly well to take advantage of the markets over the next 12-36 months.** Our growing watchlist of companies will provide us with targets if there is a correction, while my specially designed “insurance” play could more than offset any market declines. We’ve already hit two of our watchlist buy targets. As always, I am on the hunt for new unique opportunities that I share with my subscribers and invest my own money in at the same terms. And we have some very, very exciting prospects in the pipeline. There is one company that’s at the top of my radar right now. And I’m weeks – or even days away – from sending out an alert to my subscribers. It’s a brand new company that I will be putting a significant amount of money into and making it a staple in my precious metals portfolio. Chances are you’ve never heard of it. And you won’t until it’s too late. - **The last time I alerted readers to an opportunity that was imminent like this, I had to close down subscriptions to **[***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/)**.** As my subscribers know very well – to get in the deal, you have to be in the room, ready to act. If you are looking to give yourself an edge in the resource sector, my premier research service might be for you. Regards, Marin **P.S** As a thank you to all of our viewers and subscribers from our YouTube Channel and website, I’m announcing the [Katusa Fellowship](https://join.katusaresearch.com/katusa-fellowship/), where I’ll be giving away an annual subscription to my premium research to two lucky readers. [Click here to learn more](https://join.katusaresearch.com/katusa-fellowship/). --- # Chaos Preparation - URL: https://katusaresearch.com/chaos-preparation/ - Type: article - Published: 2021-01-08 - Author: Marin Katusa Many of us are ready to forget about 2020. It was a tough year emotionally, physically, and financially for many. However, just because we are flipping the calendar doesn’t mean investment strategies need to flip too. The coronavirus sent markets into a tailspin in the early part of the year, only to come roaring back on the heels of enormous fiscal stimulus packages. With trillions still to be deployed around the world. Hard earned dollars that you and I work for have transformed the financial system into one with trillions of dollars or “imaginary digits” printed by the Central Bankers around the world. Except these digits are not imaginary and will have profound consequences down the road. Did you know… - **In the United States alone, US money supply measured by the MZM (the broadest money supply measure), increased by $4.7 trillion last year?** On average since 1980, the average annual increase was $400 billion. This means that last year over 10 times the average was printed. Since 2000, the MZM money supply has quadrupled from $5 trillion to $21.7 trillion. Make no mistake financial heroine (and [financially transmitted diseases](https://katusaresearch.com/financially-transmitted-diseases/)) is here to stay. ## **Democrat Majority, Precious Metals and Traders** Under President-Elect Biden, there will be no shortage of capital being put to work. It appears the Democrats have pulled off a win in the Georgia runoff. This provides a clear policy route for expansionary fiscal policy and [Biden’s Green Agenda.](https://katusaresearch.com/a-guide-to-esg-investing-and-how-much-money-is-at-stake/) Given the current and expected “digit printing” you would think that the “smart money” would be aggressively positioned in gold and silver. But they aren’t. We can look at this through the lens of the Commitment of Traders report, which shows the positioning of non-commercial traders. Below is a chart which shows the net positioning (longs minus shorts) for noncommercial gold traders. ![Gold commitment of traders noncommercial net positioning]Here is the chart for the net positioning of non-commercial traders in silver. ![Silver Commitment of traders noncommercial net positioning]As you can see, positions are not aggressively elevated, it is clearly not a one-sided trade yet. At least from the “smart money” perspective. Contrary to what my friends Tom Kaplan and Ross Beaty say (and believe we are still in the early stages of the gold boom), I still believe we are in the “Minor Leagues”. And that means the party hasn’t started in earnest. ## **Gold is Heating Up…** As you can see from previous bull runs, we still have a long way to go if we want to have the same type of appreciation as other major bull markets. - **![Gold Bull Markets]In the United States under a Democratic majority the road is paved for increased stimulus which will push bond yields lower. ** Lower bond yields force safe haven investors to look elsewhere for capital appreciation which is good for gold. A substantial portion of stimulus is ear marked for President-Elect Biden’s Green Agenda. It is a multi-trillion-dollar stimulus package that aims to put America front and center when it comes to sustainability and green technologies. We have all seen the soaring share prices of companies like **Tesla**, **QuantumScape** and **ChargePoint**. - **Carbon free emissions will soon be all the rage and those who are carbon emitters are going to pay, and big time. ** The price of a carbon credit was up 35% last year. Pay attention to this. What could bring all the hopium crashing down? The biggest wildcard is inflation. In 2008-2009 the globalization era absorbed enormous amounts of stimulus and provided capital the ability to rotate which curbed inflation. This time around, this may not be so easy. What will Fed Chair Powell and Treasury Secretary Yellen do if inflation gets to 3-4% and the unemployment rate is still 7 or 8%? Uncertainty is great for investors because it provides opportunity and volatility. Both of which I love. Subscribers and I are fresh off an incredible year, where we had multiple triple digit winners, including one stock that returned over 400%. If you felt like your portfolio didn’t harness the opportunities in 2020 very well, or are looking for new ways to generate wealth, [consider becoming a subscriber](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) of my premium research service, ***Katusa’s Resource Opportunities***. **In my latest issue, published just days ago, we covered:** - How to buy “insurance” for your entire portfolio. - Two NEW deals to be ready for – including a Silver play you don’t want to miss. - What the Bond Market is whispering to us. - Two watchlist targets that were hit and added to our portfolio (one energy and one gold stock). **The opportunities that are lining up in the resource markets in the coming months are nothing short of spectacular.** If you’re on the fence, you might not have much longer to make up your mind. My subscribers and I are well prepared, cashed up and ready for the next leg in what I believe is the biggest commodity bull market you’ll see in your lifetime. Are you? Regards, Marin --- # Is 2021 the Death of Fiat Currency? - URL: https://katusaresearch.com/is-2021-the-death-of-fiat-currency/ - Type: article - Published: 2020-12-31 - Updated: 2020-12-29 - Author: Marin Katusa Do you have FOMO yet? If you didn’t put your cash to work in 2020, then you’re fighting the tide ignited by the Fed. Never in the history of the world has so much money been printed. Plus, if you’re an accountant and love seeing balanced books, you’ve likely never had your eyelids twitch more than this year. The reason is simple: countries have seen their balance sheets decimated deep into the red this year. Countries like Canada have seen their Debt-to-GDP ratios jump from 89% to 115%. The European Union is forecast to hit 102%. And the United States is currently at 131%. ![debt to gdp ratio g7 countries]And depending on whose numbers you believe, total Chinese debt to GDP is forecast to go as high as 318%… ## **The New Era of Helicopter Money** During the 2008 global financial crisis, Fed Chairman Ben Bernanke famously earned the nickname “Helicopter Ben” as the federal asset relief programs set the course for enormous money printing and fiscal aid. In 2020, helicopter money took on a whole new meaning. This past year alone, the United States printed 21% of all U.S. Dollars in existence. Look at the unprecedented surge in fiat currency… ![21% of all us dollars were printed in 2020]It began with a liquidity crunch back in March, ignited by the Russia and Saudi Arabian oil price war, and was followed by the eruption of the coronavirus pandemic. Economies and global trade went to a complete standstill. It’s these types of events that alligator investors like myself and other major financiers with capital – waiting for the moment to deploy en masse – salivate at. Long-time readers saw this coming… Governments are not shying away from negative rates and printing money. I call these [Financially Transmitted Diseases](https://katusaresearch.com/financially-transmitted-diseases/) and it’s something that I’ve pounded the table on for a long, long time. - **How much of that money is making it into bank accounts and circulation, you ask?** Good question… Below is a chart which shows the increase in the M2 money supply. M2 is a broad money supply measure which includes cash, checking deposits and easily convertible near money. - ** The key takeaway? Everyone is printing money, and fast. ** And there’s no going back. ## **The Death of Fiat and Rise of Assets** This new world backed by Modern Monetary Theory (MMT) will fuel a bonanza of ultra-cheap money. And we’re seeing it in real time. A stock like Tesla seemed *expensive* at $80 (post-split) at the beginning of 2020. But two factors led to speculative excess on a scale that no one’s seen before: - The entry of a massive new generation of investors (Millennials and Generation Z) thanks to platforms like Robin Hood, and - Trillions of new dollars and currency units chasing a home. With most people working remotely and stuck in their houses, that money went into online shopping and stocks. And there are no signs that this is slowing down. - **As a result of this incredible money printing in the United States, the U.S. dollar is under siege. It currently faces its largest short position since 2014. ** This means that investors are betting against the US Dollars at levels not seen in years. Below is a chart which shows the net positioning of non-commercials from the CFTC’s Commitment of Traders (COT) report. The wall of shorts has been aggressively piling on all year. ![us dollar non-commercial net positioning]This weakness in the dollar has reverberated through the markets and set the course for real assets to perform exceptionally well. ## **Explosive Gold and Silver Breakouts** I cut my teeth for 2 decades in the resource sector and let me tell you, there is absolutely no mania like a gold and silver mania. - **What we saw in 2020 is just a prelude to what I see coming in the Gold and Silver markets.** After a multi-year consolidation period, gold took the world by storm in 2020. This year gold took out its old high from 2011, and briefly surpassed $2,000 per ounce. ![gold poised for recapturing record highs]While gold has taken all the fanfare this year, silver has quietly been building momentum and is still well below its 2011 record high. ![silver moonshot potential]Silver tends to be much more volatile than gold. That’s why silver manias are truly wild and can deliver staggering returns. You think Bitcoin returns are huge? You’ve never seen a junior silver stock explode higher in a silver bull market. **And we’re just in the early days of a major silver bull market…** You’re going to want to fasten your seatbelt on the way up and even tighter on the steep chops down. Below is a chart showing the historical returns of silver’s bull markets. ![silver bull market]As you can see, silver has A LOT of room to run much, much higher. ## **The Death of Fiat: Rotating into Bitcoin, Ethereum and Cryptocurrency** While the shorts piled on the U.S. Dollar, those looking for a global devaluation bet went [not just to gold and silver, but to Bitcoin as well](https://katusaresearch.com/bitcoin-vs-gold-part-1/). Bitcoin smashed through previous highs of $19,000, breaching $24,000… ![bitcoin new all time highs]For good reason, the Bitcoin rocket ship has every crypto bug shouting from the rooftops. Yet, no one is hearing them…and we can see that below with the trends in search activity through Google search. ![bitcoin google search interest]You can see that search interest is 80% lower today than in late 2017, even though prices are higher now than they were then. Maybe it’s because many retail investors got burnt in the downswing and have already written Bitcoin off. Yet the price of Bitcoin has made an incredible comeback and noteworthy funds and companies are either already buying it, or building the groundwork to buy it. - **Square**, one of the world’s largest digital payment processors, bought $50 million worth of Bitcoin and have their own dedicated cryptocurrency team. - **Grayscale**, the largest digital asset manager in the world, reported inflows of over $1 billion in the third quarter of 2020. Currently it has over $6 billion under management. - And billionaire hedge fund managers like **Paul Tudor Jones** have made significant bets on Bitcoin as hedges against inflation. ## **But DO NOT Count Out the Almighty Dollar Just Yet…** The U.S. Dollar dominates as a payment currency for global trade with a 79.5% share of inter-regional currency usage, by value. If this past March was any indication, the world still needs U.S. Dollars. In a race to zero, the U.S. Dollar is still the best option. - **Personally, I hold a large percentage of my cash position in U.S. Dollars.** I always call myself a profit bug because I’m not tied to a single asset, currency or mandate. My job is to find unique investments that have incredible upside potential. The nominal price rise in assets is continuing a trend set in motion decades ago. - **Could 2021 be the start of the new commodities super cycle? ** What I do know for certain is that I am actively putting my money alongside my subscribers into investments with fantastic risk-reward profiles. These aren’t dinky, illiquid juniors that have no real assets or management without skin in the game. These are companies that trade real volume, have world class assets and management are big time owners of their own stock. Our hit list of stocks keeps growing and we’re always on the hunt for next deal. Looking back 3 years from now, you might wish you owned more assets. And for now, and the foreseeable future, all of those assets are denominated in U.S. Dollars. Here’s to a wild year and a safe, healthy and prosperous 2021! Marin --- # Behind the Scenes on the Base Metals Boom - URL: https://katusaresearch.com/behind-the-scenes-on-the-base-metals-boom/ - Type: article - Published: 2020-12-24 - Author: Marin Katusa This year has been one for the record books. From all time highs in the major indices to the Coronavirus meltdown… and then for the market to race back and hit new all-time highs, it’s been quite the ride. If you felt like your head was spinning this year by some of the moves you were seeing, it was for good reason. - **2020 was one of the most volatile years in history for the stock market. ** In the next chart you’ll see the number of weekly 5% or greater moves (up or down) for the Dow Jones Industrial Average. ![Dow Jones Count of Weeks with 5 percent change]We have not seen these types of major movements since historic times like the Financial Crisis, the Tech Bubble and the 1987 Black Monday crashes. Things got so bad this year that the price of oil even went negative. ![US Benchmark Oil Price]But on March 23rd, the virus driven market crash made a major reversal. The cause of the reversal was that the US Federal Reserve, along with other major central banks, began providing multi-trillion-dollar lifelines to the global economy. - **In total, the global stimulus response to date is well over $10 trillion. ** This massive influx of cash has jolted the markets back to life, racing ahead of where the current economy sits today. ## **The Back Page Benchmarks** Investors love chasing stories that are on the front page. But it’s the ones on the back pages that get no love that have the most upside. These markets and stocks are not as sexy as gold…. Not as sultry as silver… Not as stimulating as Bitcoin or Ethereum… [![Brave New World]](https://wt.richdadworld.com/aff_c?offer_id=248&aff_id=1028&source=kiiblog)But industrial metals (or base metals) have been on a tear this year in terms of commodity price increases and how sharp those stocks have risen. In short, massive supply issues have exposed fragile supply chains. Try ordering a hot tub, or refrigerator and you’ll quickly find out that lead times have skyrocketed on the back of factory shutdowns in the spring and summer. Factories are having tough times receiving their raw materials to keep up with the demand in orders (stimulus checks anyone?). The effects are starting to be felt like a large earthquake…. The demand for industrial metals has soared in the second half of the year as Chinese stimulus cash post Coronavirus works itself through the system. For example, right now supplies of iron ore at major Chinese ports stand at under 3 days. ![iron ore days of supply china]Naturally, this has caused the price of iron ore to shoot up to over $150 per tonne. ![iron ore]Iron ore companies have risen in response… **Fortescue**, Australia’s largest pure play iron ore producer is up 124% this year. Canada’s **Labrador Iron Ore** is up 45%, while **Cleveland Cliffs** in the United States is up 65%. ## **“Forgotten” Metals Making Investors a Fortune** Looking at other major industrial metals like copper, zinc and nickel, inventories are scarce there as well. It’s caused companies across the spectrum to put up monster returns this year. - **First Quantum Minerals**, one of the world’s largest copper producers and operator of Cobre Panama a world class copper mine is up 67% year to date. - Industry titan **Freeport-McMoran** is up 90% on the year. - Mid-tier copper producer **Capstone Mining** is up over 200%. **We can measure the scarcity using a metric called the “Days of Supply”.** This metric takes total global inventory levels for a commodity and divides it by global consumption. This type of analysis is extremely helpful when identifying future trends for commodity prices. Let’s start with copper…. Copper has long been an excellent proxy for global economic health. It’s used in everything from washing machines to electric cars. That’s why copper is often referred to as “Doctor Copper” – because it can diagnose the health of the market. **In our *[Katusa’s Resource Opportunities portfolio](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)* we made money on a copper focused small cap that returned a double from our entry price earlier this year…** We also alerted readers to a spinout company that rose from $1.50 to just over $6.00. And if you think Bitcoin returns are exciting, again don’t forget the back page stories like Copper… - Long-time Katusa subscribers that participated alongside me in a gold deal from a couple of years ago even **saw one of their “free” copper positions turn into a 1000% win from our cost base.** One of the things playing a big factor in the rising price of copper (and thus copper stocks) is copper’s days of supply. The following chart shows the days of supply of copper in inventory… ![copper days of supply]You can see that inventories bulged in early 2020 due to economic lock downs. However, since that time, inventories have not been able to keep pace with demand. Falling inventories can indicate that copper demand is outstripping production. **We can use this same analysis for Zinc, as you’ll see below…** ![zinc days of supply]And don’t forget nickel… ![nickel days of supply]All told, the trend is clear, that demand for industrial metals has picked up significantly in the back half of 2020. - **When demand picks up and supply can’t react fast enough, prices shoot up.** Below is a chart which shows the year-to-date performance of each major metal. To no one’s surprise, with less than 3 days of iron ore in Chinese ports, prices for Iron ore have shot to the moon and it is the best performing metal this year. ## **![market metals year to date performance]Are Industrial Metals on the Cusp of a Boom Higher?** I sound like a broken record, but I think next year is going to be another volatile year. My portfolio is prepared for what I see as a coming bull market in commodities that could be bigger than anything we’ve ever seen… given how much money world governments have injected into the system. However… There are many uncertainties around the world these days and many of them can lead to another sharp correction in the global markets. And as alligator investors, you need to be prepared with capital. Remember the ABC rule, **A**lways **B**e **C**ashed-up In my December issue to subscribers, I laid out my plan and identified 6 stocks across multiple commodities which I feel are poised to outperform over the next 2 years. We also all participated in a private placement, run by an exceptional management team in the gold space. I millions into the deal at the same price and terms, and I didn’t take a penny in fees. Subscribers all over the world were able to get the same price and terms alongside me. It’s catching the industry by storm. **But that was then, what’s coming next?** My team and I have uncovered several new opportunities that we are working day and night to finalize for ourselves and subscribers. If you’d like to learn more, click here to find out what *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)* is all about. I am excited for 2021 and want to make it my best year yet. Regards, Marin --- # Is Big Oil the New Tobacco? - URL: https://katusaresearch.com/is-big-oil-the-new-tobacco/ - Type: article - Published: 2020-12-18 - Updated: 2021-02-09 - Author: Marin Katusa *[Click here to watch this article on our YouTube channel.](https://youtu.be/8HbEW3MwZys)* The Surgeon General first concluded that cigarettes cause cancer and other diseases in its historic 1964 report. From 1976 to 1993, six independent studies found smoking accounted for between 6 and 8 percent of US healthcare costs, which amounted to more than $50 billion in 1993. To recover these costs, states began to sue the largest cigarette manufactures, Philip Morris, Reynolds, Brown & Williamson and Lorillard. In 1998, all 46 states, 4 territories along with Puerto Rico and the District of Columbia, entered into a Master Settlement Agreement with the cigarette manufacturer. It was the largest civil litigation in US history. - **To date, over $168 billion has been paid to US states and billions more will be paid in perpetuity. ** These payments are not just part of the American tax code, taxes on tobacco are found all over the world. It’s known as **excise tax** in the national tax code. And they are enacted on goods like tobacco, alcohol, gasoline and even airline tickets. Since 1998, cigarette companies have paid over **$1.6 trillion** to governments around the world… ## **![Cumulative Excise Taxes Paid by Cigarette Companies]Government Rakes It In With Various “Sound the Alarm On _____” Taxes…** Still to this day, each year cigarette companies pay each US state and territory a lump sum, culminating in a total payout of almost $7 billion annually. It has been an enormous source of tax revenue for the governments. Post-pandemic, governments are going to require new “alternative” sources of tax revenue. The politicians will appear to try to pay back some of these multi-trillion-dollar stimulus packages. - **A likely source of tax revenue in the United States and abroad (one that would meet very little resistance today) is through a carbon tax. ** If we think about the politicians running most of the large, developed world, the tax for green agenda will be in full force. Carbon taxation continues to be a focal point of discussion among all major nations. - **So, is it possible, the green, socialist governments make the oil companies pay for greenhouse gas emissions? ** The world has known about greenhouse gas emissions for decades. A famous 1982 internal memo from Exxon scientists predicted the world would hit CO2 concentration of 415 ppm and a global temperature increase of 1C. Last year global CO2 levels reached 409.8 PPM, while temperatures around the world have warmed 1C. Royal Dutch Shell’s Greenhouse Effect Working Group from the same 1980s era concluded similar results as Exxon. But are the oil companies truly at fault? I do believe the governments recognize (at least behind closed doors) that fossil fuels played an integral role in the world’s development and globalization. No question – We would not be where we are today without oil. ## **This is THE Agenda Going Forward Whether You Like it Or Not…** The price companies pay for emissions going forward is certainly up for debate and a hot topic at all political debates. According to data from Climate Watch and the World Resources Institute… - **Oil and gas + petrochemical production account for 3.6% of global emissions. ** For comparison, iron and steel production accounted for 7.2%. Transportation (road + aviation + marine) accounts for 16.2% of greenhouse gas emissions. ![Greenhouse Gas Emissions by Sector End Use]So, while oil and gas producers certainly should be held accountable for their share of emissions, the easy low hanging fruit to go after is the Big Oil companies. After all, it’s not like the tobacco farmer was on the hook for billions of dollars when they grew the tobacco. In the United States, it’s been loosely discussed starting at $15 to $25 per tonne tax on greenhouse gas emissions. - **Treasury Secretary-elect Yellen is pro-carbon taxation. ** And being a PhD Economist, who also ran the US Federal Reserve, she will understand that the government needs to find “alternative” sources of revenue. A carbon tax fits that bill. In Canada, our carbon tax is $20 per tonne and will rise at $10 per tonne annually until it reaches $170/ tonne in 2030. In Europe, it’s every country for itself, with tax policies ranging from pennies to $125+ per tonne. ## **How much Greenhouse Gas do Oil Producers Emit?** Surprisingly, as an industry… Oil and Gas producers when compared to steel don’t actually emit a significant quantity of green house gases. - **Steel for example emits over 7% of global greenhouse gases, Oil & Gas extraction emits under 4%. ** Given the green socialist agenda the first world has now gone, expect all extraction and manufacturing industries to pay a price for pollution. What was theoretical logic just a few short years ago is now law in many nations around the world. Below is a chart of major US oil producers and their annual **G**reen **H**ouse **G**as emissions divided by total production (in terms of a barrel of oil equivalent: GHG per boe produced). These 14 producers account for 65% of US oil production, making it a reasonable barometer for emission levels. ![US Oil Producers Greenhouse Gas Emissions per boe]In the next chart below, you’ll see the major integrated oil producers, Saudi Aramco, Exxon, Chevron and others. ![Integrated producers greenhouse gas emissions per boe]Integrated companies produce crude oil, refine it through their own refineries and sell finished products like gasoline and jet fuel. So, it should be expected that their emissions footprint is much larger on an oil production basis. ## **Putting a Value on Carbon in the Oil & Gas Industry** It’s going to be pretty simple and this is what you need to take home… - **Emitters will pay per tonne of GHG levy****.** And I do see the green energy companies getting net credits which can be offset or sold into an exchange. I am sure some of you will think that this is a bullshit tax and it will bankrupt the oil industry. It won’t. But it’s going to change oil production dynamics. This tax will start to move high cost and high emission oil offline and make low cost low emission oil more valuable and global emissions would drop. There will be ways to play this, and the profits could be enormous. One company we profiled in depth recently that supplies critical resources to many clean energy companies – has risen nearly 3x since our first writeup. - [Click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) about my premium research service – **Katusa’s Resource Opportunities** – where I detail the opportunities that I’m personally investing in every month Al Gore might not have invented the internet… But he certainly kickstarted a trillion-dollar market. We are ready, are you? Regards, Marin Katusa --- # The Bitcoin Gurus Are Using a Flawed Formula - URL: https://katusaresearch.com/the-bitcoin-gurus-are-using-a-flawed-formula/ - Type: article - Published: 2020-12-11 - Author: Marin Katusa Many gurus (some of which are friends of mine) are using a Bitcoin Pricing Model that has received an incredible amount of attention globally. Nothing makes me happier than the math guys getting attention – except, of course, when the math is wrong. The model getting the markets all hot and horny is called the “Stock-to-Flow Cross Asset Model”, or S2FX for short. The author (who remains anonymous) says that this model can accurately price not just assets like Bitcoin, but also things like gold and silver. If that sentence above hasn’t gotten alarm bells ringing in your head yet, it should. Why do I say this? Because the Stock-to-Flow model **isn’t new**. Mr. Anonymous’ model, as presented by Bitcoin gurus, is being talked about as if it’s as compelling as Einstein’s Theory of Relativity. Which, by the way, has nothing to do with light, and with that we can shed some light on S2FX. The truth is, **the Stock-to-Flow ratio has already existed for decades**, used as an indicator in commodities markets. ## **But Let’s First Explain What Stock-to-Flow is First…** As the name suggests, the Stock-to-Flow (SF) ratio simply is: ![Stock Flow Ratio] Simply put, the SF ratio is a measure of how much of something there is to go around. Before Bitcoin came along, this ratio had already been used before for commodities like gold and silver, corn and wheat. And long-time Katusa subscribers will find this metric a familiar one… After all, it’s more or less the same thing as my *Days of Supply *indicator that I use when I’m analyzing commodities like copper (see [Charts to Watch #3 in this previous article](https://katusaresearch.com/could-there-be-a-copper-wipeout/), for instance). So again, the first thing you need to know is that the basic concept of “Stock-to-Flow” isn’t some revolutionary new idea. It’s been around for decades. However, what the author of the S2FX model does that *is* new, is create a mathematical model that he states can “[enable] valuation of different assets like silver, gold and BTC with one formula.” Oh really? We know that the SF ratio has already been around for decades. But many in the Bitcoin world think this is a breakthrough new model that’s just been developed. As Trump would say, “Wrong.” Alright, with that set up – class, let’s get started… The author of this S2FX model calls it a “cross asset” model. That means it doesn’t just work for Bitcoin, but also gold and silver, and other assets. The SF ratio had already been applied to gold and silver long before Bitcoin existed, and yet nobody came up with a similar model. So, was this overlooked, or is this a clue that something ain’t quite right with the model? Another clue should be the fact that the author of S2FX has chosen to stay anonymous. Granted, some will argue that he isn’t anonymous to a select few in the Bitcoin world, but why not go public? The author of S2FX is not using any inside information, no proprietary information, and nothing offensive or illegal, so this is quite odd. Perhaps our Anonymous Analyst was a fan of the rock band Kiss. And figured that since Kiss got way more attention with makeup on and staying anonymous, the same would be true for his work. And just in case you were wondering, my favourite Kiss member was Ace Frehley. Ace has the best laugh in Rock’n’Roll. But back to math, and back to S2FX… If the S2FX model is as good as suggested, then the potential for massive profits is staggering. So it’s got my attention for sure. ## **What the Godfather of Card Counting Can Teach You…** When I think of revolutionaries in the world of making money, I think of men like Edward Thorp, pictured below. He is a cool dude, and I highly recommend his book “A Man For All Markets” – and the Foreword by Nassim Nicholas Taleb is great also. Mr. Thorp is known as the father of card counting. A professor of mathematics who worked at MIT, he came up with various strategies to improve the odds of winning at Blackjack. But Thorp didn’t just talk the talk, he walked the walk. Mr.Thorp is the Elvis of math geeks. He wrote a book in 1966,* Beat the Dealer*, outlining the very techniques he put to the test by – you guessed it – visiting casinos and winning money in Las Vegas. So much money, in fact, that he had to wear disguises like wraparound glasses and false beards. Men like Thorp don’t just come up with theories. They put their money where their mouth is, and they’re not afraid to stand behind their ideas. That’s the model I try to emulate myself with my publication, *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*. I don’t just talk theory, I put it into practice. I got to where I am today by following my own rules – rules I put my name on – as I have a lot of skin in the game on anything I recommend. One thing I can guarantee is that our Anonymous Analyst, who published the S2FX model, is no Edward Thorp or his ilk. I’ll explain why shortly. **Now, like I said last week, I’m not a Bitcoin hater. ** I think it has an important role to play in our future. And all I’m trying to do with this report is bring a higher standard to the industry just like I did with mining. There’s a lot of misinformation in the world of investing – and that’s true whether you’re looking at Bitcoin, gold, or stocks. That’s why I want to address the S2FX model, to break it down to see if it has any substance behind it. After all, it could very well be a revolutionary new pricing model overlooked for years by countless experts in their fields. I may be a skeptic – but never let it be said that I don’t do my due diligence. Like President Ronald Reagan said, ‘Trust, but verify’. So, with that said, it’s time to do our homework on S2FX. --- ## **Breaking Down the S2FX Model** From here on out, we’re going straight to the source. We’re going to show exactly what the author of the S2FX model has written in their paper first in **blue boxes**, with our explanation immediately following each section. ### **S2FX Model** First, I will describe the concept of phase transitions because it introduces a new way of thinking about BTC and S2F. It explains why S2FX model is important. Second, I will describe S2FX model, how it works and what the results mean. **Phase Transitions** Phase transitions are an important perspective in understanding S2FX model. During phase transitions, things get totally different properties. Transitions are often discontinuous. Three examples of phase transitions are: - Water - US Dollar - BTC **Water **The classic example of phase transitions is water. Water exists in four different phases (states): solid, liquid, gas, ionized. It is all water, but water has totally different properties in each phase. **US Dollar** Phase transitions are also present in finance. For example the US Dollar has transitioned from gold coin (One dollar = 371.25 grains of pure silver = 24 grains of gold), to paper backed by gold (“In gold coin payable to the bearer on demand”), to paper backed by nothing (“This note is legal tender for all debts, public and private”). Although we keep calling it Dollar, the Dollar has totally different properties in these three phases. ### **Katusa’s Comments** **On Phase Transitions:** It’s true that investments can perform in discrete increments: a junior mining company “phase transitions” when it acquires an exploration asset. It “phase transitions” again when it gets drill results, again when it establishes an initial resource estimate, again when it conducts a PEA, again when it finishes building a mine and starts producing. But there are always outside “swans” that can to the price such as a large newsletter writer writing up the stock which moves the price, or alternatively selling the stock and taking the price down. So, such outside items must also be considered in the real-life situations. In the industry, we don’t call these “phase transitions”; they’re just intermediate steps in a company or asset’s lifecycle. ### S2FX Model Same is true for BTC. Nic Carter and Hasu show in their 2018 study how BTC narratives changed over time [4]. These BTC narratives seem very continuous in the chart. However, if we combine the narratives with financial milestones (and later S2F and price data), they look very much like phases with more abrupt transitions: **“Proof of concept”** -> after Bitcoin white paper [5] **“Payments”** -> after USD parity (1BTC = $1) **“E-Gold”** -> after 1st halving, almost gold parity (1BTC = 1 ounce of gold) **“Financial asset”** -> after 2nd halving ($1B transactions per day milestone, legal clarity in Japan and Australia, futures markets at CME and Bakkt) These three examples of phase transitions in water, US Dollar and BTC offer a new perspective on BTC and S2F. It is important to not only think in term of continuous time series but also in phases with abrupt transitions. In developing S2FX model, I see BTC in each phase as a new asset, with totally different properties. A logical next step is identifying and quantifying BTC phase transitions. ### **Katusa’s Comments** **S2FX and BTC Phase Transitions:** Phase transitions can explain points where the intrinsic value of an investment significantly changes. What they don’t do, however, is actually lend support to, or provide evidence for, the author’s mathematical model. You can say that phase changes cause prices to go up or down, but without any math behind it, you can’t say by how much. Let’s take the case of the Lundin Mining chart for example… ![Some of lundin mining's phase transitions] Each upwards spike in Lundin Mining’s share price coincides with a major acquisition or development in the company’s business. And as you can see, they even line up extremely well – if I draw a line through each of the orange points, I end up with an R2 value of 0.932 (which basically means that they line up fairly well). - **Does that mean Lundin Mining is going to keep trading along that line as long as they continue to pick up new assets?** The answer, of course, is no – not unless Lundin Mining’s new assets (or phase transitions if you will) actually add significant enough value to the company to keep driving its share price along that trend. It’s theoretically simple to do this in mining, on paper at least… For a very basic calculation, you can take the discounted NPV of newly acquired mine and see how it adds to the market capitalization of a mining company (less any cash or debt paid for it, of course). This of course is theoretical, because unknown issues such as metallurgical or recovery rates or new taxes could affect the value. But you get the point. For something like Bitcoin, there’s no simple way to quantify when – or even if – it’ll see another phase, let alone how much it’d be worth. ### **S2FX Model** The chart below shows the monthly BTC S2F and price data points used in the original S2F model. One can visually identify four clusters. ![Bitcoin clusters] These four clusters could indeed indicate phase transitions. Quantifying these clusters can be done by minimizing distance between monthly BTC data and clusters. I use a genetic algorithm (minimizing absolute distance) to quantify four clusters. Future research could focus on different clustering algorithms (e.g. k-means algorithm). ![Bitcoin clusters 2] Each of the four identified BTC clusters has a very different S2F-market value combination that seems to be consistent with halvings and changing BTC narratives. BTC “Proof of concept” (S2F 1.3 and market value $1M) BTC “Payments” (S2F 3.3 and market value $58M) BTC “E-Gold” (S2F 10.2 and market value $5.6B) BTC “Financial asset” (S2F 25.1 and market value $114B) Like water and US Dollar these four BTC clusters represent four different assets, each with different narrative and characteristics. BTC “Proof of concept” with S2F 1.3 and only $1M market value is a totally different asset than BTC “Financial asset” with S2F 25 and $114B market value. ### **Katusa’s Comments** **On Bitcoin Clusters:** It’s important to note that this section has nothing to do with the actual mathematical pricing model introduced by S2FX. Rather, it simply explains when phase transitions previously occurred in the history of Bitcoin. The author groups the historical Bitcoin data points into clusters based on these phase transitions. The most important takeaway from this section is that the author uses these clusters to **reduce the size of their data set from several dozen points to four.** Why is this a bad thing? Statistically, there’s nothing wrong with doing so. **The problem is that the author uses these four “phase transition” clusters to calculate their model.** What this means is that their model doesn’t actually predict where Bitcoin is going – it predicts where Bitcoin’s phase transitions are going. Key phrase there is Bitcoin price vs. phase transitions. This might not sound like a big deal, but… ## **The “Clusters” Exposes Two Problems:** **The first problem** is that it makes the S2FX model a poor predictor of actual price. Take a look at this cluster, for instance: ![cluster problem] Take a look at the data points I’ve circled in green. These data points occur at the same SF ratio. They look pretty close together, right? Don’t be fooled. That’s because this chart is **logarithmic**. In a logarithmic chart, the axis are **exponential**. In other words, as you go up the chart, each point of data isn’t incrementing by 1, but by a **power of 10 (not 1,2,3 but think 1, 10, then 100, then 1000)**. The higher of the top two values is over $200 billion. The higher of the lower two values is roughly $50 billion. **That’s a variance of 75% at the same SF ratio.** Imagine if I built a model, and I told you that it predicted a price of around $6 for a particular asset. But the price of that asset traded as high as $10, and as low as $2.50 when the model predicted $6. Would you call that a good model? **The second problem** is that by basing the S2FX model on Bitcoin’s phase transitions instead of on Bitcoin’s own performance, that makes the model dependent on future phase transitions. According to the S2FX model, Bitcoin prices fall into clusters based on Bitcoin’s phase transitions. **The model predicts where these clusters go – not the prices themselves.** In other words, that makes the S2FX model reliant on future phase transitions to drive Bitcoin prices. We’ll return to this idea later. ### **Using the S2FX Model to Compare Bitcoin to Gold and Silver** ### **S2FX Model** With the phase transition perspective of BTC clusters as different assets, I can now add other assets like silver and gold to the model. This makes it a real cross asset model. For silver and gold I use stock and flow numbers from recent analysis by Jan Nieuwenhuijs [6] and ultimo December 2019 prices from TradingView. 5. Silver S2F 33.3 (900,000/27,000 tonnes) and market value $561B 6. Gold S2F 58.3 (190,000/3,260 tonnes) and market value $10.088T ![Bitcoin s2f cross asset model] The chart shows the four quantified BTC clusters (plus the original BTC monthly data for context), silver and gold. They form a perfect straight line. ### **Katusa’s Comments** **On Gold and Silver in the S2FX Model:** Alright, now I get to play in my sandbox, as I know a thing or two about gold and silver. Gold and silver have traded in a wide range these last few years. Gold, for example, has traded as high as $11 trillion in market capitalization, and as low as $5 trillion. Its SF ratio has also changed slightly over the years. Despite this, instead of using several dozen different points of historical data like they did for Bitcoin, the author arbitrarily chose numbers from December 2019. Here’s what happens when we try to apply the S2FX model to historical data instead: ![gold market cap to sf] As you can see, when 115 years’ worth of historical data points for gold’s market capitalization versus its SF ratio are plotted, we get a scattered mess with no real correlation. Even when adjusted for inflation, any single sample SF ratio yields a range of historical market caps well over the hundreds of billions of dollars. Now, let’s do the same thing for silver. We calculate and plot silver’s historical market capitalization and SF ratio, using the last three decades’ worth of data, and compare it to the S2FX model. ![30 years of silver versus the s2fx model] As the chart above shows, the S2FX model does a poor job of predicting silver’s historical performance. Even when using the S2FX model’s own silver stockpile numbers, you end up with **silver trading at $804 billion market cap at an SF of 20.87 in 2010, while it also traded at $301 billion market cap at an SF of 20.57 in 2006.** - **In-between those two data points, at an SF ratio of 20.72, the S2FX model predicts a market capitalization of $91.3 billion.** Simply put, the S2FX model is way off for gold and silver. Which means that the **data points for gold and silver used by the author aren’t valid – they were cherrypicked to fit the model.** ### S2FX Model I use regression analysis to make the S2FX model. Note that a big difference with the original S2F model is that I use silver and gold S2F and market value data in the regression analysis. S2FX model shows a significant relationship between S2F and market value of these six assets (low p-Values F-test and low p-Values coefficients) with a perfect fit (99.7% R2). ![regression analysis] The S2FX model formula can be used to estimate the market value of the next BTC phase/cluster (BTC S2F will be 56 in 2020–2024): **Market value = exp(12.7598) * 56 ^ 4.1167 = $5.5T. (emphasis by Katusa)** This translates into a BTC price (given 19M BTC in 2020–2024) of $288K. ### Katusa’s Comments **On Gold and Silver in the S2FX Model:** Let’s take a closer look at the model in question: ![market cap sf ratio] This type of equation is known as a constant elasticity function. It’s well known in economics as the shape of demand curves. But as mentioned previously, remember – this model doesn’t track Bitcoin prices. It tracks Bitcoin’s phase transitions. According to the model, Bitcoin is going to hit $288k somewhere in 2020-2024. What phase transition does this correspond to? Where else can Bitcoin go from here now that it’s already considered an uncorrelated financial asset? ![SF Model Through Design] Furthermore, if you plot out the model, you’ll see that it predicts that Bitcoin will, on average, double every year for the next 30 years. How many phase transitions is that supposed to be? How many times can we re-think Bitcoin’s purpose and change how we view it as an asset? ### S2FX Model BTC price forecast is significantly higher than $55K in the original study. Please be aware that the S2FX model is a first step that has not yet been replicated and reviewed by others. Although six observations is low, nevertheless I value the results of the S2FX model relevant. I see S2FX model as a working hypothesis, like S2F model. Future research could focus on adding more assets to the analysis. However, most assets have low S2F values (≤1) and are therefore not interesting. On the contrary, diamonds have a high S2F but have a very complex valuation (rough/cut, carats, different colors and brightness etc). S2FX model allows for interpolation, instead of extrapolation in the original S2F model. The original S2F model makes a forecast that falls outside the data range used in making the model. The new S2FX model makes a forecast that falls within the data range used in deriving the formula. Example of interpolation (left) and extrapolation (right) — data in blue, black line is model, red dot is forecast S2FX model allows for interpolation, instead of extrapolation in the original S2F model. The original S2F model makes a forecast that falls outside the data range used in making the model. The new S2FX model makes a forecast that falls within the data range used in deriving the formula. ![interpolation] Example of interpolation (left) and extrapolation (right) — data in blue, black line is model, red dot is forecast. ### Katusa’s Comments **On interpolation vs extrapolation:** I like this author. He can now say his model has been reviewed by others, namely, me. - **Whether you accept or challenge my conclusions here, everyone needs to keep the responses professional and respectful, on both sides.** The author of the model states that his new model can make forecasts that fall within the data range used in deriving the formula. This would be important if true. A model that predicts future results solely based off past performance is not a very good model. However, a model that predicts future results based on data that’s already happened before tends to be stronger. In this case, however, this “data that’s already happened before” are the data points for gold and silver. On paper, there would be nothing wrong with this if the data points were valid. The problem is that these data points were **cherrypicked by the author to fit their data**. As covered above, the S2FX model fails to properly track gold and silver when historical prices are used. In other words, the S2FX model can still only predict future prices based on previous historical Bitcoin prices. The forecasts it makes fall outside the data range used in making the model. Why is this a problem? There’s no mathematical justification for why Bitcoin is supposed to follow this model exactly in the future, beyond the fact that historical Bitcoin prices and SF ratios fit this model. Remember, those data points for gold and silver the author added were cherrypicked to fit the model and aren’t valid. That means the S2FX model’s correlation is purely built on Bitcoin’s past performance. Are we supposed to believe that Bitcoin prices will continue to follow the S2FX model simply because it has in the past? S2FX might give us an idea of the general direction Bitcoin prices are headed in at this very moment, but as more time goes by, there’s an increasing chance of it becoming less accurate and meaningful. If you’ve been investing for a while, you’ve probably seen this warning, or some variation of it before: **“Past performance is no guarantee of future results.”** This is true of all investments. The story’s the same when it comes to Bitcoin. ### S2FX Model ### Conclusion In this article I solidify the basis of the current S2F model by removing time and adding other assets (silver and gold) to the model. I call this new model the BTC S2F cross asset (S2FX) model. S2FX model enables valuation of different assets like silver, gold and BTC with one formula. I have explained the concept of phase transitions. Phase transitions introduce a new way of thinking about BTC and S2F. It led me to the S2FX model. S2FX model formula has a perfect fit to the data (99.7% R2). S2FX model estimates a market value of the next BTC phase/cluster (BTC S2F will be 56 in 2020–2024) of $5.5T. This translates into a BTC price (given 19M BTC in 2020–2024) of $288K. Solidifying known facts from the original S2F study, the S2FX model offers a new way of thinking about BTC transitioning into the fifth phase. ### Katusa’s Comments **In conclusion:** As we’ve demonstrated, the S2FX cross asset model does not actually apply to gold and silver as advertised. The phrase “phase transitions” was coined by the author, but the concept it represents is not. Besides which, there’s no guarantee that Bitcoin will see another phase transition in the future. This model was built on four data points – remember, the gold and silver data points were cherrypicked and thus not valid. Finally, recall what was mentioned about how the S2FX model is built on Bitcoin’s price clusters, and not Bitcoin prices themselves. Let’s take a closer look at just how unreliable the S2FX model is when it comes to accurately predicting Bitcoin’s performance. To pick an even more glaring example than our first one: based on the historical Bitcoin data used in the S2FX model, you can see that around the SF ratio of 22, Bitcoin has both traded below $10 billion while also having traded above $200 billion. In other words, the model can be off by a factor of over 20 times. People should know the reality of this such that: - **That $288,000 Bitcoin price by 2024 could actually just be $14,400!** Let’s get an even better idea of how little Bitcoin’s market cap performance actually depends on its SF ratio by charting the variance of the two against each other: ![Variance in bitcoin prices vs variance in sf ratio] As the chart above shows, in general the SF ratio barely moves at all, except immediately following halvings. On the other hand, Bitcoin’s market cap and price, as you likely already well know, have been extremely volatile over its trading history. According to the S2FX model, these two variables – Ln (Market Cap) and Ln (SF Ratio) – are supposed to have a linear relationship. Simply put, one goes up when the other one does, and vice versa. However, **historical data going back to 2013 shows that changes in the two variables have a correlation of 0.009**. These two variables are about as unrelated as can be – when one goes up, the other one has about a 50/50 chance of going up *or* down! **In other words, the S2FX model may provide an interesting model to explain Bitcoin’s past performance, but it can’t accurately predict Bitcoin’s price, and can’t be counted on to predict Bitcoin’s future results.** ## **Other Problems with S2FX** I have a few other concerns with the S2FX model that I haven’t been able to address yet. I’ll go over them now. Let’s return, for a moment, to the S2FX model’s lynchpin equation: ![market cap sf ratio] If you ignore all of the numbers in that equation, what it says is simply this: **Market Cap is related to, and only to, an asset’s SF Ratio.** Recall that the SF Ratio is calculated with Stock / Flow. It’s a measure of *scarcity*, or hard it is to get your hands on something. The author of the S2FX model quotes computer scientist and cryptocurrency pioneer Nick Szabo on what scarcity means. In his words, scarcity refers to items or assets that are “… costly, due either to their original cost or the improbability of their history, and it is difficult to spoof this costliness.” He calls this scarcity **unforgeable costliness**. Bitcoin, of course, is what this statement refers to. After all, it’s extremely difficult – not impossible, but nearly so – to “fake” Bitcoin. But what happens when the “Flow” in “Stock-to-Flow” hits 0? Those of you who still remember your high school math likely know the answer to this one. Well, if you use your basic calculator and divide by zero, you will get an error. No, *error* is not a fancy new quantum number. But the closer we get to zero, if you divide by that number, you get… infinity. Also, by the way, one of the coolest symbols in math: ![infinity] In other words, the SF ratio of an item that’s no longer being produced is infinitely large. However, if you plug this back into the S2FX model’s equation, what you get is **infinitely large market cap**. That translates to **infinite prices**. Now, Bitcoin is a long time off from hitting zero flow – that’s not expected to happen until around the year 2140. Ironically, the same date applies for assets like gold and silver (pre-celestial mining of course). There are other assets we can look at to see what happens when flow goes to zero, though… And since I’ve talked about Edward Thorp, Einstein, Elvis and Ace Frehley in this missive thus far, I think it’s only natural I bring up the pride and joy of early 1700’s Italy, Antonio Stradivari… [[And for the math fans out there, the logo for integration, **∫** actually came about because of Gottfried Wilhelm Leibnitz who was an incredible mathematician and musician. Ironically, his original logo for integration was not the one we know it as today, but a shorthand version of ſ (long s) character. Completely independently, Stradivari perfected the sound of the violin and the cut out (which looks like the integral sign used today in Calculus). It was widely accepted that a Stradivarius violin made a perfect sound, mathematicians took the cut out symbol on a violin and became the logo used for integration in Calculus (perfect calculation reference) and hence why the violin is on most calculus textbooks.]] ## **Antonio Stradivari and the Philosophy of Supply and Demand** ![Stradivari violin symbol integration] What do antique violins and Bitcoin have in common? Well, for one, they’re both “unforgeably costly”. Famous violin-maker Antonio Stradivari has been dead for centuries. And yet his instruments, known as Stradivarius violins, are highly regarded by the musical world as the pinnacle of violin craftsmanship. Every surviving Stradivarius violin is catalogued and tracked. While the best-made modern violins struggle to break the six-digit mark, several Stradivarius violins have been sold for millions of dollars each. They are, without a doubt, unforgeably costly. - **Since Mr. Stradivari is quite dead, no more of his violins can be made. In other words, the *flow* of new Stradivarius violins is zero.** According to the S2FX model, that would make his violins infinitely expensive. But while they’re certainly pricy, they don’t cost an infinite amount of money to buy. The thing is, when the supply of something rare goes to zero, that means pricing is left solely in the hands of the people who want to buy that thing. In other words, the demand part of supply and demand dictates what the value of that thing is. I have no interest in million-dollar antique violins, I prefer jamming out on a 1959 Les Paul Standard. I would wager that the majority of you have no interest in collection violins either. But those Stradivarius violins are clearly valuable to *some* number of people out there. Our long-dead Italian violin maker, Mr. Stradivari, certainly has no say in the pricing of his violins anymore. His inability to make new violins is not the only reason his violins are worth so much, or else every dead violin maker would have violins worth a lot of money. Clearly the violin buyers have some way of judging the desirability of an old violin. What the S2FX model fails to capture is this – the *demand* side of supply and demand. ## **Supply Ain’t the Only Rock Show in Town** ![Gold's market cap vs sf ratio] When gold had its dramatic bull run in 2011-2012, global stockpiles and production levels didn’t suffer any dramatic changes. The price of gold did not run up to $2,000 in February 2012 because half the world’s gold stockpile had suddenly disappeared, or because mines worldwide were forced to shut down. - **In fact, between 2010 and 2012, Gold’s SF ratio went *down* which, according to the S2FX model, should have also caused prices to go down.** But they didn’t. Instead, prices broke to new all-time highs that would not be seen again until just earlier this summer. It should come as no surprise, but the answer is simple: when it comes to pricing assets, supply is only *half* of the equation. And since the SF ratio is purely a supply-side metric, it cannot accurately price anything by itself. Finally, don’t forget: Bitcoin isn’t the only cryptocurrency out there with limited supply. Bitcoin Cash, Ripple and Litecoin are also all in the same boat, to but name a few. Shouldn’t the S2FX model should apply to all these coins too? Will they all be going to infinity at the same pace as Bitcoin? ## **Stop the Flow, and the Stock Still Goes** As our good friend Mr. Stradivari has shown us, even when an asset is no longer being produced, it will still change hands. Price is a function of both supply and demand. (Doubtless, if Mr. Stradivari were still alive today and cranking out violins, they wouldn’t be quite as expensive as they are now.) There’s more to Bitcoin’s price than just its SF ratio – or else it wouldn’t have traded both as low as $50 billion and as high as $200 billion at the same SF ratio. In conclusion, I find the S2FX model to be inherently faulty, and not mathematically sound. **You’re free to disagree with me or even ignore me, of course – I’ve laid out my reasoning, and you’re welcome to pick apart my argument the same way I’ve done to the S2FX model.** That said, I still believe that Bitcoin will have a major role to play in the future. I’m not a crypto-hater – far from it. Like I stated in the [previous article](https://katusaresearch.com/bitcoin-vs-gold-part-1/), I have a significant amount of money invested in the crypto space myself. But right now, Bitcoin is still in overbought territory, [as per our previous article](https://katusaresearch.com/bitcoin-vs-gold-part-1/). If you’re a savvy investor keen on getting yourself a good deal, now is not the time to jump into Bitcoin. Instead, you should remember that it’s [the best time of year](https://subscribers.katusaresearch.com/tax-loss-panic-rebound-2020/) to be on the lookout for buying opportunities on the markets. In fact I have my year end wish list. And its available now for all Katusa subscribers now on our website Regards, Marin Katusa --- # Bitcoin vs Gold – Part 1 - URL: https://katusaresearch.com/bitcoin-vs-gold-part-1/ - Type: article - Published: 2020-12-04 - Updated: 2020-12-03 - Author: Marin Katusa Ok this week I will introduce my two part series on Bitcoin vs Gold. To all the crypto players out there, I am on your side. But what I am going to share this week – and conclude next week – will shock the Bitcoin world… using advanced math to prove that the model many of the talking heads and crypto gurus are using, is actually wrong. I’ll get to that shortly. But first… let’s cover where we’ve been. It was just mere months ago that gold broke to new all-time highs of $2,089. Though it has pulled back since then, gold has since settled in at a level not seen in a decade. ## **Birds of a Feather Flock Together…** ![Gold Price YTD]But gold wasn’t the only thing that set a new all-time high this year. Just earlier this week, Bitcoin managed the same, punching its way back up to set a new record high of its own at $19,850. That’s just a hair shy of the much talked about $20,000 mark. In fact, a chart of its recent performance looks strangely familiar… ![bitcoin price]Simple coincidence, of course. After all, these charts took place across different spans of time. But Bitcoin didn’t pick up the nickname “Digital Gold” without a reason, and the two have a lot more in common than you might think. ## **Cryptocurrencies – Commodity or Currency?** How should we classify cryptocurrencies like Bitcoin? Are they commodities or currencies? Technically, they’re both of the above. Which makes them unique among most asset types. - **Case in point****, Bitcoin functions as both a medium of exchange and a commodity with a theoretically finite supply. You could even call it a security, in the *loosest* sense of the term.** That said, there’s one fundamental shortcoming of cryptocurrencies that doesn’t apply to stocks, bonds, or government-issued currencies: In the unlikely scenario that the market for a particular cryptocurrency collapses it will be worth exactly *nothing*, regardless of the cost (energy, equipment and time) to create the coin. At the end of the day, cryptocurrencies are a bunch of zeroes and ones. Despite what the detractors of fiat currencies say, every bank note and coin minted is backed by the full faith and credit of the issuing government. This may not mean much if the note is issued by the Reserve Bank of Zimbabwe, but it will be a long time before the U.S. Treasury will run out of things to tax. That’s to say nothing of commodities like gold, where you actually own a physical asset – even if the intrinsic value of that asset is debatable. Beyond that, however, Bitcoin and gold serve very similar purposes. Gold, too, can be used as a medium of exchange – unwieldy as it is, there are services like Glint that allow you to buy and sell things with gold. My friends at Goldmoney also do the same. I’m cheering for them, because gold is the purest money I know. - **And for [all the ESG investors](https://katusaresearch.com/a-guide-to-esg-investing-and-how-much-money-is-at-stake/), Gold has a much smaller Green House gas foot print than Bitcoin.** Besides which, Bitcoin itself can be awkward to use as a currency for the average consumer. I know all of you crypto geeks out there are probably chomping at the bit to disagree with me on this, but let me ask you: how many things in your daily life can you use Bitcoin for? Can you use it to buy groceries, pay for gas at the pump, order things on Amazon? Indirectly, perhaps, the answer is yes – by buying things like gift cards with Bitcoin and using them instead. But then you’re not really using Bitcoin itself as the currency, are you? One of the big reasons for this lack of universal adoption is the time it takes to actually make a transaction in Bitcoin… ![median time to process bitcoin transaction]With current median transaction times for Bitcoin sitting at around 15 minutes, there’s no way you’d want to pay for anything directly with Bitcoin. Can you imagine sitting around at the supermarket waiting for 15 minutes to confirm payment for your groceries? I know I’d have whipped out my credit card instead before the first minute was up. So rather, much like gold, Bitcoin serves better as a commodity as a store of value. And as a matter of fact… - **Bitcoin has recently found itself being bought for the same reason gold often is – as a hedge against inflation.** Paul Tudor Jones, the billionaire and famous hedge-fund trader, reported earlier this May that he bought Bitcoin as an inflation hedge in his $22 billion Tudor BVI Fund. This all while central banks around the world were busy printing money to combat the coronavirus-fueled recession. It was a smart move in hindsight – this was back when Bitcoin was still trading below $10,000. **Of Course, Bitcoin, like Gold, can play a role in your investment portfolio…** You should ignore both the alarmists putting all their eggs in the proverbial “crypto” basket because of their philosophical aversion to fiat currency, as well as the old-school types who haven’t changed their tune in the last ten years about crypto being “just a fad.” It’s real and it’s here to stay. Just like MMT and more government stimulus is here to stay as is taxing those with assets, wealth and cash. Different types of financial assets are complementary, rather than substitutes, and serve to add diversification to an investment portfolio. Besides Paul Tudor Jones, many other prominent hedge fund managers in the world like Stanley Druckenmiller have invested heavily in a combination of Bitcoin, gold and stocks. **Specializing doesn’t mean limiting yourself to one asset class:** - Jeffrey Gundlach, the so-called “Bond King,” owns physical gold. - Warren Buffett invests heavily in U.S. Treasurys and municipal bonds. - George Soros didn’t derive his whole $8.6B wealth on shorting the Pound Sterling. - John Paulson made just as much money trading credit derivatives as he did betting on gold prices. That said, one thing that’s become increasingly apparent in the last few months is how disconnected Bitcoin can become from the stock market and even gold itself. While November 2020 was one of the worst months for gold and USD, Bitcoin instead took the chance to shoot for the moon. **![performance of select investments, november]** But if Bitcoin’s recent performance has whetted your cryptocurrency appetite, be careful… ## **Bitcoin Technicals** What happened to the price of Bitcoin last month should make any investor wary. In the last week of November, rampant buying pushed the price to a near all-time high of $19,330 before the price fell $2,370 over the next three days. Yet Bitcoin proved its mettle and went on to end the month at a new all-time high of $19,850. In the chart below, you can see that using the Relative Strength Index (RSI) indicator, Bitcoin has been in overbought territory far more often than oversold territory. When the price of an asset successively reaches new all-time highs on several consecutive days, it shows you that it’s not the best time to get in at market prices. ![btc weekly relative strength index]And if you can’t stomach volatility, then cryptocurrencies might not be your cup of tea. The extreme price volatility shown by Bitcoin in the past, where it has swiftly gained (or lost) over 30% of its value in a single day, undermines its attractiveness as a stable store of value. - **On March 12th earlier this year, Bitcoin lost over 38% of its value in a single day (over $3,000). ** Contrast this to the S&P 500, which took one month to decline 33%, between February 19th to March 23rd this year. Or for a better comparison, let’s check Bitcoin’s volatility against gold’s… ![bitcoin vs gold price volatility]Right now, Bitcoin is still well in overbought territory… And its volatility means that sudden, large price swings are quite commonplace, both to the upside and downside. If you’re suffering from Bitcoin FOMO (fear of missing out) – don’t. If you want to build a position, then you should treat Bitcoin like any other stock or commodity, and [only start buying incrementally while the herd is selling](https://katusaresearch.com/the-investors-biggest-problem-and-his-worst-enemy/). ## **Where Does Bitcoin Go From Here?** If gold is the barbarous relic, a piece of history from a bygone era – what does that make Bitcoin? It’s important to distinguish Bitcoin from other cryptocurrencies. For instance, the performance of Ethereum, the second largest cryptocurrency after Bitcoin, has often been driven by the performance of Bitcoin itself. But this correlation has weakened at times over the past year as the explosive growth of **Decentralized Finance (DeFi)** – financial services backed by blockchain technology, primarily built on the Ethereum platform – became a new driver of interest in Ethereum. And like Ethereum, many of the other cryptocurrencies that exist in the marketplace have different use cases – and different value propositions. Though I stated earlier that Bitcoin is too awkward and unwieldy to use as a currency for day-to-day transactions, the same isn’t necessarily true of other cryptocurrencies. - **I think there’s a good chance that one day, we’ll be able to truly use cryptocurrencies the way they were intended – as the new digital cash of the future.** But even if that day comes, Bitcoin will probably still serve the same role it does now. And that’s as “digital gold”. That means an asset prized for its scarcity, rather than its utility as a currency. Think of it as the Bitcoin standard, like how Gold was used in the gold standard. ## **SHOCKING TRUTH: Does Katusa Own Crypto?** Again, I play in the sand box where I have an advantage over others, and that’s gold equities. Not a single newsletter or fund manager in the sector can come close to my returns. That’s why I focus solely on the resource sector. But I do have a significant amount of money invested in the crypto space. I don’t manage it myself. I just don’t have the time to do it. Instead, I have one of the most knowledgeable teams manage my exposure to crypto. But I do pay attention because it is a lot of money. But I want to bring your attention to something groundbreaking… - **A math “theory” has recently made its way around the world regarding Bitcoin that is being used by almost all Bitcoin bugs. ** I will probably get more hate email next week than combined in the history of my firm for what I am going to publish. Again, I am cheering for Bitcoin. I have a lot of money in it. As most of you know, my background is mathematics. So, when someone floats around a fancy math concept, I take a look. Most guys would take a look at a sports car or a hot super model. But I like looking at math theorems. - **Next week, I will publish in detail, step by step, putting back my old Calculus prof hat on why everyone is using a wrong formula. ** I know it’s going to viral. I know it’s going to get hate. But to be a successful investor or speculator, you need to understand and challenge the facts. I am NOT shorting any cryptos or any companies in the space. All I am trying to do is bring a higher standard to the industry, in the hope to better it forward. No different when I “urged” a major mine to be the first “smart” mine in North America to get rid of relying on shovel operators and truck drivers communicating to one another on delivery of ore vs. waste rock. The “old hands” thought the computers and GPS systems had no place in a mine, but it improved production by 7%. That’s what I plan on here. I know there will be those who refuse to look at the math, and to those there is nothing I can do. But if you care at all on educating yourself better on Bitcoin and cryptos, next week’s piece is a must see. And until then, I suggest you start looking at my favorite time of the year again, when stocks are sold for reasons other than their intrinsic valuations. That’s right – it’s [tax loss selling season](https://katusaresearch.com/tax-loss-season-what-does-the-broken-clock-setup-look-like/). And I’ve just [handed my Katusa’s Resource Opportunities subscribers 4 new gold stock buying opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) to keep an eye out for this Christmas. If you want to know the best stocks to buy this holiday season – and why I’m personally taking large positions in them, at the same prices as my subscribers – consider signing up [right here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). And to all the crypto crew, I look forward to next week.. Until then, stay safe. Marin Katusa --- # Gold and Silver Melt, or Meltdown? - URL: https://katusaresearch.com/gold-and-silver-melt-or-meltdown/ - Type: article - Published: 2020-11-27 - Author: Marin Katusa *You can watch this article on YouTube in video format [here](https://www.youtube.com/watch?v=WvHo8llGQtQ&feature=youtu.be).* Since early July, I’ve told my subscribers in the precious metals markets to take a *Katusa Free Ride* on all our gold stocks. Thus, all but one stock in our portfolio has a zero-cost base and we are flush with cash. Is it time to jump in right now? Before we get into what to do now, let’s do a quick review of the gold market for the last nine months up to September 2020. Gold and silver were fresh off of multi-year highs… Retail and institutional interest were at multi-year highs… And volumes were through the roof. New buying and market interest led to a large number of new gold and silver exploration companies. Promoters know that when the ducks are quacking, they must be fed. On the back of a 20% rise in the gold price in 2020, this led to a massive number of financings and raises. - **There was approximately $5.4 billion ****in resource financings YTD and 28 new gold companies alone. ** While that may sound like a lot, it’s still the lowest amount of capital raised in the sector for over a decade. Take a look at the chart below to see. ![metals & mining sector analysis]Many of the restricted shares from those financings have become free trading. And as we discussed in previous blog posts, that large issuance of new paper has put a temporary ceiling on the underlying issuers. Selling pressure was caused by this paper hitting the market, with early investors looking to lock in gains. Then, the generalist funds were quick to move and locked in their gains in gold stocks post vaccine news. Gold stocks were sold off by many of the generalist funds to buy oil stocks as the economy is expected to reopen in 2021. Couple that with falling prices for the precious metals, and you have a recipe for a washout of weak hands. I’m not a “told ya so” kind of guy, but I did [warn this could happen](https://katusaresearch.com/spac-attack-what-happens-when-hot-ipos-and-financings-hit-the-market-in-tech-and-gold/) and laid it all out for you in a previous missive. ## **The Precious Metals Paper Wall** And it’s not finished yet. Yup, you heard that correctly. We haven’t seen the end of the selling pressure yet. As you can see in the next chart, there is still **A LOT** more new paper about to come free trading in December. ![Estimated value of stock going free trading in 2020]This too shall pass, but it could get uglier first. And don’t forget that we’re now entering the season of… ## **Tax Loss Tango** Tax loss selling in the precious metal sector will be vicious this year. As I do every year, I create my Tax Loss List of the best stocks I want to buy, and the prices I’m willing to load up at in the open market. Last year I had my list, and I didn’t get hit on any of my target prices. But I got more than my fill on the best stocks in the March Meltdown just 3 months later. Fortune Favors the Prepared. I think this December will provide some incredible deals in companies that are trading under NAV. What I’m going to say next will anger many of the gold bugs, but I need to remind everyone – I’m a profit bug. ## **Don’t Fall for the Hype: Gold and Silver are Still in the Minor Leagues** Gold and silver investors love using the metaphor of baseball innings to indicate where we are in the cycle. Yes, well-known investment figures such as **Ray Dalio**, **Stanley Druckenmiller** and even **Warren Buffett** have recently made heavy investments in gold and gold equities. Though, Buffett did pull a bit of a head fake when he sold 8.9 million shares of his 20 million share position in Barrick Gold. This was only a few short months after taking the position. So much for the buy and hold strategy… and maybe he just pulled the biggest troll job on gold bugs. Sorry, I laughed when I saw the news as the gold bugs thought Buffett had been converted to one of them. Nope, he’s a profit bug. Buffett, like others, sold some of their gold to put that capital to work in other sectors. Either way… - **I still believe that gold stocks have not started their *first* inning in the big leagues. ** This will be hard for most to fathom, considering that many of us saw large runs in many of our gold equities and took profits and free rides in 2020. But gold remains in the minor leagues when seen as an investment on the global stage. Yes, as important as it is to *us*—the gold speculators and investors and gold bugs—the gold sector is not at all important yet to the global flow of capital. Do you think the *to be appointed* Secretary of Treasury Janet Yellen wants to talk about gold? Hell no. She’ll continue with the strategy that the government balance sheet can handle much more stimulus, and stimulus will come. Before I get onto why gold’s still in the minor leagues, I want everyone to focus on this one chart I created. ![21% of all us dollars were printed in 2020]Yes, 21% of all U.S. Dollars that exist were “digitally created” in 2020 thus far. But just focus on this chart for a minute… Has anything changed for the better? I’d say Biden has made it very clear the more stimulus will come. Do you really think Powell and Janet Yellen aren’t going to work together and “do whatever it takes” under a Democratic President? Meaning the printing we saw in 2020 is just the start of what’s to come. Gold’s time will come. But before it does, and before it gets promoted to the Big Leagues (which it will), for the time being if you’re savvy enough you can get the best “Big League” companies at AAA ball pricing. Consider this… Vancouver, B.C., Canada is the financing hub for global gold exploration. Yet the established money management firms don’t even include gold equities as an option for their high-net-worth individuals. They’re still touting bank stocks and REITs (with 1 percent cap rates paying out terrible 3 percent yields). Gold isn’t even taught in most business schools, CFA classes, or portfolio management courses. Gold investors are seen as outdated and irrelevant. A barbarous relic. The earth under Canadian soil might hold some of the world’s most prominent gold reserves… yet the Bank of Canada, Canada’s central bank, holds *zero* gold bullion. The biggest funds in Canada, such as the Canadian Pension Plan, have much lower exposure to gold and gold equities than the percentage of Canada’s GDP that comes from mining gold. U.S. pension funds’ exposure to gold is *even lower*. But that’s actually all good news. - **As we approach gold’s transition into the major leagues, we will see an increase in both passive and active funds positioning themselves into gold equities.** ![Gold focused etfs cumulative fund flow]The gold sector won’t start playing major league ball until the professionally managed funds in the U.S. start deploying capital into gold equities. ## **It’s All About the Flow of Capital… ** As you can see in the graph below, there are 1,357 mining companies listed in Canada and 100 mining companies listed in the U.S. ![Total mining companies listed]Of those, 428 are gold companies listed in Canada, and 44 are gold companies listed in the U.S. ![Total gold companies listed]Here’s the interesting part. All but four of the gold stocks listed in the U.S. are also listed in Canada. But the dollar volume on U.S. exchanges absolutely dwarfs the volume on Canadian exchanges. ![Gold focused total sector average dollar volume traded]Accounting for currency exchange, the **44 gold stocks** listed on the U.S. exchange trade $150 million *more* a day than all **428 gold stocks** listed in Canada. I’m Canadian, so I can say this: Canada is a small fry when it comes to the global flow of capital. I love Canada. I’m a proud Canadian. But changes are happening, and as usual the Canadian market is oblivious to it all. Management teams don’t want to talk about the fact that the “flow of funds” into the Canadian mining sector isn’t growing. In fact, it’s shrinking. Thus, investors buying gold companies listed on the Canadian exchange usually end up selling shares they own of another company to come up with the capital. - **It’s mainly a rotation of capital, not an inflow of new capital. ** More importantly, the federal government of Canada is rumored to be raising the capital gains tax rate by at least 100%. This will make it equal to the tax rate of the highest income bracket in Canada. - **This will reduce the flow of funds to higher risk, early-stage exploration companies. ** The risk/reward just won’t make sense for Canadian investors due to the higher potential tax rates. In addition, with all the new regulations and taxes, the big U.S. funds (active and passive) *can’t* and *won’t* buy gold companies in Canadian dollars. The rules for American investors, quite frankly, suck. The legend removal process on Canadian exchanges is difficult, and it’s hard for American investors to put Canadian certificates into their U.S.-managed brokerage accounts. I’ve been advocating for years that the Canadian investment industry needs to adapt to its customer—the U.S. investor—instead of forcing U.S. investors to jump through hoops to invest in Canadian-listed mining stocks. And there are big things afoot in this department that Katusa Research is working feverishly on. ## **Greedy When Others are Fearful: The Coming Katusa Alligator Stock Watchlist** I’ve been uber cautious these last few months. I’ve stated as clearly as I could, in both writing and in videos, for my subscribers to reduce as much risk as they can and lock in their Katusa Free Rides. In retrospect, our timing on the calls has been very good. I hold a very high cash position in USD and anyone following our portfolio should be high in cash. Even with the incredible gains in our portfolio, I’m over 55% cash. I hold this high amount of cash (of which 70% is in USDs) because I believe we’ll see some rocky markets in the months ahead. Whenever the markets have a sell-off, the USD performs well. And yes, as I’ve stated before, even gold sells off initially. Then the tidal wave of selling on gold miners and explorers starts (as you’re seeing right now). The U.S. election will come and go, and eventually—there will be a victor. In the end, it won’t matter who’s in the White House, with respect to the price of gold. - **Twenty-four months from the election, gold will be higher than it is today. ** There’s one simple reason why: both parties are completely committed to unprecedented stimulus. And I’m very close to pulling the trigger on a few opportunities that have been many, many months and hundreds of man-hours in the making. I’ve stayed very patient since this summer and took lots of criticism for it. But I didn’t catch a 586%, 664% and even a 1,044% win in the last 24 months by chasing every opportunity and day-trading. This isn’t armchair investing. I eat my own cooking and buy exactly what I write about… at the same price and terms as my subscribers. Look, you may not like my style or my personality. But I’m not here to be liked – that’s what bankers are for. I’m here to educate, and to deliver the best returns on precious metal, base metal and energy stocks in the business. And so far, I’ve delivered. [Click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) about *Katusa’s Resource Opportunities*. The next 6 weeks might not look pretty, but I’ve seen this rodeo dozens and dozens of times. I have a blueprint for this, and an army of readers that’ve been waiting like alligators for 6 months. And it’s almost time to eat. Regards, Marin Katusa --- # A Guide to ESG Investing and How Much Money is at Stake - URL: https://katusaresearch.com/a-guide-to-esg-investing-and-how-much-money-is-at-stake/ - Type: article - Published: 2020-11-20 - Updated: 2020-11-19 - Author: Marin Katusa ESG Investing Makes You “Feel Good”. As Forbes correctly pointed out, there is another motive at play than just chasing big profits… Investing in ESG companies and funds makes you look good. - **A recent poll found that nearly three-quarters (73%) of people think more positively of billionaires that stop investing in controversial industries****.** Let’s face it, Cancel Culture is having a major impact on how things “look”. And high net worth investors and fund managers can’t afford to have a bad social reputation. Contrary to the old *Wall Street* movie from the 1980’s, greed is no longer good. You have to *do good* to get greedy in the 2020’s. Or your headquarters or projects will be met with protesters, resistance, media, and social attacks. Worst of all to the money managers, investors will pull their capital from you. This is another risk factor that never existed before. Whether you are a mega-corp (like a Facebook or an oil company like Exxon), if you don’t have a directive on ESG – you’re going to fall behind, FAST. This will be mission critical to attract and retain the next generation of employees and capital. Think Millennials and Gen Z as the wealth from Baby Boomers transfer to their kids. These generations are rapidly increasing in the workforce right now in huge numbers and will be over the coming decades. If you’re company isn’t socially responsible, or at least is *making it look like they’re doing good*. You will be left behind, no question. ## What is ESG? ESG stands for **E**nvironment, **S**ocial & **G**overnance. They’re a modern set of operating guidelines for companies that were established in the wake of the global shift towards the 2 biggest buzzwords today: sustainability and social responsibility. The crux of ESG investing and ESG scoring is to align companies and investors, with these brand-new corporate values. Let’s start by breaking down each of the components of ESG: - **Environmental** Measures the environmental friendliness of a company and its operations. If you’ve heard the terms “eco-friendly” or “carbon neutral” from a company before, that’s a prime example of the environment part of ESG. - **Social ** Gauges a company’s attitude towards social concerns such as human rights, labor practices and diversity. Unsafe working conditions, glass ceilings and product safety would all fall under this umbrella. - **Governance** Or Corporate Governance. This comes down corporate structure and transparency, as well as business ethics. Executive compensation is the issue that most often comes to mind when corporate governance is brought up, as it’s a simple, if limited, metric of a company’s fairness and accountability. When put together, each part of ESG comes together to form a comprehensive set of standards. It checks how well a company handles these prevailing issues and concerns. Now, many financial firms now provide “ESG Ratings” on corporations for investors and regulators. They do this to sort them by how well they perform based on the above mentioned ESG criteria. In the past, the most important metrics for any company were the financial ones. A company that was growing quickly, or making a lot of money, was a good company. What we’re seeing now, is that a company’s ESG metrics are also increasingly being taken into account. This has led to the advent of “ESG investing”, which is also known as sustainable investing. Companies are weighed by their ESG metrics just as much as they are by their financial ones. ## **Follow the Money into ESG: An Avalanche of Capital Inflow** You can choose to get on board and be ahead of the green money in this corner of the market… Or sit out the greatest coordinated capital infusion the world has ever seen. Let me explain… - **Today, there are more than 597 ****ESG-focused ETFs**** (exchange-traded funds) with over $165 ****billion ****in Assets Under Management. ** The flow of money into the ESG sector is approaching tidal wave standards. Below is a chart which shows the annual flow of funds into ESG themed products. ![annual fund flow into esg themed products]From Jan 1st to Nov 10th 2020, over $60 billion has flooded into the sector. That’s double last year’s fund flow and over 6 times more than was invested not the sector in 2016. ## How is ESG Impacting Companies? On the surface, you might consider the rise of ESG and ESG investing to be a negative value proposition for companies. After all, don’t things like environmental friendliness or competitive employee salaries cost the company more – which leads to weaker financial performance in the long run? Not necessarily. You start by considering a company’s environmental footprint, like its energy consumption and waste generation. If a company can lower its energy costs and bills, that might lead to more savings, and hence better profits, over the long term. Even if it costs more capital up front to, say, build a more energy-efficient office building or production facility. And if they can produce less waste, that means less money spent on waste treatment and disposal too. Whether the money saved fully offsets the extra costs involved will vary depending on the company and project in question. But it’s certainly not as simple as “eco-friendly = more expensive”. - **Amazon, for instance, just recently placed a massive order for 100,000 custom electric delivery vehicles****, as part of their plan to hit zero net carbon by 2040. ** Not only will these vehicles be more environmentally friendly… They’ll also feature a plethora of automatic electronic safety features and direct integration with Amazon’s logistics management and routing systems. This will streamline their delivery operations – meaning both better performance and lower costs, down the road. And most likely be equipped with self-driving and robotic delivery abilities. What about the costs of social concerns? Like… - Providing better salary and work environments for employees, or - Taking more accountability when it comes to their products and services? It’s no secret that treating your employees well leads to boosts in morale and productivity. And makes attracting talent much easier. On the other hand, doing the opposite leads to decreased productivity and more employee turnover. That can be costly. And when a company takes consumer protection more seriously, that leads a lower chance of adverse government regulation or expensive litigation. The benefits of reducing corruption in any company should be plainly obvious… Without enough transparency and accountability from a company’s leaders and operations, you end up with cases like WeWork. WeWork’s failed IPO in 2019 was tainted by serious failures in proper corporate governance. It was all in connection with its now ousted founder and CEO, Adam Neumann. Finally, one of the last factors that can cause ESG to seriously impact companies is simply consumer and investor appeal. The younger generations of today have shown an increased willingness to “vote with their wallets”. And many make the conscious decision to avoid products or brands associated with companies with histories of poor ESG performance. ## **Adapt or Die: The Knockout Combination** To show this shift in consumer and investment sentiment, we can look at something called **Fund Flow**. It is the net creation of shares for ETFs. To make it easy for you – the greater the fund flow, the greater demand there is for the product. Let’s take the Top 10 ESG ETFs and compare them to the Top 10 Oil & Gas ETFs. ![ESG vs Oil and Gas Fund Flow analysis]Over the past 2 years, the trend is very clear. ESG ETFs are receiving money from investors, while oil and gas is not. This is a major shift in sentiment. ## What’s the Outlook for ESG? Make no mistake, ESG is here to stay and will only become a more dominant theme. Though, how companies are measured against one another and scored based on their ESG practice will likely change. For example… One major problem with ESG is that there’s no set standard or clear methodology for evaluating a company’s ESG profile. Different analysis firms can give different ESG ratings for the same company. You can see how that could be confusing for consumers and investors alike. Another big problem with ESG investing is that criteria are often applied incorrectly in the due diligence process. That’s where analyst take a much deeper dive into the data and company. Sometimes, investors place too much importance on ESG criteria and not enough on fundamental financial analysis. And that leads to wrong valuations. At other times, investors only take a cursory look at a company’s ESG rating without looking closer to check the exact breakdown. This causes them to miss any significant underlying issues at play. - **A study conducted by Nielsen in 2015 ****found that 66% of consumers around the world are willing to pay extra for sustainable products – but for millennials, that proportion goes up to 73%. ** And it’s not just empty talk… Last year, NYU concluded from extensive research that products marketed as sustainable accounted for 50% of the growth in consumer packaged goods from 2013 to 2018. In fact, sales for products marked as sustainable grew 5.6 times faster than those that didn’t. This impact from ESG on customer and revenue growth simply can’t be ignored. This is, in part, due to the massive $30 trillion generational wealth transfer that we’re just starting to see take place. The aging baby boomer population is passing on their assets on to their millennial children. A survey conducted by Morgan Stanley in 2019 found that 95% of millennials are interested in sustainable investing. And 88% of all surveyed believe that it’s possible to balance financial gains with ESG considerations. [What this all means is that ESG isn’t just a passing fad…](https://katusaresearch.com/your-edge-in-the-energy-sector-how-katusas-green-barrels-of-energy-gboe-metric-works/) **It’s already a major business and investing trend, and one that will only continue to grow in size and importance. ** Whether you truly believe that ESG investing can beat the market… Wish only to invest in socially responsible companies…Or even think it’s a load of bull… ESG is around to stay. That’s why it’s important to understand both the benefits and the pitfalls of ESG investing. Regards, Marin --- # Blue Wave, Red Surge, Either Way the Road is Gold - URL: https://katusaresearch.com/blue-wave-red-surge-either-way-the-road-is-gold/ - Type: article - Published: 2020-11-13 - Updated: 2020-11-23 - Author: Marin Katusa Last week we saw considerable profit taking in the precious metal market as investors de-risked ahead of what was sure to be a volatile week. It was the right trade as uncertainty continues to swirl over who will be the next President of the United States. At this point, Joe Biden has 306 Electoral College votes, to President Trump’s 232. Mainstream media has already “called” it a Biden win – adding the tag “President-Elect”. It seems likely Joe Biden will be the next President of the United States under a divided government. Though you can never count out Donald Trump and his team of lawyers. Things could get messy real fast. And that means volatility in your portfolio, on TV and potentially again in the streets. While candidates ran on different platforms and ideologies, both had one agenda item in common: Spend money, and lots of it. A divided government, which is the likely outcome, means that previous changes will be harder to rollback. Perhaps most important is Trump’s corporate tax cut initiative. Keeping taxes low keeps more money in the system, rather than in the hands of the government. This is good for gold and the stock market… ## **Printing Press: The Dollar is the REAL Tsunami** Why is that you may ask? Simple. Stimulus, aka financial heroin, is not going away anytime soon. Just before the election the Democrats and Republicans were at a typical impasse on a second round of stimulus for the country. The Democrats wanted $2.4 trillion and the Republicans wanted $1.9 trillion. This is on top of the first $2 trillion which was injected in March. These are huge numbers. With the election out of the way, we are going to see more fiscal stimulus coming. Below is a chart which shows the United States MZM Money Supply, which is the total amount of money available immediately for spending. You’ll see the trajectory of new issuances is rising faster than ever before. ![MZM money supply usa chart]These major multi-trillion-dollar injections of capital, or digits as Fed Chairman Jerome Powell calls them, are being fueled by ultra low interest rates. ## **The Road to Negativity** It’s not just political divisions and fights between friends and family that are going negative… Just last week, the United States Federal Reserve elected to keep rates low and suggested that they will continue to do so for years to come. These ultra low rates are becoming the hottest fad for central bankers around the world. - **These low rates are forcing investors to bid up asset prices until they are actually receiving a negative yield. ** Next, you’ll see a chart which shows the amount of negative yielding debt, worldwide. And you need to pay close attention. You will see there was virtually none up until 2015. Since then it has taken off at warp speed… In fact, its far easier to print more money, and let future taxpayers suffer the consequences later than to try to rip the cheap debt band aid off themselves. ![World Wide Negative Yield Debt Chart] What is most important about these charts is that governments cannot reverse these decisions easily. In fact, its far easier to print more money, and let future taxpayers suffer the consequences later than to try to rip the cheap debt band aid off themselves. - **Regardless of who wins the US election, printing digits is going to keep happening. ** And the more that are printed, the better the stock market and gold will do. ## **No Doubt, Powell Will Power Gold** It’s not a coincidence that the stock market has soared as more money is injected into the system. Neither should you consider it strange that all this digit printing has pushed gold to all-time highs. ![Digit Growth vs S&P & Gold Performance Chart]The expansion of the MZM has clearly been supportive of higher asset prices and gold. Most notably post March, with the rapid expansion of $2 trillion worth of stimulus. Let me remind you again, that these stimulus packages are not over any time soon. We’ll continue to see a very supportive environment, both from the US government and the Federal Reserve, regardless of the election outcome. This year has been a wild ride for my subscribers and the funds that I manage. We’ve had several big wins, including a 500% winner in a junior gold stock, and several others we made 50%+ on during the March meltdown. Our outperformance vs the major gold miner ETFs speaks for itself. ![KR Gold VS Vaneck junior gold miners etf]I invest millions into deals that I think have mega wealth creation opportunities. Subscribers know exactly what price points I am looking to buy under and sell above. **The gold miners share prices are volatile right now… ** As of this recording, the fewest number of gold miners are in an uptrend since the March meltdown of 2020. We warned subscribers back in the first week of September that there was a strong chance this would happen. It was time to take profits and a breather. However, the market is telling us something very important if you understand the data the market is sharing. **Right now, I am very close to pulling the trigger on 2 major opportunities, which I will be investing millions into. ** Subscribers will get to buy alongside me at the same price, and I don’t take any fees. Whether you’re worried about next year, or cashed up like I am and excited, the [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) portfolio could be just what you’re looking for. The next 3 months are shaping up to get real interesting. Real fast. I’m prepared. Are You? Regards, Marin --- # The Investor’s Biggest Problem and His Worst Enemy - URL: https://katusaresearch.com/the-investors-biggest-problem-and-his-worst-enemy/ - Type: article - Published: 2020-11-06 - Author: Marin Katusa *** ****“The investor’s chief problem—and his worst enemy—is likely to be himself. In the end, how your investments behave is much less important than how you behave.”* **– Benjamin Graham** I spent the first 10 years of my career learning how to pick stocks. And even at that, I will continue to make mistakes. After hundreds of site visits and mistakes and successes on both the technical and financial side, I’ve found a framework that works for me. Almost as important as my due diligence framework is my framework on how I buy the stock and when and how to sell. - **For one, you should never load up 100% of your desired position into any single buy order**. Perhaps there are other fund managers and newsletter writers who have a mystic ability to buy only once and be set. But I have found (through direct experience) that the best results have been from buying in tranches. ## **Buying in Tranches** To keep things simple in my newsletter, I use 4 tranches. Each tranche is 25% of my desired allocation. With specific price guidance for each tranche. In this scenario, two things can happen: - If the stock takes off like a rocket, I have skin in the game. - If the stock retreats to a level I deem discounted to its intrinsic value, then I add to my position by taking my next tranche. No one can time a stock perfectly time and time again. So, you have to ease into a position. - **Junior, mid-tier and major stocks alike can make wild moves when a big player buys or sells a chunk of stock in the open market or in periods of market panics**. If that happens like in the market panic of 2020, an alligator investor can pick up shares of a billion-dollar company, that’s run by a world class management team, and pays a fat (and stable) dividend, for cheap. If the stock drops further, you can elect to pick up a second or third tranche to ease into filling out your entire position. - **For example, if you want to build a $10,000 position in a stock, consider splitting that up into 4 equal tranches of $2,500 each.** Not all tranches may hit. And that’s okay. Only a novice investor goes all-in. I learned the hard way when I started too. For me, it makes sense to buy in tranches instead of timing and moving the stock price. This strategy has served me very well and allowed me to sleep soundly at night knowing I never had to worry about “timing” the market. In mid-2017, I used this strategy to target research on – and accumulate shares in – a company called **Nevsun Resources**. Nevsun was a base metals focused mining company that I was very familiar with. With a depressed copper price, the stock started taking a hit. When copper started recovering, the stock didn’t follow suit. I began to buy my first tranche (25% of my desired position). Then my *second* tranche… And then my *third* tranche. ## **Fast Forward a Little Over a Year…** And the investment thesis hit on target. Lundin Mining tried to do a hostile takeover, sending the price of Nevsun through the roof to $5.00. At that point, we locked in a *Katusa Free Ride* (another alligator investing strategy) so that we could take all risk off the table, and free ride the remaining shares. A few months later, Chinese outfit Zijin Mining made a bid for Nevsun and acquired the gold company for $6.00 per share. ![Nevsun-Resources-Return-e1547833694238 (1)]It was a nice gain. Not a 10 bagger, but a respectable win in a tough resource market. In total, we got 3 tranches filled for a solid triple digit return. The strategy of buying in tranches also allowed me and my subscribers of [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) to see gains this year in the portfolio of… - **130% profit **in a world-class energy company … - **A 201% profit** in a gold producer (we’re now holding for free) This strategy isn’t sexy. It doesn’t sell thousands of books and seminars. But it works. ## **Give Your Speculation Some Time to Play Out** Being patient and investing like an alligator using my system of tranche buying is extremely difficult. Over my nearly 20-year career, I’ve seen many people (including myself) become impatient and make irrational moves. As one of the largest financiers in the resource market, I’ve made many mistakes. But I have learned from each mistake. These are all lessons I share with my subscribers, so that you hopefully don’t have to learn the hard way. **Being impatient has cost me a lot of money. ** **And here’s an example from personal experience:** I met an analyst on site in early 2006 and we bonded. Site visits do that at times, especially when the plane is stranded in an unexpected 4-day snowstorm that no one was prepared for. We stayed in touch over the years. He moved on from the firm he was an analyst within 2008 and joined **Verde Potash**. I believed in this individual and without doing a site visit I purchased 4 million shares at CAD$0.25. I trusted him, knew of his strong technical background and the company was trading at a discount to cash, so I was getting the management and the project for free. The company had C$0.29 cents cash per share, so I felt good about my $1 Million bet. I had many meetings with management and then I planned to do a site visit of my own to the main asset in Brazil. (2009 was crazy for me as I spent over 300 days on the road and gained 40 pounds as a result of bad habits such as drinking beer with geologists at night on the road, and not working out regularly. But you would be amazed how much market intel you get from drunk geologists at midnight). Anyways, Verde Potash management laid out a specific time frame and business plan that they assured me would hit if I stuck it through with them. Well, the first milestone was delayed. Then the second. Remember, early 2009 was a very rough market for junior resource stocks. I didn’t have the time to go out to the project and see for myself. But a close and trusted friend of mine (thanks Miles!) stated he knew the project and that it wouldn’t work. I was skeptical after that and frustrated with management for missing the milestones. I lost sight of the main reasons I’d taken the position in the first place. Then the third milestone was missed and I sold. I netted just under a 100% gain. You would think a near double isn’t bad in a very tough market. But I screwed that one up. - **As it turned out, I missed an enormously greater score. Within 14 months, the stock was trading north of C$10 a share.** Was the delays management’s fault? No. I was impatient. Even though nothing changed, and I trusted management, I let one friend’s perception of the project change my view. I continue to learn from my own mistakes (and try to learn from others I respect in the industry). I continually remind myself that, if the specific reasons for investing in a company are still valid, and I trust management, I shouldn’t let non-management time delays sway me to abandon my position. Shit happens. We try to learn and better ourselves and become better investors. Because of my impatience, I left over $39 million on the table. It was no ones fault but my own. ## **“Big Returns in Waiting” – The Way of the Alligator** I like to put my money to work as much as anyone else, and sometimes impatience can get the best of you. That’s why I always recall [The Way of the Alligator](https://katusaresearch.com/the-way-of-the-alligator/). If you’re impatient and you’re always “doing something,” you won’t have the cash to buy up bargains during a crash. When you look at your cash positions as *big returns in waiting*, you’ll start to realize how powerful the alligator buying system is after one or two big hits. Regards, Marin Katusa --- # 5 Important Gold Charts to Watch Right Now - URL: https://katusaresearch.com/5-important-gold-charts-to-watch-right-now/ - Type: article - Published: 2020-10-30 - Updated: 2020-11-23 - Author: Marin Katusa In such volatile times, let’s see if gold is whispering anything to us. ## Chart 1: The Gold to S&P 500 Ratio In this chart you’ll see how the price ratio of one ounce of gold to the price level of the S&P 500 has varied over the years, based on the monthly high closing price of gold. The higher the ratio, the “more” expensive gold is relative to the S&P 500. The opposite is true when the ratio is below 1. A return to the 50-year average ratio would mean a gold price of $2,176.84, which would be a 14% increase over the current spot price of gold. This means gold is undervalued by 14% right now, relative to its 50 year average ratio to the S&P 500. ![Monthly Gold SPX Ratio]In other words, gold has a long way to run before it gets to its multi-generational average ratio level with the S&P500. Even at an all-time high close price of $2,063.02 an ounce… - **The Gold/S&P500 ratio is still lower than the 50-year average, and** - **It’s also still 4.5 – 9.6x lower than it was during periods of double-digit inflation.** While the S&P 500 continues pushing its own all-time highs, it’s worth noting that only 239 of its 500 components, less than half, are up year-to-date. Only 72 of the S&P 500 companies have outperformed gold and only 52 have outperformed the VanEck Gold Miners ETF (GDX). Miners Freeport-McMoran (NYSE:FCX) and Newmont (NYSE:NEM) are the 50th and 51st best performing stocks in the index, both up over 39% year-to-date. They are the only two base and precious metals mining companies in the S&P 500. ## Chart 2: Inflation-Adjusted Gold Price When gold hit its nominal all-time high close of $2,063.02/oz on August 6th, 2020, it was actually only its 24th best closing price when adjusted for inflation (indexed to 2012 dollars). Real, or inflation-adjusted, prices can be calculated simply by using any inflation indicator. The most well-known one is the Consumer Price Index (CPI). But in this case we’ll be using the GDP Price Deflator, which is generally considered a more robust measure of inflation. If we look at gold’s top 10 highest daily closing prices after adjusting for inflation, we can see that they were all either in January 1980 or between August-September, 2011. ![inflation adjusted record daily gold prices 2012 dollars]In 2012 dollars, spot gold would need to hit **$2****,****349.01/oz** to match its inflation adjusted all-time high set on January 21st, 1980. At the current gold spot price of $1867, gold would need to rise $482.01, or 23.3%, just to match that previous all-time high. ![monthly gold spot price (Inflation adjusted, 2012 dollars)]This chart might superficially suggest that gold’s current prices aren’t all that impressive. But inflation measures have their limitations… So it’s worth taking note any time asset prices hit all-time highs – even in nominal terms. In either case, the difference between previous inflation-adjusted highs means that gold still has plenty of additional price upside. ## Chart 3: Relative Valuation of Gold Miners It’s no secret that mining stocks provide great leverage to the underlying metal they produce. But are gold miners still a bargain in this market? - The short answer is: yes they are, when compared to almost every other industry in the stock market. This is especially true when you consider that the long-term outlook for gold is bullish. In the chart below, we look at *Price to Forward Cash Flow Per Share* (Forward CFPS) multiples. This tell us where stock prices are relative to the cash flows they’re expected to generate over the next twelve months. ![Gold Miners Valuations]Gold miners, and especially senior producers, have benefitted greatly in this bull market. Yet the multiples for the GDX and GDXJ, the VanEck Gold Senior and Junior Gold Miner ETFs, haven’t shot up as much as the other major market indices. In fact, GDXJ is even below its 10 year average. When you hear the words “frothy market”, just look at the NASDAQ and how its Price/Forward CFPS multiple is almost double its 10 year average; or how the big six tech stocks (FAANMG) make up 42% of the NASDAQ Composite’s market cap and 25% of the S&P 500, as of this writing. All else being equal… - **If the price of either the GDX or GDXJ went up by 100%, they would still have lower Price/Forward CFPS multiples than the NASDAQ**. ## Chart 4: Gold Price vs. Fed Balance Sheet It’s not the most correlated data set, especially since the Federal Reserve hasn’t changed its gold holdings since April 2006… But the growth in the Fed’s balance sheet shows the extent of the massive stimulus packages. Unlimited QE drives down yields. Thus, the Fed’s exploding balance sheet can be viewed as a key supporter of increasing gold prices… since gold becomes a more attractive safe-haven investment when Treasury’s have historically low yields. ![fedd balance sheet vs gold price]While the Fed has continued to disappoint many investors by not committing to a policy of Yield Curve Control and rejecting a negative interest rate policy, low rates should persist until the end of 2022 at the earliest. The Fed has staked its entire credibility on that timeline. As a gold investor, it’s worth keeping an eye on Central Bank balance sheets as well as inflation expectations and real yields. ## Chart 5: “Paper Gold ETF Fund Flows” It’s been a record year for gold, and also a defining year for gold-backed ETFs like the SPDR Gold Shares (GLD) or Sprott Physical Gold Trust. In a year of economic devastation, rampant speculation in financial markets, rock bottom yields and unprecedented changes to monetary policy orthodoxy – gold ETFs have been the vehicle of choice for major hedge funds and individual investors to de-risk and also benefit from surging gold prices. With two months still left in the year, gold ETFs across the world have already surpassed the previous annual record of gold ounces purchased, 20.7 million ounces (set in 2009), by over 45%. In fact, that record had already been surpassed mid-way through the year, by June 30th. The additional 11 million ounces purchased since then has just been icing on the cake. ## **![annual gold ounces purchased by etfs]Going for Gold** Based on all of the charts we’ve shown so far… - **All signs point to a bullish long-term outlook for gold and gold companies in the coming years.** Of course, that doesn’t preclude a reversal and consolidation of gold prices in the short-term. If that does happen, there’ll be an incredible opportunity to build up your portfolio for the upcoming gold bull cycle. In other words, you’ll need to be informed and prepared, so that when the chance comes knocking, you’ll be ready to put your money to work for you. - **Since the beginning of the year, the [Katusa’s Resource Opportunities gold portfolio](https://subscribers.katusaresearch.com/urgent-gold-stock-alert-oct-2020/?katusablog) has delivered 65% returns…** While gold itself is up only 26%, and the S&P 500 6.6%, in the same time frame. If you’re looking to make a gold-medal play on gold and want access to the best resource industry research with which to do so… Consider becoming a member of Katusa’s Resource Opportunities, and [get $1500 off for the next 2 days only by clicking here](https://subscribers.katusaresearch.com/urgent-gold-stock-alert-oct-2020/?katusablog). Fortune may favor the bold… but right now, our fortunes favor gold. Regards, Marin Katusa --- # The Noble Metals: Hard Money and the 79th Element - URL: https://katusaresearch.com/the-noble-metals-hard-money-and-the-79th-element/ - Type: article - Published: 2020-10-23 - Updated: 2020-11-23 - Author: Marin Katusa We’ve all heard the macroeconomic arguments to own gold. Today I want to talk about the actual scientific chemical reasons that separates gold from all of the other metals on the periodic table. I am sure you will be surprised by what science has to say. First, gold is inert which means it’s very inactive. It does not react with oxygen like iron does (think rust). That makes gold an *excellent* store of value. - **If all the elements in the periodic table were characters in a reality TV show, gold would easily be the most “boring.”** Why? Because gold is inert. It isn’t hooking up with anyone. Yes, gold is the ultimate celibate element. Let me explain why this is important—chemically speaking, of course. ## **The Alchemist’s History on Hard Money** There are 118 elements on the periodic table, of which gold is one. Take away the 17 gases (gases are of no value for this exercise). Also remove the six metalloids, which are elements that don’t know if they are a metal or a non-metal since they have traits of both (e.g., antimony, arsenic, silicon). Thus, we end up with ninety-five elemental metal contestants on our Currency Reality Show. - Note: For the chemistry nerds among us, I don’t count Oganesson and antimony as metals, call me old school. There are ninety-five metal elements in the periodic table. Of the ninety-five metals on the periodic table, eighty-five are “active.” This means they are fun to watch on our reality TV show because they are always hooking up with another element. But remember, activity always results in *oxidation* or *corrosion*. If you want a metal for long term storage value, you don’t want it to change. You want it to hold its own, maintain its integrity, and not degrade. For example, iron has many useful applications, but it oxidizes, then rusts. Iron is active and would be fun to watch its decay on the reality TV show for entertainment value. But it’s bad if you want to use it as a currency. The coinage will rust away. And the last thing you want is a metal that debases itself. Politicians and central bankers don’t need any help doing that; they do a wonderful job of making debasement of currency happen on their own. ## **The Noble Metals – Gold, Silver, Platinum, Palladium and…** So that leaves us with what are known as the “noble” metals. Just like there are noble gases, (noble meaning “inert”), these metals are not active. I want you to think of the noble metals as the **royalty of all metals**. They don’t interact with the peasants—the other elements on the periodic table that are always “interacting” with others and debasing themselves. The noble metals in chemistry are: - Copper, - Silver, - Gold, - Platinum, - Palladium, - Ruthenium, Rhodium, Osmium, and Iridium. Historically, copper, silver, and gold have been known as the coinage metals. And scientists deem these 3 as the “real” noble metals because of their electronic structure. Copper does react with oxygen, which is where the Statue of Liberty got its bluish-green color from. But the result of copper interacting with oxygen is not corrosion, like rust. It’s the exact opposite. The process is called “passivation,” and the bluish-green color is actually a layer of protection that protects the copper from natural debasement. That is why copper is included in the noble metals. It does “interact,” but it doesn’t corrode. This interaction acts as a protective barrier for the copper, but changes its appearance—damn two-faced metal! Silver is a bit kinky, too. It reacts with sulfide gas in the atmosphere, which causes it to look tarnished. Removing the tarnish is natural debasement: every time you polish the silver to get rid of the tarnish, you will be removing some silver, thus debasing it. The remaining noble metals just aren’t practical for use as a store of value. Not only are they hard to smelt and difficult to work with, but they are also too scarce in nature to be able to meet the need as a store of value. And they all look kind of ugly, very little sex appeal. Think silver, but without the sexiness and brightness. A blah grey is what the platinum group of noble metals look like. Nobody wants blah! In fact, all the metals on the periodic table of elements except copper and gold are a variation of grey. Silver is at least a sexy version of grey. The rest are just variations of a dull grey. ## **So That Leaves Us With Gold…** Gold’s beautiful color is not only unique on the periodic table, but it also will not change. Gold doesn’t mess with the peasant metals or with the other nobles. Gold does not react with any other element. - **And ultimately, that is why gold will always be the king of all metals—and the currency of kings.** Everyone loves gold. Nobody dreams of winning a bronze medal at the Olympics. It’s the gold metal they want! There are thousands of analogies engrained in our subconscious passed down to us through our families and societies why gold is the king of metals. The purpose of today’s was to explain why gold is the king of metals from a chemical standpoint. And it’s the only metal that serves its purpose as the best store of value. ## **Gold Market Update** As I have written several times over the past few months, I did not expect gold to be a one-way trip. Gold has risen 47 percent, or $600 per ounce, in the span of less than two years. Taking some time to consolidate before moving higher is important. In [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk), we’ve highlighted three resistance points above $1,900 per ounce that gold needed to hold above, which it failed to do so. In addition, $1,900 per ounce was a line in the sand, which gold has broken below. In the graph below, you can see that the red trendline remains intact and has acted as resistance since August. ![AuTAOct]So, what’s going on? The US Dollar continues to play its role in the price of gold. On the heels of enormous stimulus packages, the USD has faced high short sale pressure. The graph below shows the current USD positioning. ![US Dollar Positioning Chart, USD INDEX, NON COMMERCIAL FUTURES POSITION]According to the CFTC, over 9,000 contracts are currently short the U.S. dollar. - **This has only happened two other times since 2014. Both times, the USD has subsequently experienced a sharp rally.** A rally in the USD would be a headwind for near-term gold prices. Regardless, I expect the gold market to remain volatile over the coming weeks heading into the U.S. election. **Make no mistake, you can use this volatility to your advantage…** If the US Dollar rallies and takes the wind out of the supercharged gold and silver markets… are you prepared? Back in Q2 of this year, there were screaming bargains in some of the best companies in the resource world. Subscribers and I were prepared, picking up world-class companies and stocks in price swings that a junior or small cap company normally sees. - **In markets exactly like you’re seeing today, it’s important you know which stocks you’re holding are liquid – and which ones are illiquid.** We are not even halfway through the share printing spree that resource companies (explorers and developers) went on. These companies are giving central bankers a run for their money (printing). Subscribers were specifically warned about this and are seeing billions of dollars in market cap wealth destruction. It’s something that we will get further into in the upcoming November edition of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). With so much FOMO in the markets, recall Warren Buffet’s famous rules of investing: - Rule #1 – Don’t lose money - Rule #2 – Don’t forget rule #1 Sometimes it’s the bets that you DON’T MAKE that end up netting you the most money. Regards, Marin --- # Are Oil Wells Going Dry – And Is This the End of the Supermajor? - URL: https://katusaresearch.com/are-oil-wells-going-dry-and-is-this-the-end-of-the-supermajor/ - Type: article - Published: 2020-10-16 - Updated: 2020-10-15 - Author: Marin Katusa On August 27th, 1859, George Bissel and Edwin Drake changed the American petroleum industry forever. The two men were responsible for the first successful use of a drilling rig for a commercial well. Drilled especially for oil. Named the Drake well, and drilled to a whopping depth of 69 feet, it took Titusville, Pennsylvania by storm. And set the course for investment and speculation in the oil industry. You might not know this, but the history of drilling for oil predates Bissel and Drake by at least 1,500 years. - **The earliest known wells, discovered in China, date to AD 350 and were drilled out to depths of up to 800 feet by using drill bits attached to bamboo poles. ** But Drake’s well stands out from its predecessors for several reasons: Before this point in the U.S., oil was only collected where it seeped to the surface, such as in northwestern Pennsylvania where it was skimmed from the tops of ponds. [![The Day After 2020]](https://internationalman.com/the-day-after-2020-election?ref=1270)Bissel was the one who first came up with the idea of drilling for it instead – and Drake was the man who executed the plan. Drake chose to utilize a salt-well drilling technique. So, rather than digging by hand, he had a salt-drilling crew use a 6-horsepower steam engine to push the drill bit down to the bedrock. He then used a cast iron pipe to case the well, keeping the soil from falling into the hole. Drake’s well was also one of the first commercial oil wells, drilled for the Seneca Oil Company, unlike many of the wells dug out in antiquity. ![drake's well]With this, commercial production began at a peak flow of 25 barrels per day. Soon, Drake had more oil than he had barrels to store it in. - **U.S. commercial oil production effectively started when the Drake well was spud. ** In the following 40 years to 1900, production quickly ramped up to 175,000 barrels per day. ![US Crude Oil Production 1860-1900] ## **The Age of Oil** The following century from 1900 to 2000 was truly oil’s time. Oil was originally used primarily for lighting oil lamps. But it was the invention and widespread adoption of the internal combustion engine that really skyrocketed the demand for oil to where it sits today. Technology and capital raced into the sector, continuously pushing the boundaries of hydrocarbon recovery. - **In the first 40 years from 1900-1940, U.S. oil production soared from 175,000 barrels per day to over 4 million barrels per day. ** And by the time the century was over, oil production in the United States had reached a high of 9.4 million barrels per day. ![US Crude Oil Production 1860-2020] Not to be outdone, the rest of the world has also pushed the envelope. - **Since the 1960s, worldwide crude oil production has tripled to over 90 million barrels per day, matching the soaring growth in demand.** Like it or not, crude oil and its refined products have now become intertwined in our everyday lives. ## **Endgame? Worldwide Oil Demand and Supply** From gasoline in the car and jet fuel for the planes, to single- and multi-use plastic products, crude oil is everywhere. ![Worldwide Oil Demand and Supply] However, this year, oil demand came crashing to a halt as the global economy shut down due to the Covid-19 virus. Adjusted for the impact of the coronavirus pandemic, this year’s crude oil supply and demand are estimated to end around 92 million barrels per day. That’s down from a high of 100 million barrels per day in 2019. [![While oil prices collapsed box]](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/?kiiemail)But the virus is going to leave a much longer-lasting impact on oil demand than just this year’s downturn. To date, **British Petroleum (BP),** **Royal Dutch Shell (RDS.A)**, and **Total** **SE**, 3 of the world’s largest and most powerful oil companies, have all forecast significantly lower future oil demand. According to the majors… - **Oil demand will peak around 2025-2026 and subsequently decline by as much as 50% by 2050**. It’s only a matter of time before the likes of Exxon and Chevron update their respective forecasts as well. Below is a chart which shows the forecasts constructed by BP and Total, compared to Katusa Research’s own Aggressive Reduction case. ![Crude oil demand forecast] ## **New Lows in North American Drilling Activity** The Baker Hughes Rig Count is a weekly census followed by oil traders, analysts and companies. It tracks the number of offshore and onshore drilling rigs engaged in exploration and development of oil and natural gas projects. The oil & gas E&P sector was so severely impacted this year by COVID-19, collapsing oil prices and excess capacity that the rig count recorded all-time record lows in both the United States and Canada. - **In August 2020, only 244 rigs were reported online in the United States**. That’s a historic low since the data were first recorded in 1949, and a 77% decline in rig count YoY. - **In late June 2020, only 13 rigs were reported online in Canada** – Also an all-time historical low with data dating back to 1964. And a 90% decline in rig count YoY. ![North American Rotary Rig Count] ## **ESG, Electric Vehicles and the Oil Demand Knockout Combo** The central themes around future crude oil demand are transportation first, with petrochemicals a distant second. Transportation plays an enormous role in crude oil demand. Globally, transportation accounts for over 50% of crude oil demand. But mass adoption is already on the horizon for electric passenger vehicles, with electric tractor trailers and buses following shortly after. Electric mobility is a death knell for crude oil demand. - Electric passenger vehicles alone will represent **at least** **10 million barrels per day of lost crude oil demand. ** Petrochemical demand is expected to increase over the next decade. However, increased recycling of plastic products and eventual bans on single use plastics (SUPs) will likely neutralize any demand increase. With expectations of 50% of global oil demand evaporating over the next 30 years to 50 years, oil majors are turning to different avenues to replace their oil revenues. - **Total SE, Shell and BP have all telegraphed their foray into green power and clean technologies.** It’s a remarkable, and very expensive, pivot for the companies as the oil companies cost of capital has risen significantly from just a few years ago. But in this case, they have no choice – it’s either adapt or die. In addition, access to capital is getting harder and harder for oil companies to source. Investment funds have stricter protocols in place now for investing in “green” companies, and companies with strong **ESG** (**E**nvironmental, **S**ocial, and Corporate **G**overnance) profiles. For the most part, oil companies don’t fit those mandates. In other words, their well of capital is rapidly drying up. Perhaps the best example of the well drying up can be seen by examining fund flow. In the next chart you’ll see the cumulative net creation or redemption, by month, for U.S. listed ESG ETFs with a market capitalization greater than $1 billion versus the oil & gas + MLP (Master Limited Partnerships) universe. It works out to the Top 10 ETFs in each sector going head to head. The difference is remarkable and paints a very ugly picture for the oil sector. ![ESG vs Oil & Gas Fund Flow analysis] Now, I’ll be the first to admit that many of these ‘ESG’ favorites are high flying tech stocks, but either way, it shows where the capital is flowing these days. ## **At Critical Junctures Like This… There’s Serious Money to be Made** If you’re a serious oil and gas investor who’s found themselves surprised by this article… Or if maybe you “just don’t believe it” … Then you should consider becoming a member of Katusa Research. After all, even the oil supermajors have already seen the writing on the wall. And they’re already working on diversifying their asset portfolios away from oil and gas. It’s a lesson any energy or resource investor should take to heart. - **Right now, I have 2 resource stocks that I’m waiting to pounce on, both of which I believe have world-class tier 1 category assets. ** Our portfolio has been rocking this year and regardless of who wins the U.S. election, there will be plenty of opportunities. And I’m excited and ready to put the profits and free-rides we’ve taken over the past few months to work. You can join me by becoming a subscriber to [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) today. Regards, Marin --- # Cambridge House Test - URL: https://katusaresearch.com/cambridge-house-test/ - Type: page - Published: 2020-10-09 - Updated: 2019-10-10 - Author: Marin Katusa # Mining’s Next Triple Crown **A Junior Gold Stock Primed for a Bull Market Run** **BARRIAN MINING INC.** ## **TSX-V: ****BARI ****OTC: ****BARRF ****FSE:** **BM5** ## ### **Gold is breaking out.** It’s not just in the stock forums that you can hear chatter about gold. For example, for the first time in YEARS… Google searches for gold is bigger than searches for marijuana and cannabis. Also, for the first time since cannabis became legal, Google analytics searches for gold companies has now exceeded cannabis companies. **This is a very bullish indicator that few have realized.** ## Getting in early is how you position yourself for large gains in the gold sector. This can have life changing results for savvy investors. Every year at Cambridge House some of the best and brightest stocks in the mining space are showcased at the intimate Gold and Silver Summit in San Francisco. And every year there are a few darlings at the show that go to have a mammoth year. For example, in the last year since the 2018 conference… - Discovery Metals **spiked up from $0.17 to $0.74, a 435% gain in 3 months** - Sun Metals **shot up from $14 cents to $65 cents, a 454% gain in 6 months** - Equinox Gold **went up from $4.25 to $8.90, a 231% gain in 10 months** These were just a few that were featured that delivered huge gains for their shareholders. That was in a bear market… just imagine what will happen in an upcoming gold bull market. **Are you prepared?** The smart investors are making their bets on the best people in the sector who have the best gold assets. Some companies will be no longer be around next year….. And not because of insolvency like in the lean years. But because a number of juniors will get scooped up and acquired at a significant premium through takeovers. There is so much investor appetite for precious metals, this year’s conference will be bursting at the seams and why…… ## Gold Stocks Are Making Monster Returns With gold touching new multi-year highs in 2019, many gold stocks that were at last year’s San Francisco Gold & Silver Summit have exploded higher. Including **Liberty Gold which has gained 272%** ## **Small Cap Gold Stocks Crushed it in 2019 – Which One Is Next?** Companies in the resource sector offer investors the potential to generate enormous returns. **I can’t stress this enough – it’s a VERY HIGH RISK SECTOR.** But, it’s not unreasonable to expect a 200% to 1,000% gain if you pick right. Especially in a rising gold market like we have today. If you look at the run up of gold in the last year, you can tell why investors are giddy about the upcoming years. Now, get to know this 10-digit number… **$6,109,927,959. ** That is the annual amount of new wealth gained when the price of gold rises by only $1 an ounce. That’s not a typo. That means for every dollar the price of an ounce of gold moves, the wealth of those holding physical gold increases by over $6.1 Billion. As you know, the wealth created in the stock market can result in a 100x increase for a gold stock that’s leveraged to a good team, good results and a rising gold price. ## **Tap Into Gold Stock Market Momentum with Small Cap Gold Stocks** How can you turn $10,000 into $100,000 in under a year? Savvy speculators talk about asymmetrical risks. Would you risk $10,000 if it could make you over $100,000. A roll of the dice where odds is $100,000 and evens is zero. You are not going to get these odds in Vegas. **The Latin phrase ‘*Fortis Fortuna Adiuvat’* (Fortune favours the bold) comes to mind.** Now, to be clear, DO NOT get a second mortgage and buy junior gold stocks with the money. But there are huge gains to be had if you have the conviction to pick the right ones. ## **How do you find the right investments? ** People have spent their careers building their network and keeping their ear to the ground to find those choice companies and deals. Most of the best deals from the old school mining legends, you will hear about long after the fact. They have gotten in and out way before you ever hear of them. There is no school that teaches you how to be a successful mining executive. It is something you learn on the job and from others along the way. I am a firm believer that you need a mix of nurture and nature. I am the embodiment of that mantra. Cambridge House was in a transitionary state a few years ago, my dad Joe was stepping aside and I was thrust in to take over the reins. There were some major stumbling blocks, but I had him by my side to help guide Cambridge House along the way. That exposure is something that few have access to. It is priceless to listen and learn from great leaders who have been there before. I have had the privilege of working with a group of larger than life characters in the resource sector over the years from Rick Rule, Ross Beaty, Frank Giustra and dozens of others. They all have their own criteria of what to look for in investments. I have taken the best concepts from each and developed my own framework for investing. This easy acronym is what I use: - **P**eople, - **R**esources, - **O**perations, - **F**uture, - **I**nvestors/Investments - **T**riggers As in the end every investor’s goal is to **P.R.O.F.I.T.** ## **Gold Bull Market – Small Cap Spotlight** # **Barrian Mining ****(BARI.V)** **(P) – People** Through my extensive network of investors and brokers I was introduced to this company. The team has been called the next great mining magnates, Why? They are young, hungry and have access to capital and an exclusive network of powerful brokers. You need to look no further than the name of the company, which pays homage to their family’s background and successes. From Max Sali’s dad, **BARR**ie Sali, and Brad Telfer’s, Dad **IAN**. A fitting tribute from the young up-and-comers of today, to the titans of the previous generation. Their fathers are legends in their own rights and they have groomed their offspring to achieve greater things. Max and Brad have an extreme advantage compared to most as they have been mentored by some of the greatest business minds in the business. An advantage only gets you so far, you need to hustle. This group has plenty… **Max Sali, Co-Founder and CEO:** Max has spent the past decade in the investment industry. He cut his teeth with other junior resource companies and taken many from shell to full bore operations. Up until Barrian, Max was the behind the scenes wizard making the operation run smoothly. It was that experience that prepared him to run his first mining company. He has close ties to the global capital markets and knows all the important people, through his own network and his family’s. His father, Barrie Sali, was a prolific Vancouver businessman and his uncle, Rob Sali, is one of the most successful resource brokers. This is an uber smart and successful family that is well connected around the world. **Brad Telfer, Co-Founder and Director:** Brad also has spent several years in the industry, working his way up, starting out as an investment advisor. His father, Ian Telfer, is well known for his work with Wheaton River, which later merged with and became the goliath **Goldcorp**. Ian joined the Canadian Mining Hall of Fame in 2015, and you can be sure that some of the lessons and wisdom that got him there have been passed down to his son as well. Of course, simply having the right lineage doesn’t guarantee success. But what it does do is set up connections and open doors that wouldn’t otherwise be available. **Jordan Trimble, Director:** Jordan is another young up and comer who brings extensive experience from running other natural resource companies to the fold. Jordan is the CEO of Skyharbour Resources. He has a lot of know-how in all aspects of running junior mining companies. More importantly, Jordan has survived and been able to raise exploration capital in the junior uranium sector when 99.99% of the companies have gone bankrupt or left the uranium sector. Jordan has stuck with his company and is a survivor that will reap the warrants of his commitment when the uranium market turns. # **Mining’s Next Triple Crown Winner?** **(R) Resources** The #1 resource for an exploration company in any commodity is being able to raise the cash required to explore. That is a key feature with Barrian. Not only has the company raised the required funds to drill Bolo, but the company has a very low number of shares outstanding. The company has only 43.5 million shares out, compared to the junior average of over 5 times that with comparable drill programs. **The insiders are the largest shareholders and having skin in the game is key to guarding their low share count.** More importantly, Max and the Barrian team raised the funds when gold was sub $1300 per ounce. If the company has any exploration success in the already drilled Bolo project (the company is waiting for results from the assay company)… it will get the attention of the market. The likes of Eric Sprott and other smart savvy investors have been looking for low risk-high impact gold projects in the Great Basin in Nevada. ## **Nevada’s Gold Resources Are Rich** **(O) Operations** Much Like Real Estate, it’s all about **LOCATION, LOCATION, LOCATION** Barrian’s primary asset, the Bolo gold project, is located in Nevada. And if you want to talk about a good neighborhood, Bolo’s neighbor is a mine called Round Mountain. - **Round Mountain is owned by Kinross Gold Corp ($8.1 Billion Market Cap) and produced 400,000 ounces of gold last year. ** Not too shabby. And it’s a low-cost producer. Nevada is ranked as the world’s most attractive mining jurisdiction. It is a business friendly, safe jurisdiction. “The Silver State” nickname is a bit outdated as it related back to the Nevada silver-rush days of the mid 1800’s. Back then silver covered the surface of many bonanzas and could be extracted with just a shovel. Those days are long gone and the majority of the precious minerals need a bit more work to discover. And Gold is the new standard in Nevada, and most of it is Carlin-type deposit. Which to the non geo types, means that the gold cannot be visibly seen with the naked eye. You need a lab to assay the core after drilling to see how much gold in the rock. These Carlin types mines and deposits over the last 40 years have helped turn Nevada into the most prolific gold mining jurisdiction in the world. Many of the largest deposits in Nevada, such as Turquoise Ridge and Goldrush (both owned by Barrick Gold), are Carlin-type deposits. Nevada’s gold industry is so huge that it Nevada ceded from the U.S. and declared itself a sovereign country… It would be the 5th largest Gold producing country in the world behind China, Australia, Russia and Canada. The Barrian site has easy access to utilities and highways. Lowering the overall costs of exploration and development. - **This highly sought-after Bolo project was snatched away from a larger group and secured by this group of young hotshots.** They acquired the early stage gold project option from Allegiant Gold. Barrian has the option of earning a controlling (50.01%) interest in the Bolo project by spending US$4 million in exploration expenditures over the next 3 years, alongside US$1 million in staged payments of issued shares. Barrian can earn an additional 25% interest in the project by spending another US$4 million over another two years. This would leave them with a 75% interest at the end of 2024, if they choose to go this route. The Bolo project is not just a random assortment of unknown concessions in Nevada. Historical drilling on the project shows a lot of potential. To date, over 12,000 meters have been drilled on the project. At today’s drilling costs, it would take $20 million and at least 2 years to get the project to this stage. And like I said, many of the holes show **significant gold mineralization**. Highlights from past drill results from different holes, all at surface at Bolo include: - 133 meters of 1.3 g/t - 90 meters of 1.0 g/t - 52 meters of 1.27 g/t - 5 metres of 3.24 g/t What do these numbers mean? **These are thick and high-grade intervals considering this is all near surface gold results.** To the layman that might not sound like much…. But shallow mineralization makes open pit mining feasible, significantly lowering the cost of production. Bolo’s shallow mineralization is also oxidized which makes extraction cheap and another bonus of the project. Carlin-type deposits are usually large and can be mined using low cost open pit mining techniques.. ## **The Truth Machine is Turning… ** ## **Results Will Hit Any Day Now** **(F) Future** The Triple Crown Trio running Bolo are smart, aggressive and hungry. My gut tells me they have just started and I can see them do exactly what all of their fathers built their massive fortunes on, acquiring further projects. - **This company is far from a one-shot pony. For example, they also own a “Sleeper Project” that’s in the Mogollon gold district in New Mexico**. Barrian has the option of earning in full ownership of the Sleeper project through US $1 million in share payments through 2022, and the first quarter million has already been issued. The third project in the company is Troy Canyon project, another gold asset 70km east of the Bolo project in Nevada. Barrian has the option of acquiring a 100% interest in Troy Canyon, subject to a Net Smelter Return royalty (NSR), under $100K of cash, and 1.35 million shares of Barrian. At the moment, these latter two properties are just icing on the cake, as Barrian’s primary focus is their flagship Bolo project. But like I said earlier, expect Max and his team to aggressive make further acquisitions. It’s in their blood. This is a hunch from what I know of them. Right now Max and his team have their hands full at Bolo as the land package at Bolo is very large, comprising over 3,300 acres of land. Most of the drilling has focused on targets in the South Mine Fault area, There are other promising targets at Bolo that can be exploited with further drill programs. Several thousand more meters of drilling are planned at Bolo through next year. Barrian is targeting an initial resource estimate for Bolo in 2021. **(I) Investors / Investments** Share structure is critical. Many novice investors don’t realize it can make or break a company. Barrian has a solid share structure, with ~43 million shares outstanding and minimal warrants and options that can cause an “overhang” on the stock. In addition, a lot of the stock is held by management and insiders. Management and insiders own around 16% of the stock, with friends, family, and other close associates making up another 40%. Barrian raised $2,672,400 in the IPO at CAD$0.20 per share. The company had $1.2 million on the books as per their last audited financial statements. ## **The Right *Rocks* Can *Rocket* a Gold Stock** **(T) Triggers** Barrian will receive their results from the recently completed drill program at Bolo any day now. Assays on 1,838 meters on 10 holes of drilling will be released. These are deeper and fatter holes than earlier drilled. - **Again, if the company comes up with anything close to the previous results, the share price of Bolo is going thru the roof** Or as Robert Friedland likes to say, “*You will need a telescope to see the share price*”. An excerpt from the September 27th 2019 press should catch a smart investor’s attention: *“All drill holes completed during the summer program intersected zones of visible alteration typical of Carlin-type gold deposit mineralization; including silicification and decalcification of Paleozoic carbonate rocks producing **jasperoids**”.* The key term in the press release was jasperoids. - **A jasperoid is a well-known indicator for gold in Nevada. ** We’ll see if it’s the case here, but it’s a just a tiny detail that many novice investors miss that we wanted to share with you. The recently completed drill program focused on the South Mine Fault of the large Bolo project. There is plenty of room to expand to new target areas outside towards the North and East. These new targets and trends would catalyze the stock and help bring more attention to the story. But while the projects themselves are great, the people aspect of Barrian is definitely its greatest strength. They have the resources – knowledge, connections, capital and so on – which may not be so easily accessed otherwise. When you bring in the combination of heritage and hunger, you are on to something. Don’t take my word for it, some of the smartest minds in the resource sector have already invested in this company. In the junior mining sectors, **the earlier you get in, the more you stand to make.** This company will be focused at the upcoming Gold and Silver Summit in San Francisco. I strongly urge you to reach out and find out what all the buzz is about before it is too late. Life changing wealth is within your grasp. ***Fortis Fortuna Adiuvat*** **Jay Martin**, **Chairman, Cambridge House International** [www.cambridgehouse.com](http://www.cambridgehouse.com) **Disclaimer**: This is a paid sponsorship from Barrian Mining. The company will be presenting at the upcoming 2019 San Francisco Gold and Silver Summit – you can register here. This is not to be construed as individual investment advice. This is not a recommendation to buy or sell the company. Please do your own due diligence. All material was taken from publicly available information via SEDAR, company news releases and discussions with management about published information. Management has reviewed and sponsored this article. Subscribe For More Updates --- # Katusa Research Videos - URL: https://katusaresearch.com/videos/ - Type: article - Published: 2020-10-09 - Updated: 2020-10-14 - Author: Marin Katusa [![Subscribe to KR]](https://www.youtube.com/channel/UCOC4tWq0EuS0Is8b-uw4CVg?sub_confirmation=1) --- # Trump Doesn’t Pay Taxes, Why Should You? - URL: https://katusaresearch.com/trump-doesnt-pay-taxes-why-should-you/ - Type: article - Published: 2020-10-09 - Updated: 2025-07-08 - Author: Marin Katusa How would you feel if you found out that the average American billionaire pays less in taxes than you do? Not just a little less. In fact, one of them has paid *zero* taxes in ten of the last fifteen years. In 2016 and 2017, he paid $750 a year in income taxes. That’s likely much less than you paid. Of course… it’s U.S. President Donald Trump. Here’s the thing: this is by no means uncommon in the United States. - **Warren Buffett, the fourth richest man in the world, famously pays a lower tax rate than his secretary.** In 2018, the wealthiest 400 families in the United States paid an average tax rate of **23 percent**. Meanwhile the bottom half of U.S. households paid… an average rate of **24.2 percent** in income taxes. You’re probably starting to figure it out by now: the system is *rigged*. And it isn’t in your favor. Because this isn’t tax evasion. There’s nothing illegal about it. It’s perfectly legal tax *avoidance*. And this is the way the game is meant to be played. History has seen some oddball tax collections, including: - A tax on soap during the middle ages, - A beard tax in 1700’s Russia (this would work well on modern hipsters), - A tax on fireplaces in 1600’s England, - A tax on the numbers of windows on your house in 1696 England, and - A tax on hats in England. Some taxes might be difficult to escape. But if you’re ultra-wealthy, you can afford to pay a smart accountant to figure out how to not pay income taxes, legally. If you’re not… pay up. We got here from *decades* of the convoluted tax system being slowly bent in favor of high-income households. - **Among the very percentile of earners, the average tax rate has dropped* 50 percent in fifty years*—from 51 percent to 26 percent.** ![US Effective Tax Rate]This, despite a soaring federal deficit. Governments are spending trillions to keep their economies and financial markets afloat. The potential disaster of an underwhelming fiscal and monetary response is more concerning than a balanced budget or AAA credit rating in 2020. With trillions of dollars’ worth of stimulus spending being deployed by governments all across the world, many might ask: If the government can print all this money to cover obligations… And create all this paper wealth out of thin air… **Then WHY do you still need to pay taxes?** You’d think that sooner or later, the government will catch on and get its fair share from the top income earners. As it turns out, there’s a magic percentage at which high-income earners will both continue working and pay their taxes—meaning that’s where the government should theoretically set the upper tax bracket. If a government set a 0% tax rate, they would obviously get no tax revenue. If they had a 100% tax rate, they’d also get no revenue… because nobody would work. Between these two points is a curve that fluctuates as you adjust the tax rate. That curve is known as the “Laffer curve”, named after economist Arthur Laffer. Which begs the question: If the government doesn’t care about getting as much money as possible from the ultra-rich… If the *richest* people in the U.S. are paying *less* in taxes every year… If *fewer* people are paying taxes each year… If the leader of the free world *doesn’t even pay income taxes*… - **Why should the *middle class* have to pay taxes at all****? ** ## **The Boomerang Money Act of 2020** The immediate, middle school answer is that taxes are necessary to pay for everything the government does. For example, think back to six months ago, when Congress passed the CARES Act. It laid out an unprecedented $2.2 trillion in stimulus that was intended to help deal with the economic fallout from COVID-19. (Just to put that amount in perspective, that amount of money was equal to India’s entire 2016 GDP. And India has a population of *1.4 billion people*.) It’s the closest we’ve seen to helicopter money in the United States. The only difference… is that helicopter money would be printed by the U.S. government and handed out. - **The $1,200 stimulus check you probably received was paid for by your taxes.** The same money you sent the government last year is just being thrown back at you in the form of a check. And there’s at least one more round of stimulus payments coming. The CARES Act also implemented the Paycheck Protection Program. By the time the program ended, it was supporting 84 percent of small business employees in the U.S. - **The PPP program was so generous that 25 percent of Americans who were out of the workforce made *more* than when they were working.** And that’s just the money you can actually see being spent. The Federal Reserve has also provided another $3 trillion in liquidity to the capital markets so far, in addition to almost half a billion in SWAP Lines to its allies. They’re now even loaning money directly to companies. The unprecedented, “unlimited” program buys high-quality bonds from huge companies, like Apple… and also junk bonds from unfavorable investments. So maybe that’s the reason why you have to pay taxes. The Fed has to get all that money to make unlimited loans to unpromising companies from somewhere! ## **The Not-so-Federal Reserve** But that can’t be the case. Because right now, the Fed itself is spewing out new money faster than the machines can print. - **Since February 2020, the Fed has *increased* the money supply by nearly as much as the *entire* money supply that existed in 2008 (adjusted for inflation).** The economic situation is so shaky in this crisis that no one can accurately forecast how much revenue will be lost from tax deferrals, shuttered businesses and unemployed households. In the next chart, a plot of stimulus spending (blue bar) vs reported tax revenues (black dots), you can see that the amount the U.S. has committed to stimulus spending is over 85% of their 2019 tax revenue. ![Global covid 19 stimulus spending]Total U.S. federal spending in 2019 amounted to nearly $4.5 trillion. The amount of announced stimulus spending thus far represents an increase of 47% over last year’s budget. With the U.S. federal government already running fiscal deficits even in normal budgetary years (most recently to the tune of $984 billion), every dollar of revenue becomes increasingly more important. The U.S. government debt situation has been in a serious mess ever since the 2008 Global Financial Crisis, when it jumped from around 60% to over 100% of GDP. - **Think of GDP (Gross Domestic Product) as a proxy for the amount of taxable wealth generated within a country’s borders for a given period.** The U.S. is now well on its way to having a debt level that’s over 1.2x the amount of wealth created in the country each year. ## **![us fed debt mountain]Is This Sustainable?** Until the bond markets and ratings agencies say otherwise, the current levels of stimulus spending should be considered sustainable… So long as the phrase “full faith and credit of the United States” continues to mean something. But the reality is that a lot of economists and investors don’t want to imagine a scenario in which the U.S. Treasury defaults on its debt and the global economy collapses beyond repair. This kind of risk never gets priced into any models. Not because it’s too unlikely to occur or unpleasant to consider, but because it’s the kind of financial Doomsday scenario where you should be more worried about how you’re going to defend yourself from Mad Max-style raiders, than about asset prices. ## **No Money, No Limit** When Jerome Powell was asked how many dollars the Fed could print, he said: “**There’s no limit.**” Where are all of those dollars going? Well, the U.S. Treasury is flooding the market with trillions of dollars in new debt, called Treasury notes (T-notes). They’re like a credit card for the federal government. Here’s how they work… Investors buy a T-note, thereby lending money to the government. The government then owes the investor money, plus interest, due in a specific period of time. It’s a nearly risk-free investment. After all, the U.S. has a AAA credit rating, and it’s not expected to default. And taxpayers can be counted on to pay taxes in time, which can be used to service the T-note debt. - **Without taxes, few investors would want to buy T-notes. And the United States would quickly lose its ability to raise cheap money to pay its expenses.** Remember those dollars the Fed is printing, though? If the government ever “runs out” of money and can’t sell enough T-notes to investors, it can turn to… you guessed it… the Federal Reserve. The Fed can print money, then send it to the Treasury Department to buy debt. Any interest paid out on the debt goes directly back to the Treasury. That means the United States can spend *as much money as it wants*. It can always be financed by an entity that never has to care about money. - **The Federal Reserve has a literal monopoly on money.** Hold on! If the government can print as much money as it needs, and your own taxes are going toward *stimulus payments to yourself*… Why not just pay less in taxes? Wouldn’t that stimulate the economy just as well—or more? Or, for the multitrillion-dollar question—**why do you and I pay taxes *at all?*** ## **Inflation – A Tax by Any Other Name** Imagine that you never had to pay taxes again. Every year, you suddenly have an extra $20k–$50k to play around with. Save it for retirement. Invest it. Pay for your kids’ tuition. Wouldn’t that be wonderful? There’s a reason that’s a fairytale, and it’s quite simple: **Paying taxes gives our money value. ** Let me explain. As citizens, we don’t actually need money. We need the goods that money buys. So does the government. Imagine if the government printed all the money it needed to fund its own purchases of goods and services. All of a sudden, more dollars—yours and the governments’—would be chasing the same amount of goods and services. The dollars you earn would suddenly be worthless in comparison to what goods cost. Whoever spent the money first would get the lowest price of goods. Once the new dollars were spent, prices would get pushed up. And they’d stay up, because those new dollars wouldn’t just disappear. In other words, when the government prints money for itself to use, it’s still taxing you—only now it’s by bidding up the prices of the things your money can buy. - **When the government prints money, *you* pay for it. ** Put simply, taxation is a check on the U.S. government. You did not vote for Jerome Powell. So inflation as a result of his monetary policy decisions amount to taxation without representation. Americans have held tea parties for less than that. While inflation is hidden—you don’t see a byline for it on your paycheck—taxes are directly withdrawn from your bank account. They have to take your money from you in broad daylight, circa April 15 every year. Remember, though, how aggressively the Fed is increasing the money supply? The taxation without representation—the midnight robbery of U.S. citizens at the gunpoint of inflation—is happening right now. As prices start to rise, citizens will intuitively perceive the tax of inflation. And they’ll turn away from savings and push money into assets they believe will protect them. And that’s when the real problems will begin. ## ** ****Will You Be Locked Out of Paradise?** Not everyone is able to escape inflation. People who can buy solid assets—gold, for example—will. Others will “short” the dollar by buying a mortgage or taking on debt. Those who cannot will be over a barrel: - Young people taking on student loans will have no shelter from inflation. When they finally graduate, they’ll be unable to acquire assets. - People on a fixed income, such as Social Security recipients, will watch their checks simply evaporate. - Hard workers with retirement accounts will have to work *even later* in life just to have enough to finally retire. Here’s the bottom line: while many citizens still pay taxes, all of this is already beginning to happen. You’re telling your kids to save every penny. You’re paying your mortgage on time. You’re doing everything you can to stay out of debt. Meanwhile, the government is spending recklessly and printing money to cover for it. Certain classes of society are receiving free handouts from the government faster than they can give them out. The ultra-wealthy can finagle their way out of taxes or at least paying the same rate as you and I, *and *they can afford to find the best investment opportunities to make themselves even wealthier. And you’re stuck smack-dab in the middle. I say if you can’t beat them… join them. ## **Government Moral Hazard and Your Ticket Out** For the first time in history, the lines between fiscal and monetary policy are blurred, as finance ministries, banking institutions, legislatures, asset managers and central bankers all work in unison to combat COVID-19. BlackRock, the world’s largest asset manager and ‘shadow bank’, has been tapped to manage the Fed’s corporate bond buying program – much to the chagrin of rival firms like State Street and Vanguard. While stimulus spending is the foremost concern for taxpayers, everyone should be aware of the ***moral hazard*** that the Fed is creating from its trillion-dollar balance sheet expansion. For regular investors, risky investments may offer higher returns, but the tradeoff is the potential to lose most, or perhaps all of your capital. For BlackRock and the Fed’s bond buying program, however, that’s not a problem, because the government can simply print more money to replace what’s lost. On top of that, it’s not even BlackRock’s money, and they’ll earn their fees either way. With all this taken into account, one thing’s for certain – we’re in for some rough seas in the years to come. Global economies and markets will power their way through the pandemic downturn, by hook or by crook. The market is going to be volatile in the months and years ahead as the global pandemic downturn unwinds itself. **Volatility and uncertainty present investment opportunities—the kind that can make you wealthy enough to not have to pay taxes. ** I started **[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)** to make sure people like you have access to the best assets and opportunities to grow your wealth that money can buy. And that’s regardless of what stunt the Federal Reserve pulls next. You can watch the value of your money fade away over the next few years. Or you can seize this opportunity to grow your wealth. The choice is yours. Regards, Marin --- # Wrecking Ball: Dollar Milkshake Theory Eruption, “Real” Rates and Stimulus - URL: https://katusaresearch.com/wrecking-ball-dollar-milkshake-theory-eruption-real-rates-and-stimulus/ - Type: article - Published: 2020-10-02 - Author: Marin Katusa *“The people that say the central banks are out of bullets, I think, come on guys, these guys are the greatest magicians in history”* *-Brent Johnson* The US Dollar showed a lot of weakness over the summer months in 2020. But don’t mistake a temporary drop in the US Dollar index for the end of the currency – far from it. After it’s dramatic oversold position not seen since 2017 in terms of its Relative Strength Index (RSI), the greenback has come back roaring… ![US Dollar Index]That rapid rise in the Dollar Index has had a humbling effect on Gold. In the next chart you’ll see that June 25th, 2020 signalled a turning point in the Gold vs DXY relationship. You can see Gold and the DXY rallied and fell together until March when they began to move inversely. And in dramatic fashion since that June date… ![Gold vs US Dollar Index]The amount of stimulus on its way is scary. The new normal of negative rates is even scarier. Never before has a globally connected economy gone through or witnessed such a mix of unknown ingredients. This has a massive effect on your net worth… Your assets… Your ability to draw cash from the banking system… and even how you purchase gold and silver. One thing’s for sure… There will always be a way to profit. How do you protect your wealth? And where do you look to invest? ## **Brent Johnson on the Dollar Wrecking Ball and The Milkshake Theory** Today I’m releasing an exclusive interview with fund manager Brent Johnson. For full disclosure, I have invested money in his fund. And none of this is investment advice. In this video you’ll see two guys talking shop like they would over a glass of wine. Brent is a friend and I respect him and I’m doing this to share his insights because I believe people should expose themselves to smart people with original smart ideas. You may disagree or agree with our opinions and outlook, but this will be well worth your time. **In this interview you’ll hear:** - The series of “Mini Crisis” that will happen and where it will start - Why he sees Q4-2020 as the Pivotal timeframe - How Negative REAL rates are going to be a MASSIVE issue - Where Brent has a significant amount of his money invested (Hint: It’s NOT popular with the mainstream investment audience) - The *Dollar Fakeout* move and the end of the beginning – how much further the dollar can rise - Why Brent is “short the rest of the world” - Where he sees gold going over the next 6-12 months - The western countries with banking systems that could be in “major trouble” - How the Dollar trade will set up the “killer” commodities trade [**Click on this link to go straight to the video**](https://www.youtube.com/watch?v=1wwS0_6QwDA)**.** Regards, Marin --- # Critical Lessons From Mining Royalty – Tom Kaplan and Ross Beaty - URL: https://katusaresearch.com/critical-lessons-from-mining-royalty-tom-kaplan-and-ross-beaty/ - Type: article - Published: 2020-09-25 - Updated: 2020-09-24 - Author: Marin Katusa “If you could be cryogenically frozen for the next year, you’ll make a killing” -Tom Kaplan Gold and silver are correcting from their recent highs. If you’re new to the party, you’re probably worried. Financings that were hot and oversubscribed just 2 weeks ago are now underwater. Liquidity will become a concern. As long-time alligator investors are starting to lick their chops, we are also well aware this is not the first washout rodeo – nor will it be the last. And today you’ll hear from two very successful mining entrepreneurs who have seen many cycles and plenty of volatility throughout their careers. I consider them mining royalty – and but foremost personal friends. They made their fortunes by putting money to work in bad markets where no one else dared to invest. That takes balls. When you think of tech companies, there are a few names that always come to mind. Steve Jobs … Bezos… Gates… Zuckerberg… If you are a novice investor to the resource space, there are two names that you absolutely need to know. **Dr. Tom Kaplan** is the Chairman and CEO of The Electrum Group – a privately held resource investment management company. And also the Chairman of NovaGold which has a Joint Venture with Barrick Gold. Despite being a detractor of gold, Warren Buffett recently made major headlines when he bought a stake in Barrick Gold. And Barrick owns 50% of a massive gold project in Alaska. The project’s other owner is NovaGold. - **This isn’t the first time Buffett has indirectly given a major boost to the sector – and to Tom Kaplan especially…** In the late 1990’s, Buffett purchased 130 million ounces of silver. News broke of his investment foray into the precious metal just before Kaplan took his silver company public. This brought a lot of demand for the stock. Kaplan is looking for his next big score And Buffett may just have inadvertently kickstarted the process – and mainstream gold/silver acceptance – into high gear. According to Kaplan, “*Lightning has now struck twice, now I owe him two*!” **Ross Beaty** is the Chairman of Pan American Silver (a company he started in 1994) which is the world’s second largest primary silver producer. He’s also the chairman of Equinox Gold. Both are multi-billion dollar market cap companies producing silver and gold. During Ross’s 40+ year career, 13 of the 14 companies he’s taken public have returned at least 1,000%. And no, that’s not a typo. When these two mining financiers make a purchase or start a company – you want to pay attention. They have a long track record of buying near market cycle bottoms and creating billions of dollars in wealth for all shareholders that take the ride. Today we’re publishing an interview with Mining Royalty. This is an interview that you don’t want to miss, with insights you would never hear elsewhere. You’ll learn: - What Tom and Ross agree is the “generational trade” - How a billionaire manages portfolio allocation - The key to making big scores, over and over again (where the REAL money is made) - Which billionaire doesn’t have “a single penny in gold bullion” and why - How much Tom Kaplan recommends for the average investor to put into precious metals related assets - What they believe the outcome of the U.S. Presidential election has on precious metals - The metal that is going to be “*the very best performer of all*” - What they would’ve changed professionally if they could have a re-do - Ross Beaty’s simple formula for success --- # SPAC ATTACK: What Happens When Hot IPO’s and Financings Hit the Market in Tech and Gold - URL: https://katusaresearch.com/spac-attack-what-happens-when-hot-ipos-and-financings-hit-the-market-in-tech-and-gold/ - Type: article - Published: 2020-09-18 - Author: Marin Katusa Initial Public Offering’s (or IPO for short) are riding high right now. You might’ve heard about the Snowflake IPO making headlines. It’s a company with a special type of deal structure that most investors might not have heard of before. And leading the charge and fury in the IPO markets are SPAC’s, short for **S**pecial **P**urpose **A**cquisition **C**ompanies. SPAC’s start as a shell company and sell shares to investors. It doesn’t have any operations or business of its own. The purpose is to acquire one that does. It’s like a backdoor route for large sums of money (think $100 million, or more) to get into the stock market. Investors and the private equity funds behind these SPAC’s love it because there is much less underwriting. And the paper pushing process through the SEC is easier. Much like private placements in the red-hot mining space – which we’ll get to in a moment – SPAC’s have rules. - SPAC’s have a deadline of 24 months to acquire a business. - If they don’t, investors get their money back with interest - And you can also request your money back if you don’t like the acquisition **However, you can make money with SPAC’s – and quickly.** Anyone that invested in the VectoIQ SPAC before or during its acquisition of Nikola Motors (NKLA) could’ve made 10x returns. We recently alerted subscribers to a SPAC in the *Katusa’s Resource Opportunities* newsletter portfolio. - **It’s up 30% since the first research report just a few weeks ago.** You would expect with all the headlines that IPO’s are flooding the market. In fact, in the next chart you’ll see that YTD in 2020 we’ve seen the 2nd lowest number of IPO’s (113) in 6 years. But the *return* of those IPO’s through the lens of the Renaissance IPO index is much higher than the last 6 years. ## **![Renaissance IPO Index Chart]What Happens When New Paper Shares are Created?** Capital flows are one of the least understood, most closely guarded secrets in the resource sector. Bull and bear markets are driven by expansions and contractions in capital flows. This capital comes from everyone, like retail investors all the way to trillion-dollar sovereign wealth funds. Knowing how to profit from these tidal changes in the market is incredibly important for the contrarian investor. We have all heard a few marquee lines related to trading: - *“Buy when there’s blood in the streets.”* - *“The market can stay irrational longer than you can stay solvent.”* - *“You know it’s time to sell when shoeshine boys give you stock tips.”* I want to talk about the last one… **Being a good seller is as important as being a good buyer and stock picker****. ** Realizing a profit is important. But selling is a lot more than placing a market sell order for your entire position and moving on. Selling should be just like your alligator buying: Slow. Methodical. Strategic. Always use limit orders. Let the buyers come to you. Discipline is required on both the buying and selling of shares. And here’s why… ## **How to Prepare for Amateur Hour… ** I want to use my points above to help you understand how fund managers (who get redemptions) and amateur investors sell and put pressure on a stock. And my expertise is in finding and getting my subscribers and myself into resource deals like gold, oil, copper, uranium and silver. We are coming into the last four months of a year that has seen the share prices of both good and bad gold deals soar because of the rise in the gold price. Throw in a U.S. Presidential election… And I believe we are going to see pressure on many resource stocks. Now, this could be a major opportunity for us. Let’s start with how much capital has been raised in the metals and mining sector. - **Last year, we saw equity financings rise above CAD$12 billion for the sector—a value not seen since the last run up from 2009–2011. ** 2019’s spike was due in large part to Katanga Mining’s CAD$7.6 billion rights offering. If you remove that… - **Equity financings totaled just CAD$4.9 billion, which would make 2019 the worst year since 2008 when the TSX began releasing statistics.** It was a very tough year for many companies. 2020 will be an improvement. Gold has performed well, and financings are already approaching CAD$4 billion. What’s more important is what these financings represented versus the sector’s market capitalization. ## **How Much Money Really Went into the Precious Metals Sector?** In the next chart, you will see equity financings as a percentage of sector market capitalization. Historically, financings represented between 3.5% and up to 8% of the sector’s market capitalization. Over the past 5 years, financings have cratered. ![Metals and Mining Sector Analysis]Again, if you remove Katanga’s rights offering, financings in 2019 would have represented just 1.7% of the sector’s market cap (red dot). Even with the precious metals market rocking, thus far in 2020, financings have represented just 1% of the sector’s market cap—the lowest representation since at least 2008. - **For the last 7 years, the trend has clearly been toward less and less capital going to work, regardless of sector performance.** This means that although mining stock prices are rising, financings are not increasing at the same rate. You can attribute this trend to 3 different factors: - Prices are rising faster than the financings are happening. That is not the case when compared to previous cycles. - The bigger funds and the generalist funds have not yet gotten into the mining financings like they have in the past. - Passive funds are focusing on ETFs rather than on equities. Number 3 is where I believe the significant change is. But with all the new IPO’s, listing, financings, deals that are hitting the markets… what happens to all those new shares once they start trading? ## **The Great Flood: Free Trading Stock Will Flood the Market This Fall** Yes, we are data nerds and we compile incredible amounts of data that others do not. - **Scouring through our 2 best data terminals along with the TSX financing data, we have compiled a chart you won’t see anywhere else. ** Ironically if you used each data terminal individually you would get 3 different numbers for financings this year and every other year. As you know, a large portion of equity financings are conducted through private placements. - Shares in those financings are restricted for 120 days after the close. - It is only under an IPO or short-form prospectus financing that there is no four-month hold. - Once the 120 days are up, the shares become unrestricted and investors in the private placement are free to sell their shares. **For every seller of shares, there needs to be a buyer of those shares. ** It’s not rocket science to expect that the stocks that have financings coming “free trading” will trade lower. The expiration of the restrictions can create significant selling pressure as investors look to recoup their capital—all at the same time. ## **The Gold and Silver Paper Wall ** You’ll want to pay attention to this. The chart below combines the data sets and encompasses 95%+ of the equity financings in the last 12 months—certainly any equity financing over CAD$5 million. From this new data set, we’ve calculated the dollar amount of upcoming free trading stock. So, beware. This is where the flood of paper will enter the market… ![Estimated Value of Stock Going Free Trading in 2020]You’ll see that the next 4 months have significantly more free trading stock than the previous 8 months. In fact… - **I estimate over CAD$2.5 billion worth of mining sector stock will go free trading over the next four months on the TSX and TSX-V exchanges. ** The majority are gold and silver stocks. This is an enormous amount of capital for the mining sector to be able to absorb. To put it in perspective… - **If I do not want to disrupt normal trading activity, it can take many days or months for me (Marin Katusa) to close positions worth 7 figures. ** Now extrapolate my situation to the entire market and its CAD$2.5 billion dollars which is coming free trading. This creates a serious problem for relatively illiquid listed mining companies. I highly doubt there is CAD$3-4 billion in new capital ready to step in and absorb those shares in the open market at the current prices—which are much higher than the financing prices. ## **A Real-Life Example** Here’s a real-life example of a situation likely to experience major havoc sometime this fall: A small junior whose management team I have never heard of and that has never been involved in mining before raised $2 million in May. Share prices since the private placement are up 800%, not including the warrants. The company trades 225,000 shares a day right now. The private placement was for just under 30 million shares. Again, the math doesn’t lie. Converting “paper” profits to realized profits will be nearly impossible for those investors. The list of these types of deals is pages long. Most of the companies are doing financings to keep the lights on or to fund a promotion to raise the price higher so they can unload stock. I’ve always avoided those types of pie-in-the-sky burning matches and I’ll continue to avoid them for my entire career. The risk/reward is horrible. However, many good companies also financed earlier this year. And most certainly there will be investors looking to recoup some principal. - **In the event of a sudden selloff or a few bad days in the gold market, it can provide us alligators **[**with MAJOR opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)**. ** And we’ve run the numbers on a handful of companies we want to own. They are on our alligator watchlist. As the newly created shares come free trading, there will be pressure on many gold and silver stocks. [Prepare for that opportunity well before it comes](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). It could be your last ticket to pick up shares of some great gold and silver stocks on the cheap. Regards, Marin --- # The Ultimate Cheat Sheet for Gold and Silver Stock Investors – Part 1 - URL: https://katusaresearch.com/the-ultimate-cheat-sheet-for-gold-and-silver-stock-investors-part-1/ - Type: article - Published: 2020-09-11 - Updated: 2020-12-02 - Author: Marin Katusa Gold and silver stocks are highly levered to the price of the underlying metal. And spectacular gains can enter your investment account at a blistering pace. Double, triple and even more than 10 times your money are all possible. And they can go down 50% just as quick. - **When silver or gold spot prices rise, you can bet that catalyst will lift many boats in the sector. Even those with gaping holes in the hull.** While those gains are realistic when the cycles turn in investors’ favor, paper profits can also evaporate in the blink of an eye. Though junior gold and silver stocks get all the glory… They’re also the ones that carry some of the highest risk in the stock market. Let me explain some items that need to be on your resource stock cheat sheet… ## **Liquidity in Junior Gold Stocks ** Junior gold stocks have one major issue that no one likes to talk about. They lack liquidity. Liquidity is the amount of dollar volume the junior company trades on a publicly listed company. Most juniors trade less than $250,000 a day in volume. That’s peanuts for a publicly listed company. On that type of volume, even a single moderately sized order of $100k or $200k would send the share price up 20% in a day. ![chart 1]That is the main reason big investors, family offices, or large funds avoid the junior mining sector. Sure, they could offer the company a bought deal financing, but what happens if the fund wants to sell? Good luck selling your large position into a stock that trades $100,000 worth of volume a day without hurting its share price. Even if the bet pays off, how do you sell? The liquidity math just doesn’t work for most funds. It’s just way too much risk. Regardless, gold is up $400 over the past year and brokers and companies have been aggressively financing all year. There has been over $4 billion in equity financings this year. Most of those shares that have been issued from the $4 billion in financings have been restricted. This means that investors have not been allowed to sell. But those shares are now coming free trading. So, a major question you should be asking yourself is “*who is going to absorb those shares when they go free trading*?” Our in-house analysis is telling us something important… - **Although mining stock prices are rising, the total dollar amount of financings are not increasing at the same rate. ** Let me explain what that means… You can attribute this trend to 3 different factors: - Prices are rising faster than the liquidity rise and financings are happening. That is not the case when compared to previous cycles. - The bigger funds and the generalist funds have not yet gotten into the mining financings like they have in the past. - Passive funds are focusing on ETFs rather than on equities. Now, number 3 is where I believe the significant change is. Passive management funds are primarily buying gold exposure ETFs rather than the mining ETFs and mining financings of the mid-tiers and juniors. You’ll see in the chart below, fund flow into the GLD is +25 billion, versus a net outflow of over 2 billion in the mainstream gold miner ETFs. ![Gold Focused ETFs: Cumulative Fund Flow]Even if passive funds were buying direct mining company exposure ETFs like GDX and GDXJ, those ETFs do not finance junior exploration. Nor do they finance mine construction via debt instruments or streams. ## **The Katusa Playbook: The Boom, The Bust and The Echo** There’s more to a cycle than just Boom and Bust, or the Bull and the Bear There is the Alligator. And the Alligator is much older, wiser and has been on the planet for over 100 million years longer than either the bear or bull. To be rich in the stock market, you must be able to survive many cycles and come out stronger and that is what the ‘[Way of the Alligator’](https://katusaresearch.com/the-way-of-the-alligator/) is all about. - **There’s also a sideways market that always appears somewhere between the last Bust and the next Boom, ** And it also occurs in microcycles between corrections… **It’s called the “Echo”, hence: Boom, Bust & Echo.** I created this concept over 6 years ago and will be the basis of my new book coming out soon. This sideways market is an integral part of the process, with unique and definable features. Understanding how the 3 cycles work can make the difference between succeeding in the markets and failing, like most others do. I’ve tried to explain this concept to others in the investment business many times over the years. Often to deaf ears. I got the distinct feeling that my words were just bouncing off and returning to me, like an echo. And that’s how I first got the idea and how Boom, Bust & Echo came to be. ## **The Katusa Focus: Investing in Gold and Silver Stocks Like an Alligator** I’ve refined my approach over the years and while I will take the occasional “punt” on a junior resource stock. But my main focus is to find assets that have - Had a lot of money spent on the project advancing the asset (read: OPM-Other People’s Money) - With incredible upside potential in lower risk jurisdictions in the previous cycle and left for dead. How do I go about finding the best assets and management teams? Let’s break it down with a recent project my team and I have done. My goal is to identify single producing projects that are: - Not owned by majors. - Located in **+SWAP** line nations. - Potential to produce at least 100,000 ounces per year There are over 700 producing gold mines in the world. After running the criteria through my database, I came up with a list of 89 potential mines. **I then eliminated the following:** - Low-grade projects. - Projects with short mine lives (less than 8 years with no exploration potential to increase the mine life). - High-cost mines (cash costs of more than $800 per ounce; general rule of thumb – if cash costs are $800, all-in sustaining costs are ~$1,200 per ounce). **From the remaining list, qualitative digging was performed on each project.** - Who would it be a good fit for? - Does mining the deposit require a unique skill set which discourages many potential suitors? - Are there any potential synergies with mines operating nearby? - Is there some low-hanging fruit to be plucked which creates additional value for the buyer? For the gambling trader, this simply isn’t exciting enough. That group would rather place bets on super high risk plays in hopes of mansions, Ferraris and women who will take their gold and hang out on their leased boats. And the management teams of those companies are more than happy to take your money. You can subscribe to most of the other newsletter writers for those stock pics. The criteria I’ve outlined has helped me identify more winners than losers. And I’m able to place very large bets on the outcome. Because I know there will be liquidity and an exit point. I mentioned earlier that there was $4 billion of shares of mining companies that were restricted that are now coming free trading that may hit the market. That usually means there will be significant selling pressure and lower share prices usually result. - **In my latest monthly issue, [I identified 6 companies which may be punished](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) – unnecessarily – by free trading paper hitting the market this fall. ** Do yourself and your portfolio a favor… **And – most importantly – make SURE you know when all that financing paper is going free trading in companies you own.** Regards, Marin --- # Advertise With Us - URL: https://katusaresearch.com/advertise-with-us/ - Type: page - Published: 2020-09-09 - Updated: 2022-06-10 - Author: Marin Katusa # Advertise With Us For advertising and partnership opportunities, please address your message to the advertising department at ![Advertise with us Katusa Research] --- # The Fed, Modern Monetary Theory and the Impact on the US Dollar - URL: https://katusaresearch.com/get-prepared-the-fed-modern-monetary-theory-and-the-impact-on-the-u-s-dollar/ - Type: article - Published: 2020-09-04 - Author: Marin Katusa In normal times, businesses that need capital offer a reasonable rate of return to individuals or businesses who have capital. For example, a mining company might issue debt with a 10% coupon to expand their operations. It could hire a broker syndicate to sell those bonds to investors. Sometimes one party gets the upper hand—but the marketplace usually finds an equilibrium. That system hardly exists anymore. Like it or not, governments now play a major role in determining who has access to and who can use capital. In a sense, they have positioned themselves in the center of the capital allocation chessboard. Let me elaborate… There are 4 basic ways for governments to dig an economy out of a hole: - **Expansionary Fiscal Policy **– Governments cut taxes and spend more money on public projects. - **Expansionary Monetary Policy **– Central banks lower interest rates, buy assets to support markets (QE), and attempt to exercise yield curve control (YCC). - **Debt recapitalization **and **restructuring**. - **Currency ****devaluation**. Most economic crises have been caused by credit impacts dealt by the government and central banks. As economies overheat, those in charge raise rates to cool the economy, which is operating above maximum capacity. Think of this as a contraction in credit, which in turn leads to a contraction income. Governments and central banks then lower interest rates and increase the money supply to bring the economy back out of the recession and reflate the economy. **For example, during the Great Depression of the 1930s and the Global Financial Crisis (GFC) of 2008…** Central banks lowered interest rates to loosen credit markets and restore the economy. In the 2008 GFC, central banks really began to exercise their control with the creation of the Toxic Asset Relief Program (TARP). Lehman Brothers, Washington Mutual, and others were allowed to go bankrupt. [![Recommended Link 2]](https://www.riskhedge.com/go/RH060R009/KAT)But Bank of America and others were deemed “too big to fail.” Fast forward 11 years, and the US Federal Reserve is supporting most of the US corporate bond market. Through these actions, the Fed has changed the process of how money gets distributed. ## **Gold Will Benefit from Modern Monetary Theory (MMT)** This “modern monetary theory” (MMT) is happening across the world, and gold will be a huge benefactor. - **To understand why, you must know the little wrinkle in the government’s handling of the current recession…** Interest rates are already at zero. Government debt levels are at record highs… and the financial crisis isn’t over. Solving it will require using more elaborate and creative means of economic reflation. Governments around the world have already passed massive stimulus spending packages—that’s expansionary fiscal policy. In the next chart you’ll see the amount of stimulus spending by major countries vs the tax revenues they’re bringing in. You’ll see 2 bars for the US – unsurprisingly the Democrats and the Republicans can’t come to an agreement, so we’ve shown both bars. Either way you look at it, the amount of money being injected into the system is astronomical. ![Stimulus Spending vs Prior Year Tax Revenue]These packages are intended to jump-start the economy through the spending of money and increased employment. Central banks in the developed world have already [cut interest rates to near zero](https://www.youtube.com/watch?v=qOLcyTJW9P0)—that’s expansionary monetary policy of the highest degree. ![Central Bank Short Term Interest Rates]Taking it a step further, central banks have acquired stakes in toxic assets (just like the TARP program of 2008) and bought hundreds of billions worth of bonds (quantitative easing). Next is a chart that shows the appreciation of assets under US Federal Reserve Banks. You’ll see that the expansion of the Fed Balance sheet in 2020 is nearly 3 times that of the expansion in 2008-2009. ![United States Federal Reserve Banks Total Assets]This means governments are propping up the “capital” markets with massive injections of capital. ## **Governments Will Determine Who is “Too Big to Fail” ** And it will either step in during the debt restructuring process or let companies fail. For example…. - **The Iraqi Kurdistan government recently restructured a $500 million debt with mining giant Glencore. It will force Glencore to take reduced payments in 2020 and likely into 2021. ** This is a trend that will only become more common. Other oil-rich, economically poor nations such as Chad and the Republic of Congo are in similar situations. This will become a major theme for foreign operators in both mining and energy that have operations in **-SWAP** **line nations**. - **Currency devaluation is a precarious, scary scenario. It has far worse effects than debt restructuring.** Less endowed countries will not have the ability to continue to print or borrow at will. Printing at will leads to rampant hyperinflation, with Zimbabwe as a classic example. Borrowing is the only other option, but eventually lenders will refuse to lend against assets that are worth less and less. This leads to currency devaluation. We have only started to see the beginning of this: coronavirus claimed its first currency devaluation recently… - **Nigeria, one of Africa’s largest oil producers, elected to devalue its currency by 5.5%.** Again, the requirement of governments to close the gap between expenses and tax receipts is exacerbated by coronavirus. Lower tax revenue requires governments and central banks to print more money to fill that gap. This is deflationary for domestic currencies. ## **So Which Door Will Central Banks Open?** The chosen solution is a twist on the playbook from 2008-2009, which consisted of buying assets with printed money to patch the hole in the credit market. This time, the play is to print money and use the new “printed digits” to patch the hole in lost income. In 2008-2009, this process was relatively straight forward: figure out how much capital the credit system requires, print it, and keep interest rates low to reflate the economy. This time around, governments and central banks need to replace the gap in GDP caused by the collapse in output and income losses. This number is relatively straightforward as well. The question becomes this: - **After you fill that void with printed cash, how does the economy get back to full employment without massive inflation?** We have begun to see initial unemployment claims fall, and I do expect them to slowly fall further. But it took a decade to get to the employment levels seen in early 2020, pre-COVID. To get back to that level may not take a decade, but it is not going to happen in a few quarters. The restart process around the world will be challenging—and perhaps the most challenging in the United States. **If you want to see how I’m positioning my portfolio for Modern Monetary Theory** – consider becoming a member of [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin --- # Rare-Earth Element Investing 101 - URL: https://katusaresearch.com/rare-earth-element-investing-101/ - Type: article - Published: 2020-08-28 - Author: Marin Katusa The rare-earth elements (REEs) sector could become one of the most sought after, highly competitive marketplaces in the world. Why are REEs so important? - **Rare-Earth Elements provide the building blocks to produce the best magnets in the world. ** When you think magnets, you likely think of the one on your fridge that hold up your kids’ or grandkids’ pictures and artwork. Those aren’t the magnets I’m talking about. The most important type of magnet is called a “permanent magnet.” There are permanent magnets in your cell phone and in MRI machines. There are 920 pounds of permanent magnets in an F-35 jet. - **Most importantly, REEs are crucial to two major differentiators moving forward: wind turbines and electric vehicles. ** Because of their incredible magnetic properties, permanent magnets are replacing the gear box for direct drive wind turbines. In electric vehicles, permanent magnets act as the drive unit and provide the torque and precision required for the electric motor. In other words, if nations want to go green, they *must* have REEs. It’s not just the United States that is trying to go green. So is Europe, so is China, and so are many other developing nations. ## **Clean Energy and the PM’s of Rare-Earth Elements** Both direct-drive wind turbines and electric vehicle motors require a permanent magnet called neodymium-iron-boron (NdFeB). The element that is most crucial is neodymium (which in the magnet is its own compound called neodymium-praseodymium oxide). - **The average electric vehicle’s motor requires 1 kilogram (2.2 pounds) of neodymium-praseodymium oxide.** Each direct-drive wind turbine requires 200+ kilograms (440+ pounds) of this same neodymium-praseodymium oxide material. - **Direct drive wind turbines are forecast to account for 30% of connected on-shore wind turbines. ** At this point, direct-drive turbines using permanent magnets are not economic for off-shore turbines due to weight issues, so I am not including them in the forecast. The next chart shows the projected demand for neodymium-praseodymium oxide. You’ll see that current production of the compound is approximately equal to current consumption. ## **![Neodymium Praseodymium Oxide Projected Demand]Investing in Rare-Earth Elements: A Word of Caution…** There are many of these types of charts for niche metals, where demand is projected to outstrip supply five times over. - **These types of investments look good on paper. But in reality, many of these scenarios never occur because of substitution. ** Cobalt is an excellent example. It’s a metal that improves the conductivity and chargeability of the lithium-ion battery. I alerted readers to cobalt several years ago, before it briefly took off. But then the issue arose that there was limited supply outside of the Democratic Republic of Congo (DRC). It was too expensive and too risky to bet the global EV revolution on a tiny AK-47 nation. Outside of Russia or DRC, there is no real mine that could provide offtake to the EV industry currently. Within 2 years, scientists discovered that by increasing the nickel in the battery, manufacturers could achieve the same positive outcomes on chargeability and conductivity. In short, cobalt was also substitutable. ## **The Elon Musk Effect on Rare-Earth Elements** When Elon Musk said Tesla was trying to remove cobalt entirely, I took that as a huge red flag. I alerted readers to that well in advance of mainstream investors, who likely got caught with their pants down. I do not see this type of situation playing out with permanent magnets. Neodymium magnets have the highest magnetic force among all magnets in the world. In addition, they offer excellent heat resistance and coercivity (resistance to demagnetization). Toyota has done deep dives on removing some neodymium from permanent magnets and substituting with lanthanum and cerium, two “cheaper” rare earth metals. The swap resulted in lower performance and higher deterioration. Another sign we are on the right path is that Tesla has actually moved to the permanent magnet motor—substituting away from an induction motor. Elon Musk has continually been ahead of the curve; there is no reason to think otherwise here with the motor change. Today, every single major car manufacturer is now using a permanent magnet setup with the neodymium-praseodymium oxide compound. The table below shows the differences in battery chemistry across car manufacturers, compared to the unanimous decision for motor technology and critical motor materials. ## **![Key Lithium Ion Battery Tech]Understanding the Supply Side of REEs** The supply of rare earth ores and finished goods is perhaps the least transparent segment of the commodity space. China controls nearly the entire vertical and keeps it highly secretive. There are no futures exchanges for rare earths, and there are very few public companies. China is the largest producer of rare earth metals, both at the mining level and at the refined product level. It accounts for 60% of mined output, 85% of refining, and 90% of manufacturing. The chart below shows mined output for REEs by country. ![Global Rare Earth Production]Now those who are familiar with the rare earth market will say that the United States doesn’t produce any rare earth material; we import it all. That statement is *sort of* correct. The U.S. does produce a very basic rare earth concentrate. The problem is that this very basic concentrate is not useful for anything. It must be further refined into oxides or alloys, neither of which can be done on American soil. So it all gets sent to China, which refines the concentrate and sells the finished product back to the United States. The chart below shows United States imports by source country for rare earth compounds and metals. ## **![USA Rare Earth Imports by Source]America’s Lifeline to Rare Earth Elements** As I mentioned before, the United States is 100% dependent on outside sources for its refined rare earth products. Ironically, for much of the 20th century, the United States *was* the world’s rare earth powerhouse. Unquestionably, rare earths are already a matter of national security for the United States. The issue becomes an order of magnitude greater if Trump or Biden push for “Made in America” electric vehicles and wind turbines. Think about it… The United States already imports 100% of finished rare earth alloys and oxides, most of it from China. - **If America wants to ramp up production of EVs and wind turbines domestically, the surge in demand for rare earths will be enormous. ** And yes, if you have questioned yourself by this point *“Can the U.S. even be capable of mining REEs”*? The answer is YES, with time and capital. And if you include **+SWAP** Line Nations, the answer is a definite YES. Can you position yourself to profit from a surge in rare earth demand – you bet. I’ve alerted my subscribers of **[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)** to a rare-earth stock with world-class assets, a plethora of catalysts coming up and a key list of financial backers. It’s a company I want to own in my portfolio, and the price is just about ripe for this alligator. You can get all the details in my latest issue with a full breakdown and analysis. Regards, Marin --- # An Exclusive Interview with Mining’s Renaissance Man - URL: https://katusaresearch.com/an-exclusive-interview-with-minings-renaissance-man/ - Type: article - Published: 2020-08-21 - Updated: 2020-08-25 - Author: Marin Katusa It was 3am in the morning when mining’s Renaissance Man turned to his wife and told her to write down a reminder. The next morning, she said… - “By the way, last night you told me to write down ‘*buy silver mines’*… so I’m also going to add this – that is soo sexy” And just like that he went into the silver business with that reminder from his wife. In 1993, with no expertise, he forayed into the silver industry with only $10,000. He put his money on silver options and watched silver go from $3.5/oz to $5.5/oz. Making him hundreds of thousands of dollars. Then he parlayed that return optioning a property in Idaho. Then he went to Peru, Bolivia and Mexico and put more options on those properties – giving him a very unique portfolio. ## **The Billionaire Mining Mindset** I’m going to be introducing a very special individual that first of all is one of the most accomplished investors in the precious metal sector. More importantly, he’s just a great guy, and uber smart. I’ve pretty much got to know everyone in the business, from the movers and shakers to the billionaires that have built big mines. And I got to say, this individual is easily in the top three smartest people category I have met in the mining sector, if not the most intelligent. **I want to introduce Tom Kaplan** I doubt anyone else in the sector understands geopolitical risk to the extent Tom Kaplan does. If you invest in the gold and mining sector, you have to listen to this one interview, with the best geopolitical mind in the mining sector and one of the most experienced mining investors across the globe, when it comes to resource development. I really hope you enjoy this interview as much as I had participating in it. I learned an incredible amount. **In this interview, Tom Kaplan and I discuss:** - How the “Kaplan Doctrine” and Katusa’s SWAP LINE concepts are an important consideration for your mining investments - The pivot of big mining companies from safe jurisdictions to the frontier - How rumblings lead to social disturbances and big problems for mining companies in certain countries - What regions Tom Kaplan’s top interests and partnerships are located in - Which type of assets are Tom Kaplan’s favorite to invest in - What targets he sees in store for the gold and silver price (hint: much higher) and how they will become “Strategic Assets” - The sector of assets that Tom sees is “game over” for investors - The names of 2 stocks revealed as his favorite holdings (1 gold and 1 copper) [Click the image below to watch the interview.](http://youtube.com/watch?v=wJjdNqD_Vp4) Regards, Marin --- # Welcome Crypto and Cannabis Investors: This is the Worst Thing That Can Happen to a Junior Stock - URL: https://katusaresearch.com/welcome-crypto-and-cannabis-investors-this-is-the-worst-thing-that-can-happen-to-a-junior-stock/ - Type: article - Published: 2020-08-17 - Updated: 2022-09-21 - Author: Marin Katusa “Hit the bid.” “There isn’t one!” These words are all too familiar to anyone that invests (or speculates) money in speculative high risk junior companies. And this is especially true for anyone that puts money to work in companies listed on the Toronto Venture Exchange (TSX-V). This exchange is home to the serial start-up entrepreneurs looking to get their next big resource, tech, or cannabis company off the ground. One difficulty with early stage companies is that they are not well known out of the gates. These are the companies you hear about in an internet chat room, from your brother-in-law, or from your barber. It’s the hot tip of a company that will shoot to the moon once it gets a permit, approval, or a grant. Or even if it hits a drill hole or puts the dog collar supply chain on the blockchain. A second issue comes when that particular market sector cools down significantly. The momentum and interest evaporates, and the buyers along with it. When the buyers run out, there is no ‘bid’ in the stock price. There’s only a lineup of sellers on the ‘ask’. When a stock trades very little or no volume, the stock becomes ‘illiquid’. An illiquid stock can trap a shareholder for days, months, or even years before you can sell your position. This is a new phenomenon for the many blockchain, crypto, and marijuana investors new to the TSX-V. Welcome to the TSX-V. Where your dreams are shattered and your worst nightmare is the reality most of the time. Long time resource speculators have gone through a few cycles of boom and bust on the TSX-V. Whether its uranium, gold, rare-earths, blockchain or cannabis related companies, the pain is the same. And on a side note… After every major bubble bursts, expect more regulation that go to the exchange and regulators. (Read: higher costs for companies to stay listed). But there is one constant regardless of the sector: only the best will survive. **Junior Stocks Can Become Illiquid Fast** Seasoned gold, silver, and uranium investors are no strangers to illiquid companies and markets. Once the company or sector falls out of favor, or didn’t have any favor to begin with, the stock chart will look choppy like this… Charts that look like this can provide fast 10-50% returns for shareholders that are able to sell into volume quickly. But there could be a line of orders waiting to do so. And this is what you deal with when a stock is illiquid. You can see that the blue line doesn’t connect because the stock did not trade on those days. There was simply zero volume. With any rush of buyers, a stock can rise significantly. With any rush of sellers, a stock can drop drastically. And the latest sectors experiencing a liquidity drop are the cannabis, crypto and blockchain companies. You can see from the chart below that the marijuana company index surged in late 2017 through to early 2018. And those stocks had solid trading activity (the volume). As the first half of 2018 wrapped up, those same companies saw a big drop in trading volume. With that drop in volume has come a drop in price… Things were no different for crypto companies. In 2017, they pulled in over CAD$300 million in financings on the Canadian markets alone. These companies delivered massive returns to early investors that bought in the market and to those that had their hold periods expire early enough. (The *hold period* is the length of time that you can’t sell shares into the market when you participated in a private placement). In the chart below, you can see the Katusa Crypto Stock index went bananas at the end of 2017. And the trading volume was through the roof. The first few months of 2018 saw a major dip in both price and trading volume… What you’re seeing in the above charts is the exiting flow of capital. A tsunami of capital flowed into the cannabis and crypto sectors in 2017. And in 2018, the capital is exiting stage right. It is very important to watch capital flow in these markets because it’s true that a rising tide lifts all boats. But after the capital leaves, only the strong companies will stay afloat. Thus far in 2018, funding for crypto and marijuana ventures has dropped significantly. The management teams behind the scenes say that funding has all but evaporated. The big mutual and hedge funds I talked to that were raising hundreds of millions of dollars and injecting them into any such companies in fall 2017 have dried up. Managers were fired. And those exact funds are now experiencing major redemptions by investors. Therefore, expect more pain ahead. There is no more capital being allocated to the fly-by-nighters. Gone are the days of easy money where a no-name company could switch its name to “Bill’s Blockchain” and raise $10 million in 24 hours. And those funds are underwater. By quite a bit. Now that those exact major funds are experiencing fund redemptions – you don’t want to be left holding the bag with shares of companies that don’t have revenue or any future. **With Little Liquidity – Why Invest in Juniors?** Juniors have a lot less analyst coverage than large caps. A $200 billion giant could have over 30 different professional analysts covering the stock. They will analyze the company inside and out. Their research will be read by the world’s largest investment managers. It’s not uncommon for a junior to have ZERO professional analysts covering it. The management at some juniors can go a whole year without fielding a call from a professional analyst. To me this is a great, great thing. The lack of widely disseminated information about juniors allows us to get a big “information edge” in this market. It means we can find pricing inefficiencies and uncovered opportunities that can explode higher very quick. The junior market isn’t swarming with professionals looking under every rock. That is if you know how to analyze this information. You can think of it like this: would you rather take your child on an Easter egg hunt with 100 other kids or with 5 other kids, of which 3 don’t walk yet and 1 doesn’t want to leave his mother’s side? Your child will find a lot more eggs competing against those 5 kids. And the prize will be a lot bigger. If you know what to look for, who to follow and when to buy, your portfolio will also benefit from the TSX-Venture discount in a bear market. Granted, 98% of the companies are worthless and run by useless management. But the 2% can make you very, very rich. Regards, Marin P.S. [The way of the Alligator](https://katusaresearch.com/the-way-of-the-alligator/) is the exact style of investing during the current market conditions. I cannot emphasize this strategy enough. There are two companies we have published on, both dividend players that are well run, well financed and I plan on investing millions of dollars personally in both—when my target price gets hit. I published this report many months ago, and I believe we are within a couple of months before my “Way of the Alligator” proves out to be a big winner and gets us cheap stock on both companies. To learn the ticker symbols of these companies, consider becoming a subscriber to my premier research service, *Katusa’s Resource Opportunities* by [clicking here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail). --- # Fear Of Missing Out: Gold Stocks vs Gold Price - URL: https://katusaresearch.com/fear-of-missing-out-gold-stocks-vs-gold-price/ - Type: article - Published: 2020-08-14 - Updated: 2020-08-13 - Author: Marin Katusa The volume of emails and questions I get asking to buy XYZ gold or silver stock is at the highest level in a long time. And it’s coming from seasoned and new investors and subscribers alike. Be patient and always remember the quote from Charlie Munger: **“It takes character to sit with all that cash and do nothing.** **I didn’t get to where I am by going after mediocre opportunities.”** Readers have been writing into the inbox in large volumes, asking for gold and silver exposure. But the prudent and responsible thing to do is to wait for a pullback, which always comes. How sharp or long the pullback will be – no one knows. But it will happen, and you want to be prepared. Like Charlie Munger, I didn’t get to where I am by chasing opportunities with the herd. Opportunities being touted by self-acclaimed “gurus” that have never actually been part of real success. Nor part of any experience on the successful discovery of a deposit. Nor the development of a mine on the corporate side. These are major warning signs to stay away from popsicle stand gurus. Above all, I want to remind readers not to chase stocks. We’ve just seen the 8th largest dollar wise pullback in gold history. We’ve stated this would happen. But on a percentage wise pullback, it’s not even top 10. Pullbacks are normal in all bull markets. ## **The Price of Gold vs Gold Stocks** The next chart is something that we’ve published in the past. It highlighted short-term resistance at $1,750. If gold broke above that resistance, the extension target was $1,850 to $1,925. Gold blew straight through the extension target and is now knocking on the door of $2,000. ![Gold Price]So, what’s next? It is very natural for the price of gold to consolidate and test the previous consolidation level. So far, gold could not hold above $2,000 for a week. Gold dropped $150/oz and now is flirting with testing the $1,800 handle. But even a correction to $1,800 would not be considered unhealthy or unwarranted. It may not be what you want or what makes you feel good, but your desires are irrelevant. The sooner you can control your own emotions, the better you will become in both speculation and investing. One of the big questions every investor and speculator in precious metals is asking is this: Why are gold stocks are not performing as well as the metal itself? Is that comment even true? - **Given the leverage the mining prices have to rising gold prices—one could believe that gold stocks “should” be higher.** There are a few reasons gold equities have not responded according to expectations for $2,000 gold. First off, $2,000 gold didn’t last even a month, so nobody was using $2000 in their models. Secondly, institutional investment in the gold sector drives large share purchases that bring prices up or down. The “paper gold” market, which consists of ETFs backed by gold, has seen billions of dollars of inflow. But the miners have not seen the same capital inflows. That means… - **Money is going for direct exposure to gold—not exposure via gold mining company shares. ** Now let’s look into some detail on what’s going on. ## **Institutional Money and Gold** To find out where big institutional money is going, we start with the physical gold ETF’s. These are the most liquid way for generalist funds to buy and sell for exposure to the gold sector. The next chart shows the institutional fund flow for all the physical gold ETFs, including GLD, IAU, and GLDM. You’ll see that there has been significant buying activity every week since mid-March 2020. ![Paper Gold Fund Flow Weekly]In the next chart, you’ll see the institutional fund flow of all the major gold miner ETFs, including GDX and GDXJ. Note that the dollar volume units are **one-tenth** of those in the previous chart. - **What you’ll see right away is that money going into gold *miner* ETFs is a fraction of the money going into gold ETFs. ** And the buying is all over the map. May 2020 saw the only solid streak of consecutive buying. ![Gold Miner Fund Flow Weekly]If you look at the cumulative fund flows side by side, the difference in investor appetite is incredible. The next chart below shows the cumulative fund flow for the paper gold market versus the gold miner stock sector, starting in January 2019. **![Cumulative Fund Flow Comparison]** - **Since January 2019, the ETFs that provide exposure to gold miners have seen a net *decrease* in flow of funds. ** Meanwhile, ETFs that hold direct exposure to gold have added $40B. ## **So How do the Gold and Silver Stocks Break Out of Their Slump? ** Gold mining stocks have been hated by the generalist funds for a decade because so much wealth destruction occurred in the last cycle. As shown below, two good years in gold stocks led to 5 years of cratering share prices. ![Sr. Gold Miner ETF GDX]However, I do think that the last 7 months have been very constructive for the sector. Year to date, the Senior Gold ETF (GDX) is up over 36%. ![Sr. Gold Miner ETF GDX 2020]The next chart shows the fund flow and share price for GDX, which is a large and very liquid gold miner ETF. You’ll see that in May, the total fund flow was over $1 billion, yet GDX barely moved. From June to today (in the yellow box below), the share price is up 20%—and fund flow is negative. **![GDX Share Price vs Fund Flow]** - **You can see that the month of July as gold broke $2000, the red bars show flows of funds negative indicating profit taking. ** Since June the fund flow is negative, but the share price is up 20%. We will see further consolidation and profit taking. However, if gold breaks $1,750, we will see further exodus of funds. ***If*** we see gold consolidate its breakout above its old record high, that should fuel new entrants into the space. If that happens and gold does *not* break the previous support levels, it will be on its next leg—and going much higher. ## **Playing the Long Game** I am very bullish the price of gold over the next few years, but in the near term we may see further consolidation. Gold might test the previous consolidation range of USD$1,650–1,750. **If gold breaks down**, it will be an incredible buying opportunity. We will send out an alert on what we will be doing with our own money to subscribers of [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). The last time we saw a major correction, I published a series of alerts with 5 companies on my buy list. The coming weeks and months saw multiple triple digit returns. - **You have to be mentally prepared (to take action) and physically prepared (with cash ready) for the opportunity.** Being all in and not taking profits off the table and Katusa Free Rides will leave you empty when it’s time to hit the Home Run Pitch. - **You must make your wins large and meaningful…and your losses small and insignificant.** Folks like Babe Ruth have used the “home run” mindset to achieve success for centuries. Professional gamblers have used it to clean out casinos. Top traders have used it to generate 100%+ annual returns. And the venture capitalists I mentioned earlier have used it to make billions in startups. Top performers fail as often as anyone. But top performers ensure their failures are small and limited…while their successes are large and meaningful. In fact… - **One of the companies in our portfolio of resource stocks jumped as much as 49% in a single day** on the back of one of the most incredible drill holes of the year. Right now, I am working on two huge deals, that I along with my subscribers will be participating in at the same price as management. If you want to follow along and seize the best pitches as they cross home plate, become a member of [**Katusa’s Resource Opportunities**](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). We’re still in the early innings of something truly special. Regards, Marin Katusa --- # The Dawn of Gold - URL: https://katusaresearch.com/the-dawn-of-gold/ - Type: article - Published: 2020-08-07 - Updated: 2020-08-06 - Author: Marin Katusa Many believe July 2020 was one for the gold history books, but it wasn’t even a top 10 move in gains for gold historically. In fact, last month’s big move in gold to all-time U.S. Dollar highs was the 23rd best spot monthly return. Let that sink in. A new all-time high was hit, and yet the “big” monthly move that’s drawn a generation of new investors and captured the imagination of a whole new set of investors… isn’t even a top 20 monthly gain percentage wise for gold historically. We are far from the top in gold. ![Top Gold Spot Monthly Return]Gold and silver stocks have responded, catching a tailwind not seen in a decade. As I showed in my premium newsletter to subscribers this week, institutional money hasn’t even entered the sector in a big way. We published very detailed analysis of the flow of funds from institutions (for paid subscribers only) and we shared our unique conclusions based on the proprietary data. ## **A Path to Profit – The Fed Can’t Print Gold** In the 12 years since the Great Financial Crisis (GFC), the U.S. Fed, European Central Bank, Bank of England and Bank of Japan have invented new ways of printing money and keeping the financial markets afloat. Below is a chart showing how much the total assets (balance sheets) of central banks have ballooned during the Crisis. ![Central Banks Ballooning Balancing Sheets]Expansionary monetary policy is beneficial to gold. Now, there are two primary schools of thought on this: - Inflationary - Deflationary Regardless of which scenario plays out, gold will benefit because that is its primary draw as an investment: a hedge against fluctuations in the real value of money. The pandemic and lockdown produced record inflows into: - Safe-haven investments like AAA-rated government bonds (often with negative real and nominal yields), - Large Tech stocks with solid balance sheets (Think paying for financial safety in the FANG stocks) - Currencies like the USD and JPY, and - Gold and silver. ## **Gold Goes Mainstream** The once “pet rock” and “barbarous relic” is now on the lips of every talking head. Flip on the financial news nowadays and every trader and portfolio manager seems to be extolling the virtues of gold and silver. Now you’ll hear guys like Jim Cramer talk about how gold miners like Barrick, Newmont and Agnico Eagle are some of the better buys right now. Looking at the YTD returns below, it’s hard to argue that gold and silver aren’t the clear winners in this bull market rally. ![Comparative Investment Returns]Economists like Nouriel Roubini and Mohamed El-Arian are talking more about gold and the benefits of the safe haven metal in these uncertain times. Even Goldman Sachs is changing their tune. They once mocked gold as an investment that’s nearly always beaten by the market. They’ve since joined the chorus of major financial institutions like Bank of America and Citigroup ringing the alarm on currency-debasement. In the next chart, you can look at how gold prices have surged, with a Relative Strength Index (RSI) showing how prices are reaching an overbought level not seen since mid-2011. ![Gold Price Analysis]But that is one indicator. Things have changed so much over the last decade and we are just starting to see the impacts of MMT on the price of gold. ## **Is There Enough Gold to Meet Demand? ** This year, as many as 119 producing gold mines in 18 different countries have either been offline at some point. Or operating at reduced capacity due to COVID-19. Estimates vary as to how much of 2020 production was lost as a result of the pandemic. The last COVID-19 impact report published by S&P Global Intelligence estimated a 10% decline in their forecasted gold output for 2020 (approximately 11 million ounces). The 10% estimate was also affirmed by the World Gold Council, despite sourcing their data elsewhere. So, let’s go with the 10% figure. As I have respect for both outfits who have come to the same conclusion. Previously, 2020 gold mining output was projected to increase by 3.7% YoY. Instead it’s fallen by at least 6.7%, barring any unforeseen shutdowns. The most important statistic from the data was an estimated US$2.5B in revenue from forecasted gold production lost. For lost silver production, this amount was US$502 Million. ## **![Gold Production]Gold Investor Beware** Gold projects that weren’t economic at $1,750 per ounce suddenly look like no-brainer investments. - **Land packages that were once barren moose pasture are now labelled as “greenfield” mining projects**. For new investors and speculators in the gold space don’t forget “buyer beware”. Not all gold projects are equal. There has always been 3 types of management teams in the precious metals sector: The Innovators, Imitators and Hot Dog Vendors. It’s just the latter two (the imitators and hot dog vendors) aren’t around during a bear market, but pop up during a bull market like a plague. - **Make sure you know which management team you are backing. Everything starts with great people.** Flavor-of-the-day companies will chase any bull market. In the late ‘90s, there were thousands of dot-com companies. In 2007, there were literally over 500 hundred uranium companies on the Stock Exchange, where there were only 15 five years earlier. In 2017, the cryptocurrency market exploded, with over 850 coins and new celebrity initial coin offerings announced daily. There will be an explosion of new precious metals companies and financings looking for your money. Or worse, to leave you with nothing better than an old hot dog. ## **Is It Too Late to Invest in Gold Stocks?** As gold pushes higher, the economics of many projects will change. And there are many factors to consider when re-evaluating a company. All-in mining costs, exploration costs, administrative costs, royalties, taxes, currencies and much more. Do you know which companies in your portfolio operate in safe jurisdictions and away from nationalization and confiscation risks? You should. Is your valuation properly discounted for these potential cost inflations and government risks? Just as much as you fawn over a climbing gold price, [don’t think that foreign governments aren’t doing the same](https://katusaresearch.com/the-importance-of-dollar-swap-lines/). They have services and stimulus to pay for those votes and to keep the masses happy. We are in the “Era of Woke”, where feelings matter more than reality and logic. ## **Supercharged Returns** You don’t have to spend over $500k a year on data feeds and analysts to figure out which gold companies to invest in. Consider becoming a subscriber to [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) and let us do the hard work for you. So how has Katusa Research done? Not only have we beaten every index and sector, our portfolio consisted of liquid (not microcaps) companies that were considerably lower risks than the indexes that we all beat. Many will promote their large gains that trade by appointment that is nothing more than speculations that are not liquid. Be wary of what you are buying and specifically your allocation to the different companies. You do not need to increase your risk exposure to increase your returns, my portfolio has proven that. You can follow along to see exactly what I’m doing with my own portfolio. And the just released details on my next major gold investment… It’s a brand-new company, with major upside. Even better, it’ll be open to all investors, not just the rich ones. This is going to be a very fun ride. Regards, Marin Katusa --- # The Dethroning of the US Dollar - URL: https://katusaresearch.com/the-dethroning-of-the-us-dollar/ - Type: article - Published: 2020-07-31 - Author: Marin Katusa There used to be 3 things you could be certain of: Death, taxes and the US Dollar as the world’s reserve currency. But is the US Dollar’s recent weakness the beginning of the end? Many “YouTube experts”, investors that can fog a mirror and self-proclaimed gurus have jumped on this bandwagon. But like with cannabis and crypto, most of that crowd plays poker with tooth picks, don’t have a pot to piss in and don’t have a real track record for 2 decades. To start, let’s take a look at how the US Dollar has performed against a trade weighted basket of other major currencies over the past 15 years. ![US Dollar Trade Weighted Index]Over the past 15 years, the US Dollar has appreciated roughly 18% versus other major currencies. During the March meltdown… - **The incredible demand for liquidity and US Dollars was so great – it drove the value of the Dollar against all major currencies into record territory. ** As things have slowly normalized, the US Dollar has come back to earth, albeit still up 18% against most currencies over the past 5 years. It is hard to argue that the US Dollar is truly collapsing right now. ## **The Dollar on the Brink of Disaster? ** Do you want to see a chart of a currency collapsing? We have you covered. Look to virtually any emerging market currency, a handful of which are shown in this chart… ![Emerging Market Currencies]You’re probably thinking… *sure, Katusa, you’re just cherry picking*. Ok, here’s the same 10-year chart versus developed nations. ![Developed Market Currencies]From those charts, it would be hard to argue that the US Dollar is on the brink of disaster. A core reason for the weakness in virtually every other nation’s currency is that it holds a trade deficit with the United States. Countries sell more goods to the United States then they purchase from the US. This creates the deficit, which snowballs annually. It’s widely known that countries like China use their trade surplus to their advantage. They purchase treasuries or US Dollars to boost their reserves which causes the US dollar to appreciate. This weakens the domestic currency in question and improves the export competitiveness of said nation. - **Ironically, a trade deficit between 2 nations other than the US can still cause the US Dollar to appreciate. ** The logic is that the country that runs a trade surplus buys US treasuries with its excess holdings. This will also cause the US deficit to increase even though they are not part of the trade. It’s the price the US pays for being the world’s reserve currency. After all, - 44% of payments over the SWIFT banking network are in US Dollars and 61% of global foreign exchange reserves are in US Dollars. Can any other “reserve” currency claim that? Not yet. ## **What’s Driving the US Dollar Lower Right Now?** In a word, [financially transmitted diseases](https://katusaresearch.com/financially-transmitted-diseases/). We’re in a world heading negative and into uncharted territory. A key reason for the fall in the US Dollar is the negative real rate of return earned on US government notes and bonds. - The real rate of return is the bond’s nominal yield minus the inflation rate. If the nominal rate is less than the inflation rate, then you have a “negative real rate of return”. For example, right now the US 5-year note yields 0.264%. Subtract US inflation and you are left with a negative rate of return. - **In fact, right now every US yield has a negative real return. ** Don’t believe me? Take a look at this next chart. ![US Treasury Real Yield Rates]Clearly, a negative return is undesirable, so investors sell the dollar for other assets. This fall in the US real rates and the US Dollar has coincided perfectly with the recent rise in the gold price. Below is a chart which shows this relationship between the real rates of return and the gold price. ![Gold VS Real 5Yr]The real 5-year yield shown in red is currently -1.13%. Since the March 24th “*whatever it takes*” move by the US Federal Reserve nominal and real yields have cratered. Dollars flooded into the system through expansionary fiscal and monetary measures. And this pushed bond prices up and yields down. Now, the US Congress is pushing for at least another $1 trillion on top of the $2.8 trillion already injected into the system this year. - **It seems that in the short-term gravity will take hold of the situation and it’s not unreasonable that we see real rates approach the March 2013 low of -1.77% ** Not to be outdone, last week the European Central Bank put together a landmark debt deal worth an additional $877 million. That brings its total pandemic response to $1.58 trillion, plus an additional $500 billion from national level stimulus packages. Total EU response is €1.77 trillion, or $2.1 trillion. These numbers are mind-boggling. Let’s not forget about Japan who threw down a whopping $2.2 trillion in stimulus relief. While the dollar values sound impressive, its more important to understand the size of the package, relative to that of the country or region’s Gross Domestic Product. Next, you’ll see a chart which compares the United States, China, Japan and the European Union’s stimulus packages as a percentage of 2020 Gross Domestic Product. On a total debt basis, things aren’t any better. Below are the 2019 and 2020 projected government debt to GDP levels. ![pre and post coronavirus debr]Clearly, the world has a debt problem and its not going to get any better. - **The takeaway here is that it is a continued race to the bottom. ** Countries around the world are going to continue to keep interest rates low and jack up fiscal stimulus to spur economic activity. As currencies devalue, it becomes increasingly more important to hold stores of value for portfolio protection and diversification. Gold continues to be a top performing asset class this year and gold stocks are on a tear. Below is a chart which shows the YTD returns of various major asset classes. A humble brag (that’s taken 20 years and a lot of mileage to get to), but the *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)* portfolio has crushed the competition, up 79% year to date. With all the excitement about FANG stocks and the NASDAQ hitting new highs, our small group of alligators have seen incredible returns. ![YTD Returns by Asset Class]But that’s in the past. What’s next? I’ve just finished my mandatory 2-week quarantine and I am hitting the ground running. My team and I have put together an incredible August issue that goes out next Wednesday and it will feature a new company recommendation. It is a world class asset, backed by incredible people in the United States that I’m almost certain you have never heard of. [Click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) about becoming a subscriber to *Katusa Resource Opportunities*. Regards Marin --- # Copper: Bold, Hold, Fold or Who Cares it’s Not Gold? - URL: https://katusaresearch.com/copper-bold-hold-fold-or-who-cares-its-not-gold/ - Type: article - Published: 2020-07-24 - Updated: 2022-08-24 - Author: Marin Katusa The price of Copper has been on a tear. There’s an expectation in the markets that the big copper mines in Chile and Peru will be shutting down due to the virus. Combine that with the market’s belief that the government of China will stimulate their economy and thus buy all the copper they can get their hands on… and the belief is that the strong run in copper prices will continue. Here’s a chart that shows China’s monthly imports of copper: ![China Copper]We’ve received a lot of feedback on our long-term stance on commodities, base metals and precious metals – especially when it comes to my [**+SWAP** vs. **-SWAP** Line Nation thesis](https://katusaresearch.com/the-importance-of-dollar-swap-lines/). And the biggest counterargument that we’ve received from management teams, analysts and investors is that: “*The market has already priced in the geopolitical risk.*” Wrong. We’ve gone through hundreds of examples where analysts are using the same discount rates for projects in both high risk emerging market nations as well as politically stable jurisdictions. And that’s across all the different stages of the project lifecycle (production, development or exploration stage assets) for precious and base metal commodities. We can also give many examples where the market is valuing peer comparable assets more highly in risky jurisdictions compared to similar projects in the U.S., Australia or Canada. **My point is…** - **In my career, I’ve never seen the market, market pundits and investors so complacent to geopolitical risks with their investments. ** The mantra of “*go wherever the gold/copper/silver/oil is*” has firmly set hold in the resource sector. But the risks aren’t being discounted correctly in the valuation models. ## **The Copper Barometer** Let’s first take a look at the recent spike in copper and share prices. Global (and especially Chinese) economic activity took a nosedive in Q1-2020. That was one of the main drivers behind plummeting copper prices. As expected, the drop in share prices of copper miners was magnified. China’s swift post-Coronavirus economic recovery and their resumption of industrial activity has led to a strong price movement higher in copper and other industrial metals. As you can see below, taking Q1 into account, the returns of North American copper producers have been less than stellar on a YTD basis. ![Copper Producer Returns YTD]However, Chinese industrial demand has begun to tick up. Look no further than Chinese domestic steel production, shown in the next chart, now at a new all-time high: ![Chinese Monthly Steel Production]Looking at the North American copper miner returns since their March 23rd, 2020 lows, we see that they’ve far outpaced the returns on not only copper itself, but also the major U.S. and Canadian equity indices. Their 108.4% return in four months is hard to overlook. In fact, this is 30.5% greater than the return on the NYSE Arca Gold Miner’s Index. ## **![Copper's Return Since Mar 17, 2020]Copper’s Commodity Sentiment** In the futures market for High-Grade Copper Cathode, we can see exactly how bullish speculator sentiment has become. In the last 15 weeks, the number of spec long positions increased by 111% (or 47,000 contracts), while the price of copper increased ~27%. ![Copper Commitments of Traders]Conversely, spec short positions have fallen by ~31%, or 21,000 contracts during the same time period. ![Copper Commitments of Traders 2]The reason why non-commercial (spec) positions are more closely examined as a sentiment indicator is because commercial traders (i.e. copper producers and their exposed counterparties) usually take the short side of the trade. Simply because their primary goal is to hedge their production for risk management. Speculators on the other hand have little interest in hedging and want to make money by betting on commodity prices. If copper continues to catch a tail wind… You can bet that desperate countries with budget shortfalls will look to “*return to the people what’s rightfully theirs.*” ## **“We Will Redistribute Mineral Wealth to the People!”** You can see the tag line that’ll make it happen. So, you can see how the implications for **+SWAP** Line Nations vs. **-SWAP** Line Nations is enormous. And you must prepare your portfolio accordingly. Governments will feel the deflationary pressures in their local economies and significant unrest from their people. There will be pressure to put their citizens first and “redistributing the mineral wealth to the people” will happen in many parts of the world. Here’s a chart which shows the exposure of select major commodities’ production to regions without U.S. swap lines compared to regions with U.S. swap lines. ![Major Commodities US Swap Line Exposure]The above chart has a lot of information in one picture. - As you can see **72% of the world’s copper production comes from regions without U.S. SWAP lines **in place**.** I do believe this will become a focal issue as the world grows and less developed economies continue to electrify. ## **Copper’s Crux** Currently Peru and Chile don’t have U.S. swap lines but produce roughly 40% (17.6 billion pounds) of the world’s copper each year. Both governments are right leaning currently, and pro- mining development and international development. But we’ve seen video footage of union mining meetings at very large mines in both Peru and Chile that suggest there are some serious issues at the mine sites there. I wouldn’t be surprised to see the current government parties lose in the federal elections in Peru and Chile in 2021. Taking this a step further… - **The top 50 copper mines produce 28.6 billion pounds of copper annually, equivalent to 64% of annual global copper production. ** Non-SWAP countries produce 22 billion pounds of that copper, compared to SWAP+ regions which produce a paltry 6.6 billion pounds. This is a dicey situation to say the least. The risk of increased taxes to outright nationalization of large mines is real and will happen. ## **Copper Exposure Chart** We can drill down a level further and examine each major copper producer’s exposure to SWAP versus Non-SWAP regions. In the next chart, you’ll see the amount of red in each company’s production bar is significant. There really isn’t a safe place to put capital to work in any of the top copper producers. **![Top 25 Copper Produceres - SWAP Line Exposure]Freeport**, the least exposed senior producer, is very interesting and a company that **Barrick’s** CEO Mark Bristow has said many times it would consider a merger with. It owns the Grasberg deposit in Indonesia, which is an enormous copper-gold deposit. However, their debt situation is the main reason I’m not currently a shareholder. Grasberg is a world class operation – it just comes down to whether the Indonesians are now willing to play ball. Or if they’ll revert back to the same nationalistic approach they took with their oil and gas assets. In the past, the government has already once forced its way into increased ownership of the mine. In addition, the government forced Freeport to build and operate a smelter when it banned the export of copper concentrate. Even though it’s been stated that Indonesia has been granted SWAP lines from the U.S. Fed, Indonesia isn’t listed in the official U.S. Fed documents we track that get updated weekly. Thus, from all the government documentation we’ve seen thus far, no funds have actually been lent to the Central Bank of Indonesia from the U.S. Fed via SWAP lines yet. ## **Katusa’s Copper Outlook** I have no doubt that there’s much potential for serious economic headwinds which could slow global growth and subsequently copper demand in the near term. Yet, copper prices and copper focused equity share prices remain strong. The long-term thesis for copper is very bullish, and the outlook remains bullish. Just to be clear, I’m bullish on copper too. I’m just also cautious with regards to the potential risks still present in the current macro global economy. And the high valuations many base metal companies are already getting. We recently put together an alert on a brand-new copper company which many Katusa subscribers received as a dividend from an existing company. - **On its first day, the spin out was valued at a 500% premium to our subscribers from its spin out valuation.** - **The company was up as much as 149% out of the gates from its previous financing price****.** This isn’t new or rare for members of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*. **In fact, it’s the second set of “free shares” my subscribers and I have received from a previous deal, along with free trading warrants.** You can minimize your risk and amplify your upside when markets work in your favor. If you don’t have the time to spot what companies can offer this in the resource sector, don’t worry. Consider becoming a subscriber of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk), and you’ll be able to follow exactly what I’m doing. Regards, Marin P.S. Gold is knocking on the door of all-time highs. Behind the scenes, I’m working to bring one of the hottest gold deals to my subscribers where I will be personally writing a large check. **And the best part is, you don’t have to be an accredited investor to get involved in this**. Once it’s published, you’ll want to make sure you’re in the room, to get in the deal. And the only way is to [become a member](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) today. --- # Is Silver on the Brink of a Major Move? - URL: https://katusaresearch.com/is-silver-on-the-brink-of-a-major-move/ - Type: article - Published: 2020-07-17 - Author: Marin Katusa It’s a well-known strategy in cycling to win races. Cyclists ride in a peloton formation to conserve energy by drafting behind lead riders. The cyclists take turns being in the front and spending most of the energy. But for the riders behind the leaders, the resulting decrease in air resistance – drag – is incredible. In a race where winners and losers are separated by seconds, this strategy can reduce drag by 5-10%. Stretch that reduction over hundreds of miles and the amount of energy saved adds up – in a big way. This allows riders to sprint to the front with much more energy. Right now, it feels very much like gold is leading the precious metals pack at the front of the peloton. Could silver be conserving its energy looking to make a sprint to the front of the pack? ## **Let’s Start with Silver 101** Silver (or ‘Argentum’ in Latin) has been a prized metal since antiquity. Though too brittle to forge swords or armor, its luster and rarity made it a prized medium of exchange. Powerful empires from Ancient Rome to Imperial Spain couldn’t mine enough of it. Silver coins became the unit of account in many important currencies: the Greek Drachma; the Roman Denarius, the Islamic Dirham and the Spanish dólar. Here is a cool side fact for all the silver bugs out there… It was the Spanish dólar, with its standardized dimensions, that inspired Treasury Secretary Alexander Hamilton to adopt the United States Dollar as the currency of the newly-founded United States of America. Nowadays, Silver has one thing that gold does not – affordability and abundance. Over 60% of silver is used in industrial applications, with the residual sub 40% used in jewelry and silver bullion. There’s certainly an argument to be made that silver is a base metal that likes to pretend that it’s still precious. ## **Production and Pricing** One of the most important things to understand about any commodity is its supply and demand fundamentals. Silver production has been impacted severely by COVID-19. - **As**** much as 66% of primary ****silver ****mine production ****was put**** on hold from anywhere from ****2** **weeks to ****4** Over 101 mines are still affected as at June 18, 2020. This represents about 33.52M oz. of total production at risk, and accounts for 26% of 2020 estimated mine production. A second round of lockdowns would be good for the price of the silver, at least on the supply side. But bad news for miners who have to shut in or curb production. ## **What Are the Largest Silver Producing Countries?** Over 60% of primary silver production comes from Latin America, or Silver CAMP: Chile, Argentina, Mexico and Peru. And let’s not forget Guatemala will become a major producer once my buddy Ross Beaty starts up the Escobal silver mine. It truly is one of the world’s most attractive primary silver mines. Many of those countries are facing a resurgent Coronavirus. All these countries have eventually come around to classifying mining as an essential service. But, a serious outbreak on a mine site could result in closures. Below is a chart showing the estimated global silver production for this year. ![Global silver production]Note that these production estimates were made pre-COVID-19. In fact, many of the largest silver miners, including Fresnillo, Buenaventura and Pan American Silver have withdrawn their production guidance for 2020. Normally, production deficits are a positive for prices. However, the fact that 75% of silver’s demand is used for industrial and commercial purposes is likely crippling its safe haven demand. - **This is one of the reasons why silver hasn’t been performing as well as gold or US Treasuries to date. ** But there’s another reason why most portfolio managers won’t put ‘silver’ in the same breath as US Treasuries, Japanese Govt Bonds, US Dollars and Gold… That’s because, it’s simply too volatile to act as a hedge. For this, we can instead look at the magnitude of daily price changes (both positive and negative) for both assets. In the next chart, you can see the volatility of how silver prices have much higher daily percentage gains and losses than gold over the last 10 years. ## **![gold vs silver price volatility]Do Central Banks Hoard Silver?** In short, no. Sorry Silver Bugs. Central banks don’t deem it stable or valuable enough to hold as foreign reserves. Also, the value of reserves per square foot in the vault is massively inefficient compared to gold. For gold, up to 47% of annual gold demand is for investments – including central bank foreign exchange reserves. Gold Demand vs. Silver Demand Gold prices are primarily determined by its demand as an investment (think store of value). On the other hand, silver prices are as much determined by industrial and commercial users than investors. It’s also worth noting that the investment market for silver is substantially smaller than gold’s. In 2019, ~$4.3B worth of silver produced went to investments in physical products or ETFs. This figure was $62.7B for gold produced in 2019. ## **![Demand split for silver]** ## **![Demand split for gold]Which Precious Metal** **Peaks First****?** Looking back at the historical data, it’s clear that silver peaks first before gold. And true to its volatile nature, it does so far more dramatically. Silver’s outstanding performance, relative to gold, can best be seen from January 1974 – May 1987; and most recently from Nov-2010 to April 2013. But today… - **The spread between gold and silver prices is widening to levels not seen in ****50** **years of pricing data.** If ever there were a time for history to play catch-up, then now’s the time. The chart below shows the first silver bull market from January 1974 to May 1987. The returns on silver spiked to over double that of gold, with silver hitting $48 / oz. vs $850 / oz. for gold. ![Silver bull market first]From November 2010 to April 2013, the second bull market for silver was not as impressive as the first. Silver didn’t reach quadruple digit percentage gains, yet it still pulled ahead of gold significantly. Currently… - Silver is 61% off its record intraday high $49.50 on April 28, 2011. - Gold is only 6% off its record intraday high $1923.70 on September 6, 2011. This means that silver has a lot more room to move up to its record highs than gold. ## **A Look at Silver Technicals** The biggest key to look out for is that psychological $20 resistance level. If the price of silver breaks out above that $20 price, then every trader and algo will start to take note. ![silver poised for breakout]Below is a long-term chart which shows how compressed silver has been. A consolidation in the $20 per ounce range, could provide a base for a major slingshot move upwards. ![Silver resistance] ## **Silver ****Commitments of Traders** In the next chart, you’ll see that non-commercial long positions increased by over 35,000 contracts in the past 6 weeks. Non-Commercial positions is a term used by the CFTC to classify speculative futures and options trades. Spec traders holding long positions in silver futures are betting that the price of the silver will increase in the future. The chart below indicates an increasingly positive trader sentiment. It would not surprise me to see silver rally like it did in 2011. ## **![silver COT]Follow the Big Money – Fund Flows** ETFs like the iShares Silver Trust attempt to track the price of silver at a ratio of one unit per ounce of silver. Commodity-based ETFs are not as simple as you might think. These funds are traded on an exchange, separately from spot and futures markets. For an ETF to track the price of silver, the fund and its market makers must issue or redeem blocks of shares in exchange for bullion. By necessity, the funds are open-ended. When an ETF adds silver bullion, it is typically doing so in anticipation of having to issue additional blocks of shares to keep up with market demand. This is so that its unit (share) price doesn’t exceed the price of silver. - **The fact that silver ETFs have posted net inflows for six straight months is a very bullish sign.** ## **![silver fund flows]How to Invest in Silver** You can invest in silver bullion or silver ETFs, and if it takes off, perhaps you could double your money. But I think the best way to get exposure to a silver slingshot move is through the miners. - **When the price of silver rises, the Net Asset Value (NAV) of many producers can soar dramatically. ** Share prices are determined off a company’s NAV, so as the NAV appreciates, the share price is likely to rise as well. As central banks and governments around the world continuously pour money into their economies, stores of value and beneficiary industries can deliver major portfolio gains. **Our portfolio has been on fire this year.** But still, I am working tirelessly on new ideas. I just got back from a site visit internationally working on a project for my subscribers. As of this publication date, I am halfway through my government mandated quarantine. With little else to do than work, we are putting together a very strong August KRO for our subscribers. If you want to know the next stocks, companies, and deals I’m looking that fit the bill… And where I’m putting my own money on the line… it’s all in my premium research service. [Click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards Marin --- # Banking on a Bluff: The Biggest Gold Scam in Modern History - URL: https://katusaresearch.com/banking-on-a-bluff-the-biggest-gold-scam-in-modern-history/ - Type: article - Published: 2020-07-10 - Author: Marin Katusa I’m sure you’re well aware, gold has been on a tear and has broken above $1,800 per ounce. Every goldbug on the planet is excited and salivating at the mouth… Except for a group of bankers who accidentally got caught up in the greatest modern-day gold racket. For them, their gold bars aren’t worth $1,800 per ounce, but more like $2.75 per pound. If you’ve watched a lot of western movies, you’ve seen it before… Before believing that the coin he’s just been handed is truly gold, a cowboy bites into it. The idea behind this test is that if the coin is truly gold, the pressure of the teeth will leave an impression on the coin. Over the years, there have been other tests to verify whether gold is *truly* gold. Primitive tests relied on scratching the metal or even drilling tiny holes in coins for a glimpse inside. In more modern history, chemical tests and even ultrasounds have been used to make sure gold bars aren’t just plated. Then and now, people have had the good common sense to *try* before they *trust*. With today’s technology, no one should be getting fooled. ## **The ****Kingold Saga: Scam of the Century?** Kingold Jewelry is a NASDAQ-listed company, based in the city of Wuhan (of coronavirus infamy). The company began as a gold factory and was previously affiliated with the People’s Bank of China. It grew to become one of China’s largest gold jewelry manufacturers. And boasts both national and international dealings on its website. According to public records, Kingold began borrowing using gold as collateral in 2013. The company’s debt continued to climb every year. Eventually, Kingold pledged 2.7 million ounces of gold in total, worth about US$4.8 billion today. Kingold not only offered the gold as collateral, but even had its gold inspected by government certification offices and insured for US$4.3 billion by a state-owned insurance company. It seemed foolproof. Suspiciously, all of Kingold’s lenders came from trusts and banks outside its own province of Hubei. You’d think a billion dollar a year business would have bank accounts set up in its own home region. ## **How Was the Fraud Discovered?** In late 2019, Kingold failed to repay a debt owed to a creditor, Dongguan Trust. Like with all collateralized debts gone awry, Dongguan took possession of Kingold’s gold that had been pledged as collateral. - **When the Trust went to monetize the gold to cover the loan, they discovered that those bright shiny gold bars were actually copper bars wrapped in gold. ** Shocked at the revelation, other creditors began to scramble to check their own collateral. One-by-one, they found out the gold they held was also copper. They had been fooled by an age-old trick on a massive modern-day scale. Company chairman Jia Zhihong is a controlling shareholder of the company and former military man. At 59, he’s been described as a bold and intimidating person. During his time in the military, he served in Wuhan and Guangzhou. And later in life, he managed gold mines owned by the People’s Liberation Army – the armed forces of the People’s Republic of China. In short, he’s a guy with some serious connections and is not someone you want to offend. ## **Which Banks ****Are**** Exposed to the ****Kingold** **Scam?** Is it just a fluke that most of Kingold’s credit came from places outside its home province? Not likely. One source in China says it was well known within their home province of Hubei that Kingold was really “KinCopper”. Local banks and other financial institutions avoided doing business with Kingold. And almost none of them were involved in financing Kingold… though they kept quiet because nobody wanted to offend chairman Jia Zhihong publicly. Here are the trusts and banks most exposed to Kingold… ![Exposure to kingold] To put into perspective just how much debt we’re talking about… - **The 2.9 million ounces of fake gold in question represent 22% of China’s 2019 gold output. That’s about 4.2% of the country’s gold reserve.** Of course, Kingold took out an insurance policy worth US$4.3 billion on the gold they pledged as collateral, through state-owned PICC Property & Casualty. It’s the largest non-life insurance company on the Chinese mainland. Though the pricing on the policy falls a bit short of the full value of the gold, getting back US$1,460 an ounce is still better than getting back $2.75 a pound. As of early June, two of the above companies, Minsheng Trust and Dongguan Trust, and a smaller creditor named Chang’An Trust filed lawsuits against Kingold. And they asked PICC P&C to cover their losses. Remarkably, Chairman Jia still denies the gold is fake. After the fraud was discovered, he’s has been quoted as saying, “*How could it be fake if insurance companies agreed to cover it?”* You have to admit, it’s a really clever way of answering the question. ## **The Kingold Red Flag** The red flag should’ve been in how Kingold dealt with Hengfeng Bank, the only commercial bank among Kingold’s creditors. Access to the pledged gold and testing procedures were controlled by Kingold. Without a third-party, how could Hengfeng Bank possibly conduct proper due diligence? Further, the loan officer who wrote the loan at Hengfeng didn’t have the cleanest track record. He was already under investigation in 2018. Who knows how long Kingold would have gotten away with this deception had they not defaulted on their loan to Dongguan Trust. But, remember how these financial institutions are trying to go after Kingold’s insurance company, PICC P&C? As it turns out, getting the money from the insurance to replace the collateral won’t happen without a legal battle. PICC P&C is arguing that the policies they hold are only to cover collateral losses – accident, theft, and disasters, but NOT fraud. So how many people are in cahoots here? Surely a few. ## **Good as Gold** The bigger question remains. Is this con a stand-alone crime or is it part of a commonplace scheme? How many other loans from how many other companies are built on fake collateral? And the true elephant in the room: how much of China’s gold reserves are “gold plated”? In 2016, a similar gold fraud case occurred in neighboring Shaanxi province. A US$2.8 million loan backed by gold as collateral turned black… tungsten black, in fact. When the loan was defaulted on, the financial institution involved, Tongguan Co-Op, found that the bars pledged for that loan were actually only 36.5% gold. Tungsten plate was found underneath the thin gold veneer. Tongguan Co-op would go on to find 46 tons, or 1.5 million ounces, of fake gold on its balance sheet. The initial incidence of this single bad loan led to the discovery of fake gold in the coffers of 19 different lenders throughout the Shaanxi and adjacent Henan provinces. - **The total amount of compromised collateral was worth US$2.7 billion – the largest gold fraud scandal in China before the Kingold affair.** That’s up to 130 tons of gold compromised between Tongguan and Kingold alone. Who knows how many other tons of fake gold could be hiding amongst China’s 1,950 tons of gold reserve. Gold is at an all-time high right now as investors look for a solid footing in insecure times. But gold is only good if it’s truly *good as gold*. Be careful where you purchase your bullion and how you invest. Regards, Katusa Research **P.S.** We’ve been publishing our weekly material in video format on YouTube. Watch it below: --- # Gold Move - URL: https://katusaresearch.com/gold-move/ - Type: article - Published: 2020-07-03 - Updated: 2020-07-04 - Author: Marin Katusa **Editor’s Note:** We’ve recently been publishing these articles in video format on YouTube. If you’re interested, please click [here](https://www.youtube.com/watch?v=MZEb6YQW818) to watch it. For the first time since November 9th 2011, front month gold futures traded hands above $1,800 per ounce. It’s now knocking on the door of a major technical resistance level. ![Gold Price Front Month Futures]Naturally, this has every goldbug and self-proclaimed expert on YouTube shouting from the rooftops. **Before we jump into what is going on in the current gold markets, lets first take a look at past gold bull markets… ** Below is a chart which shows the previous major bull markets in gold. You will see that all but 1 of the major gold bull markets resulted in gold appreciating at least 400%. Using January 2016 as the low point for the current gold bull market we are in, gold is up 69% from its lows. ![Gold Bull Markets]History may not repeat itself but it’s critical to understand what is driving the gold price right now. ## **What is Driving the Gold Market Higher?** Right now, there are several major economic factors driving gold higher. **1) Large Government Stimulus Packages Around the World** This leads to currency devaluation. The global fiscal policy response to Coronavirus is $9 trillion to date, and likely to climb further. This is supportive of assets like gold which are a store of value. Below is a chart which shows the fiscal policy response for major economies around the world. The fiscal policy response is illustrated as a percentage of the countries GDP. ![CovidResponse as percentage of GDP] **2) NIRP – Negative Interest Rate Policy** Around the world, Central Banks are cutting interest rates while starved for yield investors clamor for any bond trading with a reasonable yield. This drives bond prices higher and bond yields lower. Low interest rates discourage investors from investing in government bonds, and forces them to look elsewhere for safe haven investments such as gold. Below is a chart which shows government bond yields around the world. ![GlobalBonds]You’ll notice that Europe is nearly all red. The combination of investors starving for yield and central bank NIRP (Negative Interest Rate Policy) has driven most government bond yields into negative territory. The rest of the developed world is not far behind. These low rates have driven the total amount of negative yielding debts to levels we’ve never seen before. - **In the past 5 years, global negative yield debt has soared from zero to over $12 trillion.** **![Global Negative Yield Debt]3) The Deflation and Stagflation Trade.** I have [written extensively about this weak productivity](https://katusaresearch.com/the-single-data-point-that-changed-everything/) and GDP, high unemployment and high costs of primary goods (food, water, shelter). This type of economic environment incentivizes investors around the world buy safe haven assets which are stores of value. The International Monetary Fund (IMF) is projecting a deep recession and slower recovery… In its most recent remarks on June 30th, the IMF revised its forecast for global GDP to -4.9%. More worrisome is that its developed nations forecast, comprised of powerhouse nations like the United States, Germany, China, which the IMF forecasts to contract by 8%. In addition, the IMF projects total business losses will be over $12 trillion. Below are the 2020 projections for the Gross Domestic Product of major economies. Let’s not forget that Mexico is a very important trading partner for the U.S. There are a lot of troubling signs in the market. **![2020 economic forecast gdp]4) ETF Inflows Continue to Hit New Highs.** Gold backed ETFs have seen record inflows for weeks on end now as investors clamor for exposure to the metal. As ETFs create new units, each of which is backed by gold, this requires the ETF to purchase more gold… ## **![Total Gold Ounces Held in ETFs]What’s Next for Gold?** I don’t see the US central bank, or any other major Central Bank around the world slowing down the money printing presses. Nor do I don’t see any developed nation’s central bank have the ability to raise interest rates right now. This type of currency devaluation provides a solid long-term thesis for gold. I do think gold needs more time to consolidate in this upper range before making a sustainable move higher. ## **![GCpx]Could Silver Play Catch Up?** Using January 2016 as the start of this bull market move, silver has drastically underperformed gold. The chart below shows silver is only up 30% from January 2016, versus gold which is up 67%. ![AuAgReturns]This has led to a record diversion between the valuation of gold and silver. And this is commonly shown through the **gold to silver ratio**. Much to the chagrin of silverbugs, the ratio has continuously made new highs meaning that gold is taking off and leaving silver behind… ![AuAgRatio]I have never been one to use the gold-silver ratio as an investment tool. In fact, I don’t think its particularly helpful. **The gold-silver ratio always reminds me of the oil to natural gas ratio of the mid 2000s… ** For decades, the *oil to natural gas ratio* was fixed at 6 to 1 because the pricing was fixed on an energy equivalent basis. The shale revolution changed that, and long time subscribers will know when in 2007 I stated that the shale will produce so much gas that the ratio will be irrelevant. Silver is an industrial metal with some (and I say *some* generously) precious metal attributes. - **Don’t forget there is very little primary silver production compared to secondary production. ** That means, a lot more silver is produced as a by-product of existing mines. Also, a slower global economy does not bode well for industrial metals. Silver will do O.K., but gold is where the action is and will continue to be. **How is Marin Katusa Investing in Gold? ** I have spent 2 decades in the resource space as a professional fund manager and investor. And I make 99% of my income from investments within the resource space. I’ll let you in on a simple formula for achieving big success in resource markets… **Two of my most important criteria are:** - Management team quality and track record of success - Assets located in **[+SWAP Line Nations](https://katusaresearch.com/the-importance-of-dollar-swap-lines/)**. A bad management team can screw up a good deposit and can’t fight the burning match that is most junior resource companies. On the other hand, a good management team possesses both intellectual and physical capital. This allows them to create situations with exceptional upside and less risk. - **My old rule used to be to [avoid the AK-47 nations](https://katusaresearch.com/use-ak-47-indicator/). Those are nations where AK-47s required to feel safe, both travelling and as a local. ** Having travelled to over 100 countries, strapped on the bulletproof vests and hired ex-military guys as our security teams, I can say I avoid all that now. It might sound cool and make for a good story, but in reality, it’s not worth it. I’ve taken my thesis a step further during this COVID-19 pandemic, coining the **+SWAP** and **-SWAP** Line Nations argument. This suggests that nations with access to US dollar SWAP lines will receive preferential treatment and trade agreements versus those without access to US dollar SWAP lines. I think this is a situation that will build over the next 3-5 years before coming to fruition. Positioning yourself in the resource game requires more than throwing a dart at the board. Buying an ETF like the Jr Gold Miner ETF gives you some exposure, but not a lot. The sniper approach is simply the best. It’s the act of completing 1,000s of hours of due diligence, taking site trips, and talking to the best experts in specific fields. This is not for everyone. And it’s why I have created the *[Katusa Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)* portfolio, which provides subscribers with all my thoughts and investments. Subscribers get to buy before I do and sell before I do, and I don’t take any fees. **Our most recent gold stock has just shot up for a 460% return in just 3.5 months.** Profits like that are sexy for sure. And the fact is that most people don’t know how to build a position or look for a company with that potential. If you want to know the next stocks, companies, and deals I’m looking that fit the bill… And where I’m putting my own money on the line… it’s all in my premium research service. [Click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards Marin --- # Connect the Dots: A Speculator’s Paradise is Heating Up - URL: https://katusaresearch.com/connect-the-dots-a-speculators-paradise-is-heating-up/ - Type: article - Published: 2020-06-26 - Updated: 2020-06-25 - Author: Marin Katusa The U.S. Federal Reserve and central banks around the world appear to have the printing presses going full tilt these days. This has fueled the greatest “V recovery” any buy the dip investor could have asked for. Tech stocks and precious metals stocks alike have been among the best performers and outperformers YTD (and we’ll get to the attention they’re attracting in a minute). Fueling the fire even more are lower for longer interest rates and [yield curve control (YCC)](https://katusaresearch.com/the-single-data-point-that-changed-everything/). Below is a chart which shows the expectations for future interest rates. Each dot represents the expectation of future interest rates for each Federal Reserve Open Market Committee member. You will see that no member expects to move away from ultra low rates until at least 2023. ## **![implied fed funds target rate chart]What Does the Fed Dot Plot Mean? ** To me it means that the Fed officials know the economy is not functioning properly and will not for a long time. It signals that the Federal Reserve believes the banking climate must remain ultra supportive for businesses to remain open. This has led to an enormous disconnect between the stock market and the economy. - **Historically, the stock market was a useful barometer of economic health. That’s hard to argue today.** To start the year, U.S. unemployment was approximately 3.5%, an all-time low. Last month U.S. unemployment was over 13%. It is hard to see a picture of economic growth and stability like we saw in January this year. So why are the stock markets within shouting distance of highs? The answer lies in the ultra cheap credit and enormous financial backing of the U.S. Federal Reserve. Except a lot of this capital is not going from Wall Street to Main Street. Perhaps this next piece of information will spark your curiosity, as it did mine… ## **U.S. Bankruptcies Hit 11 Year High** Through the first 6 months of the year, bankruptcy filings in the United States have hit levels not seen since the peak of the Financial Crisis. They have already surpassed the peak from the Dot Com tech bubble. Below is a chart which shows the reported public and private bankruptcy filings in the United States. ![Reported US Bankruptcies]While unemployment is worrisome, bankruptcies are **much** worse. And this is why the Federal Reserve is buying corporate bonds. If companies fail, who is going to rehire all the unemployed workers? Where is government tax revenue going to come from? This is a very scary, slippery slope to navigate. ## **Connecting the Next Dot: Velocity of Capital** The next domino that falls in this situation is the velocity of capital. As bankruptcies increase, the velocity of capital slows. - **The velocity of money is the number of times one dollar is spent to buy domestically produced goods and services per unit of time. ** The higher the ratio, the more turnover of dollars there are. This velocity of capital is measurable through the Velocity of Money indicator. Next, you’ll see a chart that shows the rapid decline in the velocity of the United States M2 money supply. ![USA Velocity of Money M2]With all of Donald Trump’s “*Buy America*” focus, this should have increased the velocity of capital. Just the opposite happened. And Coronavirus put a nail in the coffin. At the same time, public debt held by federal, state and municipal governments and banks is at all time highs. ![US Treasury Total Public Debt Outstanding]Pushing against the string will only work for so long before the chickens come home to roost. ## **So How Do You Protect Your Portfolio?** I’ve long said that the person who wins in a deflation is the one who loses the least. That’s why I am positioned strongly in precious metals stocks and U.S. Dollars. I think most viewing this *get* the gold exposure. But the U.S. Dollar exposure confuses and even hangers a lot of people. As bad as you think the situation is in the U.S., the rest of the world is in an even worse situation. And when a liquidity crisis happens, [the U.S. Dollar is the safe haven that benefits](https://katusaresearch.com/king-dollar-sounds-a-market-alarm/), for now. But when the insolvency crisis hits, the U.S. Dollar will benefit even more. - **This year gold is the second-best performing asset class. First is United States 30-year bonds. ** These are the big winners this year for good reason… Slowing of capital movements, high unemployment and low productivity all point towards stagflation and an eventual deflation could be on the horizon. This drives demand for safe haven assets like gold and government bonds. ## **![Year to Date returns of major asset classes]Gold Market Moves and Analysis** Today we have a plethora of stimulus packages and low interest rates. In addition, global politics are on a knife edge. Not to mention we are combatting a virus that has killed 474,000 people around the world, which we cannot create a vaccine for. This is a highly favorable environment for gold and gold stocks. In the chart below you will see gold has consolidated well in this upper range and has broken above its short-term resistance line. ![short term resistance line for gold]This week gold tested the waters above $1,750. I do think more consolidation is fine around this price level. - **The next level of resistance for gold is ~$1,800 per ounce. ** If gold can clear $1,800 with momentum and volume, the highs of $1,900 could be reclaimed fast. And that is when the fun starts! New highs attract speculators and momentum. All the “gurus” that complain about algorithms and day traders will suddenly welcome them all with open arms. The reason? They bring much needed liquidity and speculation into the sector. Neither of which the sector has truly in a decade. ## **Can You Day Trade Gold Stocks? ** Small players can day trade with ease. Of course, if you know what you are looking for and can interpret drill results or economic studies faster than others. But big trading outfits need millions of dollars worth of volume in names they trade in. Not to mention a liquid derivatives market. Most of the junior resource stocks don’t do that kind of volume in a month let alone in a day. - **If gold breaks out, we will see a massive influx of new retail speculators enter the space. ** Speculation is an integral part of the natural resource sector. ## **That’s Why You Need to be Ahead of the Herd** Picking up pennies in front of a steamroller works for a while. But positioning yourself in world class operators before the speculators and other market “gurus” pile in is how you make needle moving, wealth changing investments. A few years ago, my subscribers and I made a fortune in a gold company called **Northern Dynasty**. My due diligence told me this was a stock that was poised to scream higher**. **It did… - **Retail investors (aka the herd) drove prices from $0.45 to over $4.00 per share****. ** At the same time, the Northern Dynasty warrants (which are like a call option) were trading at nearly the same price as the stock. This was pure retail speculation. And it can spike share prices like a hockey stick hundreds, even thousands of percent… in a very short amount of time. You’ve seen in the U.S. markets over the past few months in **Hertz**, **Nikola**, **Chesapeake Energy** and many others making 100% gains look like small potatoes. The good news is this gold bull market is still in the early innings. Right now, I’m making big moves and putting millions of dollars into the market in precious metal stocks and into other hated, unloved and undervalued sectors. The main focus is positioning myself and my subscribers into companies with management teams with skin in the game… And cost base the same as our own… With Gold projects that deliver strong financial returns at $1,500 per ounce gold and have exceptional leverage to rising gold prices. If you are interested in getting an edge on the herd, [click here to find out how to access my portfolio of resource stocks](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/krblog/) as a member of *Katusa’s Resource Opportunities*. Regards, Marin Katusa --- # Robinhood Trading Exposed: Steal from the Poor and Give to the Ultra Rich - URL: https://katusaresearch.com/robinhood-trading-exposed-steal-from-the-poor-and-give-to-the-ultra-rich/ - Type: article - Published: 2020-06-21 - Updated: 2020-06-22 - Author: Marin Katusa Tragedy struck fast. On a sunny day earlier this June, a young college student jumped into an oncoming train. The question he left in his suicide note wasn’t tied to any sort of extremist ideology. Instead, he simply asked: “How was a 20-year-old with no income able to get assigned almost a million dollars worth of leverage?” The answer? **Robinhood** ## **Free Trading Services – Buyer Beware** It was touted as the trading platform set to level the playing field between the Wall Street one-percenters and the rest of the world. All thanks to its ease of access and nonexistent fees. Robinhood has quickly become the go to trading platform for a generation of new investors, speculators and get rich quick fans. In the wake of the COVID-19 outbreak, millions affected by the quarantines and the economic downturn flocked to open new accounts. - **After spending five years getting to 10 million users, In the first quarter of 2020 alone Robinhood picked up an additional 3 million new users.** And this user base is exactly what it’s meant to be – young, inexperienced investors looking to get their feet wet in the markets. The median age of a Robinhood user is 30 years old, and half of them have no investing experience whatsoever. The average Robinhood account is worth about $2,000, versus the average E-Trade account at $69,230 and the average Morgan Stanley account at $900,000. - **Unfortunately, Robinhood’s client base is exactly what it’s intended to be, they’re accomplishing the exact opposite.** Traditional brokerages and banking platforms often have extensive **K**now **Y**our **C**lient (**KYC**) guidelines in place. This ensures that they know what their customers can handle when it comes to investing. KYC guidelines help institutions understand what kind of investments are appropriate for their clients. And the kind of market access they should be allowed. While Robinhood asks these same questions when you sign up for an account, it appears this may have been merely lip service. There’s no verification or follow-up on their end. **In other words…** - **College students can sign up for Robinhood accounts and get into options markets without really understanding what they’re doing.** It’s easy to blame the uneducated investors for playing with fire and getting burnt. But at the end of the day the responsibility lies with Robinhood to ensure that their users are what they say they are. It’s the same reason why you get your ID checked when you buy cigarettes or alcohol at the store. Selling alcohol to a minor means fines and jail time. But there’s no need for Robinhood to do the same because there aren’t any penalties for them failing their KYC due diligence. And as long as that stays the case it’ll continue to be detrimental for them to do so. After all, why would they **not **want their users to get access to high-risk investments they don’t understand, like options spreads? Even though trades on Robinhood are commission-free, they still make revenue from order flow – and that’s a whole other can of worms… ## **Zero Commission Does Not Mean Zero Cost** At the end of last year, Robinhood was fined $1.25 million by the Financial Industry Regulatory Authority (FINRA) for letting its brokers front run its order flow. What does that mean? How does Robinhood actually make money stealing from the poor to give to the rich? When Robinhood receives orders from its users, it does not send those orders directly to a market exchange. Instead, it sends them to 1 of 5 market maker firms, who then execute the trades on their behalf. - **This forms Robinhood’s revenue model: these market making firms actually pay Robinhood for the privilege of executing their trades.** ## **Now, Hold up a Minute – Let’s Think About This…** Why would a company **pay **to execute trades for someone? Obviously, there has to be something in it for them, or else they’d be getting paid instead. Well, when these companies receive order flow from Robinhood, they’re getting the best payment of all – **information on future trades that will happen. ** In other words, with this information in hand these companies can place trades of their own ahead of Robinhood users – also known as “frontrunning”. Robinhood was fined for “failing to ensure that its customers received best prices for securities orders”. Though they don’t directly admit fault, let’s look at the history of some of these brokers in question… - Citadel Securities receives over half of Robinhood’s total order flow. It was fined $22 million by the SEC in 2017 for **misleading their clients about how they priced trades.** - Wolverine Securities, who gets 15% of Robinhood’s orders, was fined $1 million in 2015 for **failing to prevent insider trading.** These are the firms that pay Robinhood to place your trades. That’s how Robinhood can afford its “commission-free” business. And as for that fine FINRA hit them with… what does a $1.25 million fine even mean to a company valued at $8 billion? Never forget, there’s no such thing as a free lunch. ## **Don’t Feed Robin Hood or His Merry Men** There’s no denying that Robinhood has taken off spectacularly ever since the pandemic outbreak. However, don’t make the mistake of tying the recent run-up in the markets to retail traders on the Robinhood platform like some have. To see how much impact Robinhood has on the overall markets, we can turn to look at the Assets Under Management (AUM) behind the wheel of this machine. - **In total, Robinhood has an estimated $30 billion in assets under management across all its users.** - **The U.S. equities market, in contrast, sees an average of $325 billion in dollar volume traded on its exchanges every day.** If Robinhood were somehow halted or shut down, it’s unlikely that would cause a “Black Swan” type event that would trigger a collapse in the markets. And more to the point, I doubt that’ll happen anytime soon. FINRA basically slapped them on the wrist just last December. There are plenty of other trading platforms and brokerages out there that provide excellent market access and competitive fee structures. Still, there’s no denying that Robinhood provides an easily accessible platform whose pricing is unmatched. ## **I Trade With Robinhood, How Do I Protect Myself?** So, if you already trade on Robinhood, or don’t have access to any other trade platforms, what can you do to minimize your risk? Two ways… **1. ****Don’t place market orders. Place limit orders only. ** By placing limit orders, which only execute once the security reaches a specific price, you are removing Robinhood’s brokers’ ability to “frontrun” you – i.e. give you a worse price. After all, they can’t give you a worse price if you tell them exactly what price you want to pay. And really, as an [alligator investor](https://katusaresearch.com/the-way-of-the-alligator/), you should never be placing market orders anyway. **2. Do your due diligence, and make sure you understand each trade before you place it. ** This goes double for any trade that involves options or other derivatives. This brings us back to the young college student who committed suicide, because he found himself $730,000 in debt on his Robinhood account. As it turns out, it’s probable that he was never actually in that much debt. With the put spread the student was trading that he said “should have canceled out” in his suicide note, what may have happened is that his options were exercised without the underlying securities assigned to his account. Options trades take one day to settle. In other words, our student might have seen the debit that resulted from the exercise of the puts he sold without seeing the actual stock in his holdings, due to this delay. A user interface error on Robinhood’s part, perhaps. But one that cost a young man his life. There’s enough to worry about in the world right now without adding your investments into the mix. Stay educated – and stay safe. Regards, Marin --- # The 7 Important Gold Signals to Watch Now - URL: https://katusaresearch.com/the-7-important-gold-signals-to-watch-now/ - Type: article - Published: 2020-06-19 - Author: Marin Katusa Is it too good to be true for gold? Or is this “it”? Under the leadership of Kim Jong Un’s sister, North Korea just blew up a South Korean liaison office. Talk about making a debut! There are growing tensions between India and China at a Himalayan border which led to at least 20 deaths. Another increase in coronavirus cases is erupting in many countries and even some U.S. states (Florida and Nevada are seeing daily cases rise). If civil unrest was measured like the VIX Volatility Index is in stocks, we’d be at all-time highs. And we haven’t even started getting into threats of draining the swamp, a ramp up in election coverage or mail-in ballot controversies. The stock market does not seem to care. But gold is still at elevated levels, seemingly looking to make a breakout. To recap where we’re at: - Unlimited stimulus by governments and central banks, - Deteriorating government relationships between superpowers, - Pandemic that has killed over 448,000 people with over 8 million cases. Now let’s rewind for a second… In a surprise move on March 15th, the US Federal Reserve announced its first monetary stimulus package. Considering the planned meeting was for the Tuesday, the world took it that things must be “really bad” if the Fed had to announce its plans two days early. Unsurprisingly, the market went limit down overnight on Sunday, and cratered after the open. But by noon, momentum had switched and the “buy the dip” trade was on in full force. While not a “goal” of the U.S. Federal Reserve, the shockwave sent through the market was significant. It has fueled the fastest and most significant rally seen after any major economic correction. ## **![dow jones post crash bounce]An Election Year for the Ages** In normal times, these kinds of geopolitical developments can roil global markets. And the fact that the market’s reaction has been muted is worrying. Investors can only account for so much risk and uncertainty. Regardless of who wins, this election will be unlike any other in post-WWII history. A heavy reliance on mail-in ballots, court challenges and recounts could result in uncertainty not seen since the 2000 Presidential Election. One thing that has happened historically is that when the stock market goes up, gold prices go down and vice-versa. This may be seen as a silver lining for those gold bugs who fear that a Biden Presidency with Elizabeth Warren as VP would be decidedly less business friendly. So how does gold perform in election years? The usual answer – not very good, except for 2008 (the last time there was chaos). In the 2008 election cycle, the election of Barack Obama was tepidly received by the stock market (which was already reeling from a financial crisis) while gold prices surged 28%. ## **![returns during election cycles]Gold Continues to Outperform in 2020** Lately, many investors have been trying to trade the intraday chaos in the Nasdaq and even bankrupt names. Picking up pennies in front of a steamroller only works for so long. In the long term, a focused mindset is critical to achieving investment success. On a year to date basis, gold is leading the pack across major asset classes. ![ytd returns of major asset classes]Gold has been one of the best performers YTD (yes, I’m aware Bitcoin is up ~30%). - **While physical gold and gold stocks have exploded higher, gold focused producers are still cheap. ** The best multiple for demonstrating this is a *Price to Cash Flow* multiple. I like to use cash flow rather than earnings because it’s much harder for a company to “goose the system” with fake earnings. *Cash Flow from Operations* does not lie. Shown below is a comparison of Price to Cash Flow multiples. ![gold company valuations]As you can see, even if gold producers merely catch up to their peers in the Russell 2000, a major lift in mining equity prices is to come. ## **Gold Price Technical Analysis** I don’t base my investments and speculations on technical analysis, but I know that many traders do. So, I do factor them in. Gold has made a major move, from the $1,400 area to $1,700. Our subscribers have had an incredible year of gains as a result of our gold mining stocks. Gold needs to build a strong support level around $1,700 per ounce, and it’s on its way in doing so. I do believe a breakout will come, but more time consolidating at these levels would be healthy. I see two scenarios for gold in the near term: **Scenario 1:**** Gold bounces around the $1,650-1,750 range over the next 12-16 weeks and consolidates a base for the next leg higher. ** **Scenario 2:**** The Gold Price drops over the next 12-16 weeks**. If gold corrects, I’m prepared with my shopping list of companies to purchase my next tranches in the best of the best. This would be an opportunity to prepare for the next leg of the gold bull market. Now let’s put the scenarios in visual form for some clarity. Here are my short-term support and resistance levels for gold. ## **![Gold price]Summertime Sessions – Is Gold Seasonal?** The next chart shows the monthly returns for gold since 1970. Fifty years of data suggest that summer is supposed to be “boring” for gold. The average return for gold in June, July and August is 0%, 0.6% and 0.9% respectively over the last 50 years. ![gold average monthly seasonality]But we know that this year is anything but normal. Coronavirus and Donald Trump are 2 huge wildcards that will keep everyone glued to their desk this summer. And you’ll notice that gold has already had much wilder swings in 2020 than in years past. A surprise move up or down $100 is NOT out of the question. ## **Gold Goes Mainstream** Gold holdings in ETFs are at record highs, in terms of tonnage and Assets Under Management (AUM). Even the institutional shorts are starting to cover their gold short positions, with the most recent 100,000 contracts being covered. Since April 2019, ETFs have increased their gold holdings by 42% or 33.5 M oz.: ![gold etc holdings as an indicator of gold prices]You’ll notice that during the big run in gold prices from 2008-2011, as gold increased 105%, ETF holdings increased 84%. A 14% rally in gold prices in 2016 led to a 35% increase in ETF holdings. - **So far in this run, gold is up 20% and ETF holdings are up over 40%.** Owning some physical gold is a good hedge investment. But if you’re looking for bigger returns, you have to look into gold equities. These stocks are highly leveraged to changes in the gold price. Below is a chart which compares the Katusa’s Resource Opportunities gold stock portfolio to mainstream ETFs and indices. ![year to date returns]I’ve spent 2 decades in the business building relationships with some of the smartest and successful resource magnates. You cannot replicate this type of intellectual capital. - **Even though a recent recommendation which was a buy in the open market is up 250% in the past few months, I’m not slowing down…** I’m working tirelessly on new investment ideas. And filling out all the government required paperwork to finally get to the airport and onto my next site visit… and hopefully my next big recommendation. If you’re interested in learning more about the KRO portfolio and the next companies I’ll be rotating my profits into, [**click here to join *Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin --- # The Single Data Point That Changed Everything - URL: https://katusaresearch.com/the-single-data-point-that-changed-everything/ - Type: article - Published: 2020-06-12 - Updated: 2020-06-11 - Author: Marin Katusa ***Editor’s Note:*** *Earlier this week one of the junior gold stocks in the KRO Portfolio announced major news, sending share prices soaring over 300% since our buy price was met. If you’re a subscriber, please log in to the Member’s Area to see the latest alert with a special interview with the CEO.* Dear Reader, This past week, every economist and analyst was blown away. The United States defied all odds as the unemployment rate declined to 13.3% instead of soaring towards 20%. Instead of millions more being unemployed, 2.5 million Americans went back to work. Like I said [in last week’s missive](https://katusaresearch.com/king-dollar-sounds-a-market-alarm/), America is at its best when its back is against the wall. Below is a chart which shows historical U.S. unemployment, and highlighted in red are U.S. recessions. Even at 13.3%, it’s already higher than any peak unemployment rate during any previous economic downturn. ![chart which shows historical U.S. unemployment, and highlighted in red are U.S. recessions]As you can see in the graph, unemployment tends to rise as the recession matures. Normally unemployment peaks just after the recession ends. This lag is caused when citizens try to rejoin the workforce, but not enough jobs have been created yet. So, the unemployment rate actually goes up briefly following the end of a recession, before decreasing. ## **The Longest Economic Expansion is Over** Whether it’s 13.3% or 20% unemployment, the result is still the same. The longest economic expansion in U.S. history came to an end in March. All told, the expansion lasted 128 months. The coronavirus has left no stone unturned. And every economy in the world has felt the virus’ impact. GDP contractions were felt around the world in the first quarter. The second quarter will be even worse for countries like the United States, Canada, and the Euro Zone. Major economies have essentially ground to a halt for the better part of 3 months. Yet, most major indices are within shouting distance of previous all-time highs. - **The disconnect between the market and the current state of the economy continues to be at unprecedented levels. ** Next, you’ll see the Dow Jones Industrial Average, with the U.S. unemployment rate below it. And highlighted in red are U.S. recessions. ![Dow Jones Industrial Average, with the U.S. unemployment rate below it]But remember, the stock market is forward looking. Investing by looking in the rear-view mirror is a recipe for disaster. So, this begs the question: ## **Will This Be the Fastest Recession on Record? ** In March, we saw the steepest fall in the markets. In 27 days, the Dow Jones Industrial Average fell 37%. It was total carnage and according to all the talking heads, the world was ending. Then, in the 50 days following, we’ve had the strongest recovery ever. The Dow is up 47%. And those same talking heads are now beating their chests. Below is a chart which shows the decline and rebound in the Dow Jones Industrial Average compared to previous major corrections. ![Dow Jones Industrial Average Returns During Major Economic Corrections]This past weekend, legendary investor and previous portfolio manager for George Soros, Stanley Druckenmiller, stated he totally underestimated the rebound and was underinvested. He’s not alone. Even the great Warren Buffet misread the situation when he sold off his airline positions at the bottom. The biggest, smartest, most consistently profitable investors from over the last 40 years are being shown scratching their heads by the media. But they’re rich for a reason. They DO NOT CHASE stocks. ## **Day Trading Takes Over** In the past few months, a record number of retail trading accounts were opened on the Robinhood trade platform. Over 3 million new traders have taken to the markets since March. In fact, of households making between $35-75,000 a year who received stimulus checks, spending on securities trades increased by over 90%. This was the third largest increase in any spending category, behind only savings and cash withdrawals. The demographics of Robinhood traders are similar to those of sports bettors – ages 25 to 34. According to Net Interest, the median age of a Robinhood customer has drifted up from 27 in 2017 to 31 now, and 80% of them are men. - **With the NBA, NHL and MLB all on pause since March, sports gamblers have nowhere else to turn to… except day trading.** Which is why you see the media running stories like *“One Chicago-resident flipped his sister’s stimulus check into nearly $10,000.”* And, *“One 26-year-old Robinhood trader made $1,500 in less than 24 hours betting on a beaten-down airline stock.”* Does this sound normal to you? Or sustainable? - **A company like Chesapeake Energy soared from $14 to $77 in 2 days on major retail day trading. ** This is a company that has over $18 billion in debt, trading at 5 cents on the dollar. It’s absolutely critical that you do extensive research on a company, and not just watch the ticker. Or else you’ll be left holding the bag. Meanwhile, at Katusa Research, subscribers and I built 2 new positions in top tier companies during the crash and are up big. We did miss my target on two other great gold companies by pennies. But we’ve just scored another +211% profit on a junior nonproducing gold stock. I have another incredible Private Placement opportunity up my sleeve that I believe has the potential to turn into another multi-bagger. I give us an A- for our performance. Like my dad said to me growing up, regardless of how well I did, “you could always do a little bit better.” When our monitors and systems start alerting our team that retail traders are going nuts on precious metals stocks, that will be our cue that the top is near. But for now, the best days in commodities are coming. The U.S. Federal Reserve has 2.8 trillion reasons to hope the bottom is in. And at the global level, there are over 9 trillion reasons to hope the worst is behind us. Of course, the “reasons” I am referring to is the cumulative amount invested by central banks and governments to keep the economies from total collapse. ## **The $9 Trillion Question** The $9 trillion question is, does this U.S. unemployment data point represent an *inflection point* for the economy, or is it a *one-off blip* on the screen? It’s important to consider that this is a *single *datapoint. I believe we need several more data points before we can truly connect the dots and project the type of recovery we’ll be seeing. Two important factors I’m looking at are the labour market conditions and consumer spending habits. Knowing the types of businesses that are doing the hiring is very important to understanding the real strength of the economy. How much value is being created through this rehiring process? I think we could see a quick restart of initial hiring by businesses who are cashed up and ready to go back. It’ll be a long, difficult road for those businesses less fortunate. - **Consumer spending habits will also be a key data point. ** I am hesitant to believe that discretionary spending habits will immediately go back to where they were four to six months ago. The laid off or recently rehired citizen isn’t going to go out and buy a brand new flatscreen TV, a fancy car or go on vacation to Las Vegas. This could very well be the summer of “staycations”. That’s why I believe a “swoosh” style recovery is a possible option. An economic recovery that starts quickly and then slows down, before grinding higher over time. ## **How Do You Invest at This Point in the Recovery?** U.S. Fed Chairman Jerome Powell said he’ll expand the Fed’s balance sheet to infinity if need be and keep interest rates at 0%. On top of that, as I wrote last week, **Yield Curve Control (YCC)** is likely to become a tool in the Fed’s toolbox, as the Fed tries to wrangle a hold on interest rates. This bodes very well for commodities. A tsunami of cash is a tremendous catalyst for stores of value like gold. This makes gold stocks highly attractive. At the same time, this cash fuels economic expansion which needs base metals and oil. Not to mention funding the green dream and ESG movements. It’s worth noting that I think the activity in the U.S. Dollar over the past four months truly demonstrates that the USD will remain the world’s reserve currency. The demand for dollars was virtually unlimited during the crisis. You couldn’t say the same thing about the Yen, Euro or the Yuan. It may come as a surprise to you, but the U.S. Dollar has actually increased its share of global payments. The USD currently makes up over 42% of global payments, up from 40% in 2017 – have a look at the chart below… ![Share of global payment]Here at Katusa Research, I’m positioning myself and my subscribers into unique opportunities that I believe have substantial upside. One of my latest gold stock recommendations just made a massive deal to acquire an incredible asset earlier this week. - **This junior gold stock has shot up as high as 278% since our entry price.** Take a look for yourself and see how the Katusa gold portfolio has held up versus its peers since the start of the year: ![YTD Returns Comparison]If your precious metals portfolio is not up significantly in the last couple of months… Or if you’re finding that you’re not getting the best information on commodity market action every month, consider learning more about my premium newsletter – ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)***. A secret I’ll share with you is that it really comes down to backing the best people. I’ve spent 2 decades as a professional investor and fund manager. I’ve built relationships with the who’s who of the industry. I’ve flown over a million air miles and visited over 100 countries. You can’t replicate that type of experience. I’m truly excited for the next chapter of this market. We’ve had a great start to the year, and I think the second half could be even better. To see where I’m putting millions of dollars of my own money to work in the gold and resource sectors, [click here to learn more about becoming a member](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) to ***Katusa’s Resource Opportunities***. Regards, Marin --- # King Dollar Sounds a Market Alarm - URL: https://katusaresearch.com/king-dollar-sounds-a-market-alarm/ - Type: article - Published: 2020-06-05 - Author: Marin Katusa Central Bank created cash around the world has propped up major stock markets and indices like the NASDAQ, DJIA and S&P 500. This creates a stark distinction between a “V recovery” in the stock market and the harsh reality of the real economy. Double-digit unemployment rates, negative GDP across the globe, interest rates near, at or below zero… NONE of the economic indicators point to the underlying economy being healthy. Imagine your body projecting the epitome of health on the outside. Everyone sees your fancy clothes, exotic car, and million-dollar smile. But your internal vitals are about to shut down. Your cholesterol is high, arteries are blocked, blood pressure is high, and your kidneys are failing. The market looks good, but the internal reality is not. That’s the dichotomy you’re seeing right now in the markets. I’ve never seen a greater difference between the stock market and the economy than what we’re witnessing right now. And in uncertain times, gold gets attention. ## **Recent Gold Price Activity ** Let’s take a look at gold’s recent price performance… Gold has consolidated in its upper ranges. Since May 1st, gold has only closed below $1,700 3 times. This is positive consolidation for a stronger base. ![Recent gold price graph]I personally believe it’ll take more time to consolidate before there’s a break higher. I’m also not ruling out the possibility of another “sell everything” type event happening within the next 3 to 12 months. ## **Why Is the U.S. Dollar “Collapsing”?** First off, it’s not collapsing. But that’s the narrative many want to believe. This week there was selling pressure on the U.S. dollar. The U.S. dollar came under pressure and broke key technical support levels versus major currency pairs. Below is a chart which shows the U.S. dollar breaking down against major currency pairs. ## **![US Dollar Index]What’s the Impact of the U.S. Dollar Falling?** Many may view this as a positive for global growth and improving economic conditions. I believe that there are other issues at play beneath the surface. These tell me the economic internals aren’t functioning as they should. The 3 most important letters in the market today are **YCC**: **Y**ield **C**urve **C**ontrol. - **Yield Curve Control** allows central banks of the world, such as the U.S. Federal Reserve, to target specific interest rates through the purchase and sale of government bonds. **What’s the difference between Quantitative Easing (QE) and Yield Curve Control?** The key difference between QE and YCC is that QE deals in *quantities of bonds*, whereas YCC focuses on *bond prices*. YCC requires enormous trust in the central bank. The reason is, if the bank fails to keep bond prices at the specified target level, the whole house of cards collapses. A common trait in YCC is that the short-term rates see extremely low yields (higher bond prices) while the long-term part of the curve steepens (lower bond prices). Keeping short-term rates low reduces the cost of borrowing. - **Today, the yield curve is the steepest it’s been in three years. ** The Federal Reserve has injected trillions of dollars into the system. This pushed down the yields of short-term bonds and caused long-term rates to spike. Below is a chart showing this phenomenon. You’ll see the spread between U.S. 30-year bonds and the U.S. 5-year note hit a three-year high this week. ![US 30 year bond vs US 5 year note spread]The steepening of the yield curve in a healthy market is commonly a sign of improving growth and an increased appetite for risk on assets. The problem is, right now we have anything but a healthy economy. This week, Christine Lagarde and the European Central Bank injected an additional €675 billion into the system, bringing total injections to €1.35 trillion. Eurozone GDP is forecast to be down 8.7% for the year. In the United States, several trillion dollars have been injected and there are rumours of another $1 trillion in the pipeline. U.S. GDP is forecast to contract by approximately 5%. China abandoned a GDP target for the year entirely. **What about other major players, you ask? ** Below is a chart which shows the estimates of 2020 GDP growth for major nations. ![2020 GDP Growth Rate Estimates] Given the amount of red in that chart, it’s hard to argue that the global economy is healthy and functioning well. What does a steep Yield Curve and weak economic growth signal? Weak GDP growth, high unemployment and rising long-term rates point towards deflation and then stagflation. This is not good. Again, when the insolvency crisis hits, it will be USD that the world rushes into once again. ## **How Do You Prepare for Deflation?** First, in a deflation – financially speaking, debt is the worst thing to have. Cash flows drop, and so cash is king. Everyone loses in deflation, but those who are able to preserve their wealth and lose the least win. ## **How Do You Prepare for Stagflation? ** This is when it gets very ugly for the everyday person in society. People forget that even though the stock market dropped 85% from its 1930 peak over the next two years, the great depression lasted another decade. Think of stagflation as higher prices for everyday survival goods (food, energy, shelter, clothes) but coupled with high unemployment with no economic growth. Historically speaking, gold and the U.S. dollar were opposites. When one was up, the other went down. But in this new world of [Quantum Economics](https://katusaresearch.com/quantum-economics-negative-interest-rates-and-financially-transmitted-diseases/), we’ll see a strong dollar and strong gold prices at the same time. China has shown very clearly that they’re not ready to be the world’s reserve currency yet. Perhaps even more so by creating their own “digital currency”. Eventually, governments around the world will try to solve this incredible debt problem by introducing digital currencies. China has already floated the idea, but are you, the U.S. government, the ECB, and international businesses going to subject themselves to using a digital currency controlled by a communist government? There’s a long way to go before international acceptance of digital currencies. And before then, it’s what you do financially that will position yourself and your family’s financial destiny. If you look at growth around the world, where do you see strength? Europe? No. China? Yes, if you believe their numbers – but even going off their own numbers, it’s weak compared to where they were at before. The United States? Don’t count out the U.S. Right now things are very bad in the U.S., but the U.S. has always done its best when they had their backs against the wall. What has any central bank done globally done over the last three to five years to replace the U.S. dollar as the global reserve currency? **Nothing** is the real answer. I hold a large percentage of my cash in USD (and not in my home currency of Canadian Dollars). There will be incredible opportunities to leverage a rising USD to buy assets in foreign currencies (as we saw in the March and April bloodbath). My subscribers to *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/)* have seen many of their positions take flight. One of our most recent gold recommendations is up 89% in 2 months. My largest current core position – a precious metal producer – is up 102% over our portfolio cost base. Just to catch up to its peers, at today’s gold prices over $1,700, this stock could easily trade 50-75% higher. One of our core gold takeover targets is up 229% (and I expect it to ride higher on positive drill results). Below is the year-to-date (YTD) performance of the [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) newsletter (KRO) portfolio. And like our returns since inception, we don’t include warrants from several financings that are in the money. Every position, including the losers, have been properly accounted for. ![YTD Returns Comparison]The reason I show this is not to brag. It’s to demonstrate to new subscribers that although it can be frustrating at times and requires significant patience, our alligator style of investing works. We’re not a day trading strategy. We look for the absolute best management teams with top assets and look for strategic entry points. I’m very excited about our portfolio positions moving forward and the opportunities just above the horizon. **Is your chance to buy some of the best precious metals companies over? No.** If or when a pullback happens, you want to have your hit list ready. And now is the time to do all your homework on the best opportunities. That’s where *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/)* can help in your decision making. Regards, Marin --- # Beware of the Greatest Insider Gold Trade Scheme EVER - URL: https://katusaresearch.com/beware-of-the-greatest-insider-gold-trade-scheme-ever/ - Type: article - Published: 2020-05-29 - Updated: 2020-05-28 - Author: Marin Katusa If you are a bullion holder in a Negative Swap Line *(-SWAP*) Nation – please pay attention. **Bernard Baruch** was one of the wealthiest speculators in American history. He started with nothing and worked his way up to becoming a war effort hero and a trusted advisor to many Presidents during his lifetime. But he made his fortune speculating. The myth and popularity of another speculator during the same era – Jesse Livermore – gets much more print than Bernard Baruch. But in my books, Bernard Baruch ran circles around Jesse Livermore. But I’ll leave that explanation for another day. Today’s missive is about the biggest bet that Bernard Baruch ever made. But not only did the U.S. Government take it from him, they tormented him for doing it. It’s said that no American individual has ever held more gold in his personal possession… - **Bernard Baruch’s personal stash of bullion was a little over 2 tons of gold (over 75,000 ounces).** That’s over USD$125 million in bullion at today’s prices. He was America’s first **Bullionaire**. So what happened to all that gold? ## **America’s First Bullionaire Was Blindsided by Executive Order** On April 5th, 1933, one month after taking office, President Roosevelt ordered all Americans, by Executive Order, to surrender their gold at the government fixed rate of $20.67 per every ounce of gold. All gold coins, bullion and gold certificates would have to be surrendered to the Federal Reserve by May 1st, 1933. That was less than one month after the President’s Executive Order. Over 14.5 million ounces were surrendered to the U.S. Federal Reserve. Nobody surrendered more gold bullion to the U.S. Federal Reserve than Bernard Baruch, with his stash of over 2 tons of gold (over 75,000 ounces). At the same time in Europe, the going rate for gold was about $29 per ounce equivalent. The executive order to surrender their gold didn’t give U.S. citizens enough time to organize the required logistics to play the arbitrage opportunity. Not to mention that President Roosevelt made it illegal to do so. - **Millions of Americans were forced to sell their gold at below international market rates.** Here’s what’s not mentioned in the history books of this period… The U.S. government made a serious inquiry into all the mines and gold dealers on: - Who sold gold, and - To whom the gold was sold before the executive order. Bernard Baruch had to testify to the U.S. Secretary of Treasury why he bought so much gold. In fact, the president of one of the mining companies that sold their gold to Baruch had to also testify why Baruch bought all the gold. Protecting one’s wealth and lack of trust in the fiat currency wasn’t an acceptable answer in the eyes of the U.S. Treasury Department. ## **So, You Want to Be a Bullionaire? ** Becoming a *millionaire* means financial freedom. Becoming a *billionaire* means that you’re one of 2,100 people out of 7.8 billion people on planet earth. It means you’re part of the top 0.000027% of the world’s financial elite. But there’s a new class of elite wealth being created that I call the **BullionaireTM Katusa** **Class**. A Bullionaire is someone who’s quietly accumulated over 1,000 ounces of gold (or Ag Eq). But before you set your sights on becoming one of the global **Bullionaires**, please understand what happened to U.S. **Bullionaires **in 1933. ## **The United States Gold Reserve Act of January 30th, 1934** On January 30th, 1934, after forcing Americans to surrender their gold at $20.67 per ounce, President Roosevelt raised the price per ounce of gold to $35 per ounce. This immediately booked a 69% gain on the gold that was surrendered in May 1933. Bernard Baruch was 100% correct in his prediction that gold would increase in value. However, he didn’t make a penny on his gold bets because he was forced to surrender his gold to the government – and at the government’s fixed price. In fact, the whole saga cost him a lot of money and was the source of much headache as he had to testify and defend himself from the government inquiry on why he bought so much bullion. President Roosevelt knew exactly what he was doing. America was in a deep recession in 1933. Famous individuals like Jesse Livermore owed millions and went bankrupt. Shortly after the Gold Reserve Act in 1934, Jesse Livermore filed for bankruptcy for a third time. (Not to digress – But I mentioned earlier why Bernard Baruch ran circles around Jesse Livermore. Baruch never declared bankruptcy, was a good family man and lived a long fruitful life. Six years later, in 1940, Jesse Livermore was bankrupt for a 4th and final time as he shot himself and committed suicide.). Many popular business executives that were household names committed suicide between 1932 and 1934. Eastman Kodak and Ivar Kreuger killed themselves. The U.S. economy hit all-time lows and recorded its highest unemployment rate ever up to that point. Deflation was destroying lives, families and the morale of a nation. Governments fear deflation much more than they fear inflation. President Roosevelt wanted inflation and the fastest way to do so was to re-price the gold they just nationalized from their citizens. By repricing gold, President Roosevelt brought inflation to the economy. And it worked. But before the U.S. Government did so, they forced their citizens to surrender their gold coins, bullion and gold certificates. Knowing they would reprice gold after they forced their citizens to surrender the gold, **this became the greatest insider trading scheme ever seen in the world**. ## **Government Insider Trading Coming to a Negative SWAP Line Country Near You** If you need a refresher on what a Negative Swap Line Nation is (-SWAP), [please watch the video here](https://www.youtube.com/watch?v=qeY8O0Cqa8Y). Not only are governments in the rest of world other than the U.S. breaking under the debt and deflationary pressures in their domestic economies, they’ll be forced to increase their take on foreign owned gold mines. Those same governments will copy President Roosevelt’s Executive Order of forcing all citizens to sell their gold coins and bullion to the government at a fixed price in the local currency. **So, how does a Bullionaire protect their wealth from being surrendered to their government?** - Don’t flaunt or talk about your aspirations to become a Bullionaire—you’ll be a target from not just the government but also your social acquaintances. - Use cash that’s not traceable to buy gold coins or bullion. Don’t use bank wires, cheques or credit cards as all that can be traced. - Storage is the biggest issue with becoming a Bullionaire. Never have all your gold in one place. And I’d think twice about having too much in a bank safety deposit box. In 1933, all bank vaults were forced to close and only opened under the close supervision of government officials, who checked all Safety Deposit Boxes and their contents. If there was gold, it was automatically surrendered to the government. ## **The Golden Pocket** All that said, after the 1934 U.S. Gold Reserve Act, the miners experienced their greatest period of free cash flow and dividends. - **We’re entering an incredible gold market. It’ll be volatile on both the upside and the downside. ** Around the world, gold is already hitting all-time high prices in foreign currencies and is edging nearer to all-time high prices in U.S. dollars. It’ll truly be in a bull market once the previous USD high is in the rear-view mirror. Within the next five years, gold will attract front-page attention as it hits prices that we’ve never seen before. [Silver will also follow](https://katusaresearch.com/the-first-city-of-capitalism-silvers-time-to-shine/). But broke governments will want their share. [This means you must understand the political risks](https://katusaresearch.com/the-importance-of-dollar-swap-lines/) that are currently not being priced into mining company or royalty company share prices. And for those who think they’re untouchable because they hold gold bullion, just remember what happened to the one of the greatest speculators that ever walked Wall Street, Bernard Baruch. Regards, Marin **P.S.** Be prepared both mentally and financially for what to do if gold prices take a big hit to the downside or if it breaks to new highs. Foreign Governments are fighting for their survival and we’ll start to see outright nationalizations, increased taxes and forex controls of many assets. To see where I’m putting millions of dollars of my own money to work in the gold and resource sector, [click here to learn more about becoming a member](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite) to ***Katusa’s Resource Opportunities***. --- # The First City of Capitalism: Silver’s Time to Shine - URL: https://katusaresearch.com/the-first-city-of-capitalism-silvers-time-to-shine/ - Type: article - Published: 2020-05-22 - Author: Marin Katusa *“For the powerful emperor, for the wise king, this lofty mountain of silver could conquer the world.”* -King Felipe II 1561. Powered by an intricate set of 22 dams, 140 mills churned out silver. It was an impressive feat of engineering given the time. Slaves were forced to carry 25 loads of 100-pound sacks per day. At an elevation of 13,000 feet, death was a frequent occurrence as pneumonia and respiratory infections were rampant. Legend says you could build a bridge from Potosi to Madrid with all the silver mined, and one back with bones of miners. The discovery of Cerro Rico (Spanish for “Rich Mountain”) turned a tiny Bolivian village into the 4th largest city in the Christian world in 70 years. Coined the “first city of capitalism” Potosi was home to the world’s richest silver deposit. Over a 200-year period, 1.4 billion ounces of silver was mined from the region. At its peak in the 17th century, over 150,000 Bolivians, African slaves, and Spanish settlers called Potosi home. At the time, the population of Potosi was larger than London, Milan, or Seville. Silver has no shortage of war and fortune making stories. From the days of the Hunt Brothers cornering the silver market… to Warren Buffet buying 112 million ounces of silver calling it “for investment purposes” rather than outright cornering… To the JP Morgan short position… The booms and busts of silver have truly been exceptional, putting the testicular fortitude of even strongest silver bugs to the test. ![Silver: Boom and Busts] Much to the rage of silver bugs, while gold has steadily grinded higher over the past few years, silver was left behind. The gold spot price is up nearly 40% YTD while silver spot is treading water. ![Gold vs Silver Returns] ## **The Silver Lining** Change may be afoot. The “anything it takes” economic policy of central banks and governments around the world is shaking things up across the spectrum of investment types. Since March 23, 2020 silver has been one of the top-performing major commodities, outperforming gold by a significant margin. ![Commodity Returns Since March 23, 2020] ## **What the Silver CoT Charts Are Telling Us** The hedge fund and managed money crowd are not all-in on silver. Below is a chart which shows the Commitment of Traders non-commercial long positioning for silver. ![Silver Positioning Non-Commercial Long Positions] Will this change? What I find equally interesting is that the commercial group is less *short* than normal. This commercial group is made up of producers and others who manage business risk by hedging futures positions. It’s logical to think that when the commercial group has a large short position, prices are likely near a high point. Below is the commercial positioning. ![Silver Positioning Commercial Short Position] While all this point to support for higher prices, the only question that matters is this: ## **Will Silver and Silver Stocks Take Off?** So far, they haven’t. Below is the returns comparison so far since March 23rd, 2020 (the meltdown lows)… ![Can Silver Miners Play Catchup] - **However, looking back in history… when silver miners move, they move BIG.** Below is a chart which shows large silver producers from 2009 to 2011, during the last big run. You’ll see that while silver surged 300%, producers at the time were up 500% or more. Even Fresnillo, the world’s largest silver producer was up over 500%. Many junior producers were up over 1,000% during the run. ![Historical Silver Producer Returns] You can see how the right silver stocks can produce mind-boggling leveraged gains over the spot price of silver. ## **Who are the Largest Silver Producers?** After the Goldcorp merger, Newmont is projected to be the world’s largest silver producer. Many investors might find it odd that a “gold” company churns out the most silver, but it’s true. Below is a chart which shows the expected top 5 silver producers in 2020. ![2020 Silver Production Estimates] ## **What’s Next for Silver?** Silver is useful both at the industrial level and as a store of value, just not to the extent as gold. This has the potential to be a double whammy for prices over the next 3 to 24 months. In theory, depreciating currencies should help stores of value like silver and gold. At the same time, the “anything it takes to keep the economy going” approach by the central banks is positive for industrial uses. It’s not unreasonable to think that silver could catch a bid. And soar. As always in natural resource speculations, - **You need to be invested in the right projects and management teams or you and your investment will be left in the dust. ** Did you know over half of the world’s silver production is produced in regions without US-SWAP lines? Yes, over half of the world’s silver comes from -SWAP Line Nations. I believe the US SWAP lines will play a huge role in mine production and company valuation moving forward. ![Global Silver Mine Production 2020: US Swap Line Exposure] The recent historic run in silver and gold stocks has lit a massive rocket under the stocks in our portfolio… My largest current core position – a gold and silver producer – is up 102% over our portfolio cost base in *Katusa’s Resource Opportunities*. Just to catch up to its peers, at today’s gold prices over $1,700, this stock could easily trade 50-75% higher. - **One of our core gold takeover targets is up 229% (and I expect it to ride higher on positive drilling results)** Another takeover candidate is up over 100% since its March lows. And our two most recent additions to the KRO portfolio (both energy stocks) are up 118% (on a free ride, and paying a fat dividend) and up 43% (also on a free ride, paying a juicy dividend)… are doing stellar. If you’ve missed out because you were on the sidelines, don’t fret. I’m very close to pulling the trigger on a monster deal for subscribers. There will be no marketing. No promotion to jazz you up about it. There’s only one chance to get into what could be the biggest gold deal of 2020. If I can pull it off, I’ll be committing a significant dollar amount to be one of the lead orders. And the only way you can get *in the deal*, is to be *in the room* before I send out the alert. [Click here to learn more about becoming a member](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite) to ***Katusa’s Resource Opportunities***. Regards, Marin --- # Trump vs. Powell: Who Wins? - URL: https://katusaresearch.com/trump-vs-powell-who-wins/ - Type: article - Published: 2020-05-15 - Updated: 2020-05-14 - Author: Marin Katusa President Trump recently tweeted, “As long as other countries are receiving the benefit of Negative Rates, the USA should also accept the ‘GIFT’. Big numbers!” Considering the President is a real estate marketing guru facing a ballooning national debt, it can’t come as a surprise he’d be in favor of Negative Interest Rate Policy (NIRP). But are they really a gift? Negative rates are supposed to incentivize spending, in theory. But as I said last year, the opposite ends up happening. ## **NIRP Doesn’t Work** The theory is that negative interest rates create a situation where the depositor should spend rather than save. But is that really the case? Look to places such as Japan and Europe where negative rates are already in place and ask their banks how their banking and lending climate is. Many forget the [sneaky Swiss recession in the 1970s](https://katusaresearch.com/the-impossible-recession-in-the-worlds-playground/). Swiss banks charged interest rates on deposits of **negative** 8.24% annually in efforts to stem the soaring Swiss Franc. The rise of the Franc crushed the competitiveness of Swiss exports while domestic industrial production cratered. It was dark times for the Swiss and the economy fell into an ugly recession. - Pre-recession, Switzerland had 81 unemployed people. At the recession’s peak, over 30,000 Swiss were unemployed. It took until the mid-80s for the Swiss economy to truly recover. Switzerland spent nearly a decade in a negative interest rate environment. As history shows us, NIRP isn’t the magic bullet that Trump thinks it is. ## **Will the U.S. Federal Reserve Use Negative Interest Rates?** Some believe so. This past week, the Federal Funds Futures rate traded above 100, signaling some traders were positioning for the possibility of negative rates. The chart below shows this positioning on May 8th. ![Negative Rates Fed Funds Futures Retreat]Federal Reserve Chairman Jerome Powell effectively slammed the door on this possibility this past Tuesday. He stated that the Fed likes their current toolkit and that negative rates is not a viable option. While negative rates may be off the table for now according to Powell, additional fiscal and monetary policy measures certainly aren’t. - **Since the start of 2020, total assets on the U.S. Federal Reserve’s balance sheet have already soared from $4 trillion to $6.72 trillion, a 68% increase – and it will go higher. ** The Federal Reserve has cut rates by 150 basis points, with the effective federal funds rate now sitting at zero. Not to be outdone, the U.S. House of Representatives passed a $2.9 trillion aid package, the largest in U.S. history. Greenbacks are being printed like never before and this is a trend I expect to continue. During all this, the U.S. unemployment rate has skyrocketed past early 1980s recession levels. ## **What’s the U.S. Unemployment Rate At?** At last print, the U.S. unemployment rate was 14.7%. That’s the highest since World War II. ![United States Unemployment Rate Graph]According to the U.S. Federal Reserve… - **40% of Americans who make less than $40,000 per year have lost their job. ** This is truly a horrible statistic and one that’s likely to get worse before it gets better. Jobless claims continue to be filed and the May unemployment rate will likely be 20% or higher. These record unemployment levels will further slow the velocity of capital throughout the economic marketplace. - **Goldman Sachs thinks unemployment may even overtake the historic Great-Depression-era peak unemployment rate of 24.9%, recorded in 1933.** Massive unemployment leads to weak aggregate demand, which fuels an ugly spiral downwards. In response, the Fed and the U.S. government must push against the string and continue to plow cheap money into the economy. I believe we’re now well into the zone of diminishing marginal returns, where each new $1 injected by the Central Bank or Government today will have less of an impact than the previous $1. ## **What’s the Impact of Stimulus on the Stock Market and U.S. Dollar?** At the end of the day, as a professional investor and fund manager, it’s about making money with the best risk-reward possible. Below is a chart which shows this year’s market crash against other major historical corrections in the Dow Jones Industrial Average. We’ve had the most rapid descent ever seen in history. Then, thanks to the “anything it takes” coordinated central bank policies, we had one of the fastest and largest rebounds ever… ![Dow Jones major corrections - Katusa]Just because the bounce was swift doesn’t mean we’re out of the woods just yet. In fact, I think the odds are high that we probably topped out last week in the S&P 500. - **Billionaire industry titans like Stanley Druckenmiller and David Tepper are calling the market incredibly overvalued right now. ** While I tend to agree, the major indices are not my focus. I strongly believe that the U.S. dollar will remain the world’s reserve currency and retain its store of value against other major currencies. Look no further than the dependence upon the U.S. Federal Reserve to [create SWAP lines of U.S. dollars for other central banks](https://katusaresearch.com/the-importance-of-dollar-swap-lines/). You could argue that demand for U.S. dollars has never been higher. And I don’t see this changing any time soon. I think more and more nations will be forced to choose between being an ally of the U.S. or not. Those who become allies will receive access to U.S. dollar SWAP lines. And for those that downplay the SWAP lines, just remember who the SWAP-er and who the SWAP-ees are in global Central Bank relationships. ## **Gold Backed Currency** For all the U.S. dollar haters out there… I just want to remind everyone of an often-overlooked fact… I hear so many arguments state that the beginning of the end for the U.S. Dollar was in 1971 when President Nixon closed the gold window. I won’t argue that the move was detrimental. And as most know, I’m very bullish on gold – even though I think we’ll still get some price selloffs along the way to $2,000 gold. But I just want to remind everyone that Great Britain closed the gold window in 1931, 40 years before the U.S. One month later, Canada followed suit in October 1931. By the end of 1931, Japan also ended the gold backing of their currency. Germany had Great Britain beat by eight years and closed their gold window in 1923. And China? The Chinese currency was never actually backed by gold. So as bad as you think Nixon’s move was, just think about how much longer the U.S. Dollar was backed by gold when compared to other nations. I continue to believe that gold will do well, even if the U.S. Dollar remains strong. It’s been a key investment thesis for my funds and subscribers since last year. Dubbed *Quantum Economics*, you can [learn all about it here](https://katusaresearch.com/gold-vs-bitcoin-quantum-economics-and-financially-transmitted-diseases/). ## **Markets Are Rolling Over – Where Are the Profits?** Today, I’m 100% focused on sectors that offer incredible opportunities at the right price. The precious metals sector has been on a tear. Did you know gold is up 13% year to date, while many producers are up 25% or more? Compared to the Dow Jones Industrial Average which is down 18%, that’s a phenomenal difference. - **At the same time, I’m inches away from pulling the trigger on a phenomenal energy company that can withstand virtually any oil price. ** It’s a unique business model with an incredible “moat” around it. And it’s very close to my first tranche buy target. We’ve stayed extremely disciplined with our buys in the *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)* portfolio. The portfolio has seen some incredible returns on recent picks. Even though precious metals and uranium stocks have been on a tear recently, now’s not the time for complacency. In fact, I missed a 100% move in a silver play by mere pennies. It happens, but I maintain my disciplined approach of waiting for stocks to go down to the prices that I’m willing to pay for them. The market can turn on a dime, and you must be prepared with cash to take advantage of any more corrections or fund redemptions. **It’s this type of unique thinking that’s the Katusa advantage.** Right now, I am laser-focused, cashed up, and ready to put millions of my own money on the line. It’s in this type of chaos that I make my biggest and best investments. Fortune favors the bold. We have some very exciting material in the pipeline – and if you’re interested [click here to learn how to access](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail) my premium research and top resource ideas. As always, stay safe. Regards, Marin --- # Conversation with Katusa: The Biggest Short Squeeze in History - URL: https://katusaresearch.com/conversation-with-katusa-the-biggest-short-squeeze-in-history/ - Type: article - Published: 2020-05-08 - Updated: 2020-05-07 - Author: Marin Katusa *“We’re going to go through the biggest short squeeze in history, and it just so happens to be on the dollar.”* Dear Reader, If you aren’t paying attention to the global squeeze of U.S. Dollars then you need to get up to speed quick. And to my mind, only my good friend, fund manager Brent Johnson and I, have benefited greatly by correctly calling the rise in U.S. Dollars. Investors, central banks and entire nations are starting to see that the dollar is the number one asset to turn to in times of panic. I’m seeing a lot of talk of rising dollar and rising gold. And I’m glad people are finally letting go of their biases and realizing what is actually happening. Last week, I published on [the Importance of U.S. Dollar SWAP lines](https://katusaresearch.com/the-importance-of-dollar-swap-lines/) and to pay special attention to nation’s that have them. Because those nations are at the greatest risk to increase government from the mines and in some cases even nationalize mines and projects. Their need for U.S. dollars to fund their debts and budget shortfalls is critical. - **A big source of U.S. Dollars for many emerging market governments is to sell commodities denominated in U.S. Dollars.** Whatever your thoughts about Fed secrecy, money printing and stimulus.… know that the dollar reigns supreme. For now, and for the foreseeable future. Look, the monetary system is not moral, just or fair. It is what it is. And you can choose to believe a fairy tale world or you can take action and invest in the world as it actually is. If you’re in the camp that the U.S. is an evil empire then expect the empire to act evil. It will use all the tools in its arsenal to maintain power. And its biggest weapon is the U.S. Dollar. - **The U.S. Dollar can unleash more carnage on foreign soil than a nuclear warhead. ** I know that sounds ridiculous. But social unrest can lead to civil unrest and could lead to horrible civil wars. While the dollar is “a horrible currency” according to Brent, it does not absolve the fact that other countries are just as – or even more – fiscally irresponsible than the United States. And today I’m releasing an exclusive interview with fund manager Brent Johnson. For full disclosure, I have invested money in his fund. And none of this is investment advice. It’s two guys who would normally get together over some drinks to talk shop. But with the current world we live in, we did a digital meet. You may disagree or agree, but we did this for you. We wanted to let all of you in the room to be participants in what our many discussions are like. ## The Biggest Short Squeeze in History **In this interview you’ll hear:** - The active position that’s returned Brent 4x his money… and counting - The *Dollar Fakeout* move and the end of the beginning – how much further the dollar can rise - Why Brent is “short the rest of the world” - How far the Canadian and Australian Dollars will fall against the mighty U.S. Dollar - The other metal that Brent thinks will “go through the roof” - How the dollar rally will affect gold - Why the 25 trillion that the U.S. owes in dollar debt is not the real problem, and who has the much, much bigger issue - The one country Brent is short because they’re “*completely screwed*” - The western countries with banking systems that could be in “major trouble” [Click on this link](https://www.youtube.com/watch?v=QPFl7X9R2VY) or on the picture below to go straight to the video. [![Brent Johnson Interview Marin Katusa]](https://www.youtube.com/watch?v=QPFl7X9R2VY) Regards, Marin P.S. Next week I’ll be speaking at the virtual **[Strategic Investment Conference](https://www.mauldineconomics.com/go/kr5qg8mr/KAT)**, along with many financial market masters and intelligent minds. I don’t attend many conferences, but this is one I go to in person every year. The ultra-high ticket price has been negated this year since the conference will be virtual. This bodes well for you if you’ve ever wanted to access some of the best thinkers in the world. [Click here if you want to get your pass at a reduced price](https://www.mauldineconomics.com/go/kr5qg8mr/KAT), I urge you to get them BEFORE the conference starts. --- # The Importance of a Dollar SWAP Line - URL: https://katusaresearch.com/the-importance-of-dollar-swap-lines/ - Type: article - Published: 2020-05-01 - Updated: 2020-05-06 - Author: Marin Katusa *“Hoping for the best, prepared for the worst, and unsurprised by anything in between.” *Maya Angelou, from *I Know Why the Caged Bird Sings* An engineer is trained through university and in the workforce to apply failure modes and safety factors into their designs. It doesn’t matter if it’s a structure, a circuit, a chemical or even mechanical equipment. Running a business is no different. Restaurants that only offered dine-in service quickly learned that revenue stream was dust during this shutdown post virus quarantine. Only those that were ready with online takeout and delivery options continued earning revenue. The stoic philosopher Seneca wrote, *“What catches us by surprise hurts us double.”* And if your favourite mining stock has significant production in what I call **negative swap nations**, it could be at serious risk. I’ve talked to several gold company CEOs and gold fund managers. Not one knew what a SWAP Line was nor the difference between a **+SWAP **Line Nation vs. a **–****SWAP **Line nation. As I walked them through my concept, all agreed the risk factors will soon become impossible to ignore. Are there built-in risk premiums to the prices of certain stocks? Yes. But not at the cost of creeping government ownership and eventual nationalization. The Latin phrase *Premeditatio Malorum* tells you to prepare for all evils. And today I’m going to get you up to speed on the overlooked risks to some of your biggest gold holdings. I’m not making any friends with this theory. But I have to prepare my portfolio for the risks. - **If you have a producing asset in a Negative SWAP Line (****–****SWAP) country, you must prepare for potential setbacks and for things to go wrong.** It’s about properly understanding and pricing in risk. Something that has become overlooked in the resource sector. I detail these risks in my latest briefing on [**The War on Gold**](https://katusaresearch.com/goldwar). ## **The Importance of Dollar SWAP Lines** A SWAP line provides temporary U.S. Dollar relief to the Central Banks of certain nations (pre-approved by the U.S.) who need these financial lifelines to ease the stress caused by a lack of U.S. dollars in their own nation. SWAP lines are increasing weekly and more nations will be added. And they’ll be added only if the Nation needing the SWAP Line agrees to the terms of the U.S. government—both financially and geopolitically. Make no mistake and don’t listen to the *dollar demise* crowd. The world still needs more U.S. dollars right now. We’ll see countries declare bankruptcies and we’ll see nationalization of assets. - The International Monetary Fund (IMF) came out in March stating the global U.S. dollar shortage could be crippling to many emerging markets. - The IMF will be giving “unsecured” loans (in U.S. dollars) to their most “reliable” members. Below is a list of countries where U.S. Federal Reserve SWAP Lines exist (think of them as lifelines by the U.S. Federal Reserve). ## **I call these Positive SWAP Line Nations (+SWAP):** ![dollar SWAP line countries] Is it just coincidence these are good standing allies of the U.S.? No. ## **Which Countries Do Not Have SWAP Lines?** Every other country in the world that’s not listed above. So, why am I focusing on SWAP lines? Because I believe nations who do have existing SWAP lines won’t screw with foreign operating entities (American companies) to the extent of the **–**SWAP Line Nations. I still expect higher taxes in all countries as it’s the only thing politicians across the world have executed effectively throughout time. This means mining assets in **+SWAP** Line Nations won’t nationalize their gold mines, copper mines etc. Those nations won’t screw with America. Nations with existing U.S. SWAP lines won’t put Forex (FX) restrictions on the foreign (American) companies operating there. **–SWAP** Line nations may do so, and many have already. This will cause less and in some cases prevent those U.S. dollars in **–SWAP** lines from being sent back home as dividends to the owners of the company. Basically, the SWAP lines are monetary lifelines to ease the need for U.S. dollars in their own economies. So, they won’t mess with Uncle Sam by screwing around and nationalizing foreign (American) companies’ assets on their soil. The SWAP lines have worked in alleviating the “near term” desperation for U.S. dollars. But nothing has changed fundamentally as eventually, the SWAP lines will have to be paid back. ## **Barrick Gold Just Got the First Threat** Barrick Gold is one of the world’s largest gold companies and produces just over 5 million ounces of gold per year. A few hours after [my emergency alert went live](https://join.katusaresearch.com/vsl-war-on-gold/), one of their projects was put on notice. Papua New Guinea threatened to nationalize Barrick Gold’s Porgera gold mine. - **Approximately 50% of Barrick’s gold production is in countries that do not have access to U.S. dollar SWAP lines. **Hence are in –**SWAP** Line Nations. I want us all to be prepared for anything that can happen over the next few months. That’s Alligator Investing 101. Now, things I expect to happen over the next 12 months in **–****SWAP** Line Nations that DO NOT have SWAP lines with the U.S. is for those governments to: - Increase taxes, - Increase royalties, - Increase government ownership of the mine and/or - Slap on FX controls on the foreign gold, silver and base metal producers. These would be big negatives. It has already started in some **–****SWAP** Line Nations and I expect a lot more to follow. This is something we have front and center on our watchlists. I think many investors in **–****SWAP** Line Nations will find this to be the case, even with precious metal and base metal producers. - **The American government will use SWAP lines as geopolitical leverage. Expect the unexpected in this new normal we now live in.** That means the whole “benefit” of a weakening foreign currency that attracts investors to mines in emerging market nations may be negated by the government’s need to increase their take of a foreign owned and operated asset on their soil. ## **The Most Important Gold M&A Chart in the World** Earlier in this article, I mentioned countries in terms of - Existing US SWAP Lines (**+SWAP**), and - No US SWAP Lines (**–SWAP**). Let me explain why this is important. The U.S. Government will only give SWAP lines to countries that are allies. That’s countries the U.S. government trusts and works closely with. And most importantly, countries that accept and obey the terms and conditions set by the U.S. When Russia and China get U.S. SWAP lines, then I’ll change my tune. Until then, I’m pretty sure I’m spot on with this framework and its implications. Let me give you a real-world gold producer example… I’ve shared this with some of the bigger fund managers in the business and they had no idea. This is not a well-known concept. It doesn’t matter whether we use places like Argentina or Turkey as our example – this will become the norm over the next few years in all **–SWAP** nations. A **–SWAP** country like Turkey doesn’t allow you (as a company) to sell the gold you’ve produced easily into the international markets (for example a foreign owned smelter). This would allow the USDs to go back home to their owners without any meddling of the Turkish government. **Here’s what actually happens…** - The company sells their gold to the government in local currency (Turkish Lira in this case) at the government’s exchange rate (not the real-world rate). This means the foreign company gets screwed on the exchange rate. - The government takes the gold (which is valued in USD globally). - The company converts that Turkish Lira into USD through the government at the government’s conversion rate (again, the company gets screwed financially by the government). - It’s very difficult for the company to take those USDs out of the country and they’ll most likely have to pay a higher tax to do so. It also takes time to move the money out of the country. You can’t just move the gold dore bars out of the country. The government of Turkey will clip both sides of that sale (steps 1 and 3). You can see it’s not a good deal for the foreign producer, but what else can they do? Turkey is a pro mining nation. But that doesn’t mean that they will not increase taxes etc on foreign owned mining and energy assets. Expect Turkey to do so until the point they are forced to choose between accepting the U.S. terms and conditions to be a **+SWAP** Line Nation, or if they refuse and go with the EMSP (Emerging Market Super Powers) led by China and Russia. In places like Argentina, the company has strict foreign controls on the money. It’s very difficult to move those USDs outside of Argentina without getting clipped by the unreasonable government exchange rates. - **Shockingly – I have spoken to many CEOs of producing gold companies and not one knew what a SWAP line was.** When I walked them through my framework, each were shocked and had a new perspective on M&A over the next 12 months. Now this next chart below is a FIRST of its kind EVER produced. The chart shows the top 10 gold producers and what % of each producer’s gold is produced in **US +SWAP Line Nations (green)** and **No US -SWAP Line Nations (red). ** Green is good. Red is bad, as it implies higher risk. - The black box is the % of the company’s gold production in +SWAP nations. The higher the % of exposure of their gold production to +SWAP nations, the better… ![Major gold producers by exposure graph] - **This chart will eventually be the driving force of the coming M&A rush I see happening in the gold sector.** Right now, many analysts across the board in almost every research outfit give the same financial discounts to gold producers regardless of location. When the NPV5 (Net Present Value at a 5% discount) financial models are created by these analysts, whether the project is in a **+SWAP** or **–SWAP **nation is irrelevant to most analysts. This is just wrong. Not all jurisdictions are the same. Nor should the discount rates be the same. I think we’re going to see a major change much faster than anyone expects with regards to gold majors building assets in **–SWAP** nations. ## **Indiana Jones Speculation: Now You Know the Risks…** I’ve been to over 100 countries so far in my career. Between 2004-2010 I literally wore bulletproof vests to visit some projects. I drove across Iraq with former French Foreign Legion soldiers who were our escorts and bodyguards for me to appraise the potential of an oil well. Back in 2007, I spent a week in the ICU due to bat dung exposure because I went into an underground mine. In the rush to be the first to see the potential of a massive silver deposit in Mexico, I went underground unprepared (in this case I was right and was the first to publish and finance the +300M ounce silver deposit—and our subscribers made a killing—but that was really stupid on my part). I’ve done some exciting, stupid and dangerous things and travelled to some crazy places to find the next “Big Score”. But after truly becoming one of the few in the industry who can say “been there, done that”, I learned a major lesson I want to share… Yes, it’s true some big scores are waiting for those who are first to an exotic or war-torn place with a massive tier 1 mining deposit. It makes for a sexy story that sells newsletters, and people love to read about it (Indiana Jones Speculation, I like to call it). But those success stories are so rare. The reality is, just as big of a score (and in many cases even bigger scores) can be made when you are patient in major sell offs in politically stable jurisdictions like the U.S. Yes, it’s not as sexy. Yes, it doesn’t sell newsletters. But we should only care about making the most amount of money with the least possible amount of risk. **Maximum upside with minimal downside risk** – that’s my strategy in this market. I’ve talked about it for years now. And for that reason, I want to prepare everyone for this ***potential*** scenario in the gold market. Know the plan. Read the playbook [and be prepared.](https://join.katusaresearch.com/vsl-war-on-gold/) Be prepared both mentally and financially for what to do if gold prices take a big hit to the downside. Luck is being prepared [when the opportunity arises.](https://join.katusaresearch.com/vsl-war-on-gold/) Regards, Marin Katusa --- # Clearing Browser Cache - URL: https://katusaresearch.com/clearing-browser-cache/ - Type: page - Published: 2020-04-29 - Updated: 2020-05-11 - Author: Marin Katusa # Clearing Browser Cache Some subscribers are unable to view the latest alerts and reports in their member’s area. This can usually be solved by clearing your browser’s cache. Included below, are quick guides on how to clear your web browser’s cache for many of the popular browsers: - Chrome: https://support.google.com/accounts/answer/32050?co=GENIE.Platform%3DDesktop&hl=en - Safari: https://www.replicon.com/customer-zone2/kb-2840/ - Edge: https://kb.wisc.edu/page.php?id=54747 - Firefox: https://support.mozilla.org/en-US/kb/how-clear-firefox-cache ## Clearing Cache on Mobile - Safari / iPhone / iPad: https://www.macworld.co.uk/how-to/iphone/clear-cache-iphone-3609079/#toc-3609079-1 - Chrome: https://support.google.com/accounts/answer/32050?co=GENIE.Platform%3DAndroid&hl=en If you still have issues after clearing your browser cache, please contact customer support [subscribers@katusaresearch.com](mailto:subscribers@katusaresearch.com) --- # The War on Gold - URL: https://katusaresearch.com/the-war-on-gold/ - Type: page - Published: 2020-04-28 - Author: Marin Katusa # **THE WAR ON GOLD 2020: Emergency Briefing** ## **Marin Katusa details how you position your gold stock portfolio right now will have a huge impact on your wealth in the coming gold bull market** - Why gold was already in a bull market BEFORE the pandemic swept the world… - How you should prepare (and how I’m preparing) for a gold price shock… - 4 flashing signals that show why gold is set to soar… - A HUGE secret of the gold market the mainstream financial media has no idea about (Hint: these are the gold stocks you must avoid buying at all costs)… - The 6 best gold stocks to own right now - Details on a big Gold private placement Marin is working on - ​And much, much more… ©2020 Katusa Research. All Rights Reserved. No part of this report may be reproduced without written permission. DISCLAIMER: Information contained herein is obtained from sources believed to be reliable. This includes SEC filings, current events, interviews, corporate press releases, and what we’ve learned as financial journalists. Past returns are not a guarantee of future results. It may contain errors, and you shouldn’t make any investment decision based solely on what you read or see here. It’s your money and your responsibility. [**Contact Us**](https://katusaresearch.com/contact-us/)** ****| ****[Privacy](https://katusaresearch.com/privacy-policy/) | **[**Terms & Conditions**](https://katusaresearch.com/terms-conditions-use/) --- # Uranium Just Made a Stealth Surge - URL: https://katusaresearch.com/uranium-just-made-a-stealth-surge/ - Type: article - Published: 2020-04-24 - Updated: 2020-05-06 - Author: Marin Katusa The average citizen’s knowledge of uranium and nuclear power comes from disaster movies or soundbites about accidents like Japan and Chernobyl. Or watching an episode of the Simpsons where Homer screws things up at the Springfield Nuclear Power Plant. It’s easy to paint nuclear energy as the boogeyman. The reality is that nuclear energy has provided – and continues to provide – the world with stupendous amounts of clean, safe, emission-free electric power. Coal, which is also used to generate electricity, has killed far, far more people than uranium. But the “other yellow metal” is back in the news in a major way. It just staged a massive move to the upside. Uranium prices are up over 30% in the past few weeks and the Katusa uranium indexes are up even more. See for yourself below… ![Uranium Sector Returns Chart] When this resource sector moves, it creates much larger returns than gold stocks… much larger returns than oil stocks… much larger returns than just about anything, really. But uranium stocks are extremely volatile. (If I could underline that 3 times, I would). And the metal price moves based on government intervention, policies and production. ## **Let’s Get You Up to Speed on Uranium…** The average citizen also doesn’t know nuclear power’s vital role in the American economy. - **America gets 19.5% of its electricity from nuclear power** - **It powers about 23 million homes, or about twice the amount of homes in California** Without nuclear power, the lights would go off for many Americans. Nuclear energy is responsible for about 10% of global electricity production. If the world wants to cut carbon emissions and keep the lights on, nuclear energy’s share of production must grow. Nuclear energy provides “base load” power. Base load power is consistent, dependable power. It’s always there and always on. It is the foundation of a healthy electric power grid. Base load power contrasts with solar and wind power, which can fail to produce power during the night (in the case of solar) and during periods of calm (in the case of wind). The energy content of uranium is approximately 3 million times greater than that of fossil fuels. - **To put it in perspective, realize that one tenth of an ounce of uranium contains the equivalent energy of 6,613,868 pounds of coal. ** If you’re a country with little fossil fuel resources like South Korea or Japan and you want safe, secure energy to keep your economy running, nothing beats uranium. ## **Is Uranium Going Prime Time? Not So Fast…** Let me make it very clear (I believe I have for the last four years), that uranium isn’t a supply issue—it’s a demand issue. Again, [there is no shortage of uranium](https://katusaresearch.com/the-absolute-worst-things-youll-read-about-uranium-a-katusa-short-report/). On the mine supply side, the central Asian country of Kazakhstan (yes, where Borat is from) is currently responsible for 38% of global mining production. Canada was a distant second at 22% (but no uranium is mined in Canada currently due to the virus and low prices of uranium) and Australia is a distant third (12%). A handful of countries produce modest, but meaningful, amounts of uranium. - **Key Takeaway: Kazakhstan production dominates the mined uranium market. (Kazakhstan to the uranium market is what Russia, Saudi Arabia AND the United States would be combined to the oil market)** The Coronavirus has impacted 2020 uranium production. But a bigger question is how will this affect **future** uranium production? We are watching potential Kazakh supply chain issues in sulfuric acid and well casings for clues to long-term production issues. Cameco will need to buy 11 million pounds in the market to meet its sales contracts. In addition, I believe production out of Kazakhstan in 2020 will be lower than expected, due to the forced shutdowns and maintenance. This will eat through some of the above ground inventories and could result in utility companies locking in higher long-term contracts in late 2020 or early 2021. This is all bullish for the price of uranium. But, I do not see a need to buy early-stage, undeveloped uranium resources in negative swap line nations (-SWAP) which I will detail this major importance in the very near future (keep your eyes on an alert). In a moment, I’ll discuss why you want to focus on “Made in USA” uranium. ## **How Much Does It Cost to Produce Uranium?** Here are the top 30 producing uranium mines in the world, and their mine site cash costs. ![Uranium Mine Site Costs] But it’s quite evident from the chart that even if you include a 50%–100% premium on the mine site cash costs, there is a lot of uranium that can be produced below the current spot price. This brings me back to my rationale behind buying U.S. permitted and built uranium production. - **I believe Trump and his advisors will announce some form of U.S. Department of Energy–mandated “U.S. Uranium” purchase program.** Trump has his hands full right now dealing with the virus, the economy, the oil patch disaster, and a re-election campaign. Unfortunately for all the uranium bugs, uranium isn’t very high on his priority list. That said, Trump will do whatever he can to save the oil patch in the U.S. After that, the U.S. uranium sector will get some assistance with the expected Department of Energy purchase of U.S.-produced uranium at a fixed price between $45–$55 per pound. I expect this to be announced later this year, sometime around the election. We’re exposed to a couple well positioned and highly strategic uranium companies in the [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/) portfolio ## **Understanding Uranium Demand** Let’s start with current operating reactors. The chart below shows the age range of operating nuclear power plants. ![Nuclear Reactor Age & Capacity Chart] The developed world’s nuclear reactors are aging. On average, they’ve been in operation for 41 years. The average nuclear reactor was designed and permitted for only forty years. Most are getting extensions. - **So, we decided to do some “mathamagic,” assuming all reactors currently operating get extended to 50 years before they are shut down. ** The chart below shows all operating, under construction, and planned nuclear reactors coming online and operating for fifty years before they get shut down. ![Global Nuclear Reactor Capacity Forecast Chart] This is a very optimistic chart as it assumes all “planned” reactors that are not funded or permitted actually get funded and permitted and built. Unless further reactors are announced, the nuclear energy sector will be using much less uranium in 25 years than it does today. ## **Green Dream 2.0: Uranium as a Zero-Carbon Solution** Nuclear power does not produce direct carbon emissions like their fossil-fuel counterparts. For that, it’s getting a lot of attention to be the next big “green fuel”. Now, if nuclear gets accepted as a zero-carbon solution to the Green Dream, massive government stimulus can change the destiny of the nuclear sector. Otherwise, the upfront costs of existing technology for generators is too steep for private industry to tackle. ## **Katusa Takeaways on Uranium** - There will be production cuts in Kazakhstan in 2020. They will probably end up being a bigger reduction than they state on their early May conference call. - The real risk for uranium production is if significant delays in drilling and completions in Kazakhstan continue for more than 90–120 days. In that case, 2021 production could be significantly reduced. It’s way too early to speculate on that, but it’s something we are paying attention too. - There is no shortage of uranium—even with Cameco using the virus to keep Cigar Lake offline and all the uranium production reductions. The result will be more of the above-ground stockpiles being consumed, which will help lift the base to the lowest-cost production. - Don’t get caught speculating in early stage uranium projects in **-SWAP** line nations thinking the uranium price will get to $75–$90. It’s not going there anytime soon. - The best place to be positioned for uranium is in the U.S., with permitted, built, and operating production. The uranium markets are moving fast and we are staking positions in the best companies that will do very well in the next uranium bull cycle. I have just recorded a uranium webinar with CEO’s of some of the largest uranium producers in the world to peel back the curtain for you on this secretive industry. **These are CEOs of companies who control some of the largest producing uranium assets in the world with production over 10 Million pounds annually. ** More to come, very soon. Regards, Marin P.S. While uranium markets are moving fast, gold is surging. But we have a very different take on some major things many companies and newsletters are missing on gold markets. We’ve been working around the clock on an important alert to send out to *Katusa’s Investment* *Insights* readers. If you haven’t [whitelisted our emails](https://katusaresearch.com/white-list-katusa-research/), I strongly suggest you do so before Sunday. --- # When Will the United States Reopen for Business? - URL: https://katusaresearch.com/when-will-the-united-states-reopen-for-business/ - Type: article - Published: 2020-04-19 - Updated: 2020-04-20 - Author: Marin Katusa *This is the second issue in **The Rise of America**, a series about the future of the United States as the global superpower. For the first, which predicted Trump’s new $2T infrastructure push just days before he tweeted about it, [click here](https://katusaresearch.com/america-the-broken-can-it-be-restored/).* Dear Reader, When all of this began, it wasn’t supposed to be for very long. “Fifteen days to slow the spread,” they told us. But now we know differently. It’s obvious we’re going to be holed up in our homes much longer than that. It wasn’t Easter 2020. *Could it be* Christmas 2020? *Easter of 2021? * Of course, you’re painfully aware of *why* we’re social distancing: it’s to “flatten the curve.” Only if we flatten the curve, that means it lasts longer. So just how low and long does this curve need to be? In other words, how long will we be standing six feet apart at the grocery store… will gatherings of more than three people be illegal… will we see our best friends as biohazards? It’s not just important to know for our sanity. It’s vital in order to understand how much damage this will have on the economy—and what the timeline looks like for getting it back up and running. The toll it’s already taking is astronomical. For example, BMW has decided to shutter its single North American plant for at least a few weeks; that will cost it **more than $36 million *a day.*** And then there’s unemployment, which is already at 10%… and rising at rates not seen even during the Great Depression. Lots of models have already been created to try to predict when we’ll ease up on lockdowns. Morgan Stanley, for instance, created the following potential timeline: **Exhibit 1**: Projected timeline and milestones for a return to work in the US ![Morgan Stanley Coronavirus Graph] Source: Morgan Stanley Research Now before you start getting your hopes up, the bad news first: social distancing will not be gone any time in the near future. And if it is: It *will* be brought back. Quickly. Countries like Singapore, Taiwan, South Korea, and even China are seeing this happen. The cases return to zero, the lockdown orders are removed, and the spread starts anew. Even though China has underreported their case counts (and has revised their own death count due to the virus in Wuhan by over 50% higher), their official daily new case count on Sunday, April 12th was 108 – the highest since March 5th, showing that it’s likely they’re facing the beginnings of **a second wave.** In other words, suppressing the virus is not a temporary battle. Foreigners and travelers will just begin the cycle over again. **So shelter-in-place measures are not happening to eliminate the virus. Their sole purpose is *to* *buy time*. ** And that precious time is necessary for three things: - Give hospitals time to adjust and handle the influx of patients - Testing nearly the entire population (and subsequent involuntary isolation of infected individuals) - Development of an effective vaccine The first makes sense. Do whatever we can to help out our health care workers. The second also at first glance sounds good… at least in theory. But the chemicals used to manufacture tests are expected to run out within a month. And the third will take at least twelve to eighteen months for limited clinical trials to prove the vaccine is safe and that it works. Only then will the manufacturing process of hundreds of millions of doses begin. Even in the best case, this places vaccine availability starting in the first quarter of 2021 at the earliest. **Until either of those happen on a near-global scale, staying at home and complete corporate shutdowns are our new way of life.** Soon, the global economy will effectively need life support of its own. So what does the absolute best case scenario for reopening for business look like? ## **The History That’s Impossible to Ignore** Most projections place a potential second wave of infections around November or December of this year. And while experts hope that successive waves are less severe than the current peak, there’s no way to know for sure. The Spanish Flu of 1918 provides a sorely needed history lesson: It came in three deadly waves, as isolation regulations were relaxed, then strengthened again. Notably, the second wave occurred around November of 1918 and was far deadlier than the first initial wave. Given how our understanding of the science behind infectious diseases has progressed since then, however, it’s unlikely that this will be the case for COVID-19. All in all, the Spanish Flu began in the spring of 1918… and it was the fall of 1919 before the deaths had levelled off. And we’re actively prolonging that process. In line with the Spanish Flu’s timeline, economists estimate that the U.S. economy won’t return to pre-pandemic levels until the end of 2021. In other words, we’re going to be here awhile. ## **There Will Be No Return to “Business as Normal”** And that brings us to the good news. As Thomas Wright from the Brookings Institution wrote: * “The longer the pandemic goes on, the more the world will change.”* For the United States, that means change in a very good way. **Because when it comes down to it, times like these are what the United States was made for. ** We’re going to see massive changes in society… in policy… in politics… and *especially* in business. Which is even more good news: - **The more the world changes, the more investment opportunities there are.** You see, investment opportunities arise when there is a difference between *value* and *perception. * And when rapid change happens, those differences are all over the place. It gets even better. Many changes that were already underway when the pandemic hit are going to be dramatically accelerated. - **The faster the world changes, the *greater* the investment opportunities are.** … and right now, we’re watching history on 16x fast forward. Huge companies will buy out little ones. Companies will bring their supply chains home to the United States. Companies head over their heels in debt will quickly fade away. And you will have the opportunity to get rock-solid companies at rock-bottom prices. Eventually, as the director of the NIAID said, “We will get over this, and this will end.” When that happens, you’ll want to be ready. Because maybe not today, and maybe not by Christmas 2020—but soon, and for the rest of your life, *America will rise*. Regards, Marin Katusa --- # Gold Bugs: Pay Close Attention to This Data - URL: https://katusaresearch.com/gold-bugs-pay-close-attention-to-this-data/ - Type: article - Published: 2020-04-17 - Updated: 2020-11-26 - Author: Marin Katusa Interest in gold and gold stocks has skyrocketed in the last 2 weeks. And for good reason. Let’s recap what we’ve just seen in short order… - Explosive price gains – *check**.* - Massive changes in investor sentiment – *check*. - Retail calling stockbrokers (and vice versa) about highly speculative junior gold stocks – *check*. Gold surged from $1,470 during the peak of the March Meltdown to over $1,750 this week. Gold is getting hot again. Stockbrokers that were all cannabis and blockchain oriented the last few years are now calling their clients about the next “hot” junior gold stock. *“Get in now before the exploration this spring and summer.”* Oh please. And bankers are lining up the next big financings to fill their institutional clients with. Searches for gold stocks are up sharply and the newsletter crowd will follow shortly. **My red flags are going up.** In the long run, I’m very bullish on gold. But like all commodities, it is very cyclical. *But Marin, gold is money!* Yes, true – but most junior exploration companies have no gold. And I have a very different take on what’s going to happen (which I alerted subscribers to last week). So far, it’s unfolding like I thought it would. But from here on out there are 2 scenarios that could happen over the coming weeks and months. In either unfolding scenario, we are prepared to act. For those new to the program (and those catching up), let’s take a look at how gold does during bad market conditions. ## **Gold as Crisis Insurance** This is a chart of the S&P 500’s largest declines in the past forty years. And it shows gold’s performance in the same time frame. ![gold return table S&P500]First, you’ll see that glaring decline in the price of gold in the early ‘80s. Gold had just come off its best decade ever, with a 2,300% increase. The cool-off period had to come. But you’ll also notice that the length of the decline doesn’t matter. Gold nearly inevitably rises—at least a little—whether the recession lasts a few months or a few years. Think of gold like earthquake insurance. Your city is destroyed. Suddenly, everyone you know wants earthquake insurance too. After such devastation, banks may require multi-dwelling buildings to have earthquake insurance as part of the mortgage. Right now, it’s too late. Gold prices are too high, and dropping stock prices are closing in fast. - **Gold is insurance that can give you insane protection on your portfolio once everything is broken. Thus far, it’s working. ** ## **COT Report – What are Gold Traders Saying?** Every week the Commitment of Traders report comes out. It details what positions the large speculators and the commercial side are taking. It’s another tool you can use to make your own bets in the sector. In the chart below you’ll see the non-commercial long positions in gold. You’ll notice that these traders are reducing their net longs in gold (which was at a 10-year high recently). ![Gold COT commercial longs graph]On the way down from the 10-year high in long contracts, however, it found some support around the 5-year trend line. This indicates that traders aren’t quite ready to let go of their safe haven long gold positions just yet. This is an important point for gold, and we are watching this closely. Maybe we’ll get another chance to add to our gold stock holdings in the portfolio yet. In the next chart, let’s look at the short positions of the large speculators… Large speculators’ short positions in gold are at 5-year lows. Meanwhile, the gold price is at 5-year highs. Is there a rapid reversal coming? ## **![Gold COT chart]Technical Analysis (TA) Corner** From a technical standpoint, a longer-term pattern is forming where gold may test the major resistance band around $1,750-$1,800. ![2010-2020 Gold Price Chart]A classic Cup & Handle formation could occur where gold pulls back to test the recent support level. I am not a TA guru, but I do know the best in the business. I don’t base any of my decisions on any one fact, which is why I also pay attention to what the TA charts are saying. **The key is this**: Can gold consolidate above the $1,750 range for a couple of weeks? If so, we’ll have created a new base. If not, the short crowd will be slamming gold hard. But if gold continues to rally, there could be a higher support level formed similarly to what developed back in 2011-2013. How high gold will go is anyone’s guess, but a pullback is expected at some point. We’re closely watching this as well as there’s been a recent support line forming. ![2020 Gold Price Test of support]The line has been tested twice already and is shaping up to get tested a 3rd time. If this forming trend continues the gold price will rise even further. If not, it may fall into the cup and handle formation shown earlier. The next 90 days will be incredibly exciting and important to the price of gold. ## **The Importance of the Gold Forward Offered Rate (GOFO) and Lease Rates** What is the GOFO rate? In simple terms, it’s the rate brokers in the London Bullion Market are willing to swap physical gold for U.S. Dollars at a future date. The future date is anywhere from one month to a year later. - **The GOFO rate is used as a benchmark to determine whether the cost of carrying gold is negative (backwardation) or positive (contango). ** This is an alternative measure to the spread between gold futures contracts and the spot price. In contango, there’s a lack of liquidity in the gold bullion markets. This often leads to a huge rally in physical gold prices due to arbitrage. And we’ve been at extreme contango levels the past 2 weeks. Unfortunately, the LBMA stopped publishing this data back in 2015. So instead, we look at the Implied **Gold Lease Rates** – which is the cost of storing gold in a bonded and secured vault. These vaults are same ones which are approved by the CME or the London Metals Exchange for storage and settlement of futures contracts. As you can see in the chart below, gold lease rates are nearly all negative for maturities under 12 months. Here’s what that means… - **These gold owners must pay out of pocket for the privilege of letting banks use their gold as collateral in order to lend money to other firms.** ![Gold Chart US Gold Lease Rates]This is comparable to an incident at a Danish bank where, for the first time in history, they issued covered bonds with a *negative* coupon. **That means bond holders had to pay interest to debtors for the privilege of lending them money. ** In fact, the short-term gold lease rate went below -5% at one point. The Coronavirus made it impossible to deliver gold bullion between London and New York. There were 2 main factors: - Commercial flights were cancelled, and this is how gold is typically transported. - The closing down of Swiss refineries, which is where the 400 oz. gold bars traded on the London markets are recast into 100 oz. bars in order to meet the specifications of COMEX gold contracts. ## **Mine Shutdowns and Offline Gold Production** Our current count indicates that 338 mining operations have been shut down worldwide due to COVID-19. Ramping up production cannot happen overnight and it can take mines as long as 21 days to resume full production. To date, 115 gold mines are still offline – down from 122 last week. The chart below shows that 7 gold producing mines will be back online this week. ![Global Gold Mines Shutdowns Graph]At least 23 gold producers have suspended their 2020 guidance due to anticipated or actual disruptions to their mining projects. To date, 115 gold mines are still offline. Last year, those mines produced 12.6 million oz. of gold. - **For companies that issued guidance for 2020: that’s 6.8 million oz. of annual production offline.** ![Offline Gold Productions 2019 vs 2020 Graph]Bear in mind that while these numbers understate the true amount of gold production that’s currently offline, only a fraction of those 6.8 million ounces is likely to remain a production deficit for 2020. We expect many of these mines to be back online before the second half of 2020, but not without hiccups (remember the Yugoslavian mines I mentioned last week?) It’s difficult to forecast how high the gold production deficit will be for each mine that comes back online – it could be anywhere from 50% to as low as 1%. The implications will be different for each gold miner, but unlikely to move the price of gold either way. Gold isn’t rising because of the mine shutdowns. Gold is rising because it’s a proven safe haven in uncertain times. But don’t get caught paying through the nose for gold stocks… Many gold royalty companies and gold producers are trading at over 200% above their Net Asset Value. Gold will do well, but don’t overpay. Regards, Marin **P.S**. I just sent members of *Katusa’s Resource Opportunities* an alert on “**How to Prepare for a Possible Gold Price Shock**”. We’ve uncovered some gold market anomalies that present 2 scenarios where gold is heading and how to prepare your positions. If you’re not yet a member – [click here to learn more](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Next week if gold makes the expected move, I will put out an emergency briefing. Please ensure your email is whitelisted so you don’t miss it. --- # The Coming Supply Shock in Mining - URL: https://katusaresearch.com/the-coming-supply-shock-in-mining/ - Type: article - Published: 2020-04-10 - Updated: 2020-04-16 - Author: Marin Katusa No country is immune to the spread of COVID-19. The virus has killed over 95,000 people and infected over 1.6 million people in 209 countries globally. The virus has put many major mining operations at risk. Mines are being shut down across the world, either by government mandate or by the company due to the virus. The knock-on effects of the mine shutdowns will be significant. For example, in Namibia, mining contributes to 25% of the country’s income and the whole industry has been put on hold. Despite mining being an essential service in many regions… - **Over 500 Gold, Silver, Copper, Iron, Coal and Uranium mining, development and exploration assets across the globe have ceased or scaled back production (meaning operating stockpiles and with limited workforce).** This has had a significant impact on many companies that are not well capitalized to weather the storm. The virus has put a company like **First Quantum** in a serious predicament. First Quantum has current total liabilities of over $11 billion while it has a market cap of $5 billion. First Quantum’s largest operating mine, Cerro Panama, has been put on care and maintenance this week because of the virus. I visited this project in 2007, back then its name was Cerro Petaquila. After spending 3 days at the site and going through all the drill core and data, I wrote in my report to subscribers an alert that the project would be a producing mine within a dozen years. I organized a Private Placement for my subscribers in early 2007 that returned a 50% gain in 4 months that I personally was the lead order. We took a *Katusa Free Ride* on the company 4 months after our initial recommendation and it worked out well for us in the end. It’s a good mine that the virus took down. The First Quantum team are among the top and best mine builders in the world. And if a company like First Quantum can be impacted—everyone can be impacted. I don’t know how First Quantum gets out of this predicament with their debt obligations, but this brings me to a bigger point. ## **Real World: Bringing Back a Mine Isn’t Like Turning the Lights Back On ** You can’t just flick a switch. The mining world has never seen such a rapid shut down. A good example of rapid mining shutdowns is the Yugoslavian mine shutdowns in the early 1990’s. The world has pretty much forgotten that during the 1960’s, Yugoslavia had one of the largest operating copper mines and had the 5 largest operating silver-lead-Zinc mines. Yugoslav leader, Marshall Tito understood the importance of mining. Trajan, one of my personal favourite Roman Emperors also understood the importance of Balkan mines to the Roman Empire during his reign from 98AD to 117AD. The reason I am sharing the Yugoslavian mine shutdowns of the early 1990’s is because the mine managers expected the mines to be reopened quite quickly (they were shut down due to the civil war). Back in the 1990’s, The Yugoslav army was the 6th largest military in the world and expected a quick defeat of the rebel Croats. The Yugoslavs lost and most of the mines remained shut down. In the early 2000’s I went on my own quest to buy these past producing mines within the Trepca complex. So, in 2004, with a rental car full of geologists I hired (fluent in Serbian Cyrillic), paying out of own pocket, we travelled across Serbia, Kosovo, Croatia and Bosnia. We visited mines and smelters that were operating in the 1990’s that never came back online. I literally walked through dozens of mills, mine head offices and mines that looked like everyone left on a Friday afternoon and never came back for a decade. Most of the mills we visited were rusted out and all but one came back online. After one mine visit, and after going through the historical drill data and production numbers, I asked the former mine “[газда](https://www.wordhippo.com/what-is/the-meaning-of/serbian-word-fbb0d8b4968b5b28531685b56f757cc4b947eff4.html)” (boss) why the mine never came back online? He shared with me that they tried many times, but they just couldn’t make it work for various of reasons. I just want to remind everyone; it’s not guaranteed every one of the publicly and privately owned mines (that I list below) will come back online. - **If the former Yugoslav authorities couldn’t bring back their mines (and these Slavs had mining in their blood), who’s to say the mine you are invested into can?** Again, I’m just sharing the Yugoslav mining experience, and maybe all the mines will come back online without a hiccup. I just don’t think that will be the case. It’s very rare that mines, when they are built, come online without hiccups (production delays and cost overruns). At a minimum expect the same for bringing back the mines that have been shut down. Either way, many of the shutdown mines will face financing hardships and will be at the mercy of their bankers. Much like First Quantum, which is run by some of the best mining guys in the world. ## **How Many Mines are Shut Down?** The chart below shows the number of mines that have been impacted on a daily basis over the last 30 days. The data includes public and privately owned and operated mines. We overlaid that data with the number of Covid-19 infections globally during the same time. This is to show you visually the infection rate globally compared to mine shutdowns. ## **![global mining shutdowns 2020]Will There be More Mine Shutdowns?** Yes – I expect more shutdowns. No new mine shutdowns were announced over the last two days (April 8th & 9th) —however, I do expect more shutdowns. I do want to mention that we have contacts that have messaged us stating a major underground gold mine has employees who contracted the virus and the company has not announced the infection nor shut down the mine yet. I expect this will be announced shortly but is **NOT **in our data above because the information is not been confirmed by the owner. I also emphasize that there will be hiccups in many of the mines listed above in trying to bring the metal back online. Precious metals mines were the hardest hit and that is because of the nature of the operations. For obvious reasons, underground mines were harder hit than open pit operations. The number of confirmed COVID-19 cases across the globe has surpassed the 1.5 million mark. Some countries have been ahead of the curve trying to *flatten the curve* while others have lagged behind. And this is especially important in resource reliant producing countries. Two countries that we are keeping a close eye on are **Australia** and **Kazakhstan**. ## **Will the Land Down Under… Go Under?** Most of the world has gone into their bunkers, quarantining down and stocking up on staples to ride out the storm. However, Australia has not been taking the coronavirus seriously – until very recently. For some of the Aussies have been business as usual… ![group of aussies on a beach]This was the scene on March 20th. Only a few days later did officials shut down the beach – as people were not maintaining social distancing. This behaviour may see the virus spread into the Australian mining operations. ## **Coronavirus Impacts on the Uranium Market** The uranium market is controlled by a handful of players. - **The top 10 uranium producers account for over 80% of global uranium production. ** In North America, Cameco shut down its underground Canadian Cigar Lake Uranium project for 1 month because it is a remote fly-in fly out operation. Social distancing can’t be maintained. That shutdown takes 13% of the global uranium production off the table. In Namibia, production has been shut down for 3 weeks including its uranium projects, that takes another 10% off global production offline. And the biggest catalyst to the uranium price has been Kazakhstan. Kazakhstan has reduced uranium production in its 12 largest uranium ISR mines by 17.5%, which is about 11 million pounds of uranium (if annualized) offline. To put that into context, that is about 60% of Cigar Lakes 2019 uranium production of 18 million pounds. [![Sponsored Link]](https://katusaresearch.com/grow-rich-from-one-of-the-worlds-newest-obsessions/) To the uranium market, Kazakhstan is like Saudi Arabia, Russia and all of OPEC to the oil market. The Kazakh state-run operation Kazatomprom is the world’s largest, lowest cost uranium miner in the world. - **Kazatomprom produces over 40% of the world’s uranium. ** Recently, Kazakhstan shut down its biggest cities and declared a national emergency. Visas for foreigners have been pulled and they have shut down most essential businesses, except for its uranium mines. They have been over 780 cases reported to date with 8 deaths and Kazak officials hope that it will peak at 3,500 over the next few months. Many of the state-owned uranium sites are in remote regions. Workers live in close quarters. It is in everyone’s best interest that no one gets sick. All eyes in the uranium world are on Kazakhstan. ## **Do Mine Shutdowns Lead to a Price Shock?** In normal times, a decrease in supply leads to higher commodity prices. However, these are not normal times. The reason is, there has been an equal if not larger reduction in the global demand for commodities. Take the oil market for example… Current oil production is soon to be 103 million barrels per day. In April, with most of the world’s major economies shutdown, demand is set to crater by over 15%. The same can be said for other industrial commodities like copper, zinc and iron ore. So, the answer to that question is, it depends. Copper is lower today than pre-shutdowns. Uranium, gold and silver are higher today than pre-shut down numbers. Those who are well capitalized can survive the downturn. But those with large debts denominated in US dollars will struggle mightily. Stay Safe, Marin Katusa **P.S.** I just sent a major alert to subscribers of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)* on how to prepare for a coming gold price shock. During chaos is when the best deals occur, and I want to position our portfolio to take advantage. To learn more about my research – [click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). --- # What Comes Next – The GDP Reckoning is Here - URL: https://katusaresearch.com/what-comes-next-the-gdp-reckoning-is-here/ - Type: article - Published: 2020-04-03 - Updated: 2020-04-02 - Author: Marin Katusa *“How far the coronavirus will spread is yet to be determined, but its current reach will be enough to slow major economies around the world.”* I wrote those words in February in my newsletter as my team and I went deep into China’s GDP numbers and world supply chains. Here’s what’s coming down the pipeline: - Global GDP numbers for Q1 will be significantly lower - Most sectors will also experience lower earnings for Q2 - The unknown now is to what extent Q3 earnings will be impacted I’m not taking any chances. We have intentionally positioned our KRO portfolio heavy in gold and U.S. Dollars and we are doing incredibly well. ## **China’s Numbers Indicate a Worldwide Slowdown** The coronavirus in China and the rest of the world revealed a hard-economic truth: a broken growth story. - **In the transition from growth to fundamental value, capital will always flee to safety. ** That is why we have seen the price of U.S. 10-year treasury notes rocket to all-time highs—meaning the lowest yields ever. As I’ve stated many times before, this [financially transmitted disease](https://katusaresearch.com/financially-transmitted-diseases/) (FTD) is going to push global yields lower for longer. This also means that further compression in the market should be expected. In the charts that follow, we’ll look at the increase in global reliance on China. Today, China plays a massive role in the global supply chain system. It is a key manufacturing hub that consumes and produces trillions of dollars worth of goods every year. Globalization has increased over the past two decades, and we need international trade for everyone to prosper. The country’s increased share of global GDP indicates just how intertwined China is with the rest of the world. Below is a chart that compares China’s share of global GDP back in 2003 during the SARS epidemic to this year’s pre-coronavirus global GDP estimate. ![Share of Global GDP] The next chart shows the proportion of Chinese consumption for base metals in 2003 during the SARS outbreak and initial estimates for 2020 (pre-coronavirus). As you can see, China makes up about *half* of global base metal demand. ![Chinese Proportion of Global Base Metals Consumption] Below is a chart showing the consumption of Industrial metals in 2003, compared to this year’s estimates (pre-Coronavirus). ![Chinese Proportion of Global Industrial Metals Consumption] The heartbeat of China is its manufacturing sector. Below you’ll see a map that shows the estimated restart dates for each province. Now, there is a big difference between being open and operating at full capacity. I believe at best most of the factories (even if they were operational) were working at 75% capacity in March. Not much will change for April. China may be opening internally, but who will they sell to considering much of the consuming world is in lockdown? ![Map of China Coronavirus Factory Re-openings by Province] A further hint that the economy is not functioning at 100% is the enormous glut in Chinese rebar. Rebar is a type of steel used to reinforce concrete structures. It’s another “alternative dataset” we use at Katusa Research to gauge consumption. You’ll see in the chart below that Chinese rebar inventories have skyrocketed to all-time highs. ![Record Chinese Rebar Inventory Levels] Monitoring these inventories provide an inside look at consumption patterns. These are the “hidden” indicators that tell the truth of the current state of the economy. And because so few people follow them, they are less manipulated by the powers to be. The reason for the pattern is because it’s very difficult to completely idle the furnaces that produce steel. Clearly there is a disconnect between buyers and sellers right now. If buyers were hungry for steel, inventory levels would not be building. - **Given inventories are rocketing to new highs, this is bearish for steel consumption and general economic activity.** The heartbeat of China is its manufacturing sector. When manufacturing slows down, the entire country comes to a halt. The coronavirus forced many of the manufacturers in China to at least temporarily halt production. ## **What’s The *Worst* That Can Happen? Because It Probably Will** It all comes down to how long the factories run at less than 100% utilization. The faster the recovery time, the less GDP growth will be affected. - The worst-case scenario includes shutdowns for the Chinese Lunar New year, plus an additional five days of 0% factory utilization, thirty days at 50% capacity and forty-seven days at 100% capacity. - The base-case scenario includes shutdowns for the Chinese Lunar New Year, an additional fifteen days running at 50% capacity, and then sixty-seven days at 100% capacity in Q1. The best-case scenario includes shutdowns for the Chinese Lunar New Year and then straight to 100% utilization for the rest of the quarter. Through government imposed shutdowns, and big build ups in steel and copper inventory the likelihood of a “best case scenario” is impossible. ![China Nominal GDP Forecast] - **Based on these estimates, I think Q1 GDP will be at the lower end of between ****¥****6 trillion and ****¥****24.6 trillion.** While I believe the Q1 data will be very weak, the government of China will likely put their stimulus machine into overdrive for the remainder of the year. And you can guarantee they will juice their numbers to the max, meaning you can take them with a grain of salt. I think it’s logical that the Chinese government will loosen interest rates and lower reserve ratios in efforts to stimulate demand. I could see fiscal aid packages coming as well. ## **This is a “Too Big to Fail” Situation for China** While this paints an ugly picture for the first three to six months of the year, the significant Chinese government stimulus coming will make the second half of the year and 2021 very robust for base metal demand. But the U.S. will also do “W.I.T”- Whatever It Takes. Meaning trillions in stimulus is coming. What the markets are showing you is that investors will flee to yield, meaning paying incredibly high asset prices for low yield. - **Passive investment funds will flock to large and liquid companies that have solid cash flows and dividends.** That’s why you’re seeing multi-billion dollar companies trading like gold juniors right now. My subscribers and I just bought a major +$15 Billion EV company I consider one of the best in the business. All Katusa subscribers have now taken a *Katusa Free Ride* on the company (it doubled from our entry price) and are now collecting +10% yield at NO risk. Our second company recommendation for March is also up significantly, we’re collecting +6% yield and expect to take a *Katusa Free Ride* shortly. I wrote about these as part of 5 companies I wanted to own at incredible prices in my premium research service, [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)**.** We sold it for a free ride and will collect a supercharged dividend for years and years to come. If you’re an alligator investor and have prepared for this you will do incredibly well through this market turmoil. While everyone else is fleeing world-class companies selling for fire sale prices to meet margin requirements, you will look back in a few years and be very happy with the positions you’ve taken. **Everyone wants to be a contrarian until it’s time to actually step up to the plate and take a swing.** The key is to be prepared with the analysis in hand. That’s what we do and it’s exactly why March 2020 was one of our most profitable months ever. Personally, as I have been writing for a long time in my newsletter, I’ve been heavy in cash for a long time… waiting for the right opportunities with odds stacked in my favor. And now it’s showtime. Regards, Marin Katusa --- # America the Broken – Can It Be Restored? - URL: https://katusaresearch.com/america-the-broken-can-it-be-restored/ - Type: article - Published: 2020-03-27 - Updated: 2020-03-30 - Author: Marin Katusa *This is the first issue of ***The** **Rise of America***, a series about the future of the United States as **the** global superpower. You’ll read about the forces that will propel it to unprecedented dominance—and how you can best position yourself to profit from it.* Dear Reader, You’ve heard someone say some variation of this recently… “What a crazy time to be alive!” Or, “We live in interesting times”. But none of those are true. For centuries, times like these have been *the rule*. The United States has been in turmoil for much of its history: - The Revolutionary War - The Great Chicago Fire - The Civil War - The Great Depression - The Cold War - The Vietnam War - Hurricane Katrina. It’s a long list of stormy times. And every single one of those heartbreaking events has led to renewed growth and prosperity for the American people. But there *is* something unusual about our time: a complete breakdown of some of our country’s most critical aspects. Take infrastructure, for example. In 2017, the American Society of Civil Engineers released its latest “report card” on United States infrastructure. The overall grade: D. Roads, dams, public drinking water, schools (ironically), all of them got a D or worse. One in four bridges of the bridges you drive across every day are deficient or *obsolete*. But that’s nothing compared to other systems that are part of everyday American life. These, among others, are all in shambles: - The tax code - Medicaid - Healthcare - Education - Corporate welfare That list wasn’t just made up. It came from a senior U.S. Senator. The big problem is that the government has become so flawed and ineffective that the “D” in each of these areas is on pace to quickly turn into an “F.” ***[![how high can gold stocks soar]](https://katusaresearch.com/junior-gold-stocks-soar-even-when-gold-doesnt/)*** How can we turn back from a certain collision course absolute catastrophe? Well, there could be an “enlightened” coup—as we’ve seen slight glimmers over the past two decades. Or perhaps we could change the way our democracy operates or hold a new constitutional convention to rewrite the rules. Or maybe create a new, *viable* third party… the first one in more than a century. But the final option—one that’s uniquely American—is most likely. It’s called a “**Sputnik moment**.” ## **Mass Chaos Always Leads to American Prosperity** On October 4, 1957, the Soviet Union launched Sputnik 1. It was the world’s first man-made satellite. When news media greatly exaggerated the danger of the situation, the United States went into shock. One scientist wrote that the day Sputnik orbited the Earth was the day the U.S. became a “second-rate power.” But in a private meeting, President Eisenhower revealed that he knew the opposite was true. Russia has “done us a good turn,” said Eisenhower. Because with that launch, the Soviet Union had thrust the powerful American machine into action. Remarkably… - **NASA was created from the ground up in under a year. ** And a decade later, the first men landed on the moon. And they were American astronauts, not Soviet cosmonauts. Within 20 years, the Soviet Union was *gone*. And the United States was the undeniable, unassailable world leader in space**. ** - **It’s been the same throughout all of U.S. history. America has waited until its back is up against a wall before acting. ** And when it *does* act, it absolutely *crushes* whatever problems oppose it. ## **Right Now, America’s Back is Up Against a Wall** The coronavirus ripping across the nation has already resulted in tax code changes and bailouts. It’s disrupted the education system. And parents are seeing firsthand how broken the education system is. The strength of Medicaid and our healthcare system are about to meet the test of a lifetime. It might be hard to look past a market in freefall and the collapse of order and the hoarding of toilet paper all around us. But coronavirus has done us a good turn. Because**… this is our Sputnik moment**. This is what will force a healthcare overhaul, an education renovation, and economic restructuring. All in the name of not getting beat by a virus. This is what will set our foreign policy and domestic economy on the path toward another half-century of record-breaking growth and prosperity. - **In short, the fears of these completely *normal* times will propel the incredible success of the next. ** ## **What Comes *After* the Catastrophe Is What’s Important** You see, a few years after the mass hysteria caused by Sputnik, John F. Kennedy ran for president. A major part of his platform was the “missile gap”—the fact that the United States trailed the USSR in its missile stockpile. The American public still thought the Soviet Union could destroy the head of a needle anywhere on earth. And Eisenhower’s opponent, John F. Kennedy, was running his campaign on the “missile gap”—the fact that the United States trailed the USSR in its missile stockpile. But Eisenhower knew better. Based on secret U-2 missions, he knew that the U.S. had jumped far ahead in the arms race. [![Sponsored Link]](https://katusaresearch.com/grow-rich-from-one-of-the-worlds-newest-obsessions/) Right now, people are claiming that the coronavirus will kill us. If not physically, then economically. But that’s based on their limited insight. - **Yes, the Coronavirus will inflict pain in the short term. But in the long term, it will propel the United States to historical greatness. ** As a private investor, it’s easy to be distracted by the layoffs, the new jobless claims, and the death count reports by the mass media. After this drop, you might be tempted to ditch the market altogether. I don’t blame you. But while everyone else is jumping ship, great investors are looking forward. They’re looking past the coronavirus and the inevitable economic fallout. They’re planning for a future when the United States will have once again surge far past its competition. Because time and again, America has fixed its problems *without* a regularly scheduled revolution. And America is going to do it again. Infrastructure, which we’re rapidly finding out is necessary to maintain the integrity of vital supply chains and a calm public, will be one of the first to get an upgrade. - **President Trump proposed a $2 trillion package in his 2020 budget. That’s enough to fix nearly every bridge, road, sewer, and school in the United States. ** Now, with interest rates at historical lows, borrowing that amount will be far more attractive. That massive infrastructure development will need China’s levels of resources to construct: copper, iron, and oil. Savvy investors are already mapping out which decimated resource stocks they want to pick up for dirt cheap. - **Because those stocks are eventually going to fly higher than they’ve ever been before. ** And when the coronavirus is gone and the country has been fixed, it will be America the beautiful—once again. Regards, Marin Katusa **P.S.** On Monday, [I released my special briefing on the current markets](https://join.katusaresearch.com/vsl-market-meltdown/). If you have not seen it yet, I urge you to watch it before it gets taken down later today and shares it with anyone who might benefit. --- # An Emergency Briefing from Marin Katusa - URL: https://katusaresearch.com/an-emergency-briefing-from-marin-katusa/ - Type: article - Published: 2020-03-23 - Updated: 2020-03-27 - Author: Marin Katusa Dear Reader, What we’re seeing today is absolute carnage. Never have the markets had such a shock where economies, supply chains and health have all stretched to critical mass. What were extreme market conditions one day became instant entries in record books. Every new day seems to bring increased panic and downside. On a comparative basis to this market meltdown, only the 1929 crash compares. The charts look eerily similar… ![dow corrections in panic] Dumb Money Confidence indicators from various outlets are reaching all-time lows. This means that novice investors have all but thrown in the towel. This past week saw the most down 90% down volume days in the history of the exchange. And the ultimate gauge of sentiment – google search and news outlets – are writing negative and “bear market” articles near the record 2008-09 levels. Now, this is going to be painful. And difficult to digest. - **The worst is not yet over and we are at that critical moment. With mass panic and fear, blood is now in the streets.** You can feel it everywhere. It’s easy to talk about being a contrarian but now that’s it time to step up to the plate – many investors are paralyzed. Wall street analysts, major banks and investment bankers are downgrading stocks faster than any time since 2008. I know of many funds that are on the edge of insolvency. The response around the globe to the economy, to supply chains, to businesses and to workers is unprecedented. ## **We are Witnessing “The Great Reset” Right In Front of Our Eyes** Businesses are closing. Institutions are shutting doors. Entire industries will be altered. **Oil** just crashed through $25 per barrel. Many oil companies are in serious trouble. Many oil service companies face a massive storm ahead. **Silver** collapsed from $20 to $12. Mines are being shut down and many companies can’t make money at the current silver spot price. In January we warned that **Copper** was signalling trouble ahead and we stayed clear of copper companies. Now you’ve seen major copper companies share prices melt lower, falling on the back of a sinking copper price. **Gold** companies have corrected hard. Some mines are shutting down. Stock prices of world class producers are acting like juniors. This is true alligator investing… Waiting in the wings, cashed up, for opportunities that come around once in a decade. Or once in a generation. But put money in the wrong place, or for the wrong time period – and you will lose. The truth is that investing in these times is very difficult. And I’ve now seen a few crashes in my career – and navigated my portfolio through the storm. I want you to know that the whole team at Katusa Research is burning the midnight oil, as we’ve prepared for a crisis like this. But no one expected it to come so swift and involve the entire globe. As such, there will be government handouts for everyone: students, business and everyone in between. But there will be nothing for the investor like you and I, except for very high risk and very high upside in exchange. When the Fed cut rates on Sunday March 15th, I messaged my top analyst that we had to get to work immediately that day. Things would start to unravel quickly. Later that night I sent a very important alert to my subscribers detailing what I see happening to the major commodity sectors. Since that alert, there have been many major market changes. - **As a member of *Katusa’s Investment Insights*, I want you to be aware of what’s happening right now… and what could happen next.** So, I am publishing a special emergency briefing. [Click here to watch the presentation](https://join.katusaresearch.com/vsl-market-meltdown/) right now. **I’m going to go over everything you need to know in this market meltdown:** - Why “Financially Transmitted Diseases” will take the world by storm - How negative rates will affect your portfolio - Which sectors are going broke - Which markets and companies are trading at values not seen in generations - Which group of stocks to focus on for a potential slingshot move upwards in a recovery - The asset class I’m most bullish on and why you should be too In short: If you’re like most people, you might be sitting on the sidelines right now… or worried the ongoing crash could wipe out your earnings… But when this crisis is all over, the natural resource market in particular will present immense opportunities for investors. Don’t miss [my briefing about these turbulent markets](https://join.katusaresearch.com/vsl-market-meltdown/). Stay safe, Marin --- # Better 10-Year Returns than Amazon – And You’ve Never Heard of the Company - URL: https://katusaresearch.com/better-10-year-returns-than-amazon-and-youve-never-heard-of-the-company/ - Type: article - Published: 2020-03-16 - Updated: 2020-03-13 - Author: Marin Katusa If you watch the local news, there’s a good chance that it’s not “local” at all. In fact, odds are good that the news you’re seeing is being broadcast by a company you’ve never heard of. There’s a media company that started in 1996 with a single station in Scranton, Pennsylvania. It took them nearly two decades to grow to just fifty local television stations. But over the past few years, they’ve used a simple strategy to reach absolute market dominance in the U.S.: buy *everything.* Now, with 197 television stations in 115 markets, Nexstar Media Group is the largest TV station operator in the country. That’s some *serious* growth. Their broadcast empire reaches 63 percent of households in the United States. You’ve seen that kind of consolidation happen before in many other industries: phone companies, dating sites, airlines, gas stations, and oil refineries. Lots of little companies make lots of little dollars (each of Nexstar’s properties make an average of only $6.5 million a year on ads). Then someone decides to buy all of the little companies—and make a *whole lot* of money. **For Nexstar, that’s more than $1.2 billion a year.** Combine that kind of profit with rapid growth year after year, and that leads to outstanding stock performance. Ten years ago, Nexstar was sitting just under $3 per share. In early 2020, it traded well above $100 a share. **That’s easily thirty-five times your money.** ![Nexstar's Share Price, 2009-2019 Graph] Since late 2009, Nexstar has outpaced Amazon’s returns. It’s the kind of investment you wish you had sunk your entire portfolio into right after the Global Recession. Nexstar is old news, though. The bulk of their growth is behind them, and they’re content now to sit back and cash in on their mature media empire. **But there’s another company following the exact same playbook.** They started as a single tiny blog in 2011. By 2016, they had a couple hundred thousand users. And they’re in an industry that’s growing much, *much* faster than local TV news**.** **And they’re buying *everything.*** ## **The Google of Video Games – The *Next* Nexstar** Remember, video games have some of the fastest growing, most valuable communities in the world. By 2017, that little blog, which had started in the founder’s parents’ garage, had grown into a community of a couple million video gamers. In 2018, the company acquired seven more massive video game communities. In 2019, they’ve tossed a tanker truck full of lighter fluid on their “buy and build” game plan. **Using a brilliant strategy, they’re snatching up valuable new video game properties left and right.** All these purchases mean that **their audience is already larger than Nexstar’s**—and that’s the company that the FTC barred from growing its viewership any bigger. - **And despite that massive growth, it’s not only the largest—it’s still the *fastest-growing* online community of video gamers. ** Think about that for a second. It’s still the largest AND fastest growing in its industry. Like Google, Amazon, or Apple years ago. Just when you think they’re big, they become even bigger. And the returns are colossal. This company’s buyouts are all part of a master plan to aggregate a diverse set of profitable video game communities. Together, those sites are set to make a *lot *of money, no matter what the future of video games is. For example, one website pulls in six million monthly visitors—who are just there to learn how to master the video games they play. - **Another is ranked #7 in the world for the highest concentration of female visitors. ** This makes it extremely attractive to advertisers seeking to reach that demographic. Altogether, those communities would make for an extremely valuable company with little to no competition. Only this company isn’t just buying communities… They are on their way to becoming the largest *vertically integrated* video game company in the world. Vertical integration is what makes Apple such a profitable company: they own the hardware, the software, the services, and the stores. You know the drill… they can control the entire customer experience from start to finish—*and make money every step of the way.* This video game company’s current holdings include: - Half a dozen esports teams, - Over fifty esports influencers, - One of the largest gaming expos, - *More than 100* gaming websites, and - ***Almost 1,000 gaming YouTube media channels.*** ***Altogether, they’re reaching more than 200 million English-speaking gamers monthly.*** And they’re still snatching up as many properties on the board as possible. They make money every time someone does something even remotely related to video games. They’re winning a real-life game of Monopoly. ## **Match.com Meets Its Match ** Other companies that have tried such a bold consolidation of their sector have run into hard barriers. Take Match Group, for example. If you’ve used nearly any online dating property—Plenty of Fish, Tinder, OkCupid, Hinge—you’ve made Match money. At first, people thought no one would be interested in “online dating.” Video games still face that doubt. “Who wants to watch someone else play video games online?” you may have wondered. The answer is: “Plenty of people.” ![Recently Watched someone play video games graph] And unlike dating, the pool of people who want to watch video games is not mostly limited twenty- to forty-somethings. In fact, the video game industry continues to grow by double digits every year. And that’s across almost every demographic, with no signs of slowing. ![Age breakdown of US Video Gamers Players 2019 Pie Chart] Match.com ran into another tough obstacle, too. When the product was successful, and people got into a relationship, they quit paying money. Video games are just the opposite. They follow Warren Buffett’s key metric for long-term value in a company: they’re addictive. Here’s the deal. Even with all these problems, Match became a $20 billion company. This video game industry conglomerate, on the other hand, has everything going for it: - Dozens of avid communities that are dedicated to the product and willing to pay for it in the long-term. - The ability to use data to precisely target users with highly profitable advertising. - Synergy across all platforms, enabling it to drive rapid growth across its communities, events, and esports teams. Here’s the question you have to ask… **If a dating site can get to $20 billion, how big could a video game company get—with no barriers in its way? ** You might’ve missed the boat for the consolidation of mobile phone carriers… dating websites… local TV stations. Any of these those would have easily netted you hundreds or thousands of percent in profit. Don’t make the same mistake with the video game industry. Multibillion-dollar trends only come around so often. Tomorrow, we’re releasing a report that could allow you to “level-up.” The company identified by the Katusa Research Team is quickly executing a detailed strategy for absolutely dominating the esports market. This mania is still on the back pages… for now. This is your chance to get in early on the world’s most formidable gaming enterprise. Regards, The Katusa Research Team --- # Data Is Everything: How a Grocery Store Predicts a Pregnancy… and Profits - URL: https://katusaresearch.com/data-is-everything-how-a-grocery-store-predicts-a-pregnancy-and-profits/ - Type: article - Published: 2020-03-15 - Updated: 2024-10-16 - Author: Marin Katusa It all started three decades ago. Clive Humby was showing the executives of a giant UK grocery chain the potential of a revolutionary new concept called a “loyalty card.” It would enable the store to focus its promotions to appeal to loyal customers. Sounds simple now, right? But nobody was doing it back then. When Clive showed them how it worked, the chairman of the board said: *“What scares me about this is that you know more about my customers after three months than I know after thirty years.”* In an instant, Clive knew he’d struck a new kind of oil gusher. (Or if you’re a gold bug, “digital gold.”) For the last century, oil and gold have been sources of immense wealth creation. The Rockefellers, Rothschilds, Nobels, Gettys—all of them became multibillionaires and household names from black gold that spewed from massive oil wells, known as *gushers*. But in the twenty-first century, that’s all changing. Oil is fast being replaced by something that’s turning out to be much more profitable: **data**. - **“Data gushers” are the new billionaire legacy-makers.** Far more value can be extracted from a good dataset than from the best oil well in the world. It just takes intuition, creativity, and some statistical know-how. This is why many of the world’s top energy companies are investing billions into extracting data from refineries and rigs. We recently wrote about the overwhelming popularity of online communities. More specifically, video game communities. On their own, these communities are incredibly profitable. Subscriptions yield easy, recurring revenue. And mass (i.e., untargeted) advertising can even throw up some hefty numbers, too. Take Reddit, for example. It’s estimated that it achieved $119 million in revenue in 2019. ![Reddit Net Ad Revenue Growth Graph] And that number is expected to more than *double* in two years—**to $261 million in 2021**. But they’re not even coming close to maximizing the potential they have for profit. Why not? It’s simple. They don’t require an email address to register an account, and they don’t track user data. And that’s their problem: You can’t maximize profit by just spamming communities with random advertising. Profitable advertising has two cardinal rules: - It must be directed at *specific* users. - It must be displayed *in context*. Reddit’s users are anonymous. No one enters their location, name, birthday, or any other identifying features to create an account. Thus, their advertising must be completely generic. For their communities to really be valuable—to create the levels of wealth enjoyed by oil tycoons—**these communities must have user data**. Think about it. A wealthy, middle-aged male entrepreneur browsing sports scores online doesn’t much care for ads featuring cosmetics or high-heeled shoes. A company that knows its audience and key buyer characteristics will ensure that the score-browsing entrepreneur sees ads for luxury watches and sports cars. It’s the same reason kid’s toys are advertised during Saturday morning cartoons or on YouTube videos featuring children. Potential profit is maximized when user data is used to display exactly the ads that are *relevant* to a specific user. And precisely *when* and *where* they want to see them. For the foreseeable future, the ability to do those two things is more valuable than discovering a new oil patch. ## **Target’s Ad Targeting** Thirty years after Clive pulled his little loyalty card stunt, another major supermarket’s advertising team discovered a far more valuable way to leverage data. - **A researcher for Target identified twenty-five products that could be used to predict—with startling accuracy—whether a customer was pregnant. ** And* her due date.* So, Target began to send coupons for baby items such as maternity clothing and cribs to customers, based on their “pregnancy scores.” It was *perfectly* delivered advertising to a notoriously spendy demographic. The data turned out to be a little too good: a father received a flyer of baby coupons. And he soon found out that his teenage daughter was pregnant. Ouch. There’s zero danger, though, in applying that concept to deliver targeted, precisely relevant advertising in other industries. The same conclusions can be drawn: Someone who likes a particular game is also likely to want to buy a similar game. And you can replace “game” with a pair of shoes, jewelry, or anything else. When that data is drilled and refined, advertisers come *running*. - **That’s where the value of a niche online community starts to look like the value of the next Royal Dutch Shell or ExxonMobil. ** ## **Where the Real Magic Happens… ** It’s a no-brainer: advertisers want to target people who spend money and buy their product. And video gamers spend a *lot* of money, making them an extremely lucrative demographic to target. In an average month, a gamer spends more than $85 on video games. ![Average Monthly Spend in Video Games] What’s more, video gamers spend a *lot* of money on all things related to video games. In the United States, more than $43 billion was spent in 2018—on video games alone. For perspective, the *total* domestic movie box office in 2018 was an all-time record-breaking… $12 billion. - **More than 3.5 times more money is spent on video games than on movies.** Video gamers automatically form extremely valuable communities that advertisers love. For example, one video game community is one of the largest groups of women online. Combined, all of this means that advertisers will shell out big bucks to make sure their ads are being seen by some of the most profitable groups of people on earth. And once the users have been perfectly targeted with relevant ads, the data used can be “fracked.” In other words, **other companies will pay a mint to add their own data, and then extract *additional* value out of it.** **We call this “Digital Alchemy.”** The scary part is, unlike in the real world, digital alchemy *works*. The unrefined raw data might only be worth $0.10–$0.25 per user to another company. But once you know your user base… you can move the decimal over a few places. Multiply that by hundreds of millions of users… and suddenly it’s the greatest new source of revenue for all companies that operate a platform. ## **The ExxonMobil of the 21st Century** In two days, we’ll send you our report on a company that can precisely target **200 million global video gamers…** **Every. Single. Month.** For context, that’s two-thirds the population of the United States. And that audience is growing by the day. They’re already mining user data so they can provide contextualized, user-specific ads. They will be the first to deploy Digital Alchemy in the video game sector. **And they’re about to use a new system with the potential to 4x their current revenue.** Keep your eyes on your inbox tomorrow. You’ll find out the ingenious move this company is taking to eliminate its competition—leaving it with zero barriers to becoming the most valuable gaming community in the world. Regards, The Katusa Research Team --- # Market Bloodbath: The End of Oil? - URL: https://katusaresearch.com/market-bloodbath-the-end-of-oil/ - Type: article - Published: 2020-03-13 - Author: Marin Katusa Last week, news broke that Russia walked out of the OPEC meeting. Saudi Arabia was pressing its fellow oil producing nations to cut an additional 1 to 1.5 million barrels of daily oil production. Russia walked. Saudi unleashed the taps. Russia said, we can do that too. You might be thinking, there must be more to this than just ego. And yes – there’s much more at play here. ## **The Black Swan Is Covered in Oil** Oil prices cratered on Sunday night on news that Saudi Arabia was opening the floodgates. Saudi Arabia stated they were going to produce 12.3 million barrels per day (bpd) by April, with state-owned oil producer Saudi Aramco asked to raise their production capacity to 13 million bpd. In the past few months before this, the Saudis had been holding steady at 9.7 million bpd. Russia responded within minutes, with their energy minister stating that the nation could add 500,000 barrels of production. Not to be outdone, Iraq plans to increase its oil production by 350,000 bpd. I’ve talked ad nauseam about the “cut to kill” strategy playing out in uranium (where Kazakhstan could ramp up or cut production to kill their competition in the uranium markets)… And now the Russians and Saudis are using the same “cut to kill” strategy to dominate the oil markets. In turn, it will kill their competition. Then Meltdown Monday happened. The Dow Jones fell 2,000 points with energy stocks taking massive beatings. Chevron shares fell over 15%, more than any other time since October 1987. **On a year to date basis, oil related stocks have been decimated****. ** Canadian oil producers were crushed… down an average of 58% YTD. US oil producers were decimated…down on average, 54% YTD. And even major pipeline companies took hits not seen in decades…they’re down 39% year to date. ![Oil & Gas Sector: YTD Returns]It’s chaotic out there. Alligator investors that have held onto strong cash reserves are salivating at the opportunities. But the million-dollar question is: should we keep waiting, or is now the time to buy? Many of you know that I don’t like to catch a [falling safe](https://katusaresearch.com/single-idea-worth-least-100000/). In one of my education pieces, I wrote: “During a crash, terrified investors sell assets with no regard for their underlying values or ability to produce cash flow. During a crash, the price of assets becomes “decoupled” from the value of assets. If you can keep a level head while others are losing theirs, you can buy at fire-sale prices.” Instead, wait for the safe to hit the ground. Crack open. And then you can go and collect the valuable contents inside. But while some markets are correcting sharply and in borderline bear territory, one market is doing surprisingly well. And right at ground zero of the coronavirus outbreak. While you may be blurred by the daily 1,000 point moves in the Dow Jones… ## **China’s Stock Market is Holding Up Rather Well** ![Major Exchanges Around the World YTD Returns 2020 Graph]Has the worst passed in China? No. Iran’s also in bad shape. Not just because of the virus, but also because the Saudi increase in production is directly aimed at Iranian oil market share. The Saudis are hitting the Iranian economy and regime at their weakest moment in decades. If there’s a regime in the world that’s most vulnerable for a downfall right now, it’s Iran’s current one. **What About Europe?** If you have to pick a place to be quarantined, Italy would be at the top of the list. Great food, great wine, great culture and great people. If you’re a foreigner (Katusa Research has subscribers in over 120 countries) and you’re stuck in quarantine in Italy, this is what you do: Try to get away from the big cities. For the most amazing Italian experience, find any small town or village away from the tourist traps. The food and wine will be incredible. The people are amazing. Our thoughts are with all those who are ill, quarantined or have loved ones in either situation. Italy is a look through the time machine for the rest of the developed world. Unfortunately, this isn’t just a normal flu, and it’s going to have severe economic knock-on effects. - **More importantly, every EU member will use the virus as grounds for extreme funding for the EU.** What other choice does the ECB have? The current 25 billion euro proposal is less than 1% of the Eurozone’s GDP. When this is all said and done, every European nation will be in line for funding from the ECB. And that gets me back to [Financially Transmitted Diseases](https://katusaresearch.com/financially-transmitted-diseases/) (FTD’s). Interest rates are going lower for longer. ## **The V vs. U vs. L Recovery** “Buy the dips” has been such a successful mantra over the last 12 years. That’s all most money managers and market participants know and preach. Few even know how to use fundamental value analysis. I’ll explain with a personal story—one that I perhaps shouldn’t share, but will. I personally know a director of one of Canada’s largest wealth management firms. About six months ago he called me asking if he could come to discuss a few things with me at my office. I’ve known him for over a decade. He’s a product of loose monetary policies and the bull market. Basically, he told me that he thought I was crazy for having such a high cash position, and for not using any debt to maximize my exposure to the markets. Yet, the fact that my performance over the last decade outperformed any one of his firms’ accounts or funds was irrelevant. He felt I was too conservative. Think about that—a director of one of Canada’s largest wealth management firms thought I was too conservative. That’s too funny, as there’s nothing riskier than resources—or at least that’s what I thought, until I saw what products they were selling. This was a major signal to me that the money management business had lost all sanity. I asked him for his best ideas. Remember, this was coming from one of Canada’s largest “wealth management firms”, so you’d expect uber-conservative strategies. His pitch was zero cash, maximize my leverage and go into speculative U.S. stocks. Zero bonds or yield generating products. And when I asked him about the stocks that were his *Top Picks*, he couldn’t tell me the name of the CEO, corporate address, nor any details about the financials (cash, debt etc…). My point here is that this wasn’t some schmuck working at a junior brokerage. This was an experienced, well to do director of a preeminent Canadian money management firm. This is what investors with money at the “conservative” shops are getting. This will shift. And along with the shift, massive losses will occur. ## **The L Recovery:** More importantly, few in the sector are prepared for “The L Recovery”. The L recovery is a big drop followed by zero growth in a sideways market. The **L** Recovery is what Japan has experienced over the last 30 years. The market is expecting massive liquidity from Central Banks. The recent 50 basis point cut by the U.S. Fed wasn’t enough and we saw a massive drop in markets. I believe another 50 basis point cut is coming, but it’ll also amount to disappointment from the market as it won’t be enough. The point is, nothing the Fed can do will be enough. The markets are transitioning. As I’ve been saying, the world economy is tired, and the full depth of coronavirus’s impact isn’t well understood yet. But over the next 10 days, we’ll see the updated coronavirus numbers from the U.S. and Europe, and I don’t think they’ll be positive. I’ve stated for a while now that ‘Cash is King’. Here’s why… The scariest chart I’ve seen in a long time is the chart below created by Remi Tetot and my friends over at GMI. It’s still early, but if the U.S. cases of coronavirus follow the Italian curve, watch out—the market will go down a lot lower. The blue line is an 18-day lag of U.S. coronavirus cases compared to Italy’s current cases of the virus. The difference is, the U.S. has a population over 500% larger. ![Covid-19 Total Cases USA vs Italy]I’m not trying to be a fear monger. But I look at data and apply common sense to everything. Things don’t look good and I’m pricing in that risk accordingly, with my [Alligator Cash Fund](https://katusaresearch.com/the-way-of-the-alligator/) ready to deploy when the time is right. And the opportunities are becoming ripe. We’ve done a good job managing our ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) ***portfolio through the last 12 months and by locking in *Katusa Free Rides* on some of our positions, we are cashed up. Just yesterday I issued a flash alert revealing my [PANIC WATCHLIST](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) to all premium subscribers that once-in-a-decade fire sale type of opportunities are now showing up in many sectors. These are the stocks I have been waiting to own for years and want to build a position in. We will send any updates when it’s time to get active in the markets. Fortune Favors the Bold, Marin Katusa --- # Quantum Economics, Negative Interest Rates and Financially Transmitted Diseases - URL: https://katusaresearch.com/quantum-economics-negative-interest-rates-and-financially-transmitted-diseases/ - Type: article - Published: 2020-03-06 - Updated: 2020-03-13 - Author: Marin Katusa [![Negative Interest Rates Video]](https://youtu.be/qOLcyTJW9P0?t=9)This week the US Federal Reserve announced an emergency rate cut of 0.5% (50bps). It is part of a coordinated effort by central bankers around the world to keep the decade long bull market going a few days longer. Ultra low interest rates and ever depreciating currencies are the new normal. It’s a race to the bottom so to speak. Last week [we profiled the most important charts](https://katusaresearch.com/the-6-most-important-charts-to-pay-attention-to-in-turbulent-markets/) to keep an eye on during these turbulent times. Among them was the 10-year US Treasury yield. And this week it broke below 1% for the first time in history. ![USA 10 Yr Gov Bond Yield]This is NOT normal. ## **How do falling interest rates impact my portfolio?** Whether you’re a billionaire or a single mom, negative interest rates will have major implications. From your job security to the price you pay for gas, to your monthly mortgage payment… to your “balanced” investment portfolio. **So what has happened this past week?** Bonds are trading like stocks (not normal). Trading platforms and exchanges stopped working (not normal). Major markets are fluctuating 4-5% up and down in a day (not normal). I’ve been getting a lot of attention recently about a concept I’ve created about how FTDs will distort negative interest rates and how Quantum Economics now plays into this all. A lot of people think negative rates and Financially Transmitted Diseases (FTDs) are a short-term fix, kind of like what QE was after the Global Financial Crises. I’m taking the other side of that bet. In late 2019 I answered many of these types of questions in an interview with my buddies who own Real Vision. This interview is a must watch to prepare to understand what’s coming next… and how to position yourself to profit. I get into: - How much lower interest rates can go - What impacts this will have on REAL people - What will happen to bonds (and how to play it) - The new concurrent rise in the US Dollar and Gold - Why your local currency matters A LOT in the large scheme of things - The most interesting investment in the natural resource space - The name of one of my biggest gold holdings **Click [here](https://youtu.be/qOLcyTJW9P0?t=9) to watch the video.** Regards, Marin --- # The 6 Most Important Charts to Pay Attention to in Turbulent Markets - URL: https://katusaresearch.com/the-6-most-important-charts-to-pay-attention-to-in-turbulent-markets/ - Type: article - Published: 2020-02-28 - Updated: 2020-03-13 - Author: Marin Katusa The S&P 500 has been chugging along for a decade, up nearly 420% since the 2009 financial crisis lows. You can argue the reasons why – buying fueled by debt, share buybacks and low interest rates among them. Either way, it’s hard to argue against buying the index being the best risk adjusted trade for the last decade. Savvy ([alligator](https://katusaresearch.com/the-way-of-the-alligator/)) investors love a good crisis. It creates panic, which creates buying opportunities. The Coronavirus is providing us with just that. Below is a chart which shows the returns of major asset classes since the Coronavirus outbreak. ![Asset Class Performance Since Coronavirus Outbreak Graph]Gurus and *doomsdayers* alike are pounding the table, saying that the bubble has burst and that Coronavirus will topple the world’s economy. It’s a great media soundbite, though a bit excessive. Regardless, it’s created panic and volatility. As a professional investor and fund manager, this is exactly the time I want to be looking to buy best in breed companies. ## **How Do You Measure Stock Market Volatility?** A good measure of volatility is the CBOE Volatility Index. It uses *short maturity* put and call options to calculate a volatility value. The higher the value, the more volatile the market. You’ll see that in 2008-2009 during the Financial Crisis, the Volatility Index almost hit 80. This week, we hit 39. ![CBOE Volatility Index Graph]During times of crisis and volatility, investors buy assets that are good stores of value. Examples of these are **gold**, **long dated U.S. government bonds** and the **U.S. Dollar**. As investors rush into these assets, prices appreciate. You can see this very clearly in the bond market. As bond prices go up, the yield on the bonds fall. You’ll see in the chart below that the yield on the U.S. 10-year bond has made a new all-time low. ![US 10 year bond yield graph]What else does this U.S. 10-year bond chart signal? Expect more negative yielding debt. Low yields incentivize issuers to take on more debt and the debt fueled rally continues. ## **Negative Rates and Debt** Below is an updated chart for global negative yield debt. Currently there’s $14.3 trillion in negative yield debt. ## **![Global Negative Yielding Debt]Monitoring Gold Commitment of Traders (COT) Positioning** What is the *Commitment of Traders* (COT) Report? The COT report is a weekly update showing the positions of commercial and non-commercial accounts across various commodities. Last week, the Commitment of Traders report showed a massive increase in bullish positioning. Non-commercial long positions soared to a 10-year high. Below is a chart which shows the non-commercial long position for gold. ![Gold Commitment of Traders: Non Commercial Long Positioning Chart]On the heels of this record long position, gold soared to open the week. Gold broke through $1,600 per ounce, reaching as high as $1,690. ![Haven Rally Pushes Gold Towards $1700 Per Ounce Chart]I’ve learned many valuable and expensive lessons over my career as a professional investor and fund manager. - **My number one lesson: Be patient and always be well capitalized**. I’ve been carefully watching the market, and this week tripled the size of one of my positions. Subscribers had the opportunity to buy at the same price. It was a unique situation and if you weren’t on the ball, you missed it. I think the opportunity was a fantastic risk-reward setup. ## **Junk Bond Stampede** The U.S. junk bond market just experienced its biggest exodus of capital **EVER**. We’ve written about this for a long time. A potential re-rating of most corporate credit could happen because of lower growth and earnings expected across the board. I believe this market chaos is going to continue, which will create new opportunities. Over-leveraged “dumb” money will be forced to unload positions and that’s where I excel. Being positioned correctly in times of chaos requires sniper like precision. I’m loaded with cash and ready to deploy it at a moment’s notice. If you have a cash arsenal waiting to be weaponized, join me in taking advantage of the opportunities coming to us just ahead. Learn more about where I’m planning to position my capital and get into deals at the same time and price I do by subscribing to my premium research service, *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*. Fortune Favors the Bold, Marin --- # March is Critical for Commodity Markets and Coronavirus - URL: https://katusaresearch.com/march-is-critical-for-commodity-markets-and-corona-virus/ - Type: article - Published: 2020-02-21 - Author: Marin Katusa Gold soared above $1,600 per ounce this week. The US dollar continues to remain ultra-strong and the US stock markets are at record highs. The flight to safety is in full effect and Bernie Sanders hasn’t even won the Democratic nomination yet. The major theme that has captured the global markets is the Coronavirus. On February 17th, Apple warned of a sales shortfall for their Q2 reporting on the heels of the virus outbreak. When Apple’s results drop after their quarter ends in March, the markets will react. As of this publishing, there are over 75,000 reported Coronavirus cases around the world. Given that the epicenter of the outbreak in China is under full lockdown, it’s safe to say that the number of cases is sure to soar higher. If this is the calm before the storm – you’ll want to [prepare with some crisis insurance](https://katusaresearch.com/is-gold-investment-a-good-move-for-the-future/). And judging by gold’s rise and the breakout of many gold stocks, many investors are taking notice. ## **Coronavirus Investment Themes** Since the start of the outbreak, known gold ETF holdings have increased by over 2.7 million ounces. At today’s gold price, that’s $4.5 billion worth of bullion. ## **![Known Gold ETF Holdings Graph]Real Time China Data** Fake news is almost the norm nowadays. I am sure your inbox and social media feeds are like mine, cluttered with a bunch of BS fear mongering types. I’m going to share some real, tangible data with you… First off, if you think people are back to work in China already, you’re in for a surprise. Not only that, but main tourist attractions in major cities are empty. One of my colleagues took the pic below for us just a few days ago… ![Empty streets in china coronavirus]Just how big is the drop-off in traffic? Let’s take a look at motorists first. Below is real time traffic pattern data for the last 7 days for major cities in China. You’ll see the blue line is the average congestion for the day based on all data in 2019. The red line is the current conditions. Below are the traffic conditions in **Shanghai**. For a city of 26 million people and home to China’s most important shipping port, there is very little traffic. ![Shanghai Traffic effects of coronavirus]Next, you’ll see the last week’s traffic conditions in **Shenzhen**, the second largest shipping port in China. Shenzhen is one of China’s most important industrial cities with a population of over 12 million citizens. Again, traffic congestion is down significantly. ![Shenzhen traffic effect of coronavirus]Finally, **Guangzhou**, a city of 13 million plus Chinese citizens and the 5th largest shipping port in China. Any lane is yours right now, no one is on the road. ## **![Guangzhou traffic effect of coronavirus]China’s Power Demand Plunge** Another way to show the total collapse in Chinese output is through electricity consumption. Much of Chinese electricity production comes from coal generation. Below is a chart showing real time coal consumption. Levels for 2020 thus far are about 22% lower than normal. ## **![Graph of daily coal consumption during Lunar New Year]The Coronavirus Impact on Commodity Markets** The spillover to the commodity markets is not a minor blip. We are already starting to see large builds in stockpiles for industrial metals such as copper. Below is a chart which shows the inventory level for copper in Shanghai. I believe we are going to see inventory levels rise significantly over the coming weeks as businesses continue to sit idle. Copper for sale in Shanghai trades at a premium to copper traded at the Comex in the United States or the Mercantile Exchange in London. And this premium has fallen to the lowest level of the year. This means there is a lot of copper supply domestically. ![Shanghai Copper Premium Graph 2020]Our boots on the ground intelligence is telling us the worst is yet to come. The true impact of 780 million quarantined Chinese citizens is yet to be felt. The Chinese manufacturing hub is the heartbeat of China and it’s flat lining right now. Cash reserves are surely dwindling across the board for Chinese businesses. Even Foxconn, the maker of Apple’s iPhones was reported to have slashed workers’ pay by one-third. Subscribers to Katusa Research have been positioned exceptionally well and are capitalizing on the soaring gold price. Our core precious metals investments continue to hit all-time highs. I’ve spent 2 decades using volatility and crises to my advantage and it’s paying off in spades right now. In the next issue of *Katusa’s Resource Opportunities* coming the first week of March (unless it needs to be published earlier for urgency), I am going to be detailing my next major idea to all my subscribers. I believe there is a massive investment opportunity just ahead. If you’re not yet a subscriber to my premium research, consider becoming one [right here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) and get ahead of the crowd for the coming boom in commodities. Based on historic bull markets, [we’re still in the early innings](https://katusaresearch.com/the-best-way-to-invest-in-the-coming-gold-boom/) of what could be a very rewarding trend. And I’m about to go big on three new positions, with subscribers having first access to my ideas at the same terms and prices. Fortune favors the bold… and prepared. Regards, Marin P.S. We’ve just introduced the “**Broker Challenge**”. There are a lot of deals that come across our desks, screens and through our network. To all brokers out there with great deals, submit your ideas to Edward ([edward@katusaresearch.com](mailto:edward@katusaresearch.com)) and up to CAD$25,000,000 will be given to the broker, analyst or banker with the best idea. And all results will be published. --- # China Sneezes and the World Catches Pneumonia - URL: https://katusaresearch.com/china-sneezes-and-the-world-catches-pneumonia/ - Type: article - Published: 2020-02-14 - Updated: 2020-02-20 - Author: Marin Katusa The Coronavirus originated in China and is now a global outbreak. It’s gotten so bad that entire cities in China have been shut down. Cities of 10 million people, normally hustling and bustling are eerily silent. Even Foxconn, the maker of Apple iPhones closed their factories for several days. China is an economic powerhouse. The country produces and consumes an enormous quantity of goods and services. Did you know that today, China accounts for 17% of global Gross Domestic Product (GDP)? Make no mistake, the impact of the Coronavirus is far reaching. The virus will have an impact on a lot more than just the Chinese economy. Many forget that China produces an enormous quantity of rough goods and materials. They aren’t just consumers. For example, the price of Garlic in Indonesia has skyrocketed, up over 50% in the span of a week. ![Indonesian Garlic Prices Chart]But you don’t read my missives for garlic prices. ## Coronavirus Impact on Commodities Coronavirus is already having ramifications for many commodities. For example, let’s look at the oil market. The oil market has done a complete reversal in the span of 40 days. Below is a chart which shows the 180-degree change in rhetoric for the WTI futures market. You’ll see on January 2, 2020, WTI crude oil for June 2020 delivery was selling for nearly $60 per barrel. That same barrel of oil is now selling for $50 dollars. This represents nearly a 16% decline in prices. ![WTI Future Curves Graph]Not only has the price dropped, but the expectation of future oil prices has changed dramatically. The futures curve from January 2nd (green dashed line above) shows expectations for consistently lower prices as time matures. In futures market lingo, this is known as backwardation. The February 10th futures curve (solid black line) shows prices are higher in the future. This phenomenon is known as contango. Even with a healthy China, the global oil market was already teetering on the brink of oversupply. China consumes 13 million barrels of oil every day. Due to the Coronavirus, Chinese oil consumption has plummeted by 20%. This means 2.6 million barrels a day of crude oil need to find a new home. Without China’s massive demand, there will most certainly be a glut of oil for the first quarter of 2020. I believe the oil market is just one example of the many commodity markets to be affected. [Copper](https://katusaresearch.com/doctor-copper-strikes-a-true-economic-barometer/), iron ore and coal are surely to face major headwinds here in the interim. Liquified Natural Gas (LNG) has been decimated. LNG prices are down 33% ytd. Below is a chart showing the year to date price for Liquified Natural Gas. ![Japan Korea LNG Spot Market]Crisis investing is when an alligator like me does best. ## Opportunity for Crisis Investing As a professional investor and fund manager, I use situations like these to my advantage. Deep dive due diligence, and the best resource industry contacts give me and my subscribers a massive leg up on the rest of the market. We have a war chest of cash and are thoroughly prepared to use this outbreak to our advantage. In my upcoming March report, I am outlining my crisis game plan to all my subscribers. **I believe there is a massive opportunity ahead. ** Regards, Marin P.S. If you’re not yet a subscriber, consider becoming one [right here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) and get ahead of the crowd for the coming boom in commodities. I’m about to go big on three new positions. --- # Red Gold: China’s Stealth Plan to Use Gold for World Domination - URL: https://katusaresearch.com/red-gold-chinas-stealth-plan-to-use-gold-for-world-domination/ - Type: article - Published: 2020-02-07 - Updated: 2020-02-10 - Author: Marin Katusa Gold used to be important. During and after World War II, every major developed country amassed as much physical gold as they could. It stabilized currencies and signaled independence. But with the end of the gold standard in 1971, most countries began to sell off their reserves. So much so that in 1999, an agreement was formed to limit the amount of gold that central banks could sell. Fast forward to today, and Canada’s central bank owns ZERO gold. Despite the agreement, most countries continued to shed their gold reserves as fast as possible. ![Graph of Global Central Bank Gold Reserves, 1990-2008]That is until a few years ago, when a handful of countries reversed course. Central Banks started buying gold with fury, and they haven’t let up since. - **In the final quarter of 2018, central banks purchased more gold than in any other quarter on record****.** By the end of the year, central banks collectively held around 1.064 billion ounces of gold (equivalent to 33,200 tons). That’s about one-fifth of all the gold ever mined. In the first half of 2019, central banks purchased 11.97 million ounces of gold (374 tons). Once again, that was far more than ever before. And it’s equivalent to one-sixth of total gold demand in that period. And total central bank gold purchases for 2019 were the second highest they’ve been in the last 50 years (2018 being the first). ## **The Unusual Suspects in Central Bank Gold Purchases** And the **Keyser Söze **of gold is Vladimir Putin. I’ve been very quiet about Russia and Putin the last few years as I got swamped with media requests following the success of my NY Times Bestseller ***The Colder War.*** Don’t underestimate what the Russians are doing, as others are starting to follow… While the world focuses on China, Russia has positioned itself at the center of the global political chessboard. Here’s what’s interesting with the recent central bank gold purchases: the vast majority of that unprecedented purchasing came from just four countries. These are places you’d never expect. - One of those countries is Kazakhstan, whose GDP is smaller than Kansas’s. **Kazakhstan grew their reserves from 2.4 million ounces (75 tons) in 2011 to 12 million ounces (375 tons) in 2020 — A 400% increase.** - Turkey moved far faster. **In 2017, they had 3.71 million ounces (116 tons). Now, they have 12.32 million ounces (385 tons) of gold. That’s a 232% increase in just the last two years. ** - In 2018 alone, **Russia bought 8.78 million ounces (274.3 tons)**. That’s the most it’s ever purchased in one year, and its fourth year above 6.4 million (200 tons) ounces of gold. For reference, **that’s $15.7 billion worth of gold.** Putin is undertaking what’s called a “de-dollarization.” Aware of sanctions from the United States, Russia is positioning itself to not be dependent on U.S. Dollar holdings. So, the central bank in Russia has sold nearly all of their U.S. Treasury notes. And it’s used the proceeds to buy gold. Like I said, the **Keyser Söze **of gold is Vladimir Putin. Pay attention to the world’s master strategist. This is very bullish for gold. ![Graph of Quarterly Russian Gold Purchases]You might be wondering why Russia doesn’t buy a yielding investment with the cash. The problem is that other reserve currencies, like the euro or the yen, are extraordinarily weak against the dollar and Putin knows this will continue. Russia bought $100 billion worth of euros, yuan, and yen in 2018… the ***Keyser Söze ****of gold won’t make that mistake again.* And over eleven trillion U.S. dollars’ worth of global investment opportunities have a [negative yield](https://katusaresearch.com/the-14-digits-powering-golds-rise/). So Russia would end up *paying* money to hold them. Gold, on the other hand, has paid off handsomely for Putin. - **In 2019, the value of Russian-held gold has increased from $86 billion to more than $112 billion. The rising gold price has generated a windfall for the Russians of nearly $20 billion that the Russians can leverage.** That’s providing plenty of incentive to keep Russia buying in the long run, stoking further demand. The problem is that Russia’s buying is fairly well-known. Unless it continues to step up gold purchases, its effect on gold prices has mostly already been taken into account. ## **China’s New Golden Rule** With WuFlu (the Coronavirus) now having infected more people than SARS did in 2003, will China continue their gold purchases? China stockpiled huge amounts of gold every single month last year. You’re probably wondering why… Well, you’ve probably heard the saying, “*He who has the gold, makes the rules*.” Xi Jinping, President of China, agrees with Putin’s strategy. WuFlu no doubt has sidetracked China here in the near term, but it’s been proven that the gold insurance strategy is a very wise one. The Chinese elite are aware of their aging demographics and high debt loads. The gold will be valuable to potentially backstop any shortfalls without being overly dependent on their foreign exchange reserves. China is diversifying its foreign exchange reserves away from the USD and towards gold. This will take many years, but it’s a sound strategy. The major Western countries hold upwards of 60 percent of their foreign exchange reserves in gold. China is currently at just 2.9%. Russia is currently at 20%. China knows it has to pick up its gold to reserves ratio and WuFlu will accelerate this belief. The chart below shows where Russia and China will want to be at—with the western superpowers. They will get there. And the price of gold will be positively impacted as a result. Of course, China has much larger foreign exchange reserves than most other countries. So its gold holdings represent a lower percentage of its total reserves. But even when looking at actual gold holdings, you can see that China and Russia have long lagged behind the west. Only now are they just catching up. ![Graph of Gold Reserves in USD]If – and it’s a big if – China were to shoot for the same gold-to-forex reserve ratio as the United States,** that would take 1.98 billion ounces of gold (62,000 tons) of gold off the market—or fourteen years’ worth of 100% of the world’s gold demand.** The subsequent rise in the price of gold would be unlike anything the world has ever seen. But it seems impossible… right? Here’s the thing: Russia’s own gold-to-forex reserve ratio fell below 2.5 percent in 2007. Now it’s at 20 percent—and climbing. Not only that, but China has a much, much longer-term vision in mind with their gold purchases. According to one of my favorite people to debate on stage at conferences, Euro Pacific Capital CEO Peter Schiff, Russia and China are “*preparing for the world where the dollar is no longer the reserve currency.”* China can’t do this, and they know it. Peter knows it too, until China’s reserves grow 10-fold. In short, China and Russia want a world where the U.S. dollar is no longer the reserve currency. To do that, both Russia and China (specifically China) have **a *lot*** of gold buying to do before they can realistically back up their currency. It won’t be a return to the gold standard, certainly. It will be more of a “gold support.” ## **The Angry Dragon** So here are the trillion-dollar questions: exactly how much gold is China planning to buy? And what will it do to the price of gold? The problem with China is that it doesn’t update its gold reserve numbers very often. When the numbers *are* updated, their accuracy is impossible to verify. Few believe the official WuFlu numbers, never mind gold numbers. China lacks global trust. Real gold reserves are one step towards building that trust. China buys its gold extremely quietly via back channels to avoid running up the price via its purchases. (Remember Kazakhstan’s huge gold buys? Guess who they share a border with…) From 2009 to 2015, the Chinese government didn’t provide any updates about its gold holdings. Then it suddenly announced a massive 57 percent jump in its reserves. What we do know is that China purchased nearly 3.2 million ounces (100 tons) of gold in the past year. But, they need to buy 1.9 billion ounces to be on par with America. 3.2 million ounces is a lot of gold, but relative to where they need to be—it’s not. Moving forward, that’s set to rise—dramatically. - **Zhang Bingnan, vice president of the China Gold Association, forecasted the optimal gold reserve capacity for China for the next two decades… ** He found that in 2020, China’s optimal gold reserves should be between 185.6 million ounces and 217.6 million ounces (5,800 and 6,800 tons) of gold. Remember, China’s gold reserves currently sit around 58.94 million ounces (1,842 tons). That means it would need to buy 128 million ounces (4,000 tons) at a minimum, **this year**, to meet Zhang Bingnan’s optimal rate. But even that would be short by 1.77 billion ounces to meet the ratio that U.S. reserves are at. Another way to look at it is, even if China doubles their gold reserves, they’re still short of meeting the same ratio as the United States by 93%. ## **A Dragon’s Appetite for Gold ** According to a precious metals analyst at Standard Chartered Bank… - **Just to achieve the diversification it’s looking for, China would need to buy two years of global gold production. ** In short, when China really starts buying, it’s not going to be able to disguise it any longer. And that could cause a run on gold like the world has never seen before. Central reserve banks are already snatching gold up at record levels… when prices are at record levels. These central banks themselves anticipate prices going much, much higher. When central reserve banks begin to see gold both as diversification, insurance and leverage there will never be enough of it to go around. I wouldn’t want to bet against them. I’d never bet against the ***Keyser Söze ****of gold, Vladimir Putin.* Because gold still matters—a lot. And with any shakiness in the global economy, it’s going to matter a lot more. Regards, Marin P.S. Katusa Subscribers just locked in a +400% gain on one of our core gold stocks. If you’re not yet a subscriber, consider becoming one [right here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/) and get prepared ahead of the crowd for the coming boom in commodities. I’m about to go big on three new positions. --- # Doctor Copper Strikes – A True Economic Barometer - URL: https://katusaresearch.com/doctor-copper-strikes-a-true-economic-barometer/ - Type: article - Published: 2020-01-31 - Updated: 2020-02-05 - Author: Marin Katusa Copper has long been an excellent proxy for global economic health. It’s used in everything from washing machines to electric cars. That’s why copper is often referred to as “Doctor Copper” – because it can diagnose the health of the market. There’s been a lot of market sentiment that the bottom has been put into copper, and that 2020 is the year of the metal rat. I’m long term bullish on copper, but I stated publicly in late 2019 that caution was required in the near term. Rewind just over 12 months ago when we wrote about the [potential of a copper wipeout](https://katusaresearch.com/could-there-be-a-copper-wipeout/). That research piece was one that got an insane number of eyeballs. Many copper stocks have been taking it on the chin lately, just as they did in 2018. Copper itself ended up hitting a 2-year low of $2.51 early last Fall before trying to make a rally back to $3/pound, which failed. Now it’s back to last Fall’s lows. In my ‘Copper Wipeout’, report I stated that most analysts that were bullish on copper had two major errors in their models. The first error was that analysts across the board were using consensus demand side growth metrics that were too optimistic. The second error was that analysts were too aggressive on the supply decreases, meaning they modelled overly aggressive production declines from existing mines. I believed the “consensus” used by analysts was fundamentally flawed as the production profile declines were incorrect. The 2019 production numbers published thus far support my model – yet none of the analysts are updating their models. What nobody took into account though was the black swan that would come in and wipe out all of the gains copper made since it bottomed out last September… ![Copper Price, Last 6 Months-min]This past week, copper prices took a 12% nosedive, and things might get even uglier from here. The reason? ## **Doctor Copper – A Casualty of the New Flu Pandemic ** If you’ve been paying attention to the news, then you probably already know about the Wuhan Coronavirus. Officially named the Novel Coronavirus, this latest flu belongs to the same family of viruses as the SARS and MERS infections of 2003 and 2012. With the first case occurring in the Chinese city of Wuhan last December, the virus has since spread worldwide. The Chinese New Year, which took place on January 25th this year, intensified the problem with its large influx of travelers looking to celebrate the New Year with family. As of earlier this week, there have been more cases of this new virus detected in China than there were of the SARS epidemic. The WHO (World Health Organization) held emergency meetings to discuss the outbreak. It’s unclear at the moment exactly how bad things will get. But one thing is certain… the Chinese economy isn’t getting out of this one lightly. Chinese New Year Extended Due to the coronavirus situation, China’s central government has extended the Chinese New Year holiday by three days. In addition, certain provincial governments have instructed corporations to delay restarts by an additional 7 days. Flights to China have been stopped. Production plants are halted. And there are rumors of Chinese manufacturers declaring *force majeure* and canceling contracts from commodity suppliers. The 12% drop in copper over the last week confirms this. All this led a Chinese government economist to predict that the country’s growth rate for the quarter may drop from 6% to 5% – or even lower. And as the chart below shows, China’s slowing growth will have a significant effect on global copper demand. Over the past 5 years, China has averaged out to a little over half of the total global demand for copper. ![Global Refined Copper Demand in Last 5 Years]Fears over the virus are keeping the Chinese economy down. And just like the doctors lending a helping hand in Wuhan, Doctor Copper is feeling the pressure. This isn’t the only thing that’s currently impacting copper prices, though it’s certainly the most significant… Chile and Indonesia are also in the spotlight, as far as copper goes. - **Chile as a nation is the world’s largest copper producer. ** Organized strikes by labor unions at several of the country’s mines caused multiple shutdowns and delays during 2019. It’s a very real risk that more unrest in Chile could impact global supply, but that fear is already priced into the copper market. The second wildcard in the copper market is Grasberg, **Freeport McMoran’s** mine in Indonesia. Freeport has been battling the Indonesian government for years, and it’s losing the battle. Grasberg is expected to produce 350,000 tonnes of copper in 2020 making it a top 10 copper producer in the world. The Indonesian government will continue to play hardball and Grasberg’s copper production will be impacted. But again, that’s all known and already priced into the copper spot price. That said, if things in China – or the rest of the world – get worse, we could see copper go back down to 2016 levels of below $2.00. ## **Cu Later, Alligator** My caution on copper in the short term was rewarded. To reiterate, I’m long term bullish on copper. Further weakness in copper could make 2020 a great buying opportunity to pick up quality copper companies at big discounts to their intrinsic value. But the time isn’t ripe just yet. [I’m an alligator investor.](https://katusaresearch.com/the-way-of-the-alligator/) I don’t chase stocks. I patiently wait for my prey to come to me. We do have exposure in the [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) portfolio to copper and the share price of that stock has already doubled to our cost base. I do expect it will continue to go higher. Has your copper stock done that this year? Now, if copper continues its freefall… I’m on the sidelines waiting for the falling safe to hit the ground, bounce around a bit, and crack open. There’s one copper stock I’ve had my eyes on for years. I want to own it. I know it well. But I haven’t pulled the trigger yet, as I believe I’ll be able to get it at lower prices. My subscribers will get to know about it and act on it before I do. ## **The Metals Markets in 2020 and Beyond: A Fireside Chat With Ross Beaty** At last week’s ground-breaking Vancouver Resource Investment Conference, we kicked things off with a 1 on 1 interview between me and legendary mine builder, Ross Beaty. Ross made a stop at the VRIC just prior to boarding a plane en route to Davos for the World Economic Forum. We talked about the cycles in the commodities markets and which metals Ross sees performing and under-performing in the short, medium and long term. Ross reveals one metal that was in a mania a few years ago that he sees making huge growth in the near future. And he talks about one sector that he’s very bearish on in the current markets. Not to mention, if you’re a shareholder of his companies, you don’t want to miss his updates. Regards, Marin --- # Junior Gold Stocks Soar, Even When Gold Doesn’t - URL: https://katusaresearch.com/junior-gold-stocks-soar-even-when-gold-doesnt/ - Type: article - Published: 2020-01-24 - Updated: 2020-02-05 - Author: Marin Katusa Junior gold stocks are high-risk and high reward. In a strong gold bull market, you can throw darts at a board and come out a winner. But the absolute monster returns that add extra digits to your net worth will only come from the top companies. ## **How High Can Junior Gold Stocks Go?** The table below shows the returns from junior gold stocks during the 1979-1980 gold bull market. You’ll note that we removed a 13,000% outlier (Copper Lake) to keep from skewing the results. **Junior Gold Stock Returns, 1979-1980** ![Junior Gold Stock Returns, 1979-1980 Chart]I wasn’t born with a silver spoon. But if I had a portfolio of diversified juniors the day I was born in 1978… - **The investment would have grown by 15 times**** its original size in under two years. ** Here’s what that looks like in an actual account… Let’s say you have a $100,000 portfolio. And you speculate in resource juniors with 10% ($10,000). If we are at the beginning of another typical gold boom cycle… And you capture just 75% of the gain… **Your speculations would end up being worth more than the rest of your portfolio *combined***. Famed author James Michener once wrote that sometimes, * “… along come these differential experiences that you don’t look for, you don’t plan for—but boy, you’d better not miss them.” * The chance at +100% to +1000% portfolio gains by catching gold stocks at the right time is an incredible experience you don’t want to miss. Now you might be thinking, “You’re just using a single gold rally to prove your point.” Here’s the thing: This holds true for *every* gold boom in the last century. And while we’re proving that, we’ll also give you an even better reason to use juniors to invest in gold. That is, if you can stomach the high-risk nature of the speculations. Juniors can skyrocket… even when gold doesn’t. ## **The Hemlo Rally of the 1980’s** From 1981-1983, the gold market underwent what came to be known as the “Hemlo Rally.” It was named for a huge gold discovery near Ontario, Canada. In the last thirty years, the Hemlo mine has produced more than 21 million ounces of gold. During the ‘Hemlo Rally’, gold dropped from $513 to $413. That didn’t stop the juniors within the area play of Hemlo to skyrocket. In the table below you’ll see the 1983 returns from the companies that had exposure to the Hemlo mining complex. **Junior Gold Stock Returns, Hemlo Rally** ![Junior Gold Stock Returns, Hemlo Rally]That’s not a typo. - The average return in under one year for these stocks was more than 4,000%, during a period when gold was ***down***. Let’s look at one more gold stock rally. Again, this one happened while gold was almost completely flat. A string of gold discoveries in the mid-‘90s ignited an incredible bull market. The table below shows producer returns during the rally. As usual, these returns struck *fast*—an average of 100% in less than two years. We’ve even removed a 766% outlier to avoid skewing the data. **Producer Returns, 1990s Rally** ![Producer Returns, 1990's Rally]And the next table shows how the top performers during the same time frame performed. Notice again the dramatic difference in return. The nerve to buy when gold is completely flat—and the courage to hold on during extremely wild swings—can be worth millions. (One company we didn’t include in the table, Cartaway, achieved a literally off-the-charts 26,040% return.) **Junior Gold Stock Returns, Mid-90s Rally** ![Junior Gold Stock Returns, Mid-90s Rally]The gains of the juniors make the senior (large cap) producers’ performance look tiny by comparison. ![Mid 90s Gold Producer Returns]And as you’ve now seen, investing in juniors can produce life changing returns. So you need to target the right junior stocks to ensure your portfolio is prepared for the next, massive gold bull market. ## **I’m Betting Big on These 3 Gold Stocks ** We just wrapped up the prestigious VRIC 2020 (Vancouver Resource Investment Conference). It’s one of the world’s premier gatherings of resource financiers and companies. Its where the world of exploration comes under one roof. I’ve just prepared an exclusive report on the absolute best junior gold stock recommendations from this year’s Vancouver Resource Investment Conference. I expect to make multiple times my money in some of these stocks… just as I’ve done in the past. And my report reveals the top 3 stocks I consider *Best in Show* from the 2020 conference. These are all deals I have significant amounts of my own money in. And if you’re not in the room, you’re not in the deal. Here’s how to get the names and full research on these companies (and many more)… **My exclusive post-conference “Best in Show” report reveals [my 3 favorite junior resource stocks to own](https://subscribers.katusaresearch.com/katusa-research-special-offer-vric-2020/). ** Each is a big part of my core gold holdings, which is why I believe they will all be huge winners… and could generate gains similar to my previous conference wins of **101%, 267%, 48% and 1,053%.** I realize that’s a bold statement. But after you learn the amazing details and my analysis on these stocks, I believe you’ll agree with me… and join over 90% of subscribers that return to read my research year after year through [boom, bust and echo markets](https://katusaresearch.com/the-most-important-charts-for-your-gold-stocks-right-now/) alike. Not to mention, you’ll already be at the ready for the next big deal I publish on behind the pay wall. **If you’re interested in profiting alongside me and subscribers and seeing what I’m investing in with my own money, read my Best in Show details [right here](https://subscribers.katusaresearch.com/katusa-research-special-offer-vric-2020/)****.** Don’t hesitate – the special offer I’m making closes shortly. Regards, Marin --- # Here’s How to Be Way Smarter than Your Fellow Conference Attendees - URL: https://katusaresearch.com/heres-how-to-be-way-smarter-than-your-fellow-conference-attendees/ - Type: article - Published: 2020-01-17 - Updated: 2020-02-11 - Author: Marin Katusa Dear Vancouver Resource Investment Conference attendee, As of October 2019, there were over 1,200 publicly-listed junior resource companies on Canadian stock exchanges. While Canada is a major global player in junior resource finance, the industry doesn’t stop there. Between the U.S. markets, the Australian markets, and the London market, there’s at least 1,500 additional publicly-listed junior resource stocks in the world. In total, that’s over 2,700 public stocks for the resource investor to choose from. Exploring for and extracting raw materials like oil, natural gas, copper, gold, and uranium is a high-risk, high reward business… and so the unfortunate truth is that most of those 2,700+ stocks aren’t worth the paper they are printed on. An investment in the average natural resource firm often becomes a roach motel for capital. The money will go in, but it won’t come out. If you’re reading this letter, it’s likely that you’ve seen or are about to see many of these roach motel companies at a large natural resource investment conference. More so than other industries like retail or manufacturing, the resource industry connects with its investors through conferences. These conferences act as major money-raising events for many resource companies. At a large conference in my hometown and global mining finance center Vancouver, it’s common to see over 300 resource companies with a presence. They are all looking to attract investor capital. They all have a story to tell and stock to sell… from Aluminum to Zinc. And you know what? Some of these opportunities are incredible. When a small resource firm executes an aggressive business plan or finds a large deposit, shares can soar thousands of percent. These big scores attract people to resource conferences every year. But as I mentioned, an investment in the average resource firm doesn’t produce a big score. It just sends your capital to “money heaven.” Making it to a natural resource conference can ring up a lot of travel costs. It takes up valuable time. That’s why I’ve written an exclusive “survival guide” to help you maximize the return on the money and time you invest into attending a natural resource conference. We call it *“The Katusa Research Natural Resource Conference Survival Guide: How to recognize resource BS and find high-quality stocks that can vastly increase your wealth.”*[![VRIC Vancouver Resource Investment Conference Survival Guide Book]](https://subscribers.katusaresearch.com/wp-content/uploads/2020/01/Natural-Resource-Conference-Survival-Guide-2020.pdf)In this guide, you’ll learn: - **The single most important factor to consider before buying a junior resource stock** (this idea alone can transform a losing investor into a winner). - **Why most resource investors flock to the absolute worst countries to invest in** (and how you can easily avoid their dumb mistake). - **How to quickly and easily determine if a company is about to dilute shareholders and water down your stake** (this happens far too often, but it’s easy to avoid). - **And many, many other critical ideas to your success as a resource investor.** This is all hard-won knowledge written down by a guy who makes his living investing in the resource market… not some desk jockey analyst who has no money of his own on the line. Long-time Katusa subscribers know I’m a big believer in the Pareto Principle. It states that 80% of your results come from 20% of your efforts. For that reason, it’s also called the “80/20” rule. For example, your business may generate 80% of its sales from 20% of your clients. The Pareto Principle is alive and well in the resource sector. About 20% of resource operators create 80% of the value in the sector. I’ve even taken Pareto’s principle a step further. Years ago, I coined the 4/64 Rule—I took the 80/20 Rule and subjected it to Pareto’s principle again. The result states that 4% of entrepreneurs create 64% of the wealth (80% of 80% is 64%, 20% of 20% is 4%, hence the 4/64 Rule). If making a lot of money is your goal in the resource sector, I encourage you to do what I do; focus on the 4% of superstar entrepreneurs who own large stakes in their own companies. Invest with the best. This “survival guide” contains a list of key questions I believe any intelligent investor should ask a mining company before considering an investment in it. It addresses critical aspects of a company, like project quality, management quality, and balance sheet. If you put this idea and others in this guide to work, you’ll become a master at spotting BS and avoiding losing companies. You’ll become a master at putting the Pareto Principle to work for your own benefit… and you’ll stand a very good chance of making many, many times any investment you make in a resource conference. This guide is absolutely free to anyone who wants to grow as an investor and make their money work for them. [Click here to claim your copy.](https://subscribers.katusaresearch.com/wp-content/uploads/2020/01/Natural-Resource-Conference-Survival-Guide-2020.pdf) See you at the conference. Regards, Marin Katusa --- # The Best Way to Invest in the Coming Gold Boom - URL: https://katusaresearch.com/the-best-way-to-invest-in-the-coming-gold-boom/ - Type: article - Published: 2020-01-10 - Updated: 2020-02-05 - Author: Marin Katusa A mini gold boom that just delivered stealth doubles and triples to some investors was barely noticed. Since gold’s spectacular run last summer, it has surged even higher to nearly $1,600/oz. And with that, momentum and volume is entering the market. After waiting so patiently for gold to rise above its 2013 high, it might be tempting to take your minimal profit and run. Or, following the slight dip and stagnation in late 2019, it’s easy to get nervous about entering the market in the first place. **But if historical precedent is any indication, there is a *lot* more money to be made in the next gold boom.** Especially if you’re investing in gold the right way. Your profitability in the gold market heading into 2020 requires having the answers to these three questions: - Is this rally ever really going to take off? - What’s the best way to get in on the action? - When exactly will this cycle end? Analysis will tell us company specific details. Macro research will tell us the overall direction. But one of the most important indicators is *sentiment*. And there’s no better gauge of sentiment than a conference solely focused on resources – the 2020 Vancouver Resource Investment Conference – that’s happening this weekend. This is a special conference for me personally. It’s where I met my wife. In fact, this VRIC will be my 20th in a row. The first time I met Rick Rule at this conference, he was my age that I am today. And now, I am always on the lookout for the next superstar young gun. I’ve been co-producing VRIC with Jay Martin and the young guns at Cambridge House for the last half decade. Time sure flies while you’re waiting for a bull market! There have been lean years where Bitcoin and Cannabis were kings. But now that pendulum is shifting to precious metals… in a *big* way. If conference attendance is any indication, the pre-registration tickets are through the roof and the attendance is at sellout capacity for one of the biggest conference venues in the entire city. But that doesn’t mean it’s the peak… ## **The Next Gold Boom: The Real Gold Bull Market Is Yet to Launch** The gold market has always moved in cycles—from dramatic boom to overnight bust, and eventually back again. So far in this “boom,” gold has barely risen 20% from its floor. That’s not even close to the minimum required to qualify for a true “bull market” over the past century. - **The *smallest* gold run-up in the past 90 years was 45% from 1930-1933—more than *twice* the current gain. ** The other rallies were far, far bigger: from 1972-1974, the rally yielded a 100% gain. From 1978-1980, another 100% gain. Then from 2007-2010, a 67% increase in the price of gold. ![Graph of Gold Boom, Bull Markets, from 1930 to 2020]The point is this: when gold is ready to rise, it *takes off*. Every single one of the years in the date ranges above saw an increase of more than 20%. What some investors might see as slipping backwards may just be the cycle getting ready for its next natural advance. - **So if you’re a subscriber to my Boom-Bust-Echo theory, then you know the gold rally has barely just begun.** The biggest profits still lie ahead of us. Savvy investors will patiently hold, before finally selling near the peak of the boom. For example, many major gold producers right now, such as Kinross, Gold Fields, Alamos, and Eldorado are trading around $5-6. (Gold Fields is up nearly 190% from its lows 14 months ago – and that’s a $5 billion company!) These stocks could easily be sitting at doubles a year or two from now. And the juniors’ percentage returns will likely be an order of magnitude greater. It might be hard to believe that gold stocks could see gains of 500% or more in the next couple years. It was equally hard to believe in 1933, 1972, 1978, and 2007… but it happened every time. ## Why Gold Is a Bad Investment When “This” Happens During a gold rally, you might be tempted to invest directly in gold bullion. There are many reasons why that’s not the [best way to invest](https://katusaresearch.com/why-americans-should-not-buy-physical-gold-right-now/), including the persistent strength of the U.S. dollar. Have some bullion exposure. But another really big reason is the potential for extreme leverage with gold stocks. Look at what happened to gold in the ‘70s… It took off early, cooled off a bit in the mid-‘70s, then hit the afterburners headed into the latter part of the decade. On December 31, 1978, gold was at $226 an ounce. On January 21, 1980, it maxed out at $850 an ounce. **That would be like gold going to $5,641**** by the time the next U.S. President is inaugurated. **If it happened forty years ago, it can happen again. Now, digging up information on tiny gold producers from the early ‘80s is no easy task. Most of the information was not digitized then. But here’s data we put together below on a few producers that the Katusa Research team found, along with the percentage returns at their peak: **Table 1. Gold Producer Returns, 1979-1980** ![Table 1 Gold Producer Returns, 1979 - 1980] That’s an average of a **220% gain**.** ** Of course, it’s only the lucky investor that’s going to catch it right at the top. But suppose you could capture 75% of those gains. That’s still a 165% return. Buying into gold stocks instead of gold takes luck out of the equation. But we still haven’t mentioned where the *real* gains are to be had. The ones that turn a modest portfolio into your whole retirement plan. **And how you can beat the GDX returns by over 200% or more.** Next week, I will reveal the kind of stocks that really move your net worth needle. And my team and I will see many of them front row center at the **2020 Vancouver Resource Investment Conference** with over 350+ companies in attendance. This year we have a world-class line up you don’t want to miss… **Peter Schiff, Lord Conrad Black, Ross Beaty, Raoul Pal, Grant Williams, Brent Johnson, Rick Rule, Frank Holmes **and many, many more**.** My team and I will have our boots on the ground on the conference floor and on the stage, interviewing companies and meeting with key management behind the scenes. I’ve spent many years in this gauntlet and know exactly what to look for in a great opportunity and speculation. I encourage all Katusa Research subscribers to attend if they’re in the area and to come say hello. For more information on the event, [click here](https://cambridgehouse.com/vancouver-resource-investment-conference). To get complimentary tickets, go to the registration page [right here](https://cambridgehouse.com/vancouver-resource-investment-conference) and then enter code “**katusa100**” Regards, Marin --- # Supercharge Your 2020 Resource Portfolio - URL: https://katusaresearch.com/supercharge-your-2020-resource-portfolio/ - Type: article - Published: 2020-01-03 - Updated: 2020-02-05 - Author: Marin Katusa The resource sector had a big year in 2019, capped off with a stellar final quarter. I hope everyone’s portfolio capitalized on it. I know the *Katusa’s Resource Opportunities* portfolio did. Below is a chart which shows the performance for major commodities for 2019. You’ll see it was a tale of 2 worlds. Niche metals like vanadium and cobalt took it hard on the chin. Meanwhile oil, soft commodities and precious metals rocketed higher. ![Graph of major commodities, year to date performance, in the resource sector.]Gold finished up 19% for the year. It was the best annual return for the yellow metal since 2010. Gold producers are leveraged to gold prices. It means that when gold prices go up, producers commonly go up significantly more. The same can be said with the downside, falling gold prices mean crashing gold stocks. This year, however, it was a tale of the former. Gold put up a stellar year and gold producers rocketed higher. Below is a chart which shows the performance of junior gold producers, mid-tier gold producers and senior gold producers. ![Chart of gold sector, year to date performance, of senior gold producers, mid tier and jr gold producers]Now we’ll explain one of the biggest news stories and drivers that led the producers to significant double digit gains. ## **Breaking Down the Largest Gold Deals in 2019** Mergers and acquisitions continued to dominate headlines in 2019. I wrote extensively this year about the [Commonwealth Takeover](https://katusaresearch.com/australian-gold-stocks-and-the-commonwealth-takeover-part-2/) and the continued divestment of non-core assets from [Newmont and Barrick](https://katusaresearch.com/the-next-takeout-targets-in-gold/). ![Top mining deals of 2019]In 2020, I believe we’ll continue to see the majors consolidate their core holdings. In addition, I believe we’ll see further consolidation down the food chain. Given the strength in the gold price and positive outlook, world class development stage assets and junior producers with expansion potential are likely to become juicy acquisition targets. ## **Drill Hole Leaderboard: What Were the Best Gold Drill Holes in 2019? ** The gold sector drills hundreds of thousands of meters of rock ever year. So, what were the best drill results of 2019? An FYI… These are simply for educational purposes. The way the “top” interval is calculated uses interval length multiplied by grade. Gold investors should know, all ounces are not equal. For example, high grade refractory rock is worth less than low grade heap leachable rock. The first table shows the best gold drill holes with a minimum 1-meter interval. ![Top drill holes projects with a minimum 1 meter interval for 2019]The table below shows the best gold drill holes in 2019 with a minimum interval of 10 meters. ## **![Top drill hole gold projects of 2019 with minimum interval of 10 meters]Gold Stock Returns: What Gold Producer had the Best Returns in 2019? ** Below are the returns for junior, mid-tier and senior gold producers. The minimum production threshold for junior gold producers was 50,000 ounces of production with a maximum threshold of 250,000 ounces of production. ![Junior gold producers year to date performance]Mid-tier gold producers produced between 250,000 and 1 million ounces of gold… ![Mid tier gold producers year to date performance]Senior gold producers produced upwards of 1 million ounces of gold or gold equivalent in 2019… ![Senior gold producers, year to date performance chart]At Katusa Research, subscribers and I enjoyed a stellar year. - **Our top gold stock climbed over 250% and we just sold another producer for a 70% win. ** I believe in 2020, we will need to be highly targeted in picking winners. It won’t be a “rising tide, lifts all boats” environment. It sounds simple to buy world class producers and development stage assets. However, to make that investment decision you need to comb through thousands of production and engineering reports and travel around the globe. I’ve spent nearly 2 decades as a professional investor in the resource space. I’ve had my boots on the ground in over 100 countries and flown a million air miles. My Rolodex of experts and management teams is incomparable to others in the sector. You can’t replicate that type of education by reading a resource magazine or a company PowerPoint. I am pumped for 2020 and I know many of my subscribers are as well. If you want to get access to all my best ideas and investments, get a head start and consider a subscription to [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kii). Regards, Marin --- # Revealing Brokerage Secrets and Should Short Selling be Restricted? - URL: https://katusaresearch.com/revealing-brokerage-secrets-and-should-short-selling-be-restricted/ - Type: article - Published: 2019-12-27 - Updated: 2020-02-05 - Author: Marin Katusa Last week I published a piece on the [practice of short selling](https://katusaresearch.com/is-the-resource-sector-a-short-selling-paradise/). And I often get asked if I think short selling is good for the market. I believe in an open market… But I also believe that if we are all playing the same game (the stock market) both the longs and shorts should be playing by the same set of rules. It’s that simple. A lot of people are blaming the exchange. But the brokerage firms are part of the problem also. With the reduction in retail trading commissions, brokerage firms had to figure out ways to generate new fees. Lending out their client’s stock, and keeping 100% of the proceeds is just morally wrong. Yet, I know it happens. The exchange knows it happens and few clients with brokerage accounts know this. But it’s totally legal. Because there is a very small clause in the fine print (which almost nobody reads when they open an account) – that if you have an account and tick off the margin box, the brokerage firm is allowed to lend your stock out without asking you. And the brokerage firm keeps 100% of the profits of lending the stock to your shorts. **Think about how stupid that is… ** There will be a syndicate that will figure out which stocks are prime for short squeezes. And they can coordinate with the clients to pull the shares out of the brokerage account (the only legal right the clients have). Then the shorter who borrowed the stock will have to cover or find a new borrow from another firm. This is an incredible opportunity and the beauty of the open market is someone will figure it out. But this leads us to an important question… ## **Where Does Borrowed Stock Come From?** The basic answer is you and me. And without us even knowing about it. Let’s take **ABC Corp** for example… The stock is lent out from the brokerage house, say in this example, PaytheWood Securities Ltd where our ABC shares reside (retail and institutional). Many brokerage houses are borrowing the stock from margin accounts from their clients without the clients knowing. And the brokerage houses are making lots of money on lending the shares out to the shorter for a fee. It can be as high as a 30% borrowing cost. The brokerage houses never give the ABC shareholder the information that it’s the client’s shares that have been lent out short. Nor that the brokerage house is making money on loaning the ABC shareholders stock out! Here’s the snowball effect: The “Shorters” use the ABC shareholder stock position available in the margin brokerage accounts to drive the price down. Then the shareholder panics because he experiences such a drastic drop in the share price. And then the ABC shareholder sells his stock at a low price to the shorter who covers his short. Not to mention a couple of newsletter writers have an automatic 50% stop loss rule that plays exactly into the ‘Short & Distort’ strategy. How can this be stopped? The only way I know is if the shareholder of any company that is being shorted **does not allow their stock to be borrowed. ** When you open your account, you have to specifically state this. Also, you actually have to sign forms if you already have an account to prevent the brokerage firm, like the fictional PaytheWood from lending your stock out. It’s absurd, but it’s the new world we live in. The shorter would then have to pay higher rates to borrow the stock. This is because there is less stock available to borrow in the system. - The first thing the exchange should do is force the brokerage firms to send the clients whose stock is being borrowed an approval form—to agree or disagree whether their stock is to be borrowed - The client should get the bulk of proceeds made for their stock being loaned out—and that should be pre-agreed upon before the client agrees in Step 1 above I have no issues with shorting. I have an issue with short and then distort the story with lies. The exchange should come down hard on those dirty players. It’s no different than going after the pump and dumpers. ## **How You Can Limit Short Selling and Fees Off Your Back** Here’s a simple solution for the retail crowd. If you don’t want your shares ever to be lent out without your approval then you can **segregate your shares of the stocks you own.** This way your stock can’t be loaned. And it would force the ‘Short & Distort’ syndicate to have to start buying and covering shares. This would cause a significant increase in the share price. I want to make it very clear I am not trying to put out any manipulation theory here. I can see a ‘Short & Distort’ syndicate use my comments and distort my own intention of educating my subscribers to the reality of Wall/Bay/Howe Street. **What a shareholder can do is tell his broker:** **“I don’t want my stock loaned out, segregate it!*****” *** ***And get it in writing.*** This is what I’ve told my brokers: *“I don’t want my stock loaned out, segregate it. * *Put it into an account that is not linked to any other account that has or could have any margin in it. If I don’t have such an account please set one up. Please confirm back to me by email that the stock is now in an account where it cannot be loaned. If you cannot do this for me right away I hereby demand physical delivery of a certificate representing my shares as soon as possible and shut down my account.”* It was a seamless experience and my broker did as I asked him. When I first did this, my broker stated he has never had anyone request that from him. He is one of the largest brokers at a firm that does some of the most lending. What a world we live in. With the online brokerage accounts where one has margin, I am not sure what the solution is. Is this how the brokerage accounts subsidize their low trading fees? Interesting thought that nobody has surmised this before. ‘Short & Distort’ is active in the resource sector because the industry has a heavy percentage of retail shareholders and they are being used by the industry. And the ‘Short & Distort’ crowd look to take advantage of the retail shareholders. Not with [this Alligator](https://katusaresearch.com/the-way-of-the-alligator/)! It’s the brokerage firms who are making a lot of money on this: - Interest in the borrow, - Commission on the short sale, - Commission on the short cover and - Commission on the shareholder selling in despair. It’s a dirty secret in the business that nobody is talking about. But I wanted readers to be aware of what I believe the situation to be and how best to protect yourself and your shares. Regards, Marin Katusa --- # Is the Resource Sector a Short Selling Paradise? - URL: https://katusaresearch.com/is-the-resource-sector-a-short-selling-paradise/ - Type: article - Published: 2019-12-20 - Updated: 2020-02-05 - Author: Marin Katusa Short selling is a touchy subject. And I can see the industry hate mail coming already. Katusa is heading to the dark side of the industry and joining the *short and distort* syndicates. Let’s get one thing straight right away, not a chance. The exchange should really bring in the same level of regulation for the short and distort crowd as they have for the longs and loud crowd. If you’re going to short a stock, you better make sure your research and analysis are correct. If it’s not, you will lose more than your shirt. You’ll lose your wife’s closet of wardrobe if you’re not careful—and that’s when the real pain begins. The basics of going long and selling short are as follows… A long position means you own a stock, so you make money when the stock rises. On the other hand, a short position makes money when the share price of the stock falls. ## **Short Selling Basics** We have all heard the analogy, “buy low, sell high”. Short selling works in the reverse manner. To sell short, first you borrow the shares from a broker. The shorter pays a fee per share for the loan along with any dividend payments to the holder of record. A lot of people don’t know that their brokers are loaning out the shares of their clients without the client knowing. And the brokerage firm keeps the profits off the borrow for themselves. There is a whole article on this topic that reveals the games brokers and brokerage firms play with their client’s stocks. But I’ll leave that for another day. Now to do some short selling, you must put up a percentage of capital – this is called the *margin requirement*. If the position moves against you (stock price rises) you may be required to add to your margin. - **The most you can earn on a short sale is 100%, whereas the maximum loss could be infinite. ** The professionals who short take massive leverage. So the gains are multiple times what to the actual margin posted. Note: If the exchange forced the short seller to have the same margin requirements as the longs, that alone would take away a big incentive of the shorters. But we now live in a world with different rules for different people playing the same game. The short position is “covered” by buying back the stock you borrowed on loan. The profit or loss is the difference between the price you sell the stock at and the price you buy it back at. In a capital-intensive sector like natural resources, booms and busts lead to both long and short speculations. **Short Selling Targets in the Mining Sector** I’ve had my share of battles taking on shorts in the mining sector. In the table below, you’ll see a list of the most heavily shorted North American listed mining and metals stocks. ![Graph of Mining Sector - North America's Most Heavily Shorted Stocks, Current short interest as percentage of equity float]What this table tells you is this… In the case of a company like **McEwen Mining (MUX.T)**, short sellers are borrowing about 14% of all shares outstanding or 17% of the equity float as shown in the chart. That’s 54 million shares lent out by brokers, who collect a fee for the borrow. Aren’t they just spring peaches!? ## **Short Selling 201 – Days to Cover Ratio** While short interest is a key puzzle piece, a serious investor should take it a step further and look at the “Days to Cover” ratio. The days to cover represents the hypothetical number of trading days required for the short position to be covered. The higher the number, the longer it will take to close the position. - For the math nerds, the equation is *total shares short* divided by *average daily trading volume*. Now you need to take this number with a grain of salt. The reason is that this ratio assumes the short position is the *only* buyer of the stock. This is a highly unlikely circumstance. And it means that the days to cover ratio understates the amount of time it takes to unwind a position. Below is a chart which shows the Days to Cover ratio for the most shorted mining stocks. ## **![Graph of Mining's Most Shorted Stocks: Day to cover ratio]Short Selling in the Energy Sector** The energy sector also battles a lot of short selling. And I’ve published [bear case scenarios](https://katusaresearch.com/the-absolute-worst-things-youll-read-about-uranium-a-katusa-short-report/) equivalent to a “short report” in order to establish a very conservative view on different energy sectors. One of the first pieces of analysis we perform is to see which stocks are the most shorted. Below is a list of the most heavily shorted energy stocks in Canada. Compared to the U.S. markets, it’s a small list of companies that have a significant short position. ![Graph of Canadian Energy Sector: Most Heavily Shorted Stocks, current short interest as percentage of equity float]And here is the days to cover ratio of Canada’s most shorted energy stocks. ![Graph of Canadian energy's most shorted stocks: days to cover ratio]As I mentioned in the introduction, the U.S. markets are far more active in short selling. Below is a chart which shows the most heavily shorted stocks in the U.S. Energy sector. ![Graph of US Energy Sector: Most Heavily Shorted Stocks, current short interest as percentage of equity float]You’ll notice I had to stop the chart at 20% short interest for the U.S. energy sector. In total, there are over 120 companies in the U.S. that have a short position equal to 5% or more of the equity float. Compare that to Canada’s 12 companies with a short position of at least 5%. Now let’s take a look at the Days to Cover for U.S. Energy’s most shorted stocks… ## **![Graph of US Energy Most Shorted Stocks: Days to cover]What is a Short Squeeze? ** A short squeeze is when pressure is put on the short seller, in an attempt to force the shorter to cover the position. Covering the position means buying back shares which pushes the stock price higher. This is where the days to cover becomes so valuable. The less liquid the stock, the harder it is for the shorter to buy back shares in the market without taking the share price a lot higher. I was just a bystander in this one, but the cannabis company Tilray had a major short squeeze. Share prices catapulted from $100 to $300 per share in the span of a few days… ![Stock chart of Cannabis company Tilray facing a major short squeeze]Many shorters were blown up in the process as margin calls forced them to cover the position at any price. Since the squeeze, Tilray has dripped lower, and is now trading well under its $30 IPO price. Those who did not get crippled on the squeeze appear to have won this battle. ## **Marin Katusa Unleashed: Exposing Dark Room Short Selling ** Now I’m really fired up. Next week I’m going to publish part 2 of this short selling series where I’ll get into a few things: - Should short selling be restricted? - Where does borrowed stock come from? - The short selling snowball effect - How brokerages make a fortune off clients (and they don’t even know) - How to stop being taken advantage of and curb short selling This will ruffle a few feathers for sure. But it is important to drive transparency to all investors in the markets. Regards, Marin --- # Is It Time for Silver Stocks To Blast Higher? - URL: https://katusaresearch.com/is-it-time-for-silver-stocks-to-blast-higher/ - Type: article - Published: 2019-12-13 - Updated: 2020-02-05 - Author: Marin Katusa In 1973, planes loaded with 35 million ounces of silver flew to Switzerland. The investment was initially designed as a hedge against inflation, which was becoming rampant in the United States. The gold standard had just been lifted and the value of the U.S. Dollar was plummeting. During the early 1970s, buying gold was forbidden, so silver was the best alternative. And three brothers took advantage. In 1974, William, Lamar, and Nelson Hunt acquired futures contracts for an additional 55 million ounces – just under 10% of global production. By 1979, according to the New York Times, the Hunts owned between 150 and 180 million ounces of physical and paper silver. As such, they were the largest private silver holders in the world. The Hunts drove prices up so rapidly, even jewelry companies like Tiffany’s took notice. They ended up taking out a full page ad in the New York Times to draw attention to the matter. ![Tiffany & Co New York Time Silver]By January 1980, the Hunt brothers controlled 69% of the paper silver market on the U.S. COMEX market. They were massively leveraged. And used both their physical silver and other stock positions as collateral. In March of that year, the Chicago Board of Trade (CBOT) changed the rules of the game. The CBOT suspended the creation of any new silver contracts. At the same time, COMEX cracked down and capped the position size at 3 million contracts. The combined effect was quick and drastic on the Hunts. The margin calls began on the Hunts’ paper holdings and their powerplay ended. The Hunts’ fortunes came crashing back down to earth on “Silver Thursday” in March 1980. The end result was a spectacular crash in the markets where silver fell over 30% in days. ## **What is a Silverbug?** **silverbug** [ **sil**-ver-bak ] ***noun*** an older male gorilla, usually the leader of a troop, whose hairs along the back turn gray with age. Wait, that’s the definition of a silverback, not silverbug. But if I delete gorilla, I think that’s a fair assessment of silverbugs. I like the silverbugs. Their optimism and conspiracy theories are always entertaining. These days, silverbugs have every reason to shout from the rooftops. Even with spot silver trading mostly rangebound, many silver stocks are at or near levels not seen in 3 years. ![Primary Silver Producer Returns] Volume is picking up, momentum is picking up and the top silver companies have performed very well in 2019. So, what can we expect if this is just the early innings of a massive silver run? ## **Silver’s Mighty Booms and Busts** Below is a chart which shows the epic booms and busts in silver over the decades. ![Silver: Boom & Busts]Silver had a second spectacular rise before and during the global financial crisis in 2008. From 2000 to 2010 the price of silver climbed over 900%, well surpassing gold’s performance of 600% over the same time frame. ## **Just How Big is the Silver Market?** Many investors may be unaware, but the silver market is quite small. Last year, 840 million ounces of silver were produced worldwide. Using a silver price of $16 per ounce, this makes it a $13 billion dollar a year industry. For comparison, last year 108 million ounces of gold were produced. At a [gold price of $1,400 per ounce](https://katusaresearch.com/2000-gold-and-the-secret-gold-rally-hiding-in-plain-sight/), that represents $156 billion worth of value. That’s 11 times the size of the silver market. To truly show a commodity comparison, we can make things visual. Below is a chart showing the annual market value of mainstream commodities. ![Market Size by Commodity (Annual Production x Commodity Price)]I’ve always liked silver and silver stocks (especially miners) and I’ve made big scores on several occasions. One of my first big scores for myself and my subscribers was in 2006. I was doing due diligence down in Mexico, and I was the first to go down an old mine shaft. The ladder broke and I fell down to the base of the shaft. Unfortunately, the base was covered in bat dung. I covered my face instantly with my shirt, knowing what I just fell into and am lucky to be alive. I ended up spending 5 days in the ICU. But that cave led us to a mega silver deposit and 10-bagger win and one of the first large financings I led. These days it’s getting harder and harder to find good silver deals. There just aren’t that many legitimate *new* projects. This has to be a scary thing for a company like **Fresnillo**, the world’s largest silver producer. Below is a chart of Fresnillo’s average head grade. If you’re not a mining engineer, *head grade* is the average grade of ore that goes through the milling operation. The higher the grade, the higher the quantity of metal available to be processed. ![Fresnillo Historical Average Production Head Grade]The average head grade has fallen by over 50% since 2010. This is not a good situation for a miner. In a world where input and production costs are rising yet profit per tonne of rock has fallen by 50%, this poses serious long-term potential problems. The key to solving this issue is new high-grade production. The problem is, finding world class deposits is becoming harder and harder. This makes new discoveries that much more valuable. ## **The Best Silver Stocks: Producer Performance in 2019** In the chart below, you’ll find the performance of a watch list of silver miners that are on our radar. ![Silver Miners - Year to Date Performance]My database of silver miners doesn’t stop at just the producers – I know all the best development and exploration silver plays out there. We literally just closed our silver position in the KRO portfolio for over a 70% gain in less than a year. It wasn’t some illiquid junior. It was one of the largest producers of silver in the world. We used my alligator approach to be patient until it was right and it worked out well. 70% gain in under a year on a very liquid stock is a great score. In 2019, we saw a nice run up in silver and gold stocks. In this month’s issue of *Katusa’s Resource Opportunities* we just locked in a quick +70% gain in one of the world’s best run companies. - **In fact, every one of our gold and silver picks this past year has been a double digit or triple digit win.** 2019 was a liftoff year for the precious metals sector. And if this is truly the early innings of a massive gold and silver bull market, then you’ll want to ensure you have core positions in the best run and leveraged companies in both silver and gold. ## **The Katusa Portfolio Comparison** Comparing apples to apples with the biggest names in the business is how I set my benchmark. Here is how our portfolio is doing thus far in 2019: ![KRO Gold Portfolio Comparison-min]My finger is on the pulse of the junior markets and I am looking at a handful of opportunities – including financing deals and value buys – right now for 2020 and beyond. ## **What Can I Expect During Tax Loss Season?** Last year we profiled the gold and silver sectors as ripe for a tax loss fire sale and a potential panic rally. At the time, senior gold companies were leading the charge down. It was a telling sign of where institutional and passive fund money was going. Though tax loss selling comes around every year, this season’s opportunities may prove to be particularly juicy for investors. However, stocks that are already under pressure now may not be out of the woods yet. ![Annual Performance of Sr and Jr Gold Producers ETF]Had you [been an alligator](https://katusaresearch.com/the-way-of-the-alligator/) in the 2015 tax season, 2016 would’ve treated you very well. Companies with proven, low-cost deposits in safe jurisdictions, led by strong management teams, are the kind of companies that we look out for at Katusa Research. And of course, this applies across the entire resource sector – not just gold. Tax loss season may be prime time for building portfolio positions, but that doesn’t mean you get to skip your due diligence. You still have to find the right companies to buy. - **A discount means nothing if the product you’re buying is still worth less than what you’re paying for it.** But luckily for our *Katusa’s Resource Opportunities* subscribers, we’ve already done all of the leg work for them. We are constantly filtering through companies in the resource sector, updating and reassessing valuations, in order to find out which companies are worth their share price. And at the end of the year, when tax loss selling is in full swing, my readers will know which companies they should be looking out for – and what the right price to pay for them is. **December is one of the best times of the year to buy stocks on the TSX-Venture. ** In the chart below you can see that during the previous 20-year period, the TSX-V equities seasonally loved December, January and February… ![20 Year History of TSX-Venture Monthly Returns]If you’ve missed out on the 2019 mini-run in silver stocks and gold stocks, I’ve outlined 3 companies that I think are great tax loss buys in my [latest monthly report](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/). Regards, Marin --- # Tax Loss Season: What Does the Broken Clock Setup Look Like? - URL: https://katusaresearch.com/tax-loss-season-what-does-the-broken-clock-setup-look-like/ - Type: article - Published: 2019-12-06 - Updated: 2020-02-05 - Author: Marin Katusa Back in October 2018, **Goldcorp** was trading at its lowest level in 16 years. ![Goldcorp Plunges to 16 year low]This was before Goldcorp merged with Newmont, one of the world’s largest and oldest gold producers. Goldcorp wasn’t alone. Shares of precious metal mining companies were decimated in a horrid year for gold stocks. The last time Goldcorp traded below $9 was in 2002. That was back when gold was trading for under $300 an ounce. ## **Magical Time of the Year** We’re now entering the [alligator investor’s](https://katusaresearch.com/the-way-of-the-alligator/) favorite season. It’s one where a government law allows us to pick up shares on the cheap. These are shares of companies that are the good, the bad & the ugly and everything in-between. This phenomenon happens like clockwork every year, like a washer’s rinse and repeat cycle. ## **Tax Loss Selling Bargain Season Has Begun** When a large volume of sellers head for the exits, you want to pay attention. Investors selling in panic is a great way to find cheap prices for great stocks. Christmas often comes early for small-cap investors. And that means opportunities to make hundreds of thousands – even millions – of dollars in extra profit. Here’s what happens… At the end of the year, investors and speculators start looking at their portfolios and formulate plans to reduce their tax bills. This means deciding if positions should be held to get short-term gain tax treatment or long-term gain tax treatment. But more often than not, it means deciding to sell stocks based on factors that have little to do with their underlying values. If you’ve read my work for a while, those words should trigger your interest. You know that most of the time, the market places the correct value on assets. But not all the time. As investors, we find our edge during those rare times when buying and selling decisions are not made based on values, dividends, or cash flows. But instead, on external factors like fund redemptions, tax considerations, or fear the world is about to end. These periods are one of the only times that intrinsic value seriously decouples from share prices. In other words, when selling decisions are based on factors that have little to do with underlying values, we – the patient [alligators](https://katusaresearch.com/the-way-of-the-alligator/) – can strike and pick up assets for bargain prices. This is exactly what happens at the end of a brutal resource year like the one in 2018 in the resource market. Investors dump stocks simply to lock in losses or gains because their upcoming tax bill is first and foremost in their minds. ## **Tax Loss Season in North America’s Most Speculative Market ** The next 4 weeks are called “**tax loss season**” in the global markets. Below is a table which shows the monthly returns of the TSX Venture exchange. November and December are ugly times for the speculative investor. ![TSX Venture Monthly Returns and Seasonality]I think this tax loss season will be particularly painful for some stocks. This has been a brutal year for junior venture type stocks. Take a look at the YTD performance of the small cap focused TSX Venture: ![TSX-Venture Year-to-Date Returns]Starting from January, the TSX Venture hasn’t fared too badly, only down 5.5%. However, since March it’s been a lot uglier, down 14% for the year. Leading the cascade lower in 2019 are the cannabis companies, down on average 30-40% for the year. Right behind them are the oil and gas producers, both in the United States and Canada. Many oil and gas producers are down 20% to 40% on the year. Like a bug under the foot of King Kong, I believe certain companies will get squashed with further selling. That means lower share prices. Losses in cannabis, energy stocks (oil & gas) and even mining could spell an ugly tax loss season. While tax loss selling can occur at any time of the year, there is a window where it really kicks into high gear. This is the time where investors crunch the numbers on their wins and losses for the year, and how much taxes they have to pay. In addition, fund managers start to window dress, which means selling their losers and pushing the winners higher. ## **Number Crunching and Solving the Broken Clock** We did an in-depth analysis of the past 15 years of tax-loss seasons on the TSX Venture exchange to get key info. In the chart below, we’ve overlaid several years of the TSX Venture exchange during a specific time period. You can see a clear pattern… ![TSX Venture - Tax Loss Season 2003 - 2018 Average Returns]What the data tells us is that tax loss selling accelerates in the last 60 trading days of the year. And then a “panic rally” commences during the first 60 days of the year. This happens as sold off – yet intrinsically strong – companies explode higher. ## **A ****Tax Loss Fire Sale Could Set up Red Hot Gains for 2020** Last year we waited patiently to purchase 3 companies below what they were trading at. And that patience paid off as subscribers joined me in making some big gains… Two of our buy targets were filled out of the 3 we issued. One company we bought is one of the world’s largest and best run silver companies – **Pan American Silver **– for a 73% gain. The second company was Sun Metals, where we got filled under 22 cents. The stock caught fire early in the year rising 295% all the way to 65 cents at its peak. **My team and I have spent months going over the best stocks in the resource markets that we want in our portfolio during the 2019 tax loss season.** And I’m going to be buying these 3 companies hand over fist if they reach my target price. In a few days, I’m going to release my full tax loss report and how to capitalize on the “Panic Rebound” that ensues. Regards, Marin Katusa --- # The Next Takeout Targets in Gold - URL: https://katusaresearch.com/the-next-takeout-targets-in-gold/ - Type: article - Published: 2019-11-29 - Updated: 2020-02-05 - Author: Marin Katusa There have been close to $6 billion in gold buyouts the last 2 weeks. Coming into tax loss season, it’s time to sharpen your pencils and get your cash ready for opportunities on the horizon. The deals that happened over the last 2 weeks should not come as major surprises. And one massive gold company that I was in early on in the story made major headlines. ## **The Big Two Gold Companies Making Moves** Below is a chart which shows the operating mines of Newmont and Barrick. The yellow dots are Newmont, and grey are Barrick. The purple represents joint-ventures between the 2 companies. ![Newmont and Barrick Operating Mines]The joint-ventures are the obvious first candidates for companies to sell off or acquire full stakes in. - **Barrick has been very aggressive in stating they only want to own projects that are capable of producing 500,000 ounces or more per year.** - **The focus will be on “Profitable Gold Production and near term Reserves”.** It shouldn’t come as a surprise that one of Barrick’s first moves was to sell off its 50% stake in Kalgoorlie to **Saracen** **(SAR:ASX)** for $750 million. Saracen is a company I’ve highlighted several times as part of the [Australian miners that would take a run](https://katusaresearch.com/australian-gold-stocks-and-the-commonwealth-takeover-part-2/) at buying assets from North American peers. Mark Bristow, Barrick’s CEO, has been quite adamant about selling off assets that it does not own 100% of. Or assets that do not produce over 500,000 ounces per year for 10 years. The second major deal this week was again an Australian miner, this time **Evolution Mining (EVN:ASX)** acquiring the Red Lake package from Newmont-Goldcorp for $375 million. I believe the domino chain has begun to fall with Kalgoorlie and Red Lake, two non-core assets being sold along with Detour being acquired. This package of assets has an incredible mining history. But it does not move the needle for a company like Newmont-Goldcorp. ## **Gold Deals – The Next Chapter for Kirkland Lake** The big earthquake was when **Kirkland Lake (KL.TO)** flexed its muscle and large market cap to buy **Detour Gold (DGC.TO)** for $4.9 billion in Kirkland shares. Kirkland’s goodwill from the markets has been taken away until CEO Tony Makuch and his team can prove this deal was a profitable acquisition. Detour is a massive leveraged play to the price of gold since their costs are in Canadian dollars. And I don’t see the CAD getting stronger any time soon. I also expect the U.S. dollar to stay strong and perhaps even get stronger. Both work in Kirkland’s advantage in this acquisition. I think Tony and his team will bring in some synergies and cost improvements. But the wildcard is the price of gold. This was a bold move by Kirkland, and kudos to Tony and his team for having the balls to do this deal. But, if gold breaks down below $1300, Kirkland will have a tough time running a profitable operation at Detour. If gold stays rallies and stays above $1,500, Tony will look like a better looking version of Mark Bristow, who is known for his bold moves. It’s incredible to think only four years ago, I bought just under 10% of Newmarket Gold for under CAD$1.50 per share. Newmarket Gold owned the Fosterville Gold Mine at the time, and it’s now Kirkland Lake’s flagship asset. Although [I was one of the first to the story](https://katusaresearch.com/an-easy-arbitrage-opportunity-the-next-new-gold/), I’m still kicking myself for selling too early as Kirkland Lake rocketed to the stratosphere. This deal is going to get a lot of naysayers. And I remind these naysayers, that many of you poo-poo’d the deal between Kirkland Lake and Newmarket Gold back in 2016. How wrong were you? Considering the share price went from $3 to $60 – pretty wrong. While I do believe this deal is full value for the current Detour Mine, Tony and his team clearly have a long-term angle. Just like they did with Newmarket Gold and Fosterville. I am going to sit on the sidelines for now and watch the best performing gold company of this decade execute its game plan. Go Tony Go. ## **Breaking Down the Top Performing Gold Stocks of the Year ** I spent countless hours every week analyzing the next acquisition targets and I have my shortlist. - **If you want to skip the man hours to do it yourself, they will be published with my full analysis in next week’s December edition of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiewebsite)*.** So, how do your gold producers stack up to the rest of the assets around the world? Below is a chart that shows the production cost curve for primary gold producers. If your gold company isn’t making money at current gold prices—time to sell it and buy something that is. Focus on *Profitable Production*. ![Primary Gold Producers Average Cash Costs of Production]Now, let’s take that a step further. In the charts below, you’ll find the year-to-date performance of primary gold producers. And the minimum production we’re including is 50,000 ounces per year. Let’s start with the big boys. This includes North American or Australian listed primary gold producers that produce over 1 million ounces of gold per year. **The average return for the senior producers this year is +65%, or 47% excluding Sibanye**. ![Senior Gold Producers YTD Returns]Now let’s move on to the mid-tiers. This group produces between 250,000 and 1 million ounces of gold. The **mid-tier producers average return year to date is +34%.** And finally, below you’ll find the YTD returns of junior producers. The cutoff for the junior producers is annual gold production of at least 50,000 ounces per year, up to 250,000 ounces per year. The **average return for the juniors is +24%.** ![Jr. Gold Producers YTD Returns]So, the question to ask yourself is this – how did your picks standup? Are you comfortable with your investments, or did these returns make you squirm in your seat a little bit? At Katusa Research, my team and I pride ourselves on our analysis. And there’s no shortage of deals and opportunities right now, especially during the next 30 days of Tax Loss season. That’s when you can buy some of the best companies (from a value standpoint) on the cheap. Some investors that saw their shares in these stocks tumble over the year will want to sell en masse. It’s the annual fire sale and we’ve sharpened our list of hundreds down to 3 stocks I want to buy. Last year’s tax loss picks rocketed higher. And fast. Only subscriber’s to ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiewebsite)*** will get the names, ticker symbol and easy to read analysis. And it all comes out on December 4th. Regards, Marin --- # Marijuana Meltdown: The Next Chapter for Cannabis Investors - URL: https://katusaresearch.com/marijuana-meltdown-the-next-chapter-for-cannabis-investors/ - Type: article - Published: 2019-11-22 - Updated: 2020-02-05 - Author: Marin Katusa Since the Tulip Bubble, analysts and the media have focused on the cycle of Boom and Bust. They love catchphrases: the bull and the bear, the long and the short. A stock rises on the back of strong company results or a new sure-fire sector, and plummets when things turn sour. Or investors simply tire of a stock. They come to see it as overbought and a selloff hammers the stock lower. Sectors and the overall market follow similar patterns. During a Boom, there is a general sense of euphoria, a feeling that the market will continue notching new highs forever. Everyone is an expert, and every stock in the sector gets priced to perfection. Naturally, that’s a recipe for disaster. Inevitably, a Bust shows its ugly head. Doom & Gloom set in. Investors begin to fret that it’s never going to turn around. But, they’re just as wrong. However, patience is required. There’s more to a cycle than just Boom and Bust, bull and bear. - **There’s also a sideways market that always appears somewhere between the last Bust and the next Boom. ** - **It’s called the Echo, hence: Boom, Bust & EchoTM.** This sideways market is an integral part of the process, with unique and definable features. Understanding how the three cycles work can make the difference between succeeding in the markets and failing like most others do. In the past, I’ve tried to explain this concept to others in the investment business. I got the distinct feeling that my words were just bouncing off and returning to me, like an echo. That’s how I first got the idea and how Boom, Bust & EchoTM was named. ## **The Marijuana Meltdown – The Lesson of the Falling Safe** Before the Echo Phase, markets experience a bust. That’s when inflated share prices crater and enter freefall. These are often called “falling knives” or “falling safes.” Just like in real life, trying to catch them [can be extremely dangerous](https://katusaresearch.com/single-idea-worth-least-100000/). A market in that freefall state is nearly impossible to time successfully. It’s all but impossible to buy at the bottom. My buddy Rick Rule always says, *“Those who try to pick bottoms usually have nothing to show for it but stinky fingers.”* But that doesn’t stop many people from trying. Many people see a decline and think, “*It’s due for a big rebound… so I’m buying*.” Dead cat bounces do happen. But be careful of them. The very high levels of emotion create markets that wildly move up and down with very little concern for fundamentals. During these times, it doesn’t matter if an asset is overvalued or undervalued. People go crazy. Trying to catch a falling safe at this time can be very risky. There’s a much lower-risk way to play markets in crisis. Knowing how to do it will give you a huge edge over others. In the lucrative Echo Phase of a market you can just apply the following strategy: - **[Don’t try to catch a falling safe](https://katusaresearch.com/single-idea-worth-least-100000/). Wait for it to hit the sidewalk. Let it bounce around for a bit and crack open. Then stop, walk over and pick up the money.** You may not buy the exact bottom, but it sure beats being underwater in the position. Gold and silver bugs – heck, even oil bugs are no stranger to cycles. But in a virgin market like cannabis, a whole new generation of investors were sucked into a glorious bull market. And now they’re getting sucked into the hype trying to catch a falling safe. Many investors continue to believe management teams that say their story is different. Some truly may be, but only time – and revenue numbers – will tell. It’s easy to spot the time when a market has peaked. Like when one of our employees got a “hot cannabis stock tip” from his barber down the street back in the summer of 2019. Around that same time, another Katusa Research employee was at a concert where the musician on stage actually told the crowd to go out and buy a certain cannabis company. If those aren’t the signs of everyone being an expert, I don’t know what is. I just shake my head and see history rhyming. So let’s take a look at what’s happening… ## **Pot Stock Volume is Down…** Many of the major companies are rolling over… Below is a chart which shows an index of marijuana companies from 2017 to today. You’ll see at one point the index was up nearly 1,500%. ![Marijuana Sector Index Performance & Volume]You can see from the chart that the marijuana company index surged in late 2017 through to early 2018. The volume of shares traded in the marijuana sector was nothing short of breathtaking. The sector was trading billions of dollars’ worth of stock every day. Then prices peaked on rapidly decreasing volume. What you’re seeing and maybe even experiencing firsthand is capital fleeing the sector… fast. A tsunami of capital flowed into the cannabis sectors from 2017 to early 2019. After the first prelude to a crash in 2018 (followed by a V-recovery)… the bust is happening in earnest. Cannabis investors have now seen that a rising tide lifts all boats and subsequently when the tide goes out…they’re all washed out to sea. The big realization that’s happening right now in the marijuana sector is the concept of being priced to perfection. Up until recently, companies were trading as if their facilities were fully constructed, revenues were at expectations and costs were on budget. Obviously, that’s not what’s happened. Few – if any – facilities came online on time and on budget, hitting pro forma revenues and costs out of the gate. And if you’re not making money, investors will punish you. After the tide recedes (and it always does)… capital leaves. At that point only the strong companies will stay afloat. Funding has all but evaporated in the cannabis sector. Bonds are coming due or the terms are changing. And financings that filled up in minutes are getting filed back into the drawer. Expect more pain ahead. There is no more capital being allocated to the fly-by-nighters. ## **Financing Activity is Drying Up** Below is a chart which shows the Life Sciences financing data from the Toronto Stock Exchange. It’s not a perfect data set, but it’s a reasonable bellwether for the sector. You’ll see that financings peaked at $9 billion last year. So far year to date, financings are touching $4 billion, a 55% decrease from 2018. I’ll go out on a limb and say that financings next year will be even lower than 2019. ## **Many Junior Cannabis Companies Are Being Hit Hard…** In the chart below, you’ll see an index of small-cap marijuana stocks that have been absolutely decimated. Remember the majority of volume came from Jan 2018 to Jan 2019 pushing prices to mania levels (things are different this time!). They’ve since crashed 70% from their peak… ![Small-cap Marijuana Index YTD Performance]Tax loss selling in the cannabis space has and will continue to play a significant role in the market for the rest of the year. Many investors are down 50% or more on their investments and it’s time to throw in the towel and take a tax loss. ## **The Echo Phase: The Next Chapter ** These marijuana companies were more than priced to perfection. And now it’s time to separate the sheep from the goats. And there are **A LOT** of goats. Gone are the days of easy money where a no-name company could switch its name to “Jim’s Cannabis Co.” and raise $25 million in 24 hours for a cannabis facility in Argentina, where, by the way, ‘dreams go to die’. And those funds that invested heavily into cannabis are underwater. By quite a bit. Now that those major funds are experiencing fund redemptions – you don’t want to be left holding the bag with shares of companies that don’t have revenue or any future. Capital is fleeing and looking to find another home. And we have our eye on select companies in a rapidly growing sector that’s in the early innings of a coming bull market. It’s not a question of *if* it will happen. It will be a question on *when*. Stay tuned, The Katusa Research Team --- # An Urgent Signal for the Coming Bull Market - URL: https://katusaresearch.com/an-urgent-signal-for-the-coming-bull-market/ - Type: article - Published: 2019-11-15 - Updated: 2020-02-05 - Author: Marin Katusa If you’re new to the markets, it’s easy to get scared of volatility. The media certainly makes it out to be a bad thing. But I believe it’s a landmark moment in an investor’s career when he/she realizes that, much like a powerful river, volatility can be harnessed, directed, and used as a tool. When that realization happens, a world of huge opportunities opens. ## This Could be a Landmark Moment for You… To most investors, “volatility” is a bad word. It’s like a habanero pepper in your oatmeal. You don’t want to see it in your sensible, conservative investment mix. The talking heads on financial television bemoan volatility. Mainstream headlines make it sound like a terrible thing. And this brings up one of the greatest lessons you can ever learn about the financial markets…. [one of the true keys to market mastery](https://katusaresearch.com/investment-secret-might-not-want-share-friends/). Great investors and speculators treasure volatility. As a professional investor, I love volatility. I owe much of my success to this “dirty word’ of the financial world. **Many opportunities will come from the extremely volatile commodities market.** If you know how to harness this market’s volatility and put it to work, you can make extraordinary returns in stocks. You can make returns in 10 months that most people wait 10 years to make. Why? Because more so than any other asset, commodity prices move up and down in huge boom and bust cycles. They exhibit what’s called “extreme cyclicality.” And if I’m right that we’re in the very early – yet volatile – innings of a precious metals and uranium bull market… then there will be incredible returns to come. You just have to make sure you’re positioned in the companies that will survive AND thrive when the time comes. So today, I’m sharing an interview I did recently with a colleague and friend of Katusa Research – Cindy Broad of Stockhouse. There’s no better way to get the best insights than to ask the right questions. Cindy got the best out of me on gold, uranium, capital flow in and out of big funds, private placements and a whole lot more. In this interview you’ll learn the following: - How a $500 million gold company was formed on a 4-hr flight - The “Portfolio Law” we apply at Katusa Research that’s produced multiple home-run style returns and 10-baggers - When the big funds and brokers will panic into gold - The deal that Katusa Research subscribers were a part of that raised a record amount for a listed company on the TSX-Venture - Why I’m not invested in 95% of uranium companies (and why I get hate for this more than anything else) - Details behind one country’s “Cut to Kill” uranium strategy that’s leading them to dominate the market - How to get involved on the most lucrative, early-stage private placements at the same terms and price as me and my subscribers - And a lot more… **[Click here to see the interview for yourself.](https://join.katusaresearch.com/vsl-key-to-successful-investments-and-financings/?utm_campaign=kiiwebsite&utm_medium=kiiwebsite&utm_source=kiiwebsite&utm_content=Stockhouse-Interview&utm_term=katusaresearch)** Regards, Marin --- # Meet the Man Who Could Make the Price of Oil Spike 20% Overnight - URL: https://katusaresearch.com/meet-man-make-price-oil-spike-20-overnight/ - Type: article - Published: 2019-11-10 - Updated: 2022-09-21 - Author: Marin Katusa Imagine waking up to see this incredible headline on the front page of the *Wall Street Journal…* “**Legendary Investor Warren Buffett Arrested on Corruption Charges**.” You’d think it’s a prank. You wouldn’t believe it. Warren Buffett. An icon of capitalism… America’s friendly, honest, and wealthy grandfather. The man top CEOs look to for advice on how to do things the right way. He can’t be in jail, can he? But eventually, you see the story is for real… and every media outlet talks about it night and day. Warren Buffett has been arrested. Right now, the equivalent of this made-up situation is taking place – for real – in Saudi Arabia. Billionaire Prince Alwaleed bin Talal, a man most people consider to be the best businessman and investor in all the Middle East, was among a large group of high-profile Saudi citizens that were arrested last weekend. The arrests are the centerpiece of an “anti-corruption” purge in the Kingdom of Oil. *Prince Alwaleed bin Talal* Alwaleed is a very smart, flamboyant Saudi investor. He owns large stakes in major American businesses like Citigroup and Twitter. Forbes says he’s worth over $15 billion. You could say he’s the Warren Buffett of the Middle East, but with even more celebrity star power in his home country than Buffett has in his. Alwaleed is also the nephew of the current Saudi king. This makes his arrest also like if Donald Trump’s nephew was tossed in jail. I know most Americans don’t care much about what happens in Saudi Arabia. But the incredible situation taking shape right now in one of the world’s top 3 oil producers will directly affect your 401(k) and the U.S. economy. You’d be smart to know what’s going on. Here’s how I see it… **A New Era in the Kingdom of Oil is Underway** For better or worse, I’ve become an armchair expert on Saudi Arabian politics. The kingdom is one of the world’s top three oil producers. It shuffles among the top three spots with Russia and the U.S. So, any oil and gas investor worth his salt must know what’s going on in Saudi Arabia. Seemingly-small decisions made there can create massive swings in oil and gas prices. In early 2016, [I wrote a research piece on Saudi Arabia](https://katusaresearch.com/3-keys-the-news-outlets-are-missing-on-the-saudi-aramco-ipo/). In addition to covering the potential IPO of its massive state-owned oil company Aramco, I discussed the rise of a dynamic new power in the House of. This new power’s name is Crown Prince Mohammed Bin Salman (MBS). He’s the youngest son of current Saudi king, King Salman. MBS is part of a force I described in my *New York Times* bestseller*, [The Colder War](https://www.amazon.com/Colder-War-Global-Slipped-Americas/dp/1118799941)*. In the book, I stated how young Saudis would take power from the old generation and create a whole new direction for the country (see the sub-chapter entitled, Shaky House of Saud). At the time of my research piece, MBS was just 30 years old… yet had already accumulated enormous power and responsibility. He was soon to be named next in line to be king by his father. The naming of MBS to be next in line to become king in June 2017 was a huge shock in the country. Arab culture places huge importance on age and experience. I’m sure many “old school” Saudi royals believe that MBS is too young to have such power. He hasn’t “paid his dues” in their eyes. Since his father, the current king, is 80+ years old and reportedly has major health problems, one of the world’s largest oil-producing countries could soon have a young man at the helm. The Saudi masses will see MBS as exactly the right man to lead the kingdom into the next generation. He is smart, aggressive, and most importantly, willing to do what the people view as the right step, which is stamp out corruption. Just before the Arab Spring (which toppled some large Middle Eastern governments) broke out in 2011, I travelled through many Arab nations on different business trips. Whether I was in Kuwait, Iraq, UAE, Egypt or Syria, I found that across the board, “regular people” – cab drivers, hotel workers, etc. – all had a negative view of the Saudi royal family. They don’t like how the royals live lavishly while average people struggle to keep food on the table. I wrote about this situation in detail, and just 45 days later, the Arab Spring happened. **What MBS is Doing Right Now in Saudi Arabia is Brilliant.** First, he is consolidating his own power by eliminating the people he believes would be a threat to it. He’s eliminating threats under the veil of stamping out corruption within the kingdom. It’s a power play that has worked for thousands of years. When people threaten your political power, accuse them of corruption and jail them. Threat removed. (Let’s hope Trump doesn’t read this). Secondly, MBS will take the tens of billions of dollars that have been earned via “corruption” and direct them back towards the state. I expect a lot of that money will be directed into social programs that benefit regular Saudi citizens. MBS is playing “Robin Hood,” taking from royals who have abused their power and giving to the people. And, the whole time, MBS will have the full support of the United States for two main reasons. The first is that MBS will take on Iran for the U.S. in the region. This is something Donald Trump wants and needs. In MBS, President Trump has a bold, powerful leader who will do it. On a side note, Trump wouldn’t mind a war in the Middle East. It would be good for defense contractors that supported the Republicans. It would also create inflation in the global economy, something politicians would love to see. Moderate inflation helps create an illusion of growth and prosperity. Secondly, the U.S. understands that the Chinese will invest in Saudi Aramco’s IPO (or perhaps even Pre-IPO). The Chinese currency will rise in importance relative to the U.S. dollar. MBS is positioning himself to leverage the U.S. against the Chinese to advance his own agenda. Both will be willing participants in his game so they can advance their own agendas. Great move, MBS. In my [original article](https://katusaresearch.com/3-keys-the-news-outlets-are-missing-on-the-saudi-aramco-ipo/) on the Saudi Aramco IPO, I stated how a potential “youth vs. age” power struggle in Saudi Arabia could have major consequences: *As King Salman’s health deteriorates, a youth vs. age struggle could develop and a 1964-style coup could be in the air. Which has ramifications. The political fragility within the Kingdom may be a significant threat to the internal stability of Saudi Arabia, the Middle East, and the Saudis’ allies as the country enters treacherous ground going forward.* This scenario I laid out is becoming real. MBS is making a bold move to consolidate this power. I believe this will major effects on the global oil markets. It is the oil-covered black swan I’ve been waiting for. Also, a serious war with Iran looks to be in the horizon, which will also be bullish for the price of oil. This matters to all investors. It matters to anyone who consumes oil. **The price of oil has not only bottomed, it is going to go higher.** The best way to bet on MBS furthering his agenda – and upsetting the established order of the Middle East – is to invest in oil-rich North American shale plays where there is existing infrastructure and the paybacks are less than 12 months per well. The best technology is now being applied in the liquid-rich North American plays. Oil companies are drilling wells that are comparable to the best wells in Kuwait, Iraq, and Saudi Arabia. Why take the political risk when the same results are right here at home? For my money, right now, I am focused on the low-hanging fruit… the easy money is right here in our North American backyard. More importantly, the oil being produced in North America is needed in North America. So, the “low cost” foreign oil is now comparable to domestically produced oil from low-cost liquid-rich wells. Without any of the delivery risk that comes from depending on the Middle East. Prince Mohammed Bin Salman (MBS) has made the global oil markets much more interesting, and I want to thank him for that. I was starting to get bored with the oil markets, and the game is now back on. Because MBS is so young and has just made his boldest move to consolidate power, I have a feeling we are in for a long and exciting chapter in the story of oil. Fortune favors the bold, and I wish Prince Mohammed Bin Salman the best in his executing the rest of his plans. Things are about to get interesting. Regards, Marin Ps. One of my biggest personal holdings is a liquid rich oil play that’s in the “next great shale field”. **Shares are up 25% in less than a month and moving on higher volume**. The great news is that the land owned by this company is selling for an 80%+ discount to similar properties around the world. This junior stock is poised to soar hundreds of percent as the world catches on to this story. To get the name of this stock, consider becoming a member of *Katusa’s Resource Opportunities* by [clicking here](https://katusaresearch.com/subscribe-17/). Or get in touch with our excellent Customer Service Team at 778-737-7381 and mention promo code “KATUSA17” to get $500 off the regular price for Friday, Nov 10th only. --- # This is the Rolls-Royce of the Precious Metals Business - URL: https://katusaresearch.com/this-is-the-rolls-royce-of-the-precious-metals-business/ - Type: article - Published: 2019-11-08 - Updated: 2021-09-13 - Author: Marin Katusa Rolls-Royce is often ranked as one of the most reputable brands in the world – and for good reason. Its machines are reliable. And its brand is synonymous with luxury and the finest craftsmanship across the auto, marine and airplane sectors. In 2019, Rolls-Royce will generate $21 billion in revenue, off the backs of 54,500 employees. This works out to $382,000 in revenue per employee. Not bad. In today’s world it’s all about maximizing efficiency to generate the most profit. This is known all too well in the resource sector. Hard times have crippled the industry. All the way from the Newmont’s and Barrick’s of the world down to the tiny junior exploration companies, it’s been tough sledding. From a returns perspective, the royalty business has – hands down – been the best place to invest over the last few years. ## **You Could Call it the Rolls-Royce of the Resource Sector. ** In fact, few investors know that the royalty business is one of the best ways to make a fortune. Take the entertainment industry, for example. Songwriting brothers George and Ira Gershwin wrote an entire catalog of hits between 1920 and 1937. Today, their heirs make around *$8 million per year* in royalties from songs written nearly a hundred years ago. You can also buy shares in precious metals focused royalty stocks, like **Royal Gold**. This company doesn’t explore, mine, or produce a single ounce of gold. Instead, it collects royalties on 42 different mining projects around the world. If you were an early shareholder in Royal Gold, you’d be sitting on extraordinary long-term gains. But here’s the thing… You’d have to be related to someone in show business, like the Gershwins… or have the good fortune to have bought Royal Gold back in 1986, to make anywhere near that kind of money. But even narrowing your timeframe shows that owning royalty and streaming companies is good for your portfolio. Below is a chart which shows the Katusa Royalty Index versus the major gold producers and mid-tier producers for the past 5 years. You’ll see it’s no contest. ![Rolls-Royce Precious Metals Return Comparison Chart]It’s actually incredible how much cash these businesses earn. You’ll have to look no further than my friend, [the billionaire wine connoisseur](https://katusaresearch.com/dinner-billionaire-wine-connoisseur/) Pierre Lassonde’s company Franco Nevada as a stalwart in the space. So let’s use the largest company in the royalty sector as a case study. Below is a chart which shows Franco Nevada’s Net Income earned per employee. I’ve compared it to notable household names like Goldman Sachs, Facebook, Apple and Chevron. What you’re about to see will likely blow your mind… ![Annual Net Income per Employee Chart Franco Nevada]It’s astounding that on a *profit* *per employee* basis, the royalty/streaming business model absolutely crushes it. So how does the model work? I’m glad you asked… ## **Understanding the Business – What’s the Difference Between a Royalty and Streaming Company?** At its core, royalty and streaming companies exchange their financial capital for a right to a percentage of revenue or production of an asset. The difference is: - A royalty is when the company receives a percentage of revenue or profit. - A stream is when the company receives a percentage of production. **Here is a basic example of a royalty structure… ** Casey Mining Corp wants to build a gold mine in Argentina. But it doesn’t have enough money to build it. Let’s say the construction cost is $100 million but the bank will only give them $75 million. So, they’re $25 million short. Fortunately, around the corner from Casey Mining Corp’s office is Katusa Royalty Corp. Katusa Royalty Corp will give Casey Mining the $25 million it needs. But obviously Katusa and his shareholders require a significant return on their investment. Katusa Royalty Corp believes in the project, so it’s willing to take 10% of the revenue generated from the mine for 10 years, in exchange for the $25 million. It’s a win-win scenario. Casey Mining Corp gets to build its gold mine. Meanwhile, Katusa Royalty Corp earns a de-risked return on investment. This type of structure would be called a royalty. **Here’s an example of streaming structure…** If Casey Mining gave up 10% of its future gold production at a predetermined gold price, in exchange for the $25 million from Katusa, the deal would be called a stream. Today, mining companies that are looking to finance part of their operation with a stream or royalty deal have a plethora of choices. While some would tell you otherwise, in reality only a select few companies have access to world class opportunities. It just comes down to cost of capital. Larger companies in the space like Franco Nevada and Wheaton Precious Metals have a lower cost of capital than their competitors. It gives them the upper hand in the bidding war. They can offer better investment terms because their cost of capital is lower than their peers. It’s why you see smaller companies offering royalties and streams on third and fourth tier mines, or mines in dicey jurisdictions that aren’t even producing yet. ## **Royalties and Streams Are Best Made in Hated Markets** In certain sectors outside of gold, silver and copper, competition for the best royalties and streams is far less fierce. There’s one corner of the resource sector where there’s NO competition. It’s like showing up for a 100-meter sprint, and everyone else is out of shape and running in flip-flops. This one company I’m putting money into has the entire segment all to themselves… **It’s an incredible opportunity for the right company to be a first mover in the space. ** According to S&P Global Market Intelligence, there is one sector where only 35% of projects considered to be in the Advanced or Development stage are currently subject to royalties. On the other hand – in the gold sector – roughly 50% of producing and development stage gold projects have some sort of royalty or stream on it. After a little due diligence, you’ll see many of those royalties in this niche sector are very small, immaterial deals structured by past project owners. This one particular sector is virtually untouched by modern, cashed up royalty companies. It offers incredible upside and this one company offered terms in a deal that I just couldn’t resist. It’ll be a multi-million dollar investment for me. And subscribers have been overloading the company’s phone systems to stake their piece alongside me and other big investors. Don’t miss out on the next opportunity to get in on one of the hottest deals to hit the resource markets in a decade – sign up to [become a member of Katusa’s Resource Opportunities at an incredible price](https://subscribers.katusaresearch.com/kr-flash-offer-ipo-nov-2019/), while the limited membership spots remain. Regards, Marin Katusa --- # Whitelist Katusa Research - URL: https://katusaresearch.com/white-list-katusa-research/ - Type: page - Published: 2019-11-04 - Updated: 2025-05-01 - Author: Marin Katusa ## How to Whitelist an Email From Katusa Research Adding an address to your whitelist ensures that email from that address will not be filtered as spam. The simplest and fastest way to whitelist us would be to add our email address – **subscribers@katusaresearch.com** – into your address book. The steps needed vary, depending on the email service provider you’re using. We have gathered the procedures for some of the most popular email services below. If you have any issues with these instructions, please contact us at **subscribers@katusaresearch.com**. **These instructions are correct as of December 2024.** ### Gmail - Log in to your Gmail account: https://mail.google.com/ - Go to Google Contacts: https://contacts.google.com/ - Click on "Create Contact" at the top left corner. - Select "Create a contact" from the dropdown menu. - Enter our email address (**subscribers@katusaresearch.com**) in the "Email" field and add our name. - Click "Save" to add us to your contacts. ### Yahoo! - Log in to your Yahoo Mail account. - Click the "Contacts" icon on the right side of the screen. - Click "Add a new contact" at the bottom. - Enter our name and email address (**subscribers@katusaresearch.com**). - Click "Save" to add us to your contact list. ### AOL - Log in to your AOL Mail account. - Click the "Contacts" icon in the lower-left corner. - Click "New Contact" at the top. - Enter our name and email (**subscribers@katusaresearch.com**). - Click "Add Contact" to save. ### Outlook - Log in to your Outlook account. - Click the "People" icon in the sidebar. - Select "New Contact." - Enter our name and email address (**subscribers@katusaresearch.com**). - Click "Create" to save the contact. ### Apple Mail - Open the Contacts app on your Mac. - Click the "+" icon and select "New Contact." - Enter our name and email (**subscribers@katusaresearch.com**). - Click "Done" to save. ### Comcast - Log in to your Comcast email account. - Go to "Address Book" from the menu. - Click "New" and choose "New Contact." - Enter our name and email (**subscribers@katusaresearch.com**). - Click "Save." ### Cox.net - Log in to your Cox email account. - Click "Address Book" from the main menu. - Select "New Contact." - Enter our name and email (**subscribers@katusaresearch.com**). - Click "Save." ### Thunderbird - Open Mozilla Thunderbird. - Click "Address Book" in the toolbar. - Click "New Contact" or "New Card." - Enter our name and email (**subscribers@katusaresearch.com**). - Click "OK" to save. --- # Negative Rates, Access to Deal Flow and a First Time Ever for Doug Casey - URL: https://katusaresearch.com/negative-rates-access-to-deal-flow-and-a-first-time-ever-for-doug-casey/ - Type: article - Published: 2019-11-01 - Updated: 2020-02-05 - Author: Marin Katusa Doug is a legend in the business. Like with most legends, comes the peanut gallery that try to bash what he has accomplished to have their dorky voices heard among the roar of a legend. Ask yourself this, these trolls who bash, what have they accomplished? Doug has travelled to over 100 countries, lost and made more money than most can comprehend. And he’s experienced a life most can only read about or dream about. Yet, what you will read here—is the actual relationship between Doug Casey and I. And is the first time something like this is being published – ever. ## **I manage most of Doug Casey’s and his wife Ancha’s resource portfolio…** Ancha is smarter than Doug. She was the one who requested many years ago I manage their funds. Doug didn’t think I would do it, but out of respect for the opportunity he helped create for me early on in my career, I took it on. A small digression to my main missive today, Doug’s wife Ancha is Paul van Eeden’s older sister. Doug Casey was the one who got Paul his big break in the resource business. Many don’t know that after Paul (who is uber smart and an overall great guy) worked with Rick Rule for many years, he wrote Doug’s newsletter for a while. Then started his own letter. Paul moved on, sold the letter to his good friend, the white bearded geo. And the white bearded geo got two ten baggers from me—and I’m still waiting for my first from him. I like you my favorite white bearded geo. But seriously, I’m still waiting…. It’s a small community, and most are connected via one degree of separation. For the first time ever, I’ll pull back the curtain on the relationship between Doug and I and you can be a fly on the wall… ## **Doug and I are competitors in a way… ** He is part of the ‘Empire’ newsletter group. I run a newsletter that the ‘Empire’ wishes they wrote and can’t have. But ironically, Doug and I are closer than ever. Yes, I’ve made him and his wife big amounts of money by managing his money—but that’s not why. It’s because Doug respects my style of investing, research and outlook and we have a strong understanding of one another. I’ll share a recent Q&A we had, that for the first time ever published in this format—where Doug Casey, like most of our conversation in real life-is asking the questions, and I will share my thoughts. **Doug Casey:** Marin, good to hear your voice. **Marin Katusa: **Doug, how we doing? **Doug Casey:** Absolutely great. I got some questions for you. I was thinking today that since 2007, all of these governments; the Europeans, the Americans, the Chinese, the Japanese, and all these little countries, have been creating tens of trillions of new currency units. All of that money has flown into the stock market and the bond market, and real estate markets in big countries. It hasn’t gone into commodities, yet. This is where the action is going to be. You agree? **Marin Katusa:** By definition, [look what just happened with the German bonds](https://katusaresearch.com/financially-transmitted-diseases/). They got more money at -0.46% than they did at -0.28% **Doug Casey:** It’s completely insane! I thought it was metaphysically impossible to have negative interest rates. **Marin Katusa:** Remember, you can take the square root of a negative number as long as you introduce imaginary variable, so anything is possible with financial alchemy, and that’s where we’re at. By definition, that is deflationary, when you get negative interest rates like that. People don’t understand the negative consequences of deflation. It’s way worse than inflation. And you can’t deflate gold. I don’t care what you try to do. [You cannot deflate gold](https://katusaresearch.com/throw-everything-you-know-out-the-window/). When you look at what’s going on globally, Canada, with all its vast wealth in resources, with the wise wisdom of our socialist government, got rid of all their gold. Our federal government has no gold. So, that tells you that it’s probably a right time to start paying attention for those who have no exposure to gold. If you look historically, the sovereign wealth funds, the pension funds, they are at their lowest level of exposure to commodities in the last 75 years, and that is true for as far back as the data has been tracked. You want to be where no one else is, because once it starts picking up – and we’re in the early, early innings. It’s going to be volatile, so don’t overcommit. This is an ironman journey. You’re seeing what’s going on globally. You’re seeing the trade wars. You’re seeing what’s going on with sanctions. Negative interest rates globally. You’ve got the baby boomers retiring. People are going to start figuring it out. Let’s take the oil patch, for example. I was one of the earliest guys, in fracking. Remember, I used to debate all the gurus in 2006 and 2007. I said “By 2020, America will be a net exporter of oil.” People laughed at me, including some major oil executives who were at our conferences at the time. **Doug Casey:** And if you don’t know these things, you’re asking for trouble, investing in these markets. **Marin Katusa:** We’ve both learned the hard way—with our own money. The education through actually doing has cost me a lot of money, throughout the years. Luckily, we’ve had incredible returns also because of the lessons we’ve learned. And a passion of mine is teaching and I will enjoy sharing these lessons with people. “Be careful for this, because of these reasons…” **Doug Casey:** A great example is your unique take on uranium, which has made both of us many millions. **Marin Katusa:** I am probably the most hated guy in the uranium sector, yet probably top three largest financiers in the sector. Why? Remember Doug, I wrote a whole chapter about uranium in my book, and have been talking about the current [“Cut 2 Kill” strategy the Kazakhs are doing right now](https://katusaresearch.com/russia-1-trump-0-section-232/). And they are the smartest players in the room when it comes to Uranium, not the cowboys in Saskatchewan. Ironically, Kazatomprom, the world’s largest producer of uranium quotes me in their investor presentation. Yet, so many people said “*Marin’s crazy! What’s he talking about? Uranium’s so low, it can’t go lower.*” I said “*Section 232 is probably going to be delayed. It’s already priced into the market. It’s not going to do much, and I think it’s overpromoted.”* More importantly, if I were the Kazakhs and the Russians, I think “Cut 2 Kill” is the best strategy for their long-term goals. Imagine the power and knowledge of being the OPEC and Russia in a commodity, but you’re one company that controls over 40% of the worlds primary production of a commodity. For the Kazakhs to take some near term pain for long term gain is no problem. Yet, the public market companies can’t fight that strategy. So they bitch and whine while the former Soviet states consolidate power across the globe in the commodity. So, you can either figure this out and make a fortune over the next 5 years understanding the real framework of the market—or stick with a wrong narrative that makes you feel good. **Doug Casey:** You mentioned the Russians, and that’s interesting. Because just as the Canadians sold all of their gold pretty much at the bottom, the British sold all of their gold pretty much at the bottom, too. Now, who is buying gold today? What governments are buying gold? **Marin Katusa:** China, Russia, you and me. **Doug Casey:** What I think is going to happen, and is going to light an additional fire under this bull market, is that since the Chinese and the Russians, when they trade – the Iranians, everybody, the Indians – everybody trades in U.S. dollars, but nobody wants to trade in U.S. dollars, because it’s the currency of their antagonist, and all of that money has to clear through New York. What’s going to happen? And it’s going to drive gold to very high levels. I know that you’re not counting on higher gold prices, in order to make money on these stocks, but it’s going to happen. Because as the Chinese and the Russians buy gold, they’re going to have a gold-backed ruble, a gold-backed yuan. In order for that to happen, you’re going to need much higher gold prices than we have today. **Marin Katusa:** I think the market hasn’t quite figured the implications of Trumps sanctions. Sanctions are way more powerful than bullets. Let’s get that straight right away. Take Trumps strategy on Iran. It’s so smart—but yet will have ripple effects in the next few years that nobody is talking about. For example, its not just sanctions against Iran. By definition, that means any company that does business with Iran—selling computers etc. can’t work or do business with or in the USA. Well, going back to uranium—that’s a way bigger stimulus for the uranium market than section 232 would ever be. Why? Because the US imports over 95% of the uranium it consumes. And both Russia and Soviets sell a lot of uranium to the Iranians. So, either a choice has to be made; dump Iran, or dump America. Can’t have both. And if China acts as an intermediary—that means if you work with China—China gets slapped also in Trumps Iran sanctions. Will Putin dump Iran? No! So, this actually works in the benefit of both Russians and Kazakhs, because you will see a giant pop in the price of uranium if that happens. We haven’t talked about this – I believe there are a lot of things working for the U.S. dollar in the near term. I know a lot of the gold bugs hate my view on the US dollar and this is going to be a contrarian view. But I’m going to be honest on what I think. Let’s not forget I have a whole chapter in my New York Times Bestseller book, about the Petrodollar. Remember, America was exporting U.S. dollars to the middle east. **Doug Casey:** It’s our major export… dollars. **Marin Katusa:** Exactly. Well now, things are going different. We’re exporting oil. So, there’s this reversal of the petrodollar. Let’s call it the unwind of the petrodollar. So, the global market isn’t getting flooded like it was, relatively speaking, in the U.S. dollars anymore. Think of it as a major decline in availability of U.S. dollars or a shortage of U.S. dollars. Secondly, all of the big debt from the IMF and going around the world, whether infrastructure, dams, nuclear plants, all these road plans, bridges, the wall, whatever you want – the big, big infrastructure projects globally, the big pipelines – the debt is based in U.S. dollars. So actually, in the near term, there’s going to be this kind of vacuum or a shortage of the U.S. dollar. I think this is going to be the first time where I think in the near term, less than 12, 18, 24 months, that the U.S. dollar and gold are going to go up simultaneously. Because it used to always be inverted. Gold goes up, dollar goes down. That’s been the last 40-50 years. I think this is a unique market, because of what is going on globally with these negative interest rates. What is the E.U. going to do? They’re screwed! You have that great line, “At least the U.S. dollar, you know who owes you. The E.U. is, who owes you?” So, it’s going to continue. And like you said, the E.U. – and I’ve done a lot of business in Europe – it’s going to become a museum for the Asians. **Doug Casey:** That’s true. Talking about the U.S. dollar, U.S. interest rates are extremely low. Ten-year bonds are on the order of 2%. But that’s about 2% higher than what you can get in Europe, where it’s negative interest rates. It’s unbelievable that ten-year Greek bonds are also yielding 2%. **Marin Katusa:** Now, do you want a Greek bond or a U.S. bond? Let’s be straight here, right? I like Greek food, my sister in law is Greek and she and her family are wonderful. But, Greek bond is garbage. **Doug Casey:** Exactly correct. There are so many distortions and so much misallocation of capital around the world, that we’re heading for a real smashup. It’s why you want to be in gold and silver, and that’s why you want your money to be in someplace that’s not inflated, that’s not in a bubble. **Marin Katusa:** And if you look at the risk that these European banks, whether it’s the Spanish banks, the German banks, they’re going to have to be bailed out by the government. That’s just the reality. Look at them. Look at their financials. **Doug Casey:** They’re going to be creating more euros. **Marin Katusa:** And that money is going to flee to safe havens, and in the near term, I do believe the U.S. dollar is going to be a safe haven. If you look at all of the big crashes, even in 2008, gold actually did go down initially. **Doug Casey:** For a while. **Marin Katusa:** Yup—all about liquidity. **Doug Casey:** Because there was a market for it. You could sell it. **Marin Katusa:** That’s right. It was liquid. The U.S. dollar has power. Then, gold started ripping. So, what I’m telling people now is make sure you’re cashed up in U.S dollars. Figure out the best players, who they are. What are the best projects? What are managements’ cost base? In today’s market, I don’t need to take any expiration risk. The geos hate when I say that they’re a bunch of pretend scientists with a box of crayons, coloring on a map. Because that’s great in a bull market. But you can buy – for example, when we did Northern Dynasty – that project had over $800 million U.S. invested in it. It had a $25 share price and a $2 billion market cap. We bought one of the biggest blocks in the company at a $45 million market cap, a 98% discount to the share price from 4 years earlier. That’s the situation we are in. I can go on a contrarian bent, that the management have blown themselves up because of the market, because of the financing costs, because of permitting delays. Mining is a tough, tough business, if you don’t know what you’re doing. But if you know what you’re doing, that echo phase I talk about in my second book, you can truly make a fortune. And unless you have cash – dry powder, as I call it – ready to deploy—it’s a lost opportunity. A lot of people say “Marin, you were really lucky that you went to cash in late 2011.” Well, I stayed cash for a while there, Doug. And one of our other partners, thought that I should go heavy into gold in 2014. I said “No. It’s going to go lower.” At the end of 2015, you and I bought out a bunch of our shareholders in the fund, because we believed that the psychology was the right time. You want to buy when there’s blood in the streets, and you want to sell when there’s euphoria in the streets. We are in the “echo” phase of the gold market. Other than gold bugs and a small minority of investors on the global scale—few care about gold and mining. Think of it this way, Doug. If you take every single major gold producer, every major royalty company, mid-tiers, small companies, exploration companies – you take the whole world of gold companies that are involved in the production, exploration, development. You add them all up. Let’s call it Gold Global Market Cap. It’s still smaller than Exxon, which is now not even a major company, when you compare it to some of these tech giants. **Doug Casey:** Exactly. **Marin Katusa:** So, the gold market is so small on a global perspective, especially when you compare it to the bond market. Then, you look at these other industries, kind of like silver. It is a fraction of the gold market. So, there are so few major whales playing in this area. When that tidal wave of capital starts coming in, that’s why you see this explosion, so you structure the best deals. Because what are these big money – they’re not stupid. They’re just going to come in, hire the best analysts and engineers, and go “Okay, what are the best companies?” Well, I’m more than happy to sell them our shares in a couple of years, at majorly elevated prices. It’s a simple business plan. **Doug Casey:** These are the most volatile stocks in the world. You have to buy them when they’re cheap. **Marin Katusa: **And lock in that Katusa Warrant. **Doug Casey:** Yes. In real terms, they are at about the cheapest level in history, very close to it. I’ve been in the markets, mostly in Vancouver, for roughly 40 years, and I’ve seen everybody that’s passed through this town. This is the epicenter of the resource business, mining in particular. I’ve seen the highbrows and the hipsters. I’ve seen the starlets and the phony tipsters. Geologists, mining engineers, stock analysts, newsletter writers, promoters, hustlers. I’ve pretty well covered the territory, and I’ve learned a lot in that time. It’s been a bear market in commodities, since that time. If you want to make money in the markets, you’ve got to buy when things are cheap, when things are quiet. Right now, nobody cares about any commodities, and that includes gold and silver – the precious metals. And especially, people don’t care about these little mining stocks. In the years I’ve been in this market, I’ve seen about six or seven major bull runs, where these mining stocks, as a group, have gone about ten to one. Then, they melt down 95%. Some of these stocks, and I’ve personally owned them, have gone not just ten to one, but 50 to one, 100 to one, and it’s true, 1,000 to one. I think of Diamond Fields, in particular. I think of BRE-X, which was another one that did that. I think we’re on the cusp of what may be the biggest bull market that we’ve had in resources, for 20 years. Okay, so Marin, I trust you implicitly, because I’ve known you for so long. I know how you think and how you research. What are you doing now? **Marin Katusa:** My framework has been very conservative. I don’t use $2,000 gold or $20 silver, or even $60 oil. You’ve seen many of the examples, when we put projects into production. What you call Casey’s Nine Ps, I have something called Katusa’s Keys. Like you say, the technical aspect, the geological risks, those are real, and you have to understand those. But then, there’s the street risks. What are the NGOs around? What are the environmental risks? What’s the permitting risk? What’s the infrastructure risk? What’s the capital finance cost risks? More importantly, when you produce this material, where are you sending it to? These are a lot of the questions that these geos – my wife’s a geologist; I met her in the field – is you have to really be vertically integrated to understand, even before you start a project. Where’s the end product going to go? And what type of deductions are you going to get from the smelter? These are all part of the framework. I think personally, where our success in the fund that I’m the largest shareholder, you’re the second largest shareholder, – and we’ve had a really bad market. We have the top fund in the sector, in North America, and we’ve paid huge dividends – is by keeping this framework where we’re not chasing the deals—we use my theory of “the Way of the Alligator.” When you structure these deals, I think first, we have to start with – I’ve raised the most money in the sector in the last decade, hands down and easily the most of anyone under 50. I’ve raised more money than Haywood and Sprott combined, the two biggest firms, together over the last 5 years for our sector. But I do these with what’s known as the Katusa warrant, the full five-year listed tradeable warrant. And we can start with the benefits of private placements, because that’s, to me and you, if your taking this incredible risk investing in one of the riskiest sectors ever (which is resource exploration and development)—why not get paid twice as much when it works out via the Katusa Warrant. **Doug Casey:** It’s very investor-friendly, actually, unlike the things that most brokerage firms do. The deals that you put together are for the benefit of your subscribers. **Marin Katusa:** We’re the largest investors ourselves in the deals. I disclose our cost base and my subscribers get three business days before I do. **Doug Casey:** That’s right, but you don’t charge a commission, either. **Marin Katusa:** No. I don’t take any fees from any of the financings my subscribers partake in. I’m the largest investor at the same price, at the same time. You’re usually the second largest. The key with this, and I’m trying to warn everybody now, people have seen the success that I’ve had with these private placements, and it’s the number one thing that every publishing house is trying to do today. Ironically, I started the model back in 2006 when I used to work for your firm. Well, first of all, they can’t even invest in these things. So, the “guru” doesn’t have skin in the game, why would you be listening to them in the first place? That’s the first rule. The second rule; these are marketing guys that are being forced to come up with a private placement, so you have some slick marketing guys come to a bunch of newsletter guys being forced to recommend a PP who are promoting the crap out of this, that are unblemished with success. **Doug Casey:** And know nothing about the mining market. **Marin Katusa:** So, be super careful about that. Be careful about who you follow. These publications are charging a lot of money for these private placements, and they don’t know what the hell they’re doing. You get the private placement angle free, as part of my service. People ask why I do a newsletter. I compare it to publishing as a University Professor—it’s all about staying relevant and about deal flow—I have some of the best deal flow in the business and that is a huge advantage for me. **Doug Casey:** Well, look. This is the time to be in this market. You can’t be in the mining market all the time, because the longest trend in history, actually, is commodities dropping. But occasionally, once or twice every decade, they hit a bottom, and then they explode upwards. My opinion is that now is one of those times. We’re at or very close to the bottom. And I think we’re going into the biggest bull market for these things, in 20 years. In fact, these things are the only things that you should have your money in today. I mean, people are invested in all these tech stocks, which are bubbly. Buying trillion dollar market cap corporations like Amazon and Google and Facebook. All I’ve got to say in that regard is, that was great ten years ago. But this is now. High tech, big wreck. Remember that phrase. It’s an old stock market phrase that everybody’s forgotten today. Marin, where to next? **Marin Katusa: **I’m off to Africa tomorrow for a day. **Doug Casey: **You’re going to Africa for a day? **Marin Katusa: **Don’t even get me started Dougie—I wanted to do a few other sites while I’m there, but I had to make it home for personal reasons. Then back to Africa 3 weeks later. **Doug Casey: **You take care of yourself—You shouldn’t be doing these hours anymore—but I know you will because that’s how you are wired. **Marin Katusa: **Say hi to Ancha for me Dougie. Gotta go. --- # Unleashing the Golden Dragon - URL: https://katusaresearch.com/unleashing-the-golden-dragon/ - Type: article - Published: 2019-10-25 - Updated: 2020-02-05 - Author: Marin Katusa Gold has received a lot of fanfare this year, and for good reason. The talking heads on Bloomberg, CNBC and other networks are even getting into the mix. Gold “gurus” are stepping over each other to deliver the next, great target price. So far, we’ve seen target prices of $2,500, $5,000 or even $25,000 per ounce. But in the humble Katusa Research office, I’m happy with $1,500 per ounce. No one has made a John McAfee style, “*Bitcoin is going to $100,000 or I’ll eat my genitals*” prediction on gold yet. So there is an opportunity to get 15 minutes of fame for the right individual. So, let’s do a realistic take on predictions… My investments will be highly profitable at $1,500 and if a moon-shot price of $2,500 per ounce or higher gets hit, then they’ll be wildly so. But that’s not what today’s missive is about. Today’s missive is about something far more powerful. It’s a situation that is brewing in the background, going unnoticed by most. ## **China’s Gold Buying Reaches New Highs** China has been a significant buyer of gold since the year 2000. In 2000, Chinese gold reserves were 12.7 million ounces. Today, they are over 62 million. This is nearly a 5x increase in total holdings. ![Chinese Gold Reserves Over The Years]Looking at the chart above, Chinese gold buying has historically been lumpy. A large, rapid purchase followed by nothing for years at a time. Today, it’s a different story. History is not repeating itself, take a look… ![Chinese Gold Reserves] The Chinese have purchased over 3 million ounces so far this year, this represents just under 3% of global gold production. ## **Curbing Chinese Inflation with Gold** One of gold’s allures is that it’s a store of value. It’s always been a solid [hedge in times of recession](https://katusaresearch.com/is-gold-investment-a-good-move-for-the-future/) and against inflation. In China, since 2002 when the Shanghai Gold Exchange opened, gold’s average annual return when inflation was above 3% was 17%. During years when inflation was below 3%, the return was 6.5%. ![SH Gold Exchange]Inflation has been rising in China. Fueling the fire has been a lowering of the Chinese Central Bank’s reserve requirements. This will spur additional lending and increase the money supply. Remember how I said gold was a store of value? This is a real-life experiment where you would want to protect your assets from currency devaluation. We all know [where Donald Trump stands on China’s currency situation](https://katusaresearch.com/chinas-golden-corridor-gold-reserves-and-negative-yield/). ## **What About Chinese Paper Gold? ** In North America, you can buy an **E**xchange-**T**raded-**F**und (**ETF**) that is backed by gold. The largest of which is the ‘GLD’ ETF, which has assets under management of over $40 billion. At a gold price of $1,500 per ounce this works out to 26.7 million ounces of “paper gold” exposure. If you add up the holdings of all the major gold ETFs – the “ounces under management” is 81.7 million ounces. Now, there are only 3 publicly traded gold funds in China. The combined holdings of the ETFs is a paltry $2 billion. - **That said, the assets under management have quadrupled since 2015.** Take a look… ![Chinese gold ETFs - Assets Under Management] It’s safe to say, that the “paper” gold market is just getting started in China. Will it ever be as big as the North American paper gold market, maybe not. But it’s certainly going to grow, and faster than everyone thinks. Here’s something you probably didn’t know… ## **Chinese Gold Companies Have Been on a Tear** Again, like the gold ETFs there aren’t that many yet, only 12 right now that are precious metals focused. However, the returns of those companies has blown the developed world’s gold company’s out of the water. Below is a custom built *Katusa Chinese Gold Miner Index*. For ease of comparison I have included the returns of the largest U.S. listed Gold Miner ETF, the ‘GDX’. ![Gold Miner Share Performance]We have all heard stories about massive speculation that drives wild pricing in the Chinese markets. If you were a speculator, wouldn’t you want to hedge some risk with gold? Knowing your country has been a continuous buyer? To me, it makes a lot of sense that these speculators eventually trickle into the paper gold to hedge their risk… and then into the producer market for further speculative upside. Closer to home, the [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) gold portfolio has also been on a tear. We have had multiple holdings increase by 100% or more this year. We are even giving the Chinese Gold Miners Index a run for its money. My team and I will be in San Francisco this weekend, co-hosting the Silver & Gold Summit. If you are in the area, do yourself and your portfolio a favor and come check out the show. Regards Marin --- # Gold vs Bitcoin: Quantum Economics and Financially Transmitted Diseases - URL: https://katusaresearch.com/gold-vs-bitcoin-quantum-economics-and-financially-transmitted-diseases/ - Type: article - Published: 2019-10-18 - Updated: 2019-10-24 - Author: Marin Katusa It’s a common strategy in war. Addition by division. Put simply, adding content and flair by dividing two sides, is a very effective means of polarizing two or more sides. Cultural communists use it in their war on climate change “*You’re either with us ditching plastic straws or you’re harming the environment*”. Economists use it to confirm their investment bias, “*If you’re not a Keynesian follower then you’re not a true capitalist*”. Crypto enthusiasts use it too, “*HODL or you hate Bitcoin, the future currency of everything*”. Dividing people is an easy way to engage the ones most in favor of your cause, or financial interest. And Gold vs Bitcoin is no different. I was recently asked to lend my thoughts in a candid interview and to “*rip on bitcoin, if I hate it*”. But the truth is, I’m a profit bug. If I can make money in gold, [which we’ve done handsomely here in 2019](https://katusaresearch.com/why-americans-should-not-buy-physical-gold-right-now/), I will. If I can make money in Bitcoin, which could return with a vengeance in the near future, I will. And there’s a third, critical asset class that I believe is one of the best places to be. Contrary to what many pundits, fund managers and investors think. But it has served my subscribers and I very well. It all comes down to central banks and governments unwittingly pushing [Financially Transmitted Diseases](https://katusaresearch.com/financially-transmitted-diseases/) on the globe. This will have incredible and lasting effects on world economics… And it will cause disruptions that will allow you and I to move our net worth needles in earnest, if you stay contra to the herd mentality. In this exclusive interview transcript I had with Real Vision, I explained: - Why I call negative interest rates a “financially transmitted disease.” - How negative interest rate policy (NIRP) affects savings rates and the rest of the global economy. - The potential for further negative rates around the world, as well as the prospects for NIRP in the United States. - How exposure to the single most powerful asset class in the world, along with precious metals (especially miners), and bitcoin will bolster portfolios through turbulent times. [Click here to see the unfiltered transcript for yourself.](https://katusaresearch.com/wp-content/uploads/2019/10/RV.pdf) Kind regards, Marin --- # The World-Class Gold & Silver Summit That Could Produce the Next 10-Bagger - URL: https://katusaresearch.com/the-world-class-gold-silver-summit-that-could-produce-the-next-10-bagger/ - Type: article - Published: 2019-10-11 - Updated: 2019-10-10 - Author: Marin Katusa Gold and silver have been hot in 2019, no doubt. These are the early innings of something extraordinary. Taking a look at sentiment and search indicators, you’ll find that *gold stocks* are searched more often than *marijuana stocks* now. But a rise in precious metals and stock prices won’t be without volatility and bumps along the way. That’s why I don’t get emotionally attached to gold… or stocks… or silver. I believe people who get emotionally attached to gold or silver or any other investment are making a huge mistake. Getting emotional about your investments is sure to cloud your judgement. Save the emotional attachment for your kids. They’ll love you back. Your investments won’t. If you want to make great decisions about gold, silver, and all your other investments, you need the [best information](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). And most of the time, it involves a face-to-face conversation (in the room, in the deal), instead of sitting behind your computer screen. One of my goals in founding Katusa Research was to level the playing field in the natural resource sector. It was created to provide individual investors with the insight, resources, and tools they need to compete with large funds and connected players. ## The San Francisco 2019 Gold & Silver Summit Two weeks from now, you’ll be able to get that information at the San Francisco Gold & Silver Summit, which Katusa Research is co-producing with our partners at Cambridge House International. - **On October 27th-28th, I’ll be in San Francisco, California co-producing the 2019 Gold & Silver Summit with Cambridge House International at the Hyatt Regency.** This summit is a more intimate version of the Vancouver Resource Investment Conference coming up in January. With a tighter capacity, it allows for a personal, private setting to get to know some of the best names in the resource industry. …And you can find some interesting stories that are ripe for a surge in returns. Take **SSR Mining** for example, up 159% since the last October… Or **Liberty Gold** up 244%… Or **Discovery Metals** up 213%… There are some very powerful and connected speakers attending this year. For example, do you want to know what President Trump may be thinking about the economy? Well, you should come and listen to **Stephen Moore**, who personally advised President Trump’s 2017 Tax Cuts and Jobs Act. Stephen Moore isn’t just a smart and connected guy – he’s also a gentleman. He’ll be at the conference giving a keynote, and will answer any questions you have. Where else can you get this kind of access? I’ll have my boots on the ground on the conference floor and on the stage, interviewing companies and meeting with key management behind the scenes. - **This year, there will also be the exclusive Deal Room…** It’s a private setting in the heart of the trade show floor for pre-scheduled, one-on-one meetings. The Deal Room allows investors to meet with company CEOs and keynote speakers. All meetings are held in a private setting, with personal hosts. The Deal Room is where companies meet 1 on 1 with high profile small-cap and value investors, family offices, portfolio and fund managers, bankers and investment advisors. I’ve spent many years in this gauntlet, and I know exactly what to look for in a great opportunity and speculation. The meetings, dinners and hallways of these shows is where I hunt for my next private placement and get a sense of where to deploy 6-7 figures of capital. ## **Your Exclusive VIP Katusa Pass** For more information on the companies and agenda and to register, [click here](https://cambridgehouse.com/silver-gold-summit). I’ve also arranged for you to get complimentary tickets and save the $50 fee. To get them, enter the promo code “**KATUSA100**” at the checkout. | **I encourage Katusa Research subscribers to come say hello and attend if they’re in the area.** The show has a long history of success, as it has been running for many decades. And this conference is solely happening because of my partner, Jay Martin, who runs Cambridge House. After every year, we do a wrap of the show, and after last year’s San Fran conference I didn’t want to do the conference in San Fran any longer. Side Note: As Mr. San Francisco (heavy hitting investor Paul H. Stephens—who attends the summit) once said to me, “*We in San Francisco don’t call it ‘San Fran’”*. But because Jay is so committed to having the conference in San Fran, I respected his decision. I much prefer Napa over San Fran. But if you want to find the next big score in mining or the next big drill program with a chance of success—you’ll want to make the effort to attend the summit. Actually, “gold and silver summit” is a misnomer. This annual conference started out with a focus on precious metals, but it’s grown massively beyond that subject… and has become one of the few conferences I make a point to attend every year. ## **This Year’s Speaker Lineup is Exceptional** My friend **Rick Rule** will be speaking. Rick is one of the natural resource industry’s smartest minds and one of its most skilled financiers. Rick is a walking encyclopedia of resource and business knowledge. He’ll discuss in detail the sectors and companies he sees the greatest opportunities in over the next 12 months. **Frank Holmes** will be there. Frank is the CEO and Chief Investment Officer of U.S. Global Investors. You’ll also hear from **Grant Williams, the co-founder of Real Vision** and editor of *Things That Make You Go Hmmmm*… Grant is an old buddy of mine, and sadly for Grant, the years are showing—just kidding Grant. But Grant will present a new talk to all and will be on a panel. In his [presentation before a standing room only crowd](https://www.youtube.com/watch?v=fjhLp8AHAYc&list=PLFDJWb6LJdV6UOUI2YkeRqVsZFhpFgANF), he was one of the first voices to talk about how the fall of the dollar could lead to a revised return to the gold standard. You could’ve gotten his thoughts and ideas before 240,000 other people on YouTube. I’ll be speaking at the conference as well… along with some of the world’s best business executives and newsletter writers. During panel discussions, I’ll ask investors and executives the hard questions… with a focus on getting the most useful, most actionable information for myself and the audience. **Make no mistake – although you’ll have fun, meet great people and be entertained, this conference is about making you money. ** The speakers were chosen with that goal in mind. Which company will be the next 10-bagger like Northern Dynasty, or be taken out by a gold major in a 47% “overnight win” like what happened to Integra Gold? Attending the conference will be a tremendous way to arm yourself with the knowledge and connections you need to make the biggest possible returns. Chances are high that you’ll hear about the next crop of big wins over the next 12 months at this conference. I hope to see you there. Regards, Marin Katusa --- # Why Americans Should NOT Buy Physical Gold Right Now - URL: https://katusaresearch.com/why-americans-should-not-buy-physical-gold-right-now/ - Type: article - Published: 2019-10-04 - Updated: 2019-10-03 - Author: Marin Katusa I can already see the hate mail coming in. But, it’s true. Americans, living in the U.S., shouldn’t buy physical gold right now. First, let me start by saying that I believe we’re in the early innings of a spectacular gold bull market. And I hold physical gold myself. But I’m not an American living in the U.S. And this coming bull market is one where I believe the right gold stocks will do very, very well. **So why shouldn’t Americans rush out and buy physical gold at today’s prices, or over the next 12 months?** Simple… The U.S. Dollar will continue its newfound strength [alongside the price of gold](https://katusaresearch.com/throw-everything-you-know-out-the-window/). Contrary to your recommended YouTube video feed and $1 million ad budgets to buy “America Dollar Crash 2020”, the U.S. Dollar just isn’t going to zero anytime soon. ![US Dollar and Gold Rising Together]For too long gold bugs have been using the demise of the U.S. Dollar as the reason to buy gold. Well, in the current global environment, that argument is just flat out stupid. But there is one-way Americans can use their string dollar to outperform physical gold immensely. I’ll get to that later in this missive. ## **The U.S. Dollar is Still the King of Currencies – Physical Gold is Queen** And I don’t see the USD being knocked off the throne anytime soon. Not by Bitcoin, not by gold and not by silver. Let me explain. Physical gold makes sense right now for citizens in most countries except the U.S. If you live in Canada, Russia, China, Australia, Turkey and many other nations outside of the U.S…. Then yes, buy and store physical gold because your currency will devalue significantly to the U.S. currency. Gold is an easy way to “store” or hedge your wealth from being devalued away. Remember that gold producers in those countries are selling gold in USD but paying for operations in a cheaper currency. And that means more profit on the bottom line. I see this trend continuing for the next 12 months. ## **What About Individuals in Those Countries?** Those same individuals could convert their foreign currencies into U.S. Dollars and do just as well. I think for the people in countries outside the USA, the correct answer is to own both U.S. Dollars and gold. U.S. Dollars are way more liquid than gold and the exchange fees are much less (because it’s so liquid in most of the world). So be careful in buying physical gold. And if you do buy gold, remember to buy government issued gold where you can convert (meaning sell) the gold coins quickly. If you buy non-government issued gold, you’ll be receiving some serious discounts in addition to the selling commissions. By now, you’ve probably figured this out… ## **I Expect Both Physical Gold and the U.S. Dollar to do Well – But Gold Stocks Will Top Them Both** Americans should have exposure to gold through equities of foreign producers of gold. That’s the best way for Americans living in the U.S. to convert their strong U.S. Dollars into undervalued gold stocks and optimize their returns on the best performing gold stocks. Convert your U.S. Dollars into shares of a mining company that have significant upside at current prices because they’re producing gold in a currency that’s weakening. The best way for Americans is to leverage their strong dollar and take advantage of significantly discounted producers who are producing in a weak currency. Here’s a quick example: If you are producing gold in Brazil today, your cost to operate (after building the mine) is literally 30% cheaper today than 5 years ago. So, what’s the reason? All because of the depreciated currency in Brazil. Canadian and [Australian gold producers are also benefiting](https://katusaresearch.com/australian-gold-stocks-and-the-commonwealth-takeover-part-2/) from weak domestic currencies. ## **What’s Next for Gold?** Gold and gold stocks had a strong run here in 2019 and it’s true that a rising tide lifts all ships. But how are your favorite money managers doing on an apples to apples comparison? Let’s find out… One of the smartest financiers in the resource sector is Rick Rule who is the head honcho at Sprott. And one of the largest players in the gold sector is Van Eck, who run the junior gold ETF, GDXJ. In our recent October issue of ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)***, we stacked all of our gold/silver picks next to the best in class. And here are the results… ![Gold Portfolio Comparison]Rick and I are fierce competitors in this arena, but also good friends and all I can say is, Rick, being 2nd place is pretty good too, just not as good as being first! ? But I do want to congratulate all subscribers and my team for believing in us to be able to deliver results where Katusa Research more than doubled our nearest competitors in the resource sector on returns. Remember, it never hurts to take a Katusa Free Ride to take profits off the table and let your winners ride with no risk. We’ve done that with: - **A junior gold/copper explorer that gained 270% in just under 2 months…** - **A natural gas company for a quick gain of 171%** And most recently, **one of my core gold stock holdings is up a nice 273% YTD** and heating up with increasing volume. So what’s next on my radar? After 2 years of due diligence… **I am just finishing the final pieces of my next Major Gold Take out which [I will publish for all my KRO subscribers](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)**. I haven’t bought the stock yet, and KRO subscribers will have 3 business days after publication to buy before I start buying. This is a gold stock I believe will be bought out by a major—and I plan on making somewhere between 50-150% gains on this low risk bet. I’m already waiting patiently like an alligator to stack the odds even further in our favor – by investing on pull backs in the gold price, to get shares of my favorite gold stocks even cheaper. Regards, Marin --- # The Best Oil Dividend Stocks to Put on Your Radar - URL: https://katusaresearch.com/the-best-oil-dividend-stocks-to-put-on-your-radar/ - Type: article - Published: 2019-09-27 - Updated: 2019-09-26 - Author: Marin Katusa Investors had an incredible opportunity to pick up some of the best oil dividend stocks in over a decade. Many U.S. oil companies and especially Canadian oil stocks showed signs of hitting a near term bottom. A handful of oil stocks exploded out of their comas. One of the keys to success in the markets is to look for value where others don’t see it. Coming off of the recent attack on Saudi Aramco’s infrastructure, [oil prices had a shock move higher](https://katusaresearch.com/oils-crisis-spikes-and-the-impact-on-the-gold-price/). Still, oil prices remain fairly low and attractive for bargain hunting investors. Some may see low oil prices as a negative and write off investing in the sector. But for a specific group of stocks, low oil prices are a good thing. ## **Oil Dividends – Stocks in the Juicy Refining Sector** The refining sector loves low oil prices because low oil prices mean low input costs for them. Crude oil is the main ingredient refiners need to crack oil hydrocarbons into new products like gasoline and heating oil. The best-case scenario is falling crude prices and steady or rising gasoline prices. And because there’s no pure-play producer in Canada, I’m going to focus on the U.S. refining sector here. There’s an all-encompassing measure of profitability for the refining sector. It’s called the **crack spread**. The crack spread represents the profit margin per barrel produced, based on current or future crude oil, gasoline, and distillate fuel prices. The typical refinery crack is the 3:2:1 crack. It says that for every *three* barrels of crude oil, you produce *two* barrels of gasoline and *one* barrel of distillate fuel. You can look at the “crack spread” as the profit margin per barrel. Below is a chart which shows the crack spread for the past five years. ![• oil dividend stocks crack spread] As you can see, the crack spread is well above the five-year average. And it has recently spiked from $12 to nearly $25 per barrel. - **The higher the spread, the more profitable the refiner.** As you can see from the chart, refiners are quite profitable at current price levels. They are currently enjoying low feed-stock costs from low oil prices. Meanwhile, gasoline and distillate fuel prices have remained strong. Gasoline is the main by-product of crude oil refining. And it’s very important to watch the inventory levels of these derivative products closely. Just like in the oil markets, high inventory levels are likely a sign of lower prices to come. I like to take the analysis a step further and use a **Days of Supply** calculation. This ratio measures inventory levels versus consumption. Inventories can be high, but if consumption is also high, then in reality the days of supply would be the same. ![• oil dividend stocks days of supply] Gasoline consumption is very cyclical. The recent low in Days of Supply is par for the course. This means that right now, there are lower gasoline inventories relative to consumption. This is indicative of a tighter market and this is good news for refiners. If the U.S. economy slows down, gasoline consumption is likely to fall as well. This would be bearish for gasoline prices and refiners. So we need to pay close attention to economic activity. This is a tricky industry, but one that can be very lucrative for investors if you can time it right. The goal is to invest during a period of strong gasoline prices with weak oil prices. ## **The Best Oil Dividend Stocks – Who Are The Refiners to Watch?** The United States refining sector is world-class and dominated by a handful of major players. There’s no room for juniors in this arena. Refining complexes can cost $5 billion or more to construct. The key refiners I am watching are **Philipps 66 (NYSE: PSX),** **Marathon Petroleum Corp. (NYSE: MPC)**, **Valero Energy (NYSE:VLO)** and **HollyFrontier Corp. (NYSE: HFC)**. All of them just had big share price moves, gaining 15% or more in the past few months. Personally, I’m going to watch for a pullback and keep an eye on both crude oil inventories and gasoline days of supply. If I see an opportunity to buy either the shares or options of one of the companies, I will notify all subscribers. ## **Are The Dividends Safe? – Watch These 3 Metrics** Dividend Yield A high dividend yield will attract investors and funds. But an especially high yield also signals a warning that a dividend cut might be imminent. Now here’s a word of caution. Don’t get caught up in including the one-time cash distributions as a “dividend”. Look at it as a one time bonus that you don’t include in your analysis. Most stock screens include any one time payments in their calculations and this is wrong. Free Cash Flow and Payout Ratio Free Cash Flow is how much cash an oil stock generates after paying for all its operations and capital expenditures. Think of this as “Money in the Bank”. This is a very important metric. It’s critical to determine what percentage of the free cash flow is used to pay the dividend. And this percentage is called the Payout Ratio. Anything above 65% should be a warning that the dividend could be at risk to being lowered, which ultimately means the stock price is also going lower. **Payout Ratio below 30%** – suggests that a stock is putting its profits back into the company to grow its operations. The company is more focused on growth at than paying back its owners (shareholders). **Payout ratio between 30-55%** – is pretty healthy. This range says that the company is evenly focused between keeping cash to grow the company and paying back shareholders at the same time. **Payout ratio between 55-100% – **may look good for investors on paper. But when the ratio is this high it could mean that either the company has no growth plans or that their dividends are unsustainable. Make sure you understand the company’s debt servicing requirements if the commodity price drops. **Payout ratios higher than 100% or lower than 0%** – you may be surprised, but these numbers can exist as well. A number higher than 100% suggests that a company is paying out more in dividends than it makes. A number below 0% means that a company is paying out dividends when it isn’t making any money. This means it’s probably not going to stay in business for very long. Both of these tend to be short-term occurrences due to special dividends and other extraordinary events. Now let’s circle back to some of the U.S. refinery stocks listed above and break down these metrics: ![oil dividend stocks refiners] All 4 of these companies are paying a healthy yield. They have reasonable payout ratios. And they have a positive free cash flow. So is it time to buy? ## **How Do You Find The Best Oil Dividend Stocks?** The 3 metrics above are a great starting point in your search to add quality dividend payers to your oil portfolio. But years of experience visiting management teams and operations in this very cyclical market has taught me to use more polished filters. For that reason, we’ve created an advanced **Katusa Dividend Grading System (DGS)** at the firm. An elite vintner separates the finest quality grapes from a vine. Likewise, we have to separate top quality dividend paying companies from the crowd. We do this by applying a minimum of 5 more advanced metrics in our Katusa Dividend Grading System. And then we compare these metrics in various oil price environments – up, down and sideways. This helps pinpoint good entry points where you can maximize the money you’re making from the dividends. And also reap rewards of future capital gains. So when the system spits out flashing buy signals for oil stocks in any sub-sector (refining, pipelines, services or production), we pay attention. For example, our DGS pointed out two specific oil producers in Canada that were becoming excellent value. Each had leading dividend yields (both greater than 7%). And both dividends were sustainable after looking at the simple metrics of free cash flow and the payout ratio. But that’s not all… The advanced filters in our DGS came out flashing green. And so we [published the detailed analysis for our subscribers](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite) to put on their watch-lists. On the back of the attacks on Saudi Aramco, these two companies rose 20% and 40% within 2 weeks. That’s the true power of picking up quality dividend paying stocks at the right time. Regards, Marin --- # The Way of the Alligator – Alligator Investing - URL: https://katusaresearch.com/the-way-of-the-alligator/ - Type: article - Published: 2019-09-20 - Updated: 2022-10-11 - Author: Marin Katusa Alligator Investing traces its roots all the way back to 1980. A geologist named Walter Alvarez and his father, the Nobel Prize-winning scientist Luis Walter Alvarez, put forth an outrageous idea. In what is now known as the “Alvarez Hypothesis,” the father and son team claimed dinosaurs went extinct due to the effects of a large asteroid striking the earth. The impact caused huge tidal waves and earthquakes. It threw up a dust cloud that blocked sunlight, killing most of the planet’s species…including all the dinosaurs. At the time, most in the scientific community thought the idea was absurd. They believed dinosaurs had gone extinct over a long period of time. But years of close examination of the evidence, combined with the discovery of a massive impact crater off the coast of Mexico, put the debate to rest. About 66 million years ago, a large asteroid struck Earth with a force millions of times greater than any atomic bomb and caused the greatest extinction event in the planet’s history. It is estimated that more than 75% of all species were killed off by the strike. Only the hardiest species survived. You can probably guess one of the survivors: The cockroach. But you may not know that “Crocodilians” are members of this elite survivor club as well. This is the order of predatory reptiles that includes the alligator and the crocodile. That’s right: Alligators survived what the dinosaurs could not. Over sixty million years later, they’re still going strong. There are various theories as to why alligators have survived and thrived for so long. They’re cold-blooded, which means they don’t have to eat very often. They live in fresh water, not salt water, which seems to have increased their chances of surviving the asteroid strike. They have incredible immune systems. But one huge thing alligators had–and continue to have–in their favor is their brilliant and efficient hunting strategy. Alligators are “ambush predators,” as opposed to “pursuit predators.” They don’t spend their days chasing gazelles or monkeys. They don’t expend lots of energy sprinting after their prey. Instead, alligators take a patient “sit and wait” approach to hunting. They spend long periods of time doing nothing but waiting in the water for the perfect time to strike at obvious opportunities. When unsuspecting prey approaches the water, alligators spring forward with awesome speed and force. The alligator’s ambush hunting strategy is very efficient. It allows the alligator to get huge returns on the energy he invests in hunts. It has helped the alligator become one of the most resilient, successful species in the history of the planet. I know you don’t read Katusa Research for nature lessons. I’m telling you all this because I believe The Way of the Alligator is one of the great secrets for achieving investment success. ## The Counterintuitive Way to Make Big Money by Alligator Investing When we were kids, we’re taught that if we work hard enough at anything, we’ll achieve success. More hard work in the gym means performing better at sports. Working hard on your studies means getting into the right schools. Working long hours means getting ahead in business. Working hard has its rewards. It’s a great way to get what you want in life. But “hard work” and its corollary “staying busy” actually works against investors. Staying busy typically translates into losing money instead of making money. Most people who have earned enough money to invest have the natural urge to “do something” and “stay busy.” That’s how we got the money in the first place. But unless you’re a skilled, lightning-fast day trader, the market does not reward frequent activity. In fact, it penalizes it. The urge to “do something” leads you to be impatient and less selective with your investments. It forces you into mediocre opportunities. Said another way, the quality of your investments typically moves inversely to the quantity of your investments. For investors who look to hold positions for months and years, the market simply does not serve up truly great opportunities every day. Sometimes, we only get two or three per year. Just like doing nothing and waiting for a great opportunity is often the right move for an alligator, it’s also often the right move for investors. To many investors, having a large cash balance in an investment account feels like having a wad of cash in a casino. Why let it sit there and do nothing when you can “play” with the money? Why not at least take a shot at something? This amateur thinking is why casinos earn billions of dollars in profit at the expense of impatient, probability-ignorant gamblers. Doing nothing, staying patient, and waiting for a no-brainer opportunity is often the right move. ## Alligator Investing – A Real World Example When I first published an investment idea I had on a junior gold and copper explorer, I told subscribers to be patient. Like an Alligator. The company announced some news that investors bought hand over fist. They were “chasing the stock”. I had a certain price I wanted to scoop up shares and I would wait on the sidelines to do so. Once the shares hit my target, I pounced like an alligator. Here’s what happened… ![Alligator Investing - Way of the Alligator Sun Metals] Many investors aren’t patient enough for the strategy. But one of the most famous alligator investors has used it to make billions. ## **The Ultimate Alligator Investor, Warren Buffett, on Waiting for the “Fat Pitch”** The investment legend Warren Buffett makes a great point about patience with a simple baseball analogy. Buffett says investing is like playing a baseball game where there are no called strikes. You don’t get penalized for not swinging. You can stand at the plate for a year and not have to swing. So, it makes a lot of sense to stay patient and selective and only swing at “fat” pitches. You only need to swing when the odds are overwhelmingly stacked in your favor. One of your ultimate goals as an investor is to [buy assets for less than they are really worth](https://katusaresearch.com/asymmetry-financial-secret-can-earn-10000-returns-no-joke/). Said another way, your goal is to buy bargains. However, true bargains are rare. The financial market correctly prices most assets most of the time. Most of the time, stocks, bonds, and commodities trade for approximately what they are worth. But every so often, there is a crisis in some market somewhere in the world. During a crisis, investor emotion overwhelms investor reason. Terrified investors sell first and ask questions later. They sell assets with no regard for their underlying value or ability to produce cash flow. I often say that during crashes, the price of assets becomes “unhinged” from the value of assets. If you’re impatient and you’re always “doing something,” you won’t have the cash to buy up bargains during a crash. It’s the financial equivalent of not bringing your helmet if you were to play in the Super Bowl. I like to put my money to work as much as anyone. I love the game of investing. But I always keep The Way of the Alligator in mind. I see my cash as “[big returns in waiting](https://katusaresearch.com/home-run-mindset-essential-winning-resource-market/).” There’s a reason the alligator survived the biggest extinction event in history. There’s a reason he has thrived for more than 60 million years. He’s nature’s ultimate patient opportunist. By staying patient and only acting when the odds are overwhelmingly in your favor, you’ll survive and thrive in the investment world. Regards, Marin Katusa --- # Oil’s Crisis Spikes and the Impact on the Gold Price - URL: https://katusaresearch.com/oils-crisis-spikes-and-the-impact-on-the-gold-price/ - Type: article - Published: 2019-09-20 - Updated: 2019-09-19 - Author: Marin Katusa At the time, the book was ground-breaking. Back in 2007, Nassim Taleb published a book called *The Black Swan: The Impact of the Highly Improbable*. He promoted not to try and speculate or predict wild, outlier type events… but to prepare and plan for them. The 2008 Financial Crisis launched Taleb into infamy as Black Swan event after event hit the newswires. The AIG fiasco. Fannie Mae. Freddie Mac. Lehman. Bailouts. TARP. The world was ending and black swans became normal. Fast forward over a decade and volatility and associated Black Swan events have been negligible. …Until the most shocking oil move in 30 years happened over the weekend. This past weekend, the oil markets were rocked when rebel militia from Yemen attacked the Saudi Arabian Abqaiq oil facility. Every day at Abqaiq, 5 million barrels of high sulphur Saudi crude oil is converted to low sulphur crude. This low sulphur crude oil is then sent to oil refineries which make petroleum products. Make no mistake, the Abqaiq facility represents 5% of global oil supply. And it’s a key piece of global oil infrastructure. The effect was felt immediately as oil prices soared over 10% just minutes into the trading day in London. It was the biggest 1 day rise in the history of the oil markets. Monday’s move in oil and oil equities was simply incredible. Share volume for Canadian and American based energy stocks were 3 to 5 times what they’ve normally traded the last few months. But… **Were you surprised that the spot price of gold barely reacted to the attack on the Saudi oil fields?** I was more shocked that gold didn’t rocket higher. Let’s investigate why the spot price of gold yawned at the biggest ever attack on a major producing oil field. ## **Gold Returns During Oil Spikes** History never repeats, but it does rhyme. So let’s look at the five largest oil crises since WW2 in the table below. ![Oil Crises and Impacts on Gold] The first global oil crises post WW2 was the Suez crisis in 1956 and lasted 6 months. During the crisis, 10% of global oil supplies were restricted and the price of oil popped 9%. Gold was still under a fixed price by the U.S. government and therefore had no price movement. But the first major price pop in the spot price of oil happened during the OPEC Embargo in 1973. 7.5% of the global output was restricted and the price of oil increased 213% because of the OPEC Embargo. During that same time, the price of gold rose 65%. Two years earlier, Nixon closed the gold window. And the price of gold increased slightly over 40% the 12 months that followed. - **But it was the OPEC Embargo that caused the price of gold to break over $180 for the first time.** However, that wasn’t the biggest pop ever for gold due to an oil crisis. That happened during the period of the Iranian Revolution in 1978… Gold surged 163%, while oil rose 119% and 7% of global oil output was restricted. This time around, gold yawned and barely moved on the news that 5% of the world’s oil supply was just attacked by a terrorist group. The oil prices moves on the production halts in Saudi Arabia also seemed to take the news as moot point within a few days. This meant that the global markets expect Saudi Aramco to bring production back online quickly. ## **The Oil Markets Believe Saudi Aramco** There was a lot of speculation within the first 48 hours on the time it would take [Saudi Aramco](https://katusaresearch.com/saudi-aramco-a-peek-into-the-worlds-most-valuable-company/) to bring back the oil production. The speculators based this on blurry photos and satellite imagery. And the “talking heads” were speculating that the damage would keep 5% of the global oil production off for a long time. Aramco’s CEO, Amin Nasser, stated the facility is currently processing 2 million barrels per day and expects to hit 4.9 million barrels per day (pre-attack levels) by the end of the September. The spot price of oil moved back to the price range just before Bolton was removed from his post as U.S. National Security Advisor. It’s obvious now that the oil markets are taking Saudi Aramco at their word that they have the damage under control. - I’ve proven for over a year that there is no shortage of oil. The price action we just witnessed, considering the magnitude of the event, confirms that position. ## **Should Gold Be Higher?** Gold has made a significant +15% move in the last 90 days. Combine this with the expected 25bp cut by the U.S. Fed that was priced in… And the fact that the Saudi’s have a solid grip on bringing back the production within a few months… …there can be an argument that gold is digesting some profit taking, Not only should [gold be higher](https://katusaresearch.com/the-14-digits-powering-golds-rise/), but it will be a lot higher. Gold is consolidating and will continue to do so. Thus, even though the impact of the attack on the Saudi oil field was massive, it’s understandable why gold didn’t react. Oil’s price shock was short lived. And perhaps the lack of movement in the gold price was a price predictor on what was going on Saudi Arabia. ## **We Sure Live in Exciting Times…** And the biggest drama in Canada right now is not oil pipelines or gold consolidation… It’s that a drama teacher in 2001 put on brown face make up for a school party. But that’s not even the *most* surprising part. The surprising part is how did a drama teacher ever become Prime Minister of Canada. Don’t expect things to change much in Canadian politics. We are too polite not to forgive a drama teacher for playing a pretend Prime Minister. Regards, Marin P.S To see all the stocks that I’m watching, buying and selling for a profit in this current gold market, consider becoming a subscriber to ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*** today. --- # Katusa Research Feedback Form - URL: https://katusaresearch.com/katusa-research-feedback-form/ - Type: page - Published: 2019-09-17 - Author: Marin Katusa --- # Financially Transmitted Diseases - URL: https://katusaresearch.com/financially-transmitted-diseases/ - Type: article - Published: 2019-09-13 - Updated: 2019-09-12 - Author: Marin Katusa I came up with Financially Transmitted Disease, or FTDTM for short, a couple of years ago. It all happened when I was having dinner with some colleagues discussing quantitative easing (QE) and negative interest rate policy (NIRP). NIRP will have the biggest impact on our global markets moving forward. I believe this is a monetary policy stance that major central banks like the European Central Bank, most global Central banks in emerging markets and even the People’s Bank of China are going to take. This form of monetary policy is going to fuel a bonanza of ultra-cheap money. Just take a fresh look at the countries that have negative rates in the table below… ![Financially Transmitted Diseases negative rates] I rarely rant about economic policy, but NIRP has massive implications to the resource world that I want to position our portfolio for. Almost all economists and market pundits believe NIRP will be a short-lived phenomenon. However, I have a very different take. Negative interest rate policy changes the law of economics. I also believe that NIRP will not only go much lower than almost everyone expects but will be with us globally. Across the board. For much longer than we can imagine. First, let me explain why NIRP will go lower and stick around for a much longer time than anyone expects. The general perception of NIRP, using a bond at a -0.5% interest rate, for example, means that if I buy that bond, I will get back less money in the future. But, the reason why it’s working is the unit cost of the bond is rising significantly. This means the investor who is getting a negative interest rate, is making up for it on the bond price of the unit. ## **Examples of Financially Transmitted Diseases ** The bond market is many times the size of the stock market. The price of Austria’s 50-year bond has gone up 28% year-to-date and 8.8%% in August alone. All the while the yield is -0.02% after taxes. That is an incredible return for the bond market unit. ![Financially Transmitted Diseases negative bond rates] From the perspective of a bond manager, he is aware he is taking the loss on the yield. But, he’s making a 28% gain on the unit price. - **This makes for a score rarely ever seen in the bond market.** The “sellers’ of these bonds are aware that the bond managers made 28% YTD on a -0.02% yield. So, they will do what the market always does and push the boundaries of logic. It’s just a matter of time before a bond is -1%. And then the gain won’t be 28% on the unit, but 15% (or whatever the market interprets). And the yield will continue lower as bond managers now chase gains, not yield. - **Bonds will soon be trading like stocks** At this point, you will ask yourself…*Who the hell in their right mind would invest in a negative-yielding bond to “hope” for a gain in the unit price of the bond*? Lots of bond managers. Because they have to place that capital somewhere. Don’t get me wrong, I don’t think this even a remotely viable strategy. This will eventually take us down a rabbit hole where everything implodes. I do believe the bond market is pricing this all in. And will eventually be bailed out by the government via some form of debt jubilee. **The Creation of Financially Transmitted Diseases ** To trace the creation of financially transmitted diseases and negative interest rates, we have hard math to thank. For hundreds of years, mathematicians believed you couldn’t take a square root of a negative number. Try it. Grab any basic calculator, and type “-1” and then hit the square root on your calculator ‘√’ symbol. You will get an error message. But that changed through the work of mathematicians Euler and Gauss. They figured out that if you remove the negative sign, and then introduce the letter ***i ***(which stands for imaginable variable) we can actually take the square root of a negative number. Without the invention of an imaginary variable, quantum mechanics would not have advanced the way it did. Maybe it never would have. Though I’m sure someone would have thought of another way. Imaginary variables make it easier. And Quantum Mechanics doesn’t need to be any more complex than it already is. Quantum mechanics is the “really hard math” I had to do to get my math degree. And without that introduction of imaginary variables, we wouldn’t have smartphones, MRI machines, and lasers. ## **Financially Transmitted Diseases and Negative Rates ** The most flagrant of financially transmitted diseases is NIRP. Negative Interest Rate Policy is as important to economics as imaginary variables are to quantum mechanics. And NIRP is going to be taking the global macro environment on an incredible, volatile and unpredictable journey. I have shared my conclusions and in-depth research with some of the brightest minds in the investing sector. And we all have agreed it’s the first of its kind and first to be published in the world. My framework on NIRP is based on mathematics using global demographics and economies. Most people would assume I call NIRP a FTD (Financially Transmitted Disease) because you lend someone money today knowing you would get less in 10 years (or whatever the term of the bond). That’s part of it. But it’s ultimately much worse than that. **What Financially Transmitted Diseases Have in Store for the World Economy** Again, we have to turn to the biggest FTD offender which is none other than negative interest rate policy. NIRP [will cause the U.S. Dollar to rise](https://katusaresearch.com/chinas-golden-corridor-gold-reserves-and-negative-yield/), and the rest of world currencies will struggle. As a result of the U.S. Dollar’s rise, global funding using dollars will slow down. This will increase tariff wars across the borders. And ultimately currency wars will be World War III. The economic impacts of FTD’s are going to bigger than any other economic invention before. Simply because of the derivative impacts on the market. First, by definition, NIRP is very deflationary. Deflation is the biggest fear of all governments. Your *spider sense* should be tingling right about now – so pay attention. This is much more entertaining and scarier than imaginary variables in quantum mechanics class. NIRP is a brilliant invention by the central bankers. Japan’s first major NIRP was in 2016, which was a result of their quantitative policy which started in 1997. And like all critical viruses, NIRP is going to spread virally throughout the world. This is where my coined phrase FTD, Financially Transmitted Disease, comes from. Unfortunately, the average citizen in every country in the world will be affected by the greatest FTD to have ever been known to mankind. And most won’t even know why their whole future will be impacted by this FTD. Yet, there was nothing they did wrong. And most won’t have the ability to protect themselves from the world’s worst financially transmitted diseases. But you do. I’ve said many times that everybody loses in a deflation, except he who loses the least. That thought scared the shit out of me. So, I set out on a quest that amounted to thousands of hours of research. I wanted to find a solution to not just “lose the least” but to grow my fortune in a NIRP environment. **This is not meant to sound like fear-mongering… ** But NIRP is spreading globally. It’s appealing to central bankers and governments. They will keep funding what will ultimately be the greatest financial global death spiral we will see in our lifetime. **Worst of all…** The average “citizen” will initially *approve* of NIRP because they are seeing positive impacts that they believe will help them. The positives include things like lower borrowing costs for cars and houses. That’s how quickly financially transmitted diseases can spread without notice. But, just like bond markets, asset prices such as houses have increased significantly because of historically low-interest rates. This is all going to change. The velocity of U.S. Dollars will slow outside of the U.S. And that will result in slowing growth and in many cases negative growth rates. And, like any drug, the world will be addicted to NIRP. There will be no solution but to keep going down the death spiral of lower negative rates. Most people will laugh when they hear of -1% yield. ## **Quantum Economics Redefined** Negative interest rates policies have created a monster. The virus has spread past the inflection point. I believe when this is all said and done, we will see -5% yield. - **Yes, we have now entered quantum yields, meaning imaginary variable returns. ** It’s a new area of economics that most were trained to believe didn’t exist. There are no textbooks, policy or theory on NIRP. This is a real-time experiment. And because the results of NIRP have prevented a global catastrophe from happening, it will continue until one day, because of the FTD, it won’t. And then *everything* will pop. Most believe NIRP is just a “short term solution” to be used to stimulate the economy, like QE1 and QE2. In Keynesian economics, there are no negative interest rates to stimulate the economy. Just like in linear mathematics there are no imaginary variables introduced to take the square root of a negative number. Are you scared yet? Just wait until I explain how we’ve entered a new era of Keynes’ Monetary theory… I call it **Keynesian Quantum Economics**. Stick around and I’ll show you how to prepare for the wildest and [most profitable ride of your life](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite). Regards, Marin --- # The Impossible Recession in the World’s Playground - URL: https://katusaresearch.com/the-impossible-recession-in-the-worlds-playground/ - Type: article - Published: 2019-09-06 - Updated: 2019-09-10 - Author: Marin Katusa Over the last six months, it has become very apparent that our global economy is changing. Yet most investors seem entirely complacent. **FTD’s**™, aka **Financially Transmitted Diseases**, will start to appear and be used more frequently. And the policymakers at central banks globally will apply these FTD’s to combat everything you’re reading about in headlines today to battle recessions and a deflationary market. The global economy is experiencing tailwinds, headwinds, and crosswinds like never before… Trade wars have sent prices for copper, long the bellwether of economic activity, to 52-week lows at $2.50 per pound. Safe-haven assets like gold have to come to the forefront as gold regained $1,500 per ounce for the first time in 5 years. The main character in this new world is Financially Transmitted Disease known as **NIRP**. This key topic that is moving today’s markets is the concept of ***Negative Interest Rate Policy*** (NIRP). NIRP is the single biggest drug for an infected financial system. And it’s only getting started, right under your nose. Want to borrow money? Sure no problem, give it back to me in 10 years with zero or even negative interest rates. That’s not cheap money, that’s free money. But we all know there’s no such thing as a free lunch. And when the flow of capital eventually halts, the harsh reality of being infected with an FTD will become apparent. As a financial history buff, I’ve studied every major financial recession. There are always lessons to be learned from past crises. ## **A Crisis in the Safest Place on the Planet Unfolds** Known as the “Playground of Europe”, Switzerland is recognized for its beauty and safety. It has low crime rates, a peaceful nature (literally and in international relations) and it’s a popular country where the rich park money. It’s routinely voted as one of the best places to live. And it has one of the most prestigious passports and citizenship you can obtain. What you may not know, is that Switzerland had a major recession in the 1970s. It got so bad that Industrial production fell by 15% in 1975, while exports declined by nearly 10%. Unionized workers went on strike every week. Who knew there could be such civil unrest in such a peaceful country? So what makes the Swiss recession significant? This recession was caused by negative interest rates and an ever-strengthening domestic currency. - - **Many think Japan was the first country to really go down the rabbit hole of NIRP. They’re wrong. Switzerland spent nearly a decade in a negative rate environment. ** After U.S. President Nixon lifted the gold standard in 1971, currencies began to float and valued themselves based on interest rates and economic conditions within each country. The U.S. Dollar declined against many major currencies. And as the dollar declined, the market sought refuge in safe-haven assets like gold and the Swiss Franc. Take a look… ![Safe Haven Asset Demand 1970-1971]The value of the Swiss Franc began to soar, and Swiss exporters were angry. The business was suffering. The Swiss government imposed reserve requirements on non-resident deposits. The Franc climbed further. The Swiss then banned interest payments to non-residents (essentially zero interest rate policy). The Franc climbed further. As a last resort, the Swiss enacted a 2% per quarter penalty on any non-resident holding Swiss Francs. **This works out to a negative 8.24% annual interest rate. ** ![Safe Haven Demand 1971-1974]The Middle East oil embargo of 1973 once again pushed the demand for safe-haven assets sky high. Even with negative capital controls in place, the Swiss Franc continued to soar. In November 1974, the Swiss Government imposed a non-resident annual penalty on held deposits of -12%. - - **This means if you put $1,000 in the bank on January 1st… on December 31st of that same year, you’d only have $880.** Things only got worse for the Swiss as the Franc continued to appreciate. In January 1975, the Swiss government had an emergency meeting. The Swiss Central bank put a 41% annual penalty on foreign deposits. ## **And Then the Recession Hit Hard…** Pre-recession Switzerland had 81 unemployed people. Yes, 81 people. I had to triple check that stat on Bloomberg. At the peak recession, over 30,000 Swiss citizens were unemployed. **That’s an unemployment rate increase of 36,900%.** From 1971 to 1975, the Swiss Franc appreciated 70% vs the U.S. Dollar. Over that same time period, gold rose from $37 per ounce to over $180 per ounce. That’s a rise of 386% for gold. - - **That same rise would see the gold rocket to $7,200 per ounce today.** It took half a decade for Switzerland to crawl out from the depths of the recession. The Swiss economy didn’t regain its true strength until the early 1980s. Now if that story doesn’t get your *spidey sense* tingling, I don’t know what will. Most certainly, our current economic situation is different – we don’t have the same inflation setup. But we do have a very strong U.S. Dollar currency set up and a negative interest rate environment. ## **Could the United States and the USD become the Switzerland of the 1970s?** It’s very clear to me that we are entering a new global paradigm of negative interest rates (NIRP). And I just published my thesis on **Keynesian Quantum Economics™** to my subscribers this past week. Make no mistake, these negative rates are the financial heroin. It’s an FTD that will be difficult for your family, friends, and neighbors to* not* be affected by. Cheap money feels great. But then you need a little bit more. And then a little bit more and then the flow of capital comes to screeching halt when the whole system becomes illiquid. I believe this financial heroin is going to last longer than people think. This is not a 6-12 month policy for Central Banks around the world to ‘kick start’ their economy till the next election. Eventually, earnings and economic growth will slow. Transfer payments will slow, along with salaries. As this plays out, people will try to save every penny they have. Most of it will be used to make the next payment on that overpriced house they can’t afford and that they are significantly underwater on at current rates. The whole economy as a whole will slow. And that’s when the bubble pops. But, we are far from that right now. Don’t get me wrong, [I hate to be a doomsayer](https://katusaresearch.com/great-investor-must-treasure-one-thing-people-hate/). But I don’t feed my family or pay my office’s salaries by being a cheerleader. I’m a nice guy, but I’m also a realist. NIRP is already having a massive impact on the prices of commodities across the board, and so few people are even aware of it. And I’m laying out exactly how it affects Gold, Oil, Uranium, Rare Earth Elements, Copper and other major commodities in my latest issue of ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite)*****.** I am positioning myself to take full advantage of the strong U.S. Dollar and rising precious metals prices. This year alone, we’ve already had gains of 177%, 22%, 39%, 53%, and 110% on the gold stocks in our portfolio. And I think we’re just in the first leg of this multi-leg bull market on the best-run gold companies. Do yourself a favor and be ahead of the crowd by joining me today. Regards, Marin --- # The Brilliant Hidden Agenda Behind Trump’s Greenland Buyout - URL: https://katusaresearch.com/the-brilliant-hidden-agenda-behind-trumps-greenland-buyout/ - Type: article - Published: 2019-08-30 - Updated: 2019-08-29 - Author: Marin Katusa “*Build the wall!*” he chanted. And they laughed. Until he actually started building the wall. “*Cut corporate taxes!*” he campaigned. And they laughed. Until the Tax Cuts and Jobs Act of 2017. “Buy Greenland!” he tweeted. And they laughed. Until . . . ## **The Original Green New Deal** Greenland doesn’t seem to have a lot going for it. There’s almost zero infrastructure, no land for crops, and it runs a consistent deficit. Most of its money comes from fish. The country’s national anthem roughly translates to “Our country is really old.” The backup national anthem translates to “Our country is really long.” Financially, Greenland is a mess. Denmark subsidizes Greenland to the tune of about half a billion dollars a year. That’s two-thirds of the annual budget. Without that help, Greenland would face complete collapse within years. So at face value, Greenland looks like a horrible proposition. But this isn’t even the U.S.’s first, or second, or even third attempt to pick up the Arctic country. One of those attempts was right after World War II. The U.S. offered Denmark $100 million (~$1.4 billion today) in gold to buy Greenland. A memo from that time, written by the U.S. Director of the Office of European Affairs, stated that “*the control of Greenland is indispensable to the safety of the United States.”* That’s never been more true than it is now, eighty years later. ## **Red China Moves Into Greenland** As they’ve done in Latin America, Australia, and Africa, China is buying their way into Greenland. They’re using the same model there that they have used everywhere else: provide the country with airports, running water, roads… everything citizens are used to doing without. Kuupik Kleist, former prime minister of Greenland, spoke of China’s involvement in the country: *“We need it, you see.”* But of course, China has its own ideas about the Greenland play. It has begun to call itself a “near-Arctic” country… despite being more than 1,500 miles from the Arctic Circle. So they’re taking actions to *make *themselves an Arctic country: I call it the creeping takeover. - Three years ago, a company owned by the Chinese government tried to **buy a naval base** in Greenland. Denmark had to keep them from doing so. - Last year, China tried to **finance three airports** to gain access to the region, with **a possible military foothold** in the works. The U.S. stepped in and shot the plan down. - Now, China is desperately trying to take control of **several valuable resources** unique to Greenland. In 2008, a U.S. Geological Survey was conducted in Baffin Bay, which separates Greenland from Canada. The survey estimated that the Bay holds more than seven billion barrels of oil and fifty-two trillion cubic feet of natural gas. Greenland also holds incredible proven and unproven reserves of resources such as gold, diamonds, lead, and iron ore. Not to mention, Greenland holds 10 percent of a resource that is becoming [a lot more valuable around the globe](https://katusaresearch.com/the-most-important-resource-on-the-planet/). But those are nothing compared to a priceless resource hidden deep under Greenland’s ice. The country that controls the supply of this resource has the same control that oil powers had in the mid–twentieth century. Every other country in the world must do their bidding. ## **A Time Bomb of Rare Earth Metals** Rare earth metals are a resource crucial to the production of electric vehicles (EVs), wind turbines, military technology, cell phones…the list goes on. There are 17 rare earth elements and they have fancy names like Yttrium, Erbium, Cerium and Lanthanum. These metals are crucial not just for national security, but for the technology we use every day. Total global reserves for rare earth metals are estimated at 120 million tons (excluding Greenland). Greenland adds 38.5 million tons to that total—a full quarter of the global supply. But they’re not mining it yet. The country that predominantly controls rare earth metal production is China. It has the world’s biggest rare earth ore deposits. And it absolutely dominates the market: more than 70% of rare earth metals are produced in China. ![Global Rare Earth Production by Country 2018] In June 2019, the U.S. Commerce Department issued a warning. If China halted their rare earth exports — which they did in 2010 – it would significantly shock both the U.S. and foreign supply chains. The U.S. government is desperately looking to diversify outside of China. Greenland is a logical choice. It gets a near-perfect score on [the AK-47 indicator](https://katusaresearch.com/use-ak-47-indicator/). It’s politically stable, has a long-standing legal system, and low corruption. As its rare earths thaw out, literally, Greenland presents a natural solution for the United States’ national security interests. Most of the rare earth metals are currently under a layer of ice one to two miles thick. But that ice is melting fast. Much faster than scientists had originally predicted. According to Denmark’s Polar Portal… *“In July alone, [Greenland] lost 160 billion tonnes of ice through surface melting. That’s roughly the equivalent of **64 million Olympic-sized swimming pools**. Just in July.”* Greenland itself is already getting ready for when the ice melts. Speaking to the Wall Street Journal, Prime Minister Aleqa Hammond declared, “*Mining will come to Greenland*.” The political party, wanting to eventually separate from Denmark, has seen resource extraction as its chance to gain economic independence. But several roadblocks stand in its way. Greenland has always been a poor, dependent country. So it has never had the money to develop its natural resources. The country is huge – more than three times the size of Texas. But its entire, rapidly aging population wouldn’t even fill a football stadium. So there’s no one to extract the resources. Finally, the country is almost completely defenseless. It relies on far-off Denmark for its national security, and is trying to gain complete independence from the country. ## **The Polar Silk Road** All of this makes Greenland the perfect target for China. If China’s President Xi Jinping plays his cards right, he could get a near-total monopoly on rare earth metals, valuable plays in oil & gas and the upper hand in global affairs with a new base in the Arctic. Xiao Yang, director of the Arctic Research Center, said: “*A small and weak Greenlandic nation . . . will be the key node for the successful implementation of the Polar Silk Road*.” To see just how easy it will be for China to take over, consider a project Greenland recently approved for London Mining. Don’t let the name fool you: It’s almost entirely backed by Chinese companies. The single project is a $2.35 billion iron ore mine… **or about the entire GDP of Greenland.** **It will require up to 3,000 workers** that represents about 6 percent of the nation’s entire population. In other words, China won’t even have to make an offer or start a war. It’ll be a takeover from within. We have seen this story unfold before in places like Central America and Africa. Denmark is already wary of the threat. But a foreign affairs spokesman in the Danish government, said: “*We don’t want a communist dictatorship in our own backyard*.” That leaves Greenland with only one place to turn for help: the United States. And the United States needs Greenland to secure its own naval defense in the Arctic Circle. It’s probably premature to add new stars to the American flag just yet. Any movement will be at a glacial pace. It’s taken seventy years for the U.S. consulate to finally reopen in Greenland. Greenland is increasingly fighting for complete independence, with 2021 being given as a potential date to break free from Denmark. So with time… we might not be laughing anymore. I’m currently doing advanced research on several rare earth opportunities for subscribers and me. And when I do publish an investment idea on rare earths, members of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/)* will be the first ones to know about it. Regards, Marin --- # Throw Everything You Know Out the Window - URL: https://katusaresearch.com/throw-everything-you-know-out-the-window/ - Type: article - Published: 2019-08-23 - Updated: 2020-03-13 - Author: Marin Katusa We’re on the precipice of a new adventure in the markets. Never before has so much data and information been available to investors around the globe. And yet, there’s no consensus on what’s going to happen. Not to mention we have major geopolitical issues happening around the world… China’s cracking down on Hong Kong. Oil transport vessels are being seized. On top of that, we have a very gloomy global economic environment. ## **A Signal for Coming Chaos?** Last week, the United States yield curve inverted. This happens when the yield on the 2-year note is higher than the yield on the 10-year bond. Yield curve inversion is a classic economic signal that a recession could be in the works. It’s not a guarantee, but highly probable. In the United States, each of the last 7 recessions has been preceded by a yield curve inversion. All of this is fuelling the fear trade and sending gold to record prices in almost every currency. And most important to your portfolio… the mighty U.S. Dollar is actually rising *with* the price of Gold. Exactly what is going on? ## **Is the Rise in Gold Already Signalling a Recession?** Last week we talked about the negative yield from [governments and corporates alike](https://katusaresearch.com/chinas-golden-corridor-gold-reserves-and-negative-yield/). And one of the most talked about recession indicators, the 2 year vs 10 year treasury chart, actually inverted. ![US Bonds 10 year - 2 year spread]This had every analyst and talking head signalling a recession is around the corner. Your friendly neighbourhood fear-mongering newsletters are likely all working on end-of-the-world campaigns, at this moment, to capitalize on this. (Fear sells better than greed in the newsletter world). And many portfolio managers shun gold and provide valid reasons to confirm their bias. It doesn’t pay interest. It costs you to store it. It’s old and Warren Buffett doesn’t like it. But that’s nonsense. Gold has been a safe haven in recession times going back to any one of your favourite roman emperors. And I’ll show you the data in a moment. Note: I’m not saying a recession is around the corner, but I will sure as hell prepare my portfolio for it if one comes, in two ways: - Have plenty of attack capital (U.S. Dollars) on hand to take advantage of steep discounts in companies I want to own, and: - Accumulate more gold and precious metal stocks in times of weakness. Again, one way to get bear market insurance is to buy physical gold. In bear markets, gold tends to perform better than stocks. This is because investors see gold as a safe haven. 2019 has been a very strong year for gold. To date, the gold price has increased by 16.8%. Pulling up historical data tells us that gold outperforms stocks in periods of recessions and market corrections. One example is that gold spiked in 1980 at the start of the 80’s recession, when the price of the yellow metal soared to $850 per ounce. In the table below, you can see how gold tends to perform against the S&P 500 during the most extreme corrections since 1976. ![Biggest S&P500 Declines-min] The data shows that gold will perform better than the S&P 500 *if* or *when* there is a recession in the future. Below is a chart which compares the returns of the S&P 500 to gold. You’ll see during significant pullbacks in the S&P 500, gold performs very well. ![S&P 500 vs Gold]Owning physical gold makes a lot of sense. Just be careful where you store it. ## **The Race to Negative Yields** [Negative yields](https://katusaresearch.com/the-14-digits-powering-golds-rise/) have become a major talking point in the global bond market. Yield reflects the return an investor can obtain holding the bond to maturity. It seems crazy to lend someone $100 dollars and get back $99 in 2, 5 or even 10 years. But that is exactly what is happening in most of Europe and Japan. - **Just this week, Germany launched a 30-year bond, paying -0.11%. ** Could you imagine loaning someone money for 30 years and getting back less? Currently, the total value of negative yielding debt in the world is over $16.4 trillion. Corporate debt makes up roughly $1.4 trillion, and government debt makes up the residual. Below is a chart which shows the skyrocketing quantity of negative yielding debt. ![Global Negative Yield Debt]The questions you should be asking yourself are these: *“Will the U.S. Fed continue on the path of cutting rates with a recently spooked stock market*?” OR *“Is Quantitative Easing 4 about to flood markets?”* ## **The New Normal – A Rising U.S. Dollar and Rising Gold Price** For generations, it was established that… - A falling U.S. dollar meant a rising gold price, and - A rising U.S. dollar meant a falling gold price. And in this game, you were either Team USD or Team Gold… unless you were Marin Katusa and on **Team Profit**. I’ve stated for several years now that the U.S. dollar will be very strong. Ironically, it’s the most hated currency of gold bugs. But yet, what other currency would you rather own? USD’s are accepted everywhere I travel. It’s in demand, no matter how much the Fed prints (because let’s be real, all other governments are printing just as much, if not more). I also own physical gold as my financial disaster insurance. And as we’ve shown, it’s recession insurance. In addition, I have invested millions of my own money into the best gold producers and developers. This gives me extra leverage to rising gold prices. And what’s happened in the last year is blowing economists’ and Twitter financial gurus’ minds, but I’ve repeated this over and over to my subscribers… **We have U.S. Dollar strength AND a rising gold price.** ![2 Year Returns Gold & US Dollar]This goes contrary to almost every article and piece of research on the matter. Up to now, it was conventional wisdom that when the USD rises, gold falls. Not anymore. Welcome to the new normal. ## **What Should My Resource Portfolio Look Like?** I get this question a lot. How many stocks should I own? What currency should be my base currency, what other currencies should I hold? How much should I allocate to each position? All of these are fundamental questions that need addressing. Contrary to many in the industry, I am very open with my positions and investment thesis. Here is a snippet of what you can find in my [*free report on how to become a Resource Market Millionaire*](/guides/resource-market-millionaire/). **Cash**: I remain bullish on the U.S. dollar relative to other major currencies. Even if the U.S. Federal Reserve cuts rates, other countries are going to continue to cut rates also. NIRP is not an anomaly that will be ending very soon. It’s the new normal and will be around for at least a few years, maybe even much longer. This means that the U.S. dollar will remain strong relative to these other currencies. I don’t see another currency I’d rather own at this point. **Gold**: Across the world interest rates are falling and heading for negative territory. This is bullish for gold. In addition to my physical holdings, I remain long the best managed and leveraged gold producers and gold developers that are run by management with skin in the game. These leveraged plays provide significant upside to rising gold prices. I expect the volatility in the markets to continue for the foreseeable future. This provides both increased risk and increased reward. It’s a fine balance we must play as speculators and investors. I am very excited about our holdings, which are proving to be big winners in this market. To see all the stocks that I’m watching, buying and selling for a profit in this current gold market, consider becoming a subscriber to ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*** today. Regards, Marin --- # China’s Golden Corridor – Gold Reserves and Negative Yield - URL: https://katusaresearch.com/chinas-golden-corridor-gold-reserves-and-negative-yield/ - Type: article - Published: 2019-08-16 - Updated: 2019-08-15 - Author: Marin Katusa Just this past week, gold prices hit all-time highs in most major currencies. The British Pound… the Canadian Dollar… the Australian Dollar… the Indian Rupee… the Japanese Yen… the Chinese Yuan… the South African Rand… and more. It also broke above $1,500 in dollar terms. The highest it’s been in 6 years. This shouldn’t come as a total surprise…a trade war between global economic powers, global debt spiraling out of control… Iran and North Korea building up weapons… The world is in uncharted waters. Are the chickens going to come home to roost? Today I’ll share a few of the major key themes that every investor needs to be aware of right now. ## **The Chinese Yuan is in Freefall** Given the recent onslaught of tweets from Donald Trump, you’d think the Chinese Yuan had just started falling. In reality though, the Yuan has been depreciating since 2014. This trend was further magnified when the Chinese government let the Yuan fall below its symbolic threshold of 7 Yuan per U.S. dollar. When this happened, the #POTUS tweeting machine went out in full force, labeling China a currency manipulator. ![Trump Tweets China Currency Manipulation] Below is a chart which shows the historical exchange rate between the Yuan and the U.S. dollar. ![Chinese Yuan - U.S Dollar Exchange Rate] Currency devaluation aside, it makes a lot of sense to own assets which hold their value. Physical assets like gold, art and vintage wine all make for excellent hedges against currency devaluation. But it’s tough for major institutions or governments to buy enough art or wine to truly protect themselves. This leaves gold as the number one acquisition. It should come as no surprise that central banks have been very active in buying gold. Especially China’s… ## **The Chinese Central Banks are Buying TONS of Gold** And I mean that literally**.** - **Just so far this year, the Chinese have acquired 2.7 million ounces (92.5 tons) of gold. Using a spot price of $1,500, that’s $4 billion worth of bullion. ** Below is a chart showing Chinese Gold Reserves. ![China Gold Reserves]As a country focused on exporting more than it imports, it’s no surprise China wants to keep its currency value low. I could see the Chinese accumulating more gold over the coming months if their currency continues to weaken due to the trade war. The U.S.-China trade war has not only impacted the American and Chinese economies, but the entire pattern for global trade as well. Leading global economic indicators like national Purchasing Manufacturing Indexes have only recently begun to nosedive. And this could easily be just the tip of the iceberg. To make matters worse, it’s getting harder and harder to find somewhere safe to park cash. In times of chaos, government bonds are usually a standard go-to investment. However, times are changing. Right now, many government bonds actually have a negative yield – [something I’ve talked about recently](https://katusaresearch.com/the-14-digits-powering-golds-rise/). You read that right – if you invest $100 into negative yield or a government bond in almost any European nation, you’re going to get back less than $100 in 10 years’ time. How crazy is that? Below is a table which shows the current yields on government bonds in nations around the world. The darker the red, the more negative the yield. I don’t see this changing anytime soon either. I believe there’s more devaluation to come. Below is a chart which shows the soaring amount of negative yield government debt. It has recently surpassed $15 trillion. ![Negative Yield Government Debt]More alarming is the amount of corporate debt that has also hit negative yield. Currently there is over $1.2 trillion in negative yield corporate debt. Just a few years ago there was virtually none. Below is a chart showing this dramatic increase. ![Negative Yield Corporate Debt]Unquestionably there is blood in the streets of the bond market. Investors have no choice but to look for other places as stores of value. That’s when investors look to the famous “pet rock” and “barbarous relic” for some wealth protection. After all, it’s that or slowly lighting your money on fire buying bonds in countries with negative interest rates. With bond yields the least attractive they’ve been in years, investors and central banks are turning to gold. And with the recent surge in the Commitment of Traders long positioning and the price of gold smashing through $1,500… many pundits are saying “*THIS IS IT!”* ![Gold Commitment of Traders: Non Commercial Long Contracts]The technical chartists are all coming out with their best head and shoulders, bull flag, sliding wedge and upside-down watermelon patterns that determine the next leg up in gold. To be honest, I couldn’t care less what the talking heads say their target price is. **From a fundamental perspective gold is very strong right now. ** With nearly two decades of experience managing a fund focused on the commodity sector… I know that being positioned in the best gold developers and gold producers offers tremendous leverage to rising gold prices. - **My subscribers and I are up over 100% on one of my strongest conviction investments so far this year. ** Many of our other positions are up over 50% so far this year. The *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)* portfolio is incredibly well positioned to profit from the global market chaos. And in the coming weeks I will be publishing a brand new gold recommendation to my subscribers. It’s going to be the hottest gold deal of the year. Because with the last company the architect behind this story built… investors made ten times their money. The unrest in China, the trade war and the rise of negative yield debt aren’t likely to be cleanly resolved anytime soon. And in the meantime, many will flock to the safest haven they know – gold. Regards, Marin --- # The Most Important Resource on the Planet - URL: https://katusaresearch.com/the-most-important-resource-on-the-planet/ - Type: article - Published: 2019-08-09 - Updated: 2019-08-08 - Author: Marin Katusa What do you think the world’s most important commodity is? Is it copper? Is it gold? No, it’s water. Water truly is a commodity we cannot live without. Gigantic quantities of water are used in almost every food and drink we consume. For example… - 2,065 gallons of water are needed to produce one pound of chocolate - 1,851 gallons of water are needed to produce one pound of beef - 94 gallons of water are needed to produce one pound of bananas - 20 gallons of water is needed to produce one glass of beer If you are from the west coast of the United States you may have heard of Kern County, nestled in the San Joaquin Valley. If you’re just driving by, it may just seem like a dusty valley with rolling tumbleweeds. In reality, it hosts some of America’s most prestigious ground for growing pistachios, almonds, and pomegranates. Kern County uses over 400,000 acre feet of water every year and has a population of 893,000. For comparison, the entire city of Los Angeles with a population of 4 million requires less than 600,000 acre feet per year. One acre-foot of water is the amount of water needed to cover one acre in one foot of water. It represents 325,851 liquid gallons. For those that don’t want to visualize gallons of milk – and want barrels of oil instead, let’s divide by 42 gallons for every standard barrel of oil. This means Kern County requires over 3.1 billion barrels (130 billion gallons) of water every year. Amazingly, nearly all of the water in the Kern County region is controlled by a single family. You may have heard of the Resnick’s empire. If you haven’t their backstory is truly fascinating. Since 1970, Stewart and Lynda Resnick have grown their original 2,500-acre plot into a sprawling 180,000 acres. That’s 281 square miles. They are the largest private landholders in California. Stewart Resnick didn’t come from money. In fact, his is a classic tale of a penniless Jewish immigrant family from Ukraine. Stewart’s family immigrated to the U.S. when he was a child, settling in New Jersey. His father, a degenerate gambler, ran the neighborhood bar. He won and lost the bar several times over the years. Eventually, Stewart made his way to the West Coast, destined for law school at UCLA. He had a strong entrepreneurial spirit. Stewart and another Jewish frat brother bought a mechanical waxing machine and started a floor-waxing business. He waxed floors in the evenings, when businesses were closed. He noticed there were no security guards around, and spotted a business opportunity. So he sold the cleaning business and started a security guard business. He quickly realized that security guards were expensive, so he sold the security guard business and started an alarm company. The alarm business took off, and at its peak, half the commercial alarm accounts in Los Angeles belonged to Stewart’s company. He sold the alarm business in 1972 for $100 million. Inflation took off in the 1970s, and with all that cash on hand, Stewart was looking for a hedge against inflation. He found 2,500 acres with oranges and lemon plantations. The assessed value was $27 million. But Stewart was a shrewd negotiator, he paid just $9 million. A farming magnate was born. Over the coming decades, Stewart would continue to acquire land. He struck deals with Mobil, Texaco, and Prudential Life, all of which completely ignored the coming agriculture boom and sold tens of thousands of acres for pennies on the dollar. By 2008, Stewart owned 100,000 acres of San Joaquin Valley farmland. His company grew 65% of the nation’s pistachio crop. ## **Today, The Resnick Empire is Enormous** The Resnicks own not only the farmland, but also well-known brands such as Fiji Water, POM Wonderful and Get Crackin’ Pistachios. The empire is estimated to be worth more than $4.5 billion. All that power – and all that profit – are the direct result of Stewart Resnick’s savvy control of the most precious resource in Kern County: Water. One of Stewart’s best trades was trading junior water rights for a share of the Kern County Water Bank. He gave up $30 million in water rights for virtually complete control of a $90 million, taxpayer funded water bank in Kern County, California. In years of drought, he’s been known to sell water back to the city of Los Angeles for 600% profits. **So it’s obvious that if you know what you are doing, there are some big gains to be made in controlling the right water resources in the right jurisdictions**. The major water resources are currently controlled by a handful of very secretive, private companies. It’s a big money game, home to the who’s who of private equity and hedge funds. At the same time, water is probably the most “emotionally” influenced resource on the planet. The World Health Organization (WHO) passed a bill stating that every human on the planet has the right to clean water. From a humanity perspective, this is a good thing. From a corporate perspective, this will pose a problem for companies expecting to sell their water to the “people.” But I don’t think the government will care about oil companies having to pay high prices for water to continue their production. You probably see where I’m going with this now… I think the next big play for water is over 1,000 miles east of Kern County, in the dusty fields of Lea, Eddy, and Reeves counties. That’s the epicenter of the Permian Basin, the most important shale oil formation in the world. ## **Water Thirsty Oil Basins** Water is very important in the oil and gas world. Water is used as the carrier of proppant which after the fracking process, keeps the formation open for the oil and gas to “escape up the well”. Water is also a major by-product of oil production. In fact, more water comes out of the well than goes into it. In 2018, five billion barrels of water were used for drilling and completion activities. Meanwhile, over 20 billion barrels of water were produced as a by-product of oil and gas production. Every year, oil and gas companies are spending billions of dollars to transport and treat water that is a by-product of the oil and gas production. These costs are only set to increase as production increases. Last year in the oil and gas sector, over $30 billion was spent on water. Below is a chart which shows the capital spent in 2018 on water for each major U.S. shale field. ![2018 Water Capital Expenditures by Region] Water usage in the oil & gas sector can be broken down into four main categories: - Water sourcing - Water gathering and transportation - Water recycling and treatment - Water disposal The water sector is crucial for the next decade of U.S. oil production. At the beginning of a well’s life, producers might get one barrel of oil for every two barrels of water that are extracted. By year three or four, they’ll get one barrel of oil for every four or five barrels of water extracted. Below is a single well production chart for the Permian Basin, showing oil and water produced along with the water-to-oil ratio. ![Oil and Water Production for Permian Basin] In a recent report, Morgan Stanley stated there were over 5,000 shale wells yet to be drilled in the Permian Basin. If each well requires 500,000 barrels of water to drill and complete, that’s 2.5 billion barrels of water. Now, recall that as wells mature, more water is pumped out of the well relative to oil. Over the life of a well in the Permian Basin, the water to oil ratio ranges between 3 to 10 barrels of water per barrel of crude oil. Let’s say on average 5 barrels of water are pumped out per barrel of oil equivalent. These days, a decent shale well in the Permian will have recover between at between 1 million and 1.5 million barrels of oil equivalent. Using the low end, that means another 5 billion barrels of water will be extracted. Just from the Permian. If you apply this same math to areas like the Bakken or Eagleford, the amount of water that needs attention is staggering. Clearly there’s an angle to be played here. ## **How I Want to Play Water in the Oil & Gas Sector** With all of this in mind… I only want exposure to a company that generates revenue from each of the major water segments I outlined earlier: sourcing, gathering and transportation, recycling and treatment, and disposal. Controlling the entire vertical is key. It makes the company invaluable to the oil & gas producers. Think about it. Why deal with a company in each segment when you could deal with just one company for the entire process? Almost all the companies that have significant pure-play exposure to water in the oil & gas sector are private. In fact, right now there is only one public company which has pure play exposure to this rapidly growing sector. I’ve already talked to management and completed my due diligence on the company. My subscribers and I are just about to pounce on the opportunity [which I think could be a big winner](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). Regards, Marin --- # How IoT is Disrupting Mining in a Major Way - URL: https://katusaresearch.com/how-iot-is-disrupting-mining-in-a-major-way/ - Type: article - Published: 2019-08-02 - Updated: 2019-08-05 - Author: Marin Katusa Be long the disruptors, and short the disrupted. It’s one of the biggest themes in the investment world over the past 10 years. You know you could have bought Netflix stock in 2002 for $1.07 per share? Today shares are worth over $320 per share. That’s nearly a 30,000% gain. Long Netflix and short Blockbuster is a great example of being long disrupters and short the disrupted… Below is a chart which compares the share price returns from 2002 until 2011. ![netflix vs blockbuster] In the late 90s and early 2000s the Internet took the world by storm. Everyone wanted to be online. Most businesses that were too afraid to adopt to the new world went the ways of Blockbuster and eventual bankruptcy. But where is the next big disruption on a global scale? Is it Crypto? Cannabis? 5G? Those manias have already come. We have now entered Internet 2.0, “The Internet of Things”, or IoT for short. The *Internet of Things* will give us more than just the ability to watch streaming shows on Netflix or Disney+. The Internet of Things is going to give big business the ability to change how they manage day to day operations… Right down to the minutia and finer details, to reduce operational costs. ## **Smart Oil and Gas – Next Generation Well$** A well has pumps that are pumping oil two thousand feet below the earth’s surface and a mile away from the wellhead. Now let’s say there’s only a trickle of oil coming out from the wellhead… Does it mean the well is dry and there’s no oil? Or does it mean the pump is malfunctioning? Thanks to the internet 2.0, the pump can be fitted with a sensor that can monitor data points like: - Performance, - Production, - Sulphur levels, - Water, - Pressure, and much more… Think of the sensor as a “*Fitbit*” for the oil well. These sensors send information to the control center that determine (in real time) how best to optimize the operation. If a part breaks, the pump can interact with the company’s database and send an order for a replacement part. It may sound terrifying, but this is the future. - **Real time monitoring of assets is going to *reduce* unplanned maintenance downtime and *grow profits*** The rise of the internet and all the connected devices are generating another massive investment theme in the Internet of Things (IoT). Currently, there are over 30 billion devices connected to the internet and this number is forecast to rise to 50 billion by 2030. And according to the accounting firm PWC… Between 2015 and 2020 businesses will invest $6 trillion into Internet of Things solutions. The amount of info that will soon be available for data collection and analysis is profound. Whomever can collect and process this data, will be a big winner. ## **Information is an Incredibly Valuable Asset** Take a General Electric jet engine for example… Prior to 2010, a jetliner used to collect information at 3 points from 30 sensors during the flight. - Once at takeoff, - Once at cruising altitude and - Once on landing. Today, a GE jet engine collects 5,000 pieces of information every second of every flight. It’s estimated that within the next 5-10 years there will be well over 50 billion devices connected to the internet. And this is a conservative forecast… ![Global Connected Devices] In 2020, consumers, governments and industries will invest $1.5 trillion in this space. And by 2025 over $6 trillion will be invested. The most valuable commodity today is actionable information. Think I’m crazy? Here’s a real-life example of how powerful real time data analytics can be… ## **Spying on the Biggest Investors in the World** Every plane in the world has its activity tracked. Take** Quandl **for example. It’s a company that specializes in harnessing alternative data sources. It showed the private jet of **Occidental Petroleum** fly around to all of **Anadarko’s** different oil fields. And then it showed Occidental’s plane flying to Omaha, Nebraska. Here’s why this data matters… A few days later, Occidental and Berkshire Hathaway went public with a deal to buy Anadarko Petroleum for $38 billion. That isn’t inside information. It’s the new playing field. ## **This is Next Level Intelligence** While the Occidental deal was a cool example on its own, it goes a lot deeper than that. Right now, there are billions of devices connected to the internet. It’s not just cell phones and computers that are connected. We’re talking devices in oil fields, manufacturing facilities and in warehouses like Amazon’s packaging centers. **Intel**, one of the world’s largest technology firms, states that there could be up to 200 billion connected devices by 2020. These connected devices have the potential to send and receive info on literally anything that can be measured. In 2018, there were over 30 billion connected devices. Below is a chart which shows what industries are using the IoT (Internet of Things) the most. ![Internet of Things Connected Devices in 2018] The Internet of Things is not just about using products like *Roomba* or a *Google Nest* in your home. It’s about modernizing our entire industrial manufacturing processes. In the resource space especially… it’s about using predictive software to know not only when parts will break but why they break. Even commercial real estate operating costs will be reduced because of IoT… Did you know that in United States alone, 30% of energy consumed in commercial buildings is wasted? ## **I See a Big Opportunity in the IoT With Data Processors** These are the companies that can take massive quantities of data and process it intelligently into solutions that improve the way society and businesses operate. Software will unlock massive savings for many companies. I know that to some of you, today’s technologies maybe scary… Even I regularly get Katusa Research’s full time in-house tech guru, Simon, to help me with issues with my computers on a regular basis. But the key is to embrace the learning process. …or at least be receptive to it. Many mining companies are far ahead of their peers when it comes to finding a new edge in their operations. And we’ve found one company that does that in spades for companies in the resource sector (and more). We published our research and recommendation on this company to our subscribers recently. It focuses on improving efficiency and optimization of already operating equipment or facilities. Its key assets are proprietary computer programs. Think of them as the “super brain” of the business. These software programs help solve many of the world’s most important issues today, like: - Curbing energy waste, - Maximizing power production, and - Extending the lifespan of critical energy infrastructure. Think of it as the ability to create an ultra-precise, virtual model of an oil pipeline, petrochemical facility or even a power plant. (And to actual military grade specs — the U.S. military is a client). - **The best part of this deal is the Katusa Advantage that allows our subscribers to make money while the company achieves its business plan** And we get two additional upside lifts if the stock prices rises (and not by much from today’s levels). That’s triple the upside for subscribers versus buying in the open market. If you’re not a subscriber to ***Katusa’s Resource Opportunities*** – my premium newsletter – where I reveal the exact plays I’m putting a large part of my net worth… [consider becoming one right here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). The Internet of Things is the real deal and I expect it to disrupt the way many industries operate today. It’s my fiduciary duty to subscribers to find the best investments for us. Regards, Marin --- # What Have You Done Today to be Better than Rick Rule? - URL: https://katusaresearch.com/what-have-you-done-today-to-be-better-than-rick-rule/ - Type: article - Published: 2019-07-26 - Updated: 2019-08-07 - Author: Marin Katusa Who is the best public speaker in mining? Most would say it’s Robert Friedland. But it’s not. Without a doubt, that title belongs to Rick Rule. Rick is quick witted and very fun. But it’s not until you get to know him on a personal level that you realize how smart he really is. I first met Rick at the end of the January 2003 Cambridge House conference. He literally spent hours with me after the show, in the hallway of the conference venue after everyone went home. Back then, I was full of drive and ambition and had found something I loved, mining. Rick gave me his personal business card. I had zero business knowledge at the time, but I knew this guy was someone I wanted to work with. I kept his card on my office wall until I called him 2 years later. I’d just came back from Serbia and had an idea on how we could pick up some past producing assets in Serbia and Kosovo. Rick was interested. That was the beginning of my business mentorship, partnership and then friendship with Rick Rule. But it was far from an easy ride. I’ve lived and survived the Rick Rule School of Business. Today Rick and I are good friends. At times we’re partners in deals, and at other times—we’re competitors for a deal when there isn’t room for the both of us. But it wasn’t always that way. I’ll share a story that few people know, of how Rick acknowledged me in the markets for the first time publicly. ## **Cowboy Boots and Private Placements** It was 2006, and I’d started making a name for myself in the business. I was the largest investor in 2 hot companies at the time, Copper Mountain and Cuadrilla Resources. Both had completed financings and were preparing to go public. I was the largest individual investor in both deals at the time. I was on a roll, as I capitalized on the tungsten and uranium bull markets. I devoured any interview, print or online, with Rick Rule. But it was an interview in late 2006 that shocked me. Rick was interviewed by a well-known talking head and at the time the largest followed business show. In short, the interview started like this: **Host**: “We have legendary and uber wealthy Rick Rule here today. Few have navigated the mining markets over the last 25 years as well as Rick Rule. Rick, where are we in the mining markets today?” **Rick Rule:** “Well, I’ll tell you where I am not. My oldest and dearest friend in the world, Doug Casey, has hired this young mathematician, who is unblemished with success and struts through town in cowboy boots and shoots all sorts of deals structuring Private Placements.” I got a digital copy of that video—as it was a pivotal point in my career. Rick is a golden glove boxer. Wow, did he ever sting me with an unexpected left hook with that one without even throwing a punch. Up to that time, I thought I had Rick’s respect. Little did I know… And that line, *“unblemished with success”* was the ultimate way of saying… *This smart punk ass kid made a bunch of money in a bull market and now he has his intelligence confused with a bull market.* I didn’t sleep that night. I literally thought about what he had said all night. He was right. I was unblemished with success at the time. I had a new goal. So, I printed a big poster in the middle of the night—with Rick’s face on it. ## **What Have You Done Today to be Better than Rick Rule?** It was on my wall, above my computer in my office and I would repeat that saying thousands of times over the next few years. Rick and I met a handful of times between 2006 and 2008. But it wasn’t until he called me to have lunch in early January 2009 that things changed. At the time I had just taken over Doug Casey’s funds and they had been through a train wreck, down over 80%. Rick wanted to know what my plans were. I laid them out. I think Rick was intrigued to see if I could pull it off. I told him about a computer program and model my team and I had created, and he wanted to see it. I was so excited that Rick Rule was in my office that I was completely focused on my computer screen explaining the financial modelling we could do. That’s when I realized Rick wasn’t paying attention to what I was saying, but was looking at the poster on my wall with his face on it and the words: **What Have You Done Today to be Better than Rick Rule?** It was one of those awkward moments. Neither of us said anything. That’s when Rick offered up that he did the exact same thing with his mentor over 25 years earlier who ripped him a new one. OK, I’m not the only weird one. Right after this, we started talking regularly and doing a lot of Private Placements together. Rick was spending a lot of time with me and making a conscious effort to mentor me. Oddly enough, at this time, I became his neighbor. Bonnie, his wife, wasn’t thrilled when she was in our living room and noticed we could look down right into *their* living room. It was a ‘stalker’ish’ way for me to know who Rick was entertaining and what possible deals were happening. I would regularly ask Rick —“Oh I saw you had Bob Quartermain over for dinner—anything I should be involved in?” or whatever other guests he had over. At PDAC (the major mining conference in Toronto) in 2010 during a 7 a.m. breakfast, Rick pitched me to buy the Casey Funds and have me work for him. As a fun side note, Rick and I have done this PDAC breakfast ritual every year since and whoever shows up 2nd pays. To give you an idea of our relationship, I showed up at 6:30 a.m. for a 7 a.m. breakfast this past PDAC, and Rick was already there! Man, the guy is hard to beat. I bought breakfast. Next year I’m showing up at 6:15am for our 7am breakfast! Now, back to Rick’s 2010 PDAC pitch. I was honored, but I knew I was an alligator that had a lot of prey to finish up on. I love Rick, but I didn’t want to be his employee—I knew I wanted to be his partner, not employee. So, as a solution, Rick and I created the KCR Fund (Katusa Casey Rule) a month later. It was to fund and invest in the next generation of resource superstars. We each put up millions of dollars and the experience has been incredible. It’s always a positive experience when your fund can pay major dividends in a tough market. That brings me to why I still pay attention to Rick Rule, and why I still regularly think to myself, “**What Have I Done Today to be Better than Rick Rule?”** He is a workaholic that loves his business. Few have a better mind for this business. Rick and I are guests at each other’s conferences. For me it’s always a highlight at the Vancouver Resource Investment Conference (VRIC) or San Francisco Gold & Silver Summit when Rick and I take each other on for the audience. Like I said, he isn’t scared to throw a punch. And I love it. He is great for our business. He has been an incredible mentor to my career and many others. And most importantly, I’ve watched how he has been an incredible husband to his wife Bonnie, something I’d like to emulate myself. Rick is the mastermind behind the [**Sprott Conference**](http://sprottconference.com/) which will be held between July 29th and August 2nd 2019 in Vancouver, BC. It’s at the Fairmont Hotel Vancouver which is on 900 West Georgia Street in the heart of downtown. I will be there, and so will the who’s who of the mining business. ## **Rick’s Picks and Crystal Ball Predictions…** So, Rick and I had a chat recently and I asked him—what are the three panels you are most excited about? - The Living Legends Panel (specific individuals on the panel—**Ross Beaty**, **Robert Friedland**, **Sean Roosen**, **Bob Quartermain**); - The Up and Comers Panel (**Amir Adnani**, **Nolan Watson**, **Mark O’Dea**); - The Robert Friedland solo panel. I’ll be there for all three as well. But I’m most interested in the Up and Comers as I plan on making a lot of money with the stars of my generation. Not to mention, I have personal relationships with many of the panelists, so it’s easier access to their deal flow. Rick mentioned that he is excited about the Up and Comers because they don’t carry the price premium of the Living Legends. I pointed out to Rick that was the historical norm, but everyone can buy Ross Beaty’s next big gold bet at a big discount to NAV. Over the last few years, this was the conference where Rick Rule was talking on stage about companies like **Marianna Resources**, **Reservoir Minerals** and **Nevsun**, and **Atlantic Gold**. All played out well if you wanted to listen. Rick and I know each other well enough and have enough respect for one another that we don’t do the dog and pony show with softball questions. I wanted to know… what are the three junior stocks he is most excited about in the next three years? Rick legally couldn’t answer that (because he’s a broker and all the legal lingo that goes with unsolicited advice), so I rephrased it. “Rick, knowing I like money: which three companies should I spend extra time truly understanding the business models of, that I can potentially be making money in over the next 12-18 months?” Rick’s answer? - **EMX Royalty** **(EMX:TSX-V)**, - **Steven Dean’s** next deal (a Katusa Research exclusive in the next KRO), and - **Equinox Gold** **(EQX:TSX-V) **(Ross Beaty). Rick took Ross out for his 68th birthday recently. Ross told Rick that he’ll build Equinox into a 1 million ounce per year producer before his 71st birthday. That’s 3 years. Go Ross Go! Then I asked, what are Rick Rule’s 3 largest dollar investments outside of his Sprott holdings? Rick’s largest holdings are Sprott shares and Sprott products. But that’s too easy. I wanted to know names of companies with booths at the conference. - Starting with the largest: **Ivanhoe Mines** **(IVN:TSX)**. I’ve often compared Rick to the Mark Twain of mining when he comes up with lines like “I own so much, in fact I own a very intemperate amount. I love that line—*a very intemperate amount*. Rick’s Average cost base: about CAD$1 per share - **Sandstorm Gold Royalties** **(SSL:TSX)**—as a consequence of Mariana being taken over by Sandstorm. - **Pan American Silver** **(PAAS:NASDAQ)**—another Ross Beaty company. I like pushing for more info—mainly because Rick is always up to something interesting. I don’t always go with his bets, but they are always interesting. So I asked: what are three deals that Rick Rule wants to do a Private Placement to increase his position in, but is waiting for the right terms for? - **Lara Exploration (LRA:TSX-V)**—That’s Miles Thompson’s deal. - **Minotaur Exploration (MEP:ASX)**—According to Rick, a superb geo team, backed by OZ Minerals, with a good land package. - **You will have to come to the show to find out the third!** Rick and I also started chatting about beaten down sectors, and one of his favorites is uranium. Rick said he was delighted with the result of the [Section 232 investigation](https://katusaresearch.com/russia-1-trump-0-section-232/). He believed it was the right outcome for the country, but that Section 232 was bad for the uranium business because it was protectionist legislation (that’s the Libertarian in Rick speaking, I think). Rick is excited because so few people can finance uranium right now and he plans on investing in a big way over the next 18 months across the board as he believes all of the companies will require fresh capital. We joked that the sector has been so bad, perhaps the TSX will make an exemption for us with 10 year listed free-trading warrants. And we ended with these rapid-fire questions. Basically—will each commodity be higher or lower in 12 months? Below are Rick Rule’s thoughts over the next 12 months: For more information on the companies I mentioned above, as well as to meet with the legends and upcoming stars of the mining industry, make sure you don’t miss the Sprott Conference in Vancouver next week. Don’t forget – **“Out of the room, out of the deal.”** See you there. Regards, Marin P.S. If you’ve been on the fence and *out of the room, out of the deal* on my premium research service, [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite) then now is your chance to join. Subscribers have seen gains of 260%, 101% and 170% in 2019 and several more double-digit wins in 2019. Don’t be left behind. --- # Is Gold Investment A Good Move for the Future? - URL: https://katusaresearch.com/is-gold-investment-a-good-move-for-the-future/ - Type: article - Published: 2019-07-23 - Updated: 2019-09-23 - Author: Marin Katusa In a world where the S&P 500 blasts almost 20% higher in the space of two months, gold investment may seem a little boring. Global stocks have shot higher over the last decade as newly created fiat currency entered almost every market on the planet. The price of debt and the price of stocks rose in tandem, which is a very rare phenomenon. Gold investment hasn’t been as popular by comparison. Gold has seen a modest rise over the same time frame. Gold was trading around $920 USD an ounce in March of 2009, and in 2019 it broke $1400 USD per ounce for the first time in 5 years. Gold investment has been a good move. A price gain of around 52% in a decade isn’t too shabby. Sure, many other assets have done much better. But, gold offers investors something that no other financial instrument does. And that’s a long history of stable buying power. ## **Gold Investment Has a Long History** Gold has been money since we started keeping track of history. In fact, until 1971, gold was the basis of the Western financial system. Alongside silver and other metals, it was used as money in ancient Rome. It’s still held as a reserve asset [by many nations and central banks](https://katusaresearch.com/the-secret-central-bank-gold-transfer-operation-fish/). People in the Western world have mostly forgotten about gold investment. But there are some very good reasons why it is good to own a little bit of the yellow metal. The first and most compelling reason to own gold is fiat currency. This might sound strange, but fiat currency isn’t the most stable asset out there. The fact that the fiat currency system in the US has been relatively steady for almost 50 years is nothing short of a miracle. Have a look at places like Argentine and Turkey for more information on what can happen when fiat currency systems go terribly wrong. Gold investment will make sure you have something of value no matter what. When a fiat currency system goes belly-up, the value of gold tends to skyrocket. More importantly, gold can always be traded for cash. Gold investment ensures that you can buy groceries and other items you need on a daily basis. ## **The Investment Thesis for Gold** At this point, gold could be thought of as buying an insurance policy that could also rise in nominal terms. Even if the US Dollar-led fiat currency experiment continuities without a major crisis, gold appears to be in a long term bull market that started in 2001. The reasons why gold has rallied from below $300 USD an ounce in 2001 to more than $1400 USD an ounce today are debatable. But the peak price of $1900 USD an ounce we saw in 2011 may not be the highest price that gold achieves. This is what looks like a multi-decade bull run. The idea that gold investment is a good idea doesn’t seem to be lost on nations like Russia and China. Both countries [are accumulating gold on the international market](https://katusaresearch.com/chinas-golden-corridor-gold-reserves-and-negative-yield/). China and Russia are also major gold producers. And this makes their buying habits even more interesting. In the investment world people want to have a narrative that explains the markets. They want to know *why* gold will rise, or *why* nations outside of the US are buying up gold. The fact is that gold has been rising in price (around 4% per year over the last decade), and major world powers are accumulating gold. Gold investment might not be as exciting as Apple stock, but it has created reliable returns for almost two decades. That all seems pretty simple, no? ## **You Probably Won’t Lose Much With Gold Investment ** No one knows where gold prices will be in a week, a month, or a year. However, the second major argument for holding gold is: Gold has been a very stable means of saving money for thousands of years. Pulling up historical data tells us that gold outperforms stocks in periods of recessions and market corrections. One example is that gold spiked in 1980 at the start of the 80’s recession, when the price of the yellow metal soared to $850 per ounce. In the table below, you can see how gold tends to perform against the S&P 500 during the most extreme corrections since 1976. The data shows that gold will perform better than the S&P 500 *if* or *when* there is a recession in the future. ![gold investment returns during market crash]It would be a mistake to think about gold as a way to make huge returns. Although gold stocks can provide significant returns if you pick the right one . Considering gold as another kind of money (like a store of value) is probably a better way to view it. No matter where you go in the world, there will always be a market for your gold. In this way, gold is like a truly global currency that has thousands of years on its side. The price of gold in your local fiat currency will fluctuate, much in the same way that the value of fiat currencies move around on a daily basis. Regardless of whether or not gold is rising or falling when measured against fiat currencies, gold owners have a kind of money that is accepted everywhere in the world. It can also be swapped for cash at any time. This makes it one of the most liquid assets in the world. ## **Gold is Worth Owning-*Period*** The idea that gold investment should make up 5-10% of any portfolio isn’t new. Now that the global financial system is wholly backed by debt, holding some gold in your portfolio seems like an even better idea. And there are many ways to gain exposure to gold. For example, buying some physical gold makes sense (I continue to buy physical gold). If you ever need gold to fulfill its role as a currency, it makes sense to have some in your physical possession. Paper gold products like the GLD ETF may offer convenience, but they aren’t going to help you in a crisis. I personally rather buy gold and other resource stocks for [their unique leverage](https://katusaresearch.com/secret-making-20-fold-returns-leverage-works-natural-resource-stocks/) to the gold price. There are a lot of ways to buy gold in bullion form, without paying a big premium to spot prices. Gold bullion coins are also made in ¼ and ½ ounce weights, and these smaller denominations are worth considering. In the event that you need to trade your gold for cash, a ¼ coin will give you the option to sell less gold at one time. The media makes money from drama and hype. Gold investment doesn’t get much play in the mainstream financial press, but it is one of the most stable assets there is. There has never been a time when gold was worthless. It has been a currency of last resort for people in dire financial straits, and it has also been used to underpin the global monetary system. Ask yourself: Do I really want to turn my back on an asset that is as good as cash globally, and has been in that position for most of recorded history? Regards, Marin Katusa --- # Russia 1 Trump 0 – Section 232 - URL: https://katusaresearch.com/russia-1-trump-0-section-232/ - Type: article - Published: 2019-07-19 - Updated: 2019-07-31 - Author: Marin Katusa On July 12th, it was Black Friday for uranium companies. Many uranium stocks had a severe meltdown… ![US Focused Uranium Peers July Share Performance-min] The cause of the midday crash was an information leak from the White House. ## **It’s a Matter of National Security…** If you’ve paid attention to Donald Trump and his government over the past three years, you’ll notice his top priorities have a common theme… *…*Independence and national security. He doesn’t mind battling China on trade wars. And he’ll even impose steel tariffs on friendly allies like Canada. The administration is taking a no-holds-barred approach to negotiations. Next to its military, one could argue that the American energy sector is the nation’s most important sector. Without it, hospitals aren’t powered, airports don’t work and defense systems are inoperable. Uranium energy is baseload power. It’s crucial in keeping the lights on. A fifth of all households in the United States are powered by uranium. And if you weren’t aware, the U.S. imports over 90% of the uranium that it consumes. Which begs the question… ## **How Much Uranium Does the United States Consume? ** The United States has consumed between 40 and 50 million pounds of uranium every year since the mid-90s. Below is a chart that shows annual U.S. uranium consumption. ![US Annual Uranium Consumption-min] And this leads us to the next logical question… …Which is the one that will get a lot of attention from President Trump. ## **Where Does the United States Get Its Uranium From? ** According to the United States Energy Information Association, in 2018 the United States purchased 36 million pounds of uranium from foreign sources. Over 50% of the uranium imports came from Russia, former Russian states and Russian influenced sources. That’s 18 million pounds. The other half comes from Canada and Australia. Below is a chart that shows the United States uranium imports by source. ![2018 US Uranium Imports by Source-min] American uranium production has stagnated over the past decade. Last year, Americans produced less than 2 million pounds of uranium on American soil. ## **The Uranium Producers of America (UPA) Let America Down** I’ll explain. But first, I have a simple question for you. Do you think Russia, China or, for that matter, any major country in the world would allow foreign-controlled corporations to have direct access and input to all the various branches of government on a national strategic item like energy? Is there a UPR (Uranium Producers of Russia) that allows U.S. producers to have direct access to all the various branches of Russian government? Of course not. Well, the UPA, which stands for Uranium Producers of America, did just that. The Russians not only had direct access to the various branches of government in the U.S. but also had input and influence on the outcome. Not to mention a Russian company sits on the NEI (Nuclear Energy Institute) also. I believe foreign-state-owned enterprises that were on the UPA – who had an equal voice as the U.S. owned producers – had a different incentive than what was in the best interest of the American industry. Uranium One, which is essentially a Russian government-owned company has a major voice on the UPA. As does Cameco, which basically buys uranium sourced from the former Soviet Union and sells to the U.S. utilities as uranium coming from Canada. And add in the lobbying by the U.S. utilities, which enjoy the current fractured environment. They do not see the coming ***Cut to Kill*** strategy by Kazatomprom that I have written about (more to come at [C2KU.com](http://c2ku.com/)). I see the UPA losing members. There’s just no point for the association to exist – as seen by the results of the Section 232 investigation, which I’ll explain further below. The utilities do not believe relying on foreign sources is the definition of a national security issue. You can see how this has the attention of the White House. Especially when considering half of the countries who export to the United States would be anti-American, if push came to shove. Reliance on imports is a serious storyline and issue. American uranium companies petitioned the government to conduct an investigation into the matter. The goal was to convince the White House that such significant import reliance was a matter of national security. The ultimate win would be if the White House mandated a specific portion of uranium production within the United States (think Trump’s *Buy American* Strategy). And that’s how Section 232 came to life in the uranium markets. ## **What Is a Section 232 Investigation?** The purpose of Section 232 investigation is to determine the effect of imports on national security. This is the angle the American uranium companies played. The investigation wanted to determine whether the reliance upon importing 93% of uranium demand was a matter of national security. The issue was raised several months ago. And then the President released his initial remarks and recommendations. ## **What Does Donald Trump Think About Uranium?** Donald Trump has significant concerns about the impact of uranium imports on national security with respect to domestic mining. Here’s what President Trump said in his memo released on July 12th: Although I agree that the Secretary’s findings raise significant concerns regarding the impact of uranium imports on the national security with respect to domestic mining, I find that a fuller analysis of national security considerations with respect to the entire nuclear fuel supply chain is necessary at this time. For the full memorandum from the White House, [click here](https://www.whitehouse.gov/presidential-actions/memorandum-effect-uranium-imports-national-security-establishment-united-states-nuclear-fuel-working-group/). ## What Is the Impact of Section 232 on Uranium? The White House is going to establish a working group, which will study the full effect of the entire nuclear fuel supply chain on national security. I believe I was the only person in the public markets who stated that the final decision would be delayed. That’s exactly what this announcement is. And I can see it being delayed again, and again, and again. In a way, Trump’s doing what’s best for Trump. He’s taking the pragmatic approach and not alienating anyone here. Regardless of if the result wasn’t what the uranium producers and speculators wanted to see. He has thrown out a lifeline to the uranium producers with the working group initiative. If the government had just slapped a quota on without complete due diligence, it would likely have been repealed by the next administration. This working group will give both the producers and the utilities a voice in the decision-making process. **Here’s what I think is going to happen…** I expect the utilities to drag their feet on any quota. I believe there will be a major power struggle at the UPA. I see the smaller U.S. producers within the UPA abandoning the UPA. Here’s what **Energy Fuels**, **Uranium Energy** **Corp** and **Ur-Energy** should do… They should all leave the UPA and create their own **AOUPA—American Owned Uranium Producers Association**. The current largest members of the UPA; Cameco is run out of Saskatchewan and Uranium One is run out of Russia. I also think Energy Fuels, Uranium Energy Corp and UR-Energy should sit down in a room—without bankers—and Mark, Amir and Jeff should work out a plan to merge. A single American owned uranium producer will have much more leverage with Trump than a UPA where the #1 and #2 uranium producers in the world, neither operated out of the U.S., have control of the mandate. Who is the biggest benefactor of the current U.S. uranium situation? **Uranium One** (a Russian company) and **Kazatomprom** (Kazakhstan-Former Soviet Union State. And don’t forget, the Russians control 50% of the uranium production in Kazakhstan). Hence Russia 1 – U.S.A 0. The Russians are in total control of the price. And they will continue to ‘Cut to Kill’ until they complete their strategy. Cameco won’t fair well. Especially once Kazatomprom completes their ‘Cut to Kill’ strategy. Remember, there’s no shortage of uranium. That statement is going to ruffle feathers, but the chart below doesn’t lie. It’s one that nobody other than Katusa Research produces. It is the *days of supply monitor* for uranium. It is calculated using U.S. uranium supplier inventory levels and inventory levels at nuclear power reactors along with annual uranium consumption. ![US Uranium Days of Supply-min] The end result of Section 232 will likely be a quota. I’ve said many times that I don’t think the switch will flip and nuclear reactors will immediately be forced to use 100% American produced uranium. I think it’s much more likely that we start with a 5% quota that will gradually increase over time. It gives the utility companies time to rotate their contracts and American producers time to ramp production. ## **How Is Marin Katusa Speculating in Uranium?** For the last two years, I have publicly stated that the uranium price will stay under pressure. There’s a lot of speculation regarding the uranium price. I remain conservative and expect prices to remain lower for longer. When a deal with the American utilities does work out, we’ll eventually see prices rise towards $45 per pound. That may take a couple of years. If prices go higher, terrific. My subscribers and I are well-positioned. But we are not banking on prices of $75 per pound or more. Our big bet on how to play the uranium sector has us sitting at a 50% gain right now. And I’m happy with that. It’s going to go a lot higher because of the current uranium market. **I have no interest in early-stage uranium projects in AK-47 nations. ** I get so many negative emails from believers in moose pasture [in AK-47 nations](https://katusaresearch.com/use-ak-47-indicator/). I wish them well, but not with my money. This is why we bought a uranium “hedge”. My concept was simple: A royalty company picks up royalties and streams in a depressed market, which will last longer than most expect (including the companies that require capital to advance their assets). And the company cherry-picks the best uranium assets in the world at historic low uranium prices. Then lets the cure for low prices, low prices, take care of itself. And profits when prices start to rise. This company will do well in a poor uranium market, and it remains very leveraged to rising uranium prices. It’s the best of both worlds. ## **Last Words on Uranium…** There are a lot of so-called experts in the uranium market. Many of them have never been to real processing facilities or met with the best management teams in the world. Nor do they have millions invested into the sector. I have spent the better part of two decades heavily involved in the sector. If there’s a world-class management team or project, you can bet I’ve met with them and been to the project. Please be wary of those “gurus” who get paid by shitty companies to promote their stock—yet hide behind podcasts and anonymous blogs talking garble. Take it from me, this is a very tough and highly speculative market. It means there’s a very high risk, but also a very high reward. Be prudent with your money. And as July 12th proved, you can stalk your favorite stocks like an alligator and scoop them up for 40-50% off. Uranium and venture stocks in general, are some of the most volatile stocks on the planet. If [you’re prepared for the volatility](https://katusaresearch.com/great-investor-must-treasure-one-thing-people-hate/), you can make a significant amount of money. But if you’re over-invested, you’ll lose more than just your shirt. Regards, Marin Katusa **P.S.** For all things uranium, including my current holdings and breaking research on Section 232, consider becoming a subscriber to [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiewebsite). You’ll also find the ticker symbol of one of** my top silver holdings,** **which is up 24%** in the past 2 months **AND you’ll also get the name of one of my top gold holdings that’s up 101% so far this year.** This gold junior just announced major drill results on the heels of a major asset sale and the stage is set for this story to explode much higher. --- # The 14 Digits Powering Gold’s Rise - URL: https://katusaresearch.com/the-14-digits-powering-golds-rise/ - Type: article - Published: 2019-07-12 - Updated: 2019-07-31 - Author: Marin Katusa Gold soared past $1,400 per ounce last week, hitting a high of $1,439 per ounce. I’ve discovered an interesting angle in the gold markets that hasn’t gotten a lot of fanfare. But I think it’s a cause for the price of gold appreciating. ## **What’s Making the Gold Price Go Up? ** $13,049,718,112,256. What’s that number you ask? That’s $13 TRILLION and change. That’s the total amount of debt in the world that currently has a negative yield. And it just hit a new high. ## **What is *Negative Yield* and Why Does It Matter?** Yield refers to the interest rate paid on a bond. The higher the yield, the more interest paid to the bondholder. Lower yields equal less interest paid. And when it’s negative, it means investors are actually paying the bond issuer rather than vice versa. It’s a bizarre phenomenon but it’s become a major global issue. I’ll explain… The United States pays around 2% on its 10-year bond. However, in places like France, Austria and Germany, this interest rate is negative. It means if you buy a French 10-year bond, you’ll actually get back less than you started with in 10 years when the bond matures. The world is so upside down right now: The Greek 10 year is priced roughly at the same yield as the U.S. rate. I don’t care how much you love souvlaki and the bikinis at the beautiful Sarakiniko beach – there is no way I take the Greek side of that trade. Seriously, the Greek 10-year has roughly the same rate as the U.S yield rate? Has the world gone mad? Right now, cash under the mattress is a better investment than ¼ of the bonds from Austria, Italy, France – and the list goes on. According to Bloomberg, in the global bond market nearly 40% of all bonds are yielding less than 1%. Gold is now looking good to even Warren Buffet when compared to these other options to store cash. ## **What Is the “Real” Rate of Return?** You can calculate this by taking the bond’s nominal interest rate and subtracting the national inflation rate… There’s even more bonds with a “real” negative return. Below is a chart which shows the skyrocketing total of negative yield debt. You’ll see we have just ripped through the previous 2016 highs of $12 trillion. ![Global Negative Yield Debt-min] ## **Why Is Negative Yield Debt a Problem?** Debt is commonly considered a safer investment than stocks. Very large investors like central banks, sovereign wealth funds, or large private equity funds buy these debt instruments for security and a small yield. With negative yields, these investments are off the table. These funds could go down the value chain and invest in top tier blue chip bonds with perfect credit ratings. But, as shown by Bloomberg, 24% of those bonds also have a negative yield. There’s just no place in the bond market to earn a safe, sustainable yield. ## **Nothing to See Here – Everything Is Normal in the Crazy Land of Interest Rates** A second problem lies in national monetary policies. Zero interest rates are effectively money printing presses. This has the potential to cause widespread currency depreciation in the denominated currency. To show how desperate investors are for yield… - **At the recent Italian bond auction, demand for the 50-year bond with an interest rate of 2.90% was 6 times oversubscribed. ** The European Central Bank (ECB) has been a strong advocate for monetary stimulus and lower-for-longer interest rates. The ECB will likely appoint Christine Lagarde as the new head of the Bank. She is not a trained economist but ran the International Monetary Fund and was the Head of Finance for the French Government. She is very pro-monetary spending and supports low interest rates. As such, I just don’t see the ECB changing their path. In the United States, you have President Trump who comments every other day on Twitter about how interest rates are too high. He’s also made several nominations for FOMC members (the fed rate setters) who would be advocates of ultra-loose monetary policy and even the gold standard. Fed Chairman Jerome Powell is likely backed into a corner at this point. And the market is forecasting a nearly 100% chance of a rate cut in July. ## **Making Money in a Negative Yield Market** There are a couple ways to make money. You can buy the 50-year Italian bond like many others and earn a whopping 2.9% before inflation. Or you can buy a safe, stable commodity like gold. Over thousand years of history has proven that gold is a safe heaven to protect yourself from the lunacy of the ruling party. History always rhymes. And in a race to currency deprecation, it’s always a good idea to have an asset which will move opposite the direction of the currency. I think it’s probable that central banks and major institutions look at gold as place to rotate some capital to. In fact, many central banks have been active purchasers of physical gold over the past few years. ## **Which Central Banks Own the Most Gold?** Gold is an important part of many central banks’ foreign reserves. Below is a chart which shows the top 20 central bank gold holders. ![Central Bank Gold Reserves] The Chinese central bank has been a large buyer of gold over the past several years. And remember, this is only what’s publicly reported. China’s actual reserves could be much higher. It makes a lot of sense that China wants to diversify its holdings away from its own currency, U.S. dollars and treasuries, and allocate a portion of capital to gold. Especially when many US treasuries are yielding a negative return. Below is a chart which shows Chinese gold reserves. You can see that roughly 3 million ounces were added in the last 6 months. ![Chinese Gold Reserves] But what you may not be aware of is that China is not actually the most aggressive purchaser of gold today. ## **Which Central Bank Is Buying the Most Gold?** Over the past 12 months, the top 10 central bank gold buyers purchased 16.2 million ounces. - **Using a gold price of $1,300, that’s $21 billion worth of gold**. If you jumped to the conclusion that China was the largest gold buyer, you would be wrong. The most aggressive buyer of gold over the past few years has been Russia. Below is a chart which shows the largest gold central bank gold buyers over the past 12 and 36 months. Like the Chinese, the Russians have been swapping U.S. dollars for gold. And so far, it’s been a great trade for the Russians. You can side with the likes of the major financial institutions and buy physical gold and likely make a nice return. However, I’m taking a slightly different approach. I’m investing millions into a handful of gold stocks that I believe will significantly outperform the performance of bullion over the coming years. I think it’s reasonable that if gold pops even $100 or $200 per ounce, my gold stocks could easily double or triple in value. Just look at the recent [Atlantic Gold buyout](https://katusaresearch.com/another-gold-buyout-takes-center-stage/), for instance. We publicly stated it would be bought out and had the company on our [free gold buy out list](https://katusaresearch.com/gold-stock-buyout-candidates/). One of my gold stocks is up 40% in the last 6 weeks on the back of gold’s 9% rise. That’s the incredible leverage that certain gold stocks provide. We’ve done very well so far in 2019, but I think there’s a lot more room for the stocks we hold in [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) to run much, much further. Regards, Marin --- # Here’s How You Can Make 170% Profits in Less than 45 Days - URL: https://katusaresearch.com/heres-how-you-can-make-170-profits-in-less-than-45-days/ - Type: article - Published: 2019-07-05 - Updated: 2019-07-31 - Author: Marin Katusa Would you like to know how Katusa Subscribers just returned a +170% profit… in less than 45 days? If you got in on this pick, you could’ve turned $1,000 to $2,700… $2,500 to $6,750… and $5,000 to $13,500. Some folks would need an entire year – or more – to double their positions in size. But a small group of Katusa’s Resource Opportunities subscribers have done that and more in less than 45 days… Better yet, this is just one of many plays we’ve locked in – as certain markets are in turmoil. And this presents an opportunity to make calculated high-risk, high-return bets. But, I’m getting ahead of myself. Let me give you the background… ## ** The Opportunity** Long-time subscribers know that I have been bearish natural gas producers. My argument has always come back to this: There is no shortage of supply domestically. Back in April, the Saudis announced they’d begin a major development for natural gas at their largest oil field. The majority of natural gas producers both in Canada and the United States have consistently underperformed for years. For example… There’s so much natural gas being produced in the Permian that the regional pipelines and processing faculties are chock-full of natural gas. This caused the regional price of natural gas to go negative. And it means producers have to pay to have the gas taken away. ![Permian Basin Natural Gas Price] Recently, our proprietary algorithm and triggers detected highly uncommon market moves in the natural gas sector. ## **Rocking the Algo for Our Advantage** The trade idea was to short natural gas producers who are highly in debt. And who are exposed to the spot price of natural gas and natural gas liquids. Without going into too much detail (and to be fair to my paying subscribers), two of the many triggers we look for were flashing red. This means the timing was right for a trade… I’ll reveal two of the triggers here today: - Weak natural gas pricing - Weak NGL pricing via WTI linkage + rising inventories Katusa subscribers not only made +170% gains (or more), but we sent out an alert for all subscribers to lock in their gains and close the position out on the options trade. Not only do we do open market buys and Private Placement ideas, but we also publish option trades in our service. ## **The Play** **EQT Corp (EQT:NYSE) **is one of the largest pure-play natural gas producers in the northeast United States. The company has a market capitalization of $5 billion. The company has over $5 billion in debt, on which it pays over $200 million per year in interest payments. In each of the next four years, a substantial portion of the company’s debt will mature. All kinds of alarms went off when the company started selling off key assets and infrastructure to fund its business operations. And that’s never a good sign. I began to dig deeper and found out that the company has not generated a positive cash flow *within 5 years*… ![EQT Corp Annual Free Cash Flow] Some investors may not have touched this play with a 10 feet pole. But naturally I became more curious, and noticed… The 30-day volatility was at around 37, whereas the peer group had a volatility of 45. This is fancy talk for the market becoming very complacent. And it did not expect any surprises with regard to this company. (This is the kind of level of detail you can expect in your monthly issues of *Katusa’s Resource Opportunities*). Also, the company hedged approximately 60% of its 2019 natural gas production and none of its natural gas liquids production. By comparison, many of its peers have hedged 100% of production for 2019 and large portions of 2020. This leaves material exposure to the spot price of natural gas. Did I think the company was going to zero? No, but I did believe selling pressure was high. Which is why we published an option trade to Katusa subscribers: ![EQT Corp Option Trade Information] To make a long story short… **We closed the position a few short weeks later for a quick +170% profit.** What’s the learning lesson here? You may have heard that I’d like to think of [our elite circle as alligators](https://katusaresearch.com/the-way-of-the-alligator/) waiting in the trenches for the right opportunity. Sometimes we like to wait when the markets tell us to… And sometimes we pounce and lock down our score, *especially* when the markets are in turmoil. Based on the signals that our algorithms and data systems gave us and with more in-depth research, we pulled the trigger on this option trade. The math worked in our favor and we saw very little drawback in this play. ## **Here’s the Thing Though…** These are not plays you’ll easily find anywhere online. Chances are, you haven’t even heard of this company before anywhere on mainstream media. By the time you hear about plays like this, it’s too late. Venture and resource markets can rise, fall or go sideways… but there are always ways to make money if you’re cashed up and can take action quickly. With gold breaking above $1,400, many of our gold picks have risen sharply (our top gold company is up 69% YTD). With Christine Lagarde expected to take the reigns of the ECB, expect more loose monetary policy for Europe. Basically, this means more financial heroine for the Eurozone. Throw in Japan that is already hooked on Financial Heroine and needs more and slowing of the global economy… And gold couldn’t have a better set up if the narrative was written by the original gold bug himself, my friend Mr. Dines. The gold bull market is not something you want to miss out on. You can find all of my current gold and silver stock buys in my premium research service – [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite). Best, Marin --- # Gold Just Had Its Biggest One Day Influx EVER - URL: https://katusaresearch.com/gold-just-had-its-biggest-one-day-influx-ever/ - Type: article - Published: 2019-06-28 - Updated: 2019-07-31 - Author: Marin Katusa On Friday June 21st, the largest gold focused Exchange Traded Fund (**GLD)** saw over $1.5 billion flood into the ETF. The inflow that day was over 10% higher than the 2nd largest ever inflow. That happened on July 11, 2008. Last week, we witnessed the single largest inflow day ever in the ETF’s history, which was created just before the 2008 financial crisis. And this will have massive implications for gold investors. So pay attention… Below is a chart which shows the weekly inflows and outflows of the GLD ETF since 2013. ![iShares GLD ETF Weekly Fund Flow] It’s no wonder that Gold is at a 5 year high and recently broke a 5 year resistance line… ![Gold breaks out to 5year high] ## **Gold Rush – Follow the Fund$ Flow** A metric we follow very carefully is this: - Which sectors are “passive” funds directing their capital into? It’s been many years since the passive funds have paid attention to gold. More importantly, the passive funds have just started their influx of capital into the gold sector. And if you understand how the algorithms work (which us math nerds do), the algo’s and passive funds chase gains and liquidity. The gold sector is tiny compared to other sectors like the financial sector or bio tech sector. Thus… **It doesn’t take a lot of new capital to send the share prices soaring.** Let me explain… Below is a chart which shows the weighting of gold stocks in the S&P 500. ![Historical Gold Weighting in the S&P 500] The reduction from 0.30% to 0.07% sent the gold market into the worst bear market in history. But that’s what happens in ‘niche’ sectors. Gold is a niche sector. However… Niche sectors are the easiest to get 10 baggers when new capital flows into the sector. That is what the opportunity is in the gold sector. As you’ll see in the chart, the weighting has recently spiked back above 0.10%. The 30 year weighting average is 0.234% If the gold weighting doubles from here… Which would still be less than the 30 year average… **The gold sector will be one of the hottest markets in the world.** And we will see multiple ten baggers in short order. Let’s compare the gold sector to another high risk, venture capital market like biotech. Below is a chart which shows the weighting of gold stocks in the S&P 500 compared to the bio tech sector since 1992. ![S&P500 Weightings] Since the late 90’s, biotech has received far more capital than the gold sector. If even a slice of the passive funds rotate into gold, look out. The great thing about the niche sectors is it takes a long time for the passive, generalist fund manager to rotate their capital into gold stocks. A savvy investor can get in front of the herd and make a killing. ## **How You Can Make Money in This Cycle** History shows that resource stocks move in cycles. Especially gold stocks. And the proof is in the data. Winning is what I love to do. Especially when I kick my friends’ asses. Below is a chart which shows the performance of major gold funds and the *Katusa’s Resource Opportunities* portfolio. I’ve compared apples to apples. My investments in our portfolio (and my subscribers’) versus my competitors bets. A big difference between me and many of the funds in the market—I bet big with my own money – they bet big with your money. Skin in the game is how I roll. ## **Rumble Time: Katusa vs Rick Rule vs Frank Holmes vs VanEck** So what are the results? We’ve outperformed all the major funds by a wide margin. Note: This doesn’t even include our recent option play (which generated a near 200% gain in a little over a month). Nor our warrant exposure we get with our deals in the Katusa’s Resource Opportunities portfolio. If I included the profits from the option trades and warrants, our margin of victory would be even higher. But, being conservative, they are already top in the industry. See for yourself in the chart below… ![Top Gold Funds- Year to Date Performance Katusa Sprott GDXJ US Global Investors Gold Fund] Look, I’m not picking on Rick Rule and Frank Holmes because they lost to me (again). And all three of us have significantly outperformed Van Eck. Both Rick and Frank are friends. I’m showing the facts. And I have no problem putting our portfolio up against the best in the business. I want everyone to see our analysis and our reports. We already have some of the top fund managers and family offices as subscribers. ## Winning Is Fun… but Making Money Is Even More Fun There’s a reason why gold bugs go nuts… There’s no rush quite like a *gold rush*. And throughout the last fifty years there have been many major (and some minor) gold rushes were the gold stocks went absolutely ballistic. Many investors remember the rally during 2009-11 where incredible gains were made in gold stocks. The last time gold stocks lifted off brought incredible gains. For example, back in 2008 I started accumulated shares in Ryan Gold. I met the management team on a site tour in the Yukon Territory, where the average winter temperature is -22 degrees. Our plane was frozen, so I helped de-ice and push the plane to the airstrip so we could make the tour. Fast forward to the gold bull market of 2010-2011 and the stock jumped from around 15 cents to over $2. A 1,450% profit. I have many ten baggers under my belt. It’s why even my competitors have me manage their own money, rather than their own analysts. I work incredibly hard to build my network and assess the data to get into the best gold deals. For example, Katusa Research was the first to publish on an unknown junior copper/gold explorer in late 2018. In under 2 months, on a mega successful drill hole, the stock gave subscribers and me a 270% gain… in a sideways market. Another gold pick in our portfolio, what I call “the next 1 million ounce producer” is up over 25% in less than 2 months. But my favorite gold stock is just getting into its groove and will blow away the market with its results. My portfolio is available for all subscribers to see when you subscribe to my premium research newsletter, [***Katusa’s Resource Opportunities***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). If you’ve been on the fence or you want to invest in the same stocks I’m putting my own money into (and at the same terms and price), then you’ll want to take action. There’s no doubt my subscribers and I are fully prepared to ring profits when the golden time comes in. Regards, Marin --- # Gold Rockets Higher – Do You Own One of the Top 20 Gold Mines? - URL: https://katusaresearch.com/gold-rockets-higher-do-you-own-one-of-the-top-20-gold-mines/ - Type: article - Published: 2019-06-21 - Updated: 2019-08-26 - Author: Marin Katusa Gold has been on a tear this month. Earlier this week, the European Central Bank Chief Mario Draghi – or as I like to call him “Super Mario” – outlined a possible fiscal stimulus plan in Europe. Gold rapidly moved higher off the news. On Wednesday, U.S. Federal Reserve Chairman Jerome Powell released his own cautious statement on the economic situation. The U.S. dollar headed lower and gold popped. Even gold sentiment among investors has spiked this month. But for the last 5 years gold has been range bound in the U.S. Dollar… waiting for a catalyst to propel itself back towards previous high of $1,900 per ounce. Many of you are prudent to note that I’ve published many articles [showing how $2,000 gold is already here](https://katusaresearch.com/2000-gold-and-the-secret-gold-rally-hiding-in-plain-sight/). You don’t need to look any further than gold priced in Australian dollars which continues to march to all-time highs…. As I’ve said before… The reason for this out-performance in Australian gold pricing is due to U.S. dollar strength versus Australian dollar weakness. Lots of media outlets will lead you to believe there’s a race to the bottom in currencies. And while this may sound dire, it’s great for resource companies in the right jurisdiction. **But for most gold producers, it’s been a grind. Anyone that tells you otherwise is lying to you. ** I’ve had hundreds, if not thousands, of meetings with companies over the last 5 years. A small percentage of the mining companies are run by top-tier management teams with skin in the game (meaning a considerable amount of their money and net worth invested in the company). However, most are not. With gold showing some strength, are we through the valley of darkness? Or are expectations and confirmation bias getting the best of us? Below you’ll see the price of gold over the past 5 years. You’ll see it’s very close to breaking above $1,350 on a weekly time frame. As I write, gold is $1,380 per ounce. ![5 Year Historical Gold Prices] The $1,380 price point represents a pivot point for the commodity. This point is known by market technicians as “resistance”. Below this price point, bears have control. Above $1,380 the bulls are in control. In the chart below you’ll see the historical gold price since 2004. You’ll see gold has been very range bound since 2013. ![15-year historical gold prices] You’ll also see in the chart that when gold goes up, it trends very well. In 2004 the price of gold was $400 per ounce. Over the span of 8 years, gold trended higher and surpassed $1,800 per ounce. That’s an increase of 350%. During that time, gold stocks performed incredibly well. Many companies saw their shares significantly outperform the gold price. I’m not saying gold is going to new highs tomorrow. I can’t predict the gold markets, and neither can anyone else. All you can do is prepare and educate yourself, and then when the time is right, you pounce. ## **The Top 20 Gold Mines** Below is a chart which shows the top 20 largest producing gold mines in the world and their major owner. ![Top 20 Largest Gold Producing Mines-min] Being a very large gold mine is great, but unless the mine is a low-cost producer, the size of production is irrelevant. It’s all about Free Cash Flow. Below is a chart which shows the top 20 lowest cost gold mines which produce over 100,000 ounces per year. ![Global Top 20 Lowest Cost Primary Gold Mines-min] If you like what you’ve seen so far, I’ve got a ton of additional free research on my website. I suggest you check out my [gold buyouts list](https://katusaresearch.com/gold-stock-buyout-candidates/). It’s 100% complimentary for you. Just the other week yet another company on my list got bought out for a hefty premium. If you want to spend thousands of hours creating your own financial and geological models, go for it. But my team and I have done the easy work for you. It’s all free. Why? Because I can. The Katusa Resource Opportunities newsletter has also been on fire lately. Our May 2019 recommendation exceeded our own expectations. This past week we sent out an alert to sell and close the position to all Katusa subscribers for a +170% profit in just over a month. And one of our favorite gold juniors just spiked on drill results to a 52-week high and is up 70% YTD. I believe there’s plenty more upside to come. If you want to make life simpler for yourself and invest alongside me, consider becoming a member to [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*.* With a membership, you’ll get immediate access to companies that I am personally investing millions of dollars into. Regards, Marin --- # Making Multiple Big Scores with a Fistful of Dollars - URL: https://katusaresearch.com/making-multiple-big-scores-with-a-fistful-of-dollars/ - Type: article - Published: 2019-06-14 - Updated: 2019-07-31 - Author: Marin Katusa Late one Saturday night, the movie *A Fistful of Dollars* came on TV. At age 12, I was immediately drawn to Clint Eastwood’s character, “The Man with No Name.” Still to this day, he is one of my favorite characters ever. As you can appreciate, growing up in East Vancouver (back then – a lower income, immigrant blue collar neighborhood) with a name like Marin, you attract unwanted attention by the herd. Much like the character in the famous Johnny Cash song, *Boy Named Sue.* The coolest person I had ever seen had no name. So, I thought to myself: *Why couldn’t his name be Marin?* It was the first time in my life that I realized that you can make yourself into whoever you want to be. It might be a long, tough road. But, it’s possible. Clint Eastwood’s character, The Man with No Name, rarely talks. So when he does, you lean in close to listen. One specific line of his stuck with me… and has all these years: ***“When a man’s got money in his pocket, he begins to appreciate peace.”*** You and I are alligators. My long time readers [know what I am talking about](https://katusaresearch.com/the-way-of-the-alligator/). We are value speculators and investors. We look for significantly discounted companies in the world’s most speculative, cyclical sector: the junior resource sector. I’ve discussed position sizing and the importance of keeping cash on the sidelines at length. I believe that the worst of the resource bear market is yet to come. In this market environment, I appreciate the peace that comes from knowing I have money waiting for the right deal. When it’s time, I’ll pounce on great opportunities in the resource sector. ## **Let Me Explain Why This Is So Very Important Right Now…** Over the past two decades, I have watched as management teams have frantically pitched their company’s potential to large fund managers. They hoped those fund managers would fund their dreams. Unfortunately, most of these fund managers owned very little – if any – stock in their own funds. Picture that. They had no skin in the game. So, guess what happened? The funds underperformed. And more than three-quarters of them have lost over 65%. Or shut down entirely. That’s why there’s a massive opportunity for us right now as investors looking to buy venture stocks, especially in junior resources. Big funds that were lead orders to many junior explorers are under a lot of pressure for their apparent lackluster performance and high fund redemptions. - **That means the traditional big buyers of stocks (Institutional Funds) are now the biggest sellers in a market with very little buying volume.** This is exactly when an alligator buys – when Institutional Funds are forced to sell. ## **We Are The Buyers With No Name ** It’s me. It’s you. It’s how an alligator wins. It’s no secret I’ve never gotten along well with the big money managers. They are everything I can’t stand. More importantly, the fund managers have no skin in the game. They take fees from managing other people’s money, regardless of performance. And frankly, they are not one of us. They will never be The Man with No Name. They are part of the establishment. Suits who look down at the retail crowd. They remind me of another quote from A Fistful of Dollars when The Man with No Name says: ***“Sometimes the dead can be more useful than the living.”*** The big institutions are essentially dead in the mid-tier and junior resource sector. The few that are left are still experiencing fund redemptions. Fund redemptions are when shareholders of the fund want their money back. So the fund managers are forced to sell shares of companies they own to give the fund shareholders their money back. It’s time for them to be useful to us. We have a Fistful of Dollars. We are going to be alligators, waiting for our prey to come to us. So where am I looking to park a lot of my cash in the near future until the debt bombs start exploding? Look no further… ## **What Is A Convertible Debenture?** Recently, I talked about how [Warren Buffett just dropkicked](https://katusaresearch.com/marin-katusa-unfiltered-warren-buffett-just-dropkicked-the-resource-sector/) the resource sector. His company – Berkshire Hathaway – inked a debt deal with **Occidental Petroleum (OXY)** that will do the following: - Pay an 8% coupon (interest), and - Get Berkshire a half-warrant, that was at just a 9% premium to the share price at the time Maybe you don’t think convertible bonds are your thing. But they should be. They are much better than buying shares in certain situations. So please read this as an educational primer. If you are investing or speculating in equity, you need to understand the other side of corporate ownership: Debt. Convertible debentures provide: - A yield that gets paid to every debenture holder - The “right” to convert your debentures into shares if the share price moves up so you can “catch” as much of the upside. There’s nothing better than a real world example to make dollars and sense… Let’s use the **Pretium Resources (PVG)** USD-denominated convertible debenture to explain our thesis. ## **A Real World Convertible Debt Example – Pretium Resources** On February 9, 2017, Pretium raised $100 million. Pretium did this by selling a 2.25%, 5-year convertible debenture with a strike price to convert the debenture into stock at USD$16 per share (anytime, at the lender’s choice). At the time, the stock was trading at $12.07 per share. In addition to collecting 2.25% interest on the amount invested… The *convertible* feature allowed the holder (the person lending the company money) the right (the choice) to convert the debt to stock at USD$16 per share at any time during the 5-year period of the debenture. If the stock went to USD$20 per share… A debenture holder could convert the debt into shares priced at $16 and book an extra $4 gain per share. For example, let’s say you had $16,000 in debentures… - If the stock went to $20 and you converted, you would get 1,000 shares and book a $4,000 profit in addition to the 2.25% yield you collected previously. So a holder in this example would make interest, and a profit on the stock sale after converting. Warren Buffett is the king of convertible debentures. It’s smart investing, and why I want everyone to pay attention to this strategy. However… - If the share price goes down instead. You still get paid interest, but your option to convert is worthless. The Pretium debentures are also listed and trade like a stock. [Here is the link](http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C735277&symbol=PVG4587486) to see where the bond is trading. Click here to look up the bond on FINRA, or you can look it up on your own platform under the symbol “PVG4587486”. **Note****: THIS IS NOT A RECOMMENDATION – IT’S A REAL WORLD EXAMPLE.** Now, let’s look at the real-world performance of Pretium’s debenture since its offering closed in 2017. Like most mining bonds and debentures, the trading price of the debenture is considerably under the purchase price ($100). Thus, certain investors have taken a big loss on those debentures, as they now trade at $95.15 and today have a yield to maturity of 4.13% (2.36% annually). Essentially, they have passed on receiving their 2.25% to recoup some of their capital with a loss. If someone wanted out of the debenture, they would be selling today at $95. That’s a big loss in the bond market on a company that is still operating. I thought buying a convertible debenture on a start-up mine paying 2.25% was stupid to begin with. However, that leads us to where we are in the market today. ## **An Opportunity** I don’t believe Pretium will go bankrupt. The debenture is for $100 million, which is very manageable for the company. If you hold the debenture until expiry, which is March 15, 2022, you will be able to collect interest annually. And still have the convertible option at USD$16 per share. The stock currently trades at USD$9.43 per share, so the stock will have to go up 70% before the convertible is in the money. The gold price would probably have to be above $1,450 per ounce for that to occur. I just don’t see the spot price of gold above $1,450 this year, but if it does… subscribers and I are well prepared. **Regardless, think of this convertible feature as a free “kicker.”** The low for the Pretium debenture trading price is $83.07. It currently trades at $95.15. The debenture listed trading price will fluctuate in price just like the Pretium share price. So, if gold prices remain weak or go a lot lower, the price of the bond is going lower. If the spot gold price moves higher, the price of the bond will also move up. The advantage of the convertible debenture is that because I don’t see Pretium going bankrupt, the likelihood of losing your capital investment is very low. Again, I do think the market for gold gets worse later this year before it gets better… If I’m right, the Pretium convertible debenture will trade lower and most likely trade below its previous low of $85. Let’s say now that the debenture goes to $75. A buyer of that debenture would now lock in 5% per year and over 10% yield to maturity. In the chart below you’ll see the trading activity in the bond since it was issued in 2017. ![Price] ## **My Take on Pretium’s CEO – Bob Quartermain – Retiring** I think tax planning played a big part in his decision to retire. That was a critical reason for me when I recently retired from the board of Copper Mountain after 12 years. The rules have and continue to change for executives and directors. Specifically, the way options and soft shares are taxed. Thus, rather than getting taxed as a capital gain… after a certain amount, the rest of the gain (the bulk) is taxed at the maximum income rate. Bob is smart and loyal. And frankly, without him, Pretium would not have achieved the milestones it did. He is human, and nobody is perfect. Except anonymous Twitter trolls, of course. Retirement is a trend I also expect to see more of in the resource sector, as the older titans start their estate planning. Good on you Bob, and I look forward to seeing what you do next. If not, enjoy your retirement. - **We have had many family offices and fund managers asking my opinion on how to play the convertible debenture market in mining.** I recently published on a better convertible debenture that will pay us 10% annually. And I really think there’s a solid chance at making between 65-150% gains on the convertible option. But that’s just one of many new options I am exploring in my newsletter, where I am personally investing my own money at the same time and price as my subscribers. And to those who wonder where I’m at in this bear market, I’ll leave you with the best line from ‘A Fistful of Dollars’: ***“When a man’s got money in his pocket, he begins to appreciate peace.”*** Regards, Marin P.S. Many subscribers took advantage of *Buying Like Buffett*. And you could’ve too, if you were a member of my premium research service, [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). To learn more about subscribing and even get a sample issue to see how we break down a sector and opportunity, please send an email to MJ at [**subscribers@katusaresearch.com**](mailto:subscribers@katusaresearch.com) with the subject line “I’m Interested – Complimentary Issue” --- # Canada’s $100 Billion Loss… And Counting - URL: https://katusaresearch.com/canadas-100-billion-loss-and-counting/ - Type: article - Published: 2019-06-07 - Updated: 2019-07-31 - Author: Marin Katusa Canada has produced some amazing scientists and inventors that have changed the world for the better. Alexander Graham Bell, the inventor of the telephone, was a British subject in Canada. The first ever long-distance phone call happened in Canada in August 1876. Bell made the 7.8 mile call between two small towns in Ontario, Canada (Brantford and Paris). Every diabetic in the world can thank Frederick Banting, the inventor of insulin. Banting was the first Canadian to win a Nobel Prize. And like a true Canadian, he shared the proceeds with his team. Pretty cool, *eh*? But there is one incredible Canadian scientist that has made the biggest impact on Canada’s GDP. And I bet you’ve never heard of him. Because of this scientist’s brilliant discovery, almost 10% of Canada’s present GDP has directly resulted from his efforts. You’ll never find his name in any secondary education textbook in Canada. He isn’t on any Canadian currency. He should be, but he isn’t. And probably never will be. Yet, he is a true Canadian hero. Let me explain why this unknown chemist, Karl Clark, is one of the most important people in Canada’s history… ## **It Pays to be Unconventional** Only Saudi Arabia and Venezuela have more proven oil in the ground than Canada. But most of the oil in Canada isn’t oil that’s easily extracted, like the conventional oil in Saudi Arabia. In Canada, most of the oil is in the “oil sands”. The original residents in the region of the oil sands (mainly what is Alberta today) used the sticky, black and very thick liquid, called “bitumen”, for waterproofing their canoes and roofs. All found naturally at surface. Other than waterproofing, most ignored the value of what would become the world’s 3rd largest oil deposit. That was until Karl Clark came along. He recognized Canadian oil’s incredible value and cracked the secrets of the oil sands. Long story short, Karl Clark figured out how to separate the oil and the sand. It’s an incredibly complicated process. But Karl unlocked the secrets to what would become one of the world’s largest oil complexes. More than $250 billion has been invested in the Canadian oil sands over the past 40+ years. As a result Canada has become the 7th largest oil producer in the world. Nearly every major oil company has made an investment stake in the oil sands – ExxonMobil, Chevron, Royal Dutch Shell and even BP. But none of that would be possible without Karl Clark. ## **Canada’s New Oil Dilemma** The history of Canadian oil production has been incredibly difficult and volatile, to say the least. From boom times to bust, the “oil patch” has felt the pain like farmers do during incredible droughts. Few periods have been worse than the current drought. But this one is happening during strong oil prices. And it’s completely the fault of every Canadian in Canada – allowing foreign interests to dictate what’s best for Canada, its environment and its people. I have been to over 100 countries, including oil producers like Kuwait and Iraq. I can tell you without a shadow of a doubt, the oil produced in Canada is the most ethical, safe and moral of any oil in the world. And yet, perhaps this Canadian misjudgment is more my own fault than others. Let me explain… Back in 2014, I was asked by a senior advisor and mentor to Canada’s Prime Minister, Justin Trudeau, to be on his energy advisory panel. I politely declined. This former Federal Minister felt that with my background and knowledge, I’d be a value add to the Justin Trudeau platform. Canada, I’m sorry I didn’t do more. ## **Canada’s $100 Billion Dollar Loss… And Counting** You are reading this article for one of two reasons: - You want to better your portfolio, or - You work for an NGO and are building your file against me. Continue to do so, hopefully you’ll learn something. I can’t do anything about the people in category 2. So let’s focus on the first group, which also includes those who are looking to better society and contribute to it…. And not just the people asking what the nation can do for them. A $100 billion dollar loss is big for America, never mind Canada. Our economy is less than 10% of our southern neighbor’s. And, most of our oil infrastructure has been based around feeding Canada’s big brother’s (America’s) appetite for oil. But American ingenuity like fracking (which was led by George Mitchel two decades ago) left Canada’s oil industry at a major disadvantage. ## **How Bad Is It?** Really bad. But if you’re a value investor, you should start looking at the current reality of the Canadian oil patch. Let’s take a look at a few big name companies… One of the oldest energy companies in Canada is **Encana (ECA.TO)**. Post global financial crisis, Encana split itself into two; **Encana** and **Cenovus Energy** **(CVE.TO)**. The market cap of the company pre-split was $42.3 billion. One year after the split, the two corporations’ combined market cap was $44.8 billion, a 5.8% increase. However, the U.S became a net exporter of oil. Yes, the U.S. now exports more oil than it imports. As a result, both companies have seen their stock price fall off a cliff. Here’s a chart of Encana… And here’s the destruction of Cenovus… ![Cenovus Share Price] Just these two companies alone have lost $34 billion in market cap since their highs. Remember, the energy sector is the largest segment of the Canadian private sector, making up just under 10% of Canada’s GDP. It gets worse. Innovative companies like: **Peyto (PEY.TO)**… ![Peyto Share Price] **Seven Generations Energy (VII.TO)**… ![Seven Generations Share Price] **Crescent Point (CPG.TO)**… ![Crescent Point Share Price] **Whitecap (WCP.TO)**… ![Whitecap Share Price] …Just those 6 companies I mentioned above have lost $46.6 billion in market cap in the last 5 years. The entire Canadian oil patch has lost over $100 billion in market capitalization over the last 5 years. That’s colossal destruction of wealth. Even Canada’s Pension Plan fund has chosen to shy away from its own oil and gas industry. As of this spring, the Canada Pension Plan’s Canadian oil and gas equities holdings represent less than 0.5% of the fund’s total value. The billion-dollar question is this… will it rebound? No, sadly it won’t. But let me explain what has to happen in the Canadian oil patch… Survival. A newly elected conservative provincial government in Alberta (where the oil sands are located and where most Canadian oil is produced) will do whatever it can provincially to help the oil patch. But, it’s a Federal issue. To get the Canadian oil patch back on its feet, Canada has only one option: ## **International Markets – Oil Demand** China is not waiting around for Canada to gets its act together. China has always had a China first policy. And so they should. It’s irrelevant whether China get their oil from Kurdistan, Russia or Iran. The only thing that matters to them is that they have enough oil in their refineries to meet their domestic needs. Japan and Korea are the logical alternative for Canada’s oil exports. Both countries have a long history of their largest state-owned enterprises being direct owners and offtake users of Canadian products. Coal, copper and lumber have all been positively affected by Japanese and Korean consortiums. ## **Mr. Trudeau – Open Our Borders** I think Prime Minister Trudeau will win the next election. In fact, I bet one of Canada’s largest investment advisors 100 ounces of Canadian minted silver that Trudeau will maintain his office. As a side note, you may have found that when I bet, I bet 100 ounces of silver. That’s because in Roman times, a gentleman’s bet was always 100 silver coins. Now, back to reality… I think with some solid leadership from our Prime Minister… it’s not too late to export moral and ethical Canadian-made oil to the world. That will take time and a lot of politicking. And frankly, I don’t have much patience for that route. So how do we make this current *washout* a win? Everyone loves quoting the line “*Buy when there is blood in the streets*”, which is attributed to Baron Rothschild. But everyone also loves to be a contrarian, until it’s time to actually put in a buy order in a hated sector. **We are way beyond blood in the streets for the Canadian oil patch. The carcasses are rotting.** There will be Bankruptcies. Frankly, I am not buying any new positions in the Canadian oil patch until I see two things: - Who wins the Federal election in October 2019, and - If all of the support lines in orange in all of the charts above get broken. There isn’t much I can do about #1. But if Trudeau comes out with an even more anti-oil rhetoric, then stay on the sidelines as the whole sector will go lower. The rest of the world is fast tracking their oil development. There is NO point having your dollars exposed to a backward mentality. Neither communist nor socialist mentalities ever bred successful investment growth. Later this year, I believe that the remaining support lines labelled in the above charts will all be tested. ## **Will They Bounce or Crack Support?** My instinct tells me that the support lines will be broken. Share prices across the board will go lower. Never try to catch a falling knife. I prefer to let the safe fall, hit the ground, bounce back up, then have the safe crack open upon impact with the ground… then bounce around for a bit and then [walk up and pick up the cash while it’s just sitting there](https://katusaresearch.com/single-idea-worth-least-100000/). *Fortune Favors the Bold, but Pays the Prepared*. My team and I have been preparing our special report on how to play the disaster in the patch… All of the analytical modelling Goldman Sachs can do will be included, but with a serious dose of skin in the game and street sense. I’m not an analyst who works for a big-name firm who isn’t allowed to buy stocks on the research I write, telling you what to put your dough into. I disclose my cost base, and you can decide to get in at the same time and price. And you get to sell before I do. **I’m looking to make some big bets in the patch…** …Not quite yet. But when the time comes, you will want to know where the best bets are. No different than what my subscribers just got – an alert to a financing that I personally back stopped, with the best terms of its kind ever done on the Canadian stock exchange. Like I said, *Fortune Favors the Bold, but* *Pays the Prepared*. Regards, Marin P.S. The incredible opportunity for a triple-upside financing I published about last week is almost completely filled by Katusa Research subscribers. With only a few spots left, consider subscribing to [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk) to see how I plan to get paid handsomely and still have increased upside in these turbulent markets. --- # How to Invest in Stocks Like a Venture Capitalist for Triple the Upside - URL: https://katusaresearch.com/how-to-invest-in-stocks-like-a-venture-capitalist-for-triple-the-upside/ - Type: article - Published: 2019-05-31 - Updated: 2019-08-06 - Author: Marin Katusa What I’m about to show you is frightening to some people… And will become lucrative to a select few others. So there’s no way to sugar-coat this. The mining industry loaded itself up to the gills with low-cost debt when commodity prices were a lot higher than they are today. This was in an attempt to advance their assets towards production. ## **The Secret Investment Vehicle of the Ultra Rich – Debt ** Here’s something critical in the hierarchy of a company’s capital structure that you need to know… The rights granted to the debt holder supersede the rights of the shareholder. Let’s use the example of a producing mining company that has debt on the balance sheet and pays a dividend in a falling commodity environment… In simple terms, if costs stay the same while the commodity price goes down, the business will generate less free cash flow. The company must either pay interest on the debt or default on the debt. And debt always gets paid before the dividend. If the company can’t pay the debt, then the debt holders have rights to the value of the asset before the shareholders. **Debt holders and management always get paid before shareholders.** If there’s less cash available for the dividend, the dividend will get reduced or cut completely. This is why I always say… Debt holders’ claims to the assets almost always supersede shareholders’ claims to the assets of the company. Before we go on, let me quickly define some terminology I’ll use. **Equity**: Shares in a company that were raised from an equity offering such as a Private Placement, IPO, etc. **Bond**: A debt security that pays a coupon, with the principal repaid at a predetermined date in the future (maturity date). **Coupon**: The nominal interest rate paid on a bond (5% coupon pays 5% interest annually). ## **Why are Debt Deals Rarely Talked About in the Media? ** …Or even in newsletters and at investment conferences? When a mining or energy company goes out to issue a large bond (say $200 million–$1 billion), they go to the big banks like Goldman Sachs, Credit Suisse, or Deutsche Bank. You will rarely see the brokerages that are well known for raising equity in the “junior” or even mid-tier mining sectors like Haywood, Sprott, GMP, Canaccord, etc., run the book on bond issues. Big banks like Goldman Sachs have a very specific list of bond/debt investors who invest in bond issues. These deals are pre-marketed to these “special” bond clients. **Rarely will a fund, family office or retail investor get a piece of the action. ** That is, unless they are somehow connected to the company or firm running the book on the bond issue. But pay attention and I just might show you how you can participate… ## **Pay Your Debts or Pay the Price** The chart below is frightening… It shows how much debt is due *every year* for *every mining company in the world* combined. I am one of the few in the mining sector who holds this belief: **Over the next 24 months, Interest rates paid by mining companies will be *significantly higher* than the rates paid when the big debt was piled on.** And we’re starting to see this happening in real time. Eldorado Gold’s most recent note offering at 9.5% was a 55% higher cost than their previous note of 6.125%. The fact is, mining companies used debt as part of their operational business plan. Think of this like cheap financial heroin while commodity prices were high instead of issuing equity (dilution). Sadly, many companies now have lower equity prices and a lot of debt. There’s a harsh reality that no mining CFO wants to talk about. It’s that the cost to extend or replace the existing debt on their balance sheets will rise -substantially. If you believe commodity prices are headed lower, this puts an even larger strain on the sector. Remember, debt holders and management salaries get paid first. So it’s the equity shareholders that will suffer. First I’m going to show you why, and then I’ll show you how I will position myself and subscribers to profit. ## **A Real World Example…** Since I’m Canadian, let’s pick on Canada’s largest diversified miner, **Teck Resources** **(NYSE:TECK and TSX:TECK.A/B)**. Teck’s borrowing cost, pre-global financial crisis, was 6.13%. At the peak of the mining boom in 2012, the debt cost 5.2%. Both debt issues were 30-year bonds. In 2016, the debt cost rose to 8.5% for an 8-year coupon. It’s common that a longer duration bond will have a higher interest rate. If Teck is paying 8.5% interest on an 8-year bond, investors should reconsider what the debt for lower-quality miners would cost. A counterargument to my example is this: 2016 was a much worse commodity pricing environment than 2012 or 2005. To that I say… who says 2020 or 2021 won’t be worse? The point is, the cost to borrow money from investors **increased 63%** for Teck Resources between 2012 and 2016. This is Canada’s largest miner – one of the top ten globally. But let’s not stop there to prove our point. My friends at **Taseko Mines (NYSE:TGB, TSX:TKO)**, Canada’s second largest copper producer, are another example of this… So even though the Taseko bond was at 8.75%, the yield to maturity now trades at a little over 11%. - **That is a 42% higher cost of capital than in 2011.** ![Global Mining & Metals Debt Maturity Profile] Now, before people start thinking I’m taking a swing at Taseko because I’m one of the founding directors of **Copper Mountain (TSX:CMMT)**, a direct competitor to Taseko (Copper Mountain is Canada’s third largest copper producer)… I am not. The chairman of Taseko Mines, Ron Thiessen, is a close friend of mine. He’s probably one of the smartest men in mining and I respect him greatly. I believe the debt for all other mid-tier copper producers will be higher than it was when they did their original debt financings over the last 7 years. The point I am making here is that the cost of capital for all mining companies is going higher. For the most part, the mid-tiers will be paying interest rates in the double digits. We have many more examples confirming from our thesis of higher costs to borrow. ## **Here’s How I Plan to Profit With an Immediate Opportunity…** After months of due diligence, we’ve just released terms on our newest private placement. The terms are very lucrative and I will be backstopping 50% of the offering. This means I will be taking a very large position. All KRO subscribers are provided the opportunity to invest at the same time and terms as me and employees of Katusa Research. As always, ZERO fees and ZERO commissions are paid to me, Katusa Research or anyone. This is 100% skin in the game, which is my mantra. **I believe this is one of the best structured financings in the market. ** I just sent out a full analysis with the details of the company to my subscribers and showed why I am taking so much of the financing. All the information on how to participate is in the Members Area. And you’ll think of this structure as getting paid until the stock pops. If you’re not yet a subscriber to *Katusa’s Resource Opportunities* and you want to get on board, [learn how to become a member right here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiewebsite). This opportunity will fill up fast. But there will be a lot more exclusive opportunities to come. That’s the *Katusa Advantage*. Regards, Marin --- # Another Gold Buyout Takes Center Stage - URL: https://katusaresearch.com/another-gold-buyout-takes-center-stage/ - Type: article - Published: 2019-05-24 - Updated: 2019-07-31 - Author: Marin Katusa Gold prices have dipped below $1275. Even the *gold bugs *are getting rattled. On the other hand, *profit bugs* are on the constant lookout for opportunity in *echo markets*. This is the time when the market is rewarding strong hands and shaking out weak ones. So if you’re coming from a position of strength (loaded with cash, paying close attention) then your time to strike and cash out will arrive. I know I sound like a broken record in saying I want to be an alligator and wait for prices to come to me. But that record has moved my net worth more than a few times over the last 15 years. I am a long term bull on copper. I think it’s a fantastic place to be if you have a 3 to 5 year time frame. But that doesn’t mean that the price of copper won’t experience near-term downward pressure. On a side note… After 12 years of being on the board of Canada’s third-largest copper producer, I have decided to retire from the board. It was an incredible journey which provided firsthand experience in putting an asset into production. I am a big fan of CEO Gil Clausen and his team. Gil was surprised by my decision to retire from the board, considering I am only 40. I was the longest serving independent director on the board. I have been a very loyal director and investor in the deal, and it was time for me to step down. I have no doubt Gil and the team at Copper Mountain will increase shareholder value over the coming years. So, what’s next? My full focus is on making big bets in the echo phase of the resource market. The *echo phase* is the period of time where prices are flat- lining and only the best stories can make you multiples on your investment. **What we want and what we must prepare for… are two different things** Most investors have the attention span of a goldfish. But I have built my entire career and net worth off of being patient. Everyone in my office, myself included, makes the majority of our money from investing, not this newsletter. We are in a marathon, not a sprint. Our strategy has proven to work. Right now, there are a handful of companies I would love to own. But I am practicing discipline and waiting for lower share prices and flashing buy alerts for big entry points – as should you. Right now, there are only two types of companies I want in my portfolio… - Takeover targets (speculations), and: - World-class companies which I want to build long-term core positions in, adding to my position during periods of market weakness (investments). ## **Alligator Hunting 101** One major mistake I made in 2017 was selling Kirkland Lake (KL.T) too early. Today it is by far the best performing North American-listed gold producer from a share price perspective, going from CAD$1.50 and CAD$7 – my first two recommendations – to CAD$45 per share today. That is the one problem of being early to a great story. You sell too early also. Kirkland Lake Gold is a company that I am very familiar with, and I have owned it several times. The first meeting the new management team (Newmarket Gold) taking over Crocodile Gold had in 2015 was with me in my office. After our due diligence, I bought just under 10 percent of the company. In fact, the [first report published by Katusa Research](https://katusaresearch.com/an-easy-arbitrage-opportunity-the-next-new-gold/) when I opened up shop was on this company. Newmarket Gold merged with Kirkland Lake Gold to become the CAD$9 billion powerhouse it is today. Today, Kirkland Lake is Eric Sprott’s largest publicly disclosed resource position. He owns CAD$900 million worth of Kirkland Lake stock. While other companies have seen their share prices depreciate, Kirkland Lake shares have appreciated sharply. I’ve said before that I believe Kirkland Lake should backfill their share price (yes, this is a polite way of saying their share price is expensive and they should use their expensive paper relative to the peer group) by taking out other producers or near-term producers. But it’s not just Kirkland Lake that’s on the hunt to snipe their next buyout target. Below, I detail my methodology for filtering and finding the next takeover targets. ## **Katusa’s* Gold Takeover Methodology*** My goal is to identify single producing projects that are: - Not owned by majors. - Located in non-AK47 nations. - Producing at least 75,000 ounces of gold per year. There are over 600 producing gold mines in the world. After running the criteria through my database, I came up with a list of 89 potential mines. I then eliminated the following: - Low-grade projects. - Projects with short mine lives (less than 8 years with no exploration potential to increase the mine life). - High-cost mines (cash costs of more than $800 per ounce; general rule of thumb – if cash costs are $800, all-in sustaining costs are ~$1,200 per ounce). From the remaining list, qualitative digging was performed on each project. - Who would it be a good fit for? - Does mining the deposit require a unique skill set which discourages many potential suitors? - Are there any potential synergies with mines operating nearby? - Is there some low-hanging fruit to be plucked which creates additional value for the buyer? By now you’re asking… does this actually work? ## **Atlantic Gold Gets Taken Out** In case you missed it, **Atlantic Gold (AGB.V)** was just purchased by the Australian gold producer, St Barbara Ltd for CAD$802 million. I’ve spoken at length about how the outperforming Australian gold companies will be taking over underperforming assets and companies – and called it [The Commonwealth Takeover](https://katusaresearch.com/australian-gold-stocks-and-the-commonwealth-takeover/). It’s now happening. Earlier in the year, Australia’s largest gold company – Newcrest Mining – paid USD$806 million for a large stake in Imperial Metals’ Red Chris project. I see this trend continuing so long as the Aussie companies continue [making money hand over fist on $2,000 gold](https://katusaresearch.com/2000-gold-and-the-secret-gold-rally-hiding-in-plain-sight/). But back to **Atlantic Gold**… I first put out my thoughts on Atlantic gold being a take-out target on May 19, 2017, just over two years ago. The stock was trading in the CAD$1.50 range. On July 21, 2017 I published my 2nd comment on the company when it was trading in the CAD$1.40 range. And in the August 2018 issue of *Katusa’s Resource Opportunities*, I wrote: Atlantic Gold is another gold producer that has recently achieved commercial production in a safe jurisdiction. The Canadian company will produce upwards of 80,000-100,000 ounces in 2018 and 2019 before ramping up to 200,000 ounces by 2022. Atlantic’s gold mine is located in eastern Canada, in the province of Nova Scotia. While less documented than other areas of Canada, the eastern coast has been home to multiple historical producing base metal and precious metal mines. Atlantic Gold has done an excellent job of hitting both its production and cost guidance. As I’ll explain below, the company has proved that this is not going to be a one-deposit company. This is becoming a district play with multiple deposits contributing to increased production and mine life. This type of scaling is what mid-tier gold producers are looking for. The initial feasibility study in 2015 indicated production would average around 80,000 ounces per year for 9 years with cash costs of $480 per ounce. It’s a solid low-cost project. But that is too small to get me or a mid-tier gold producer excited enough to open a checkbook. Today, the company is on track to produce between 82,000 and 90,000 ounces per year. Cash cost guidance for the year is expected to be between $400 and $450 per ounce. This makes Atlantic Gold one of the cheapest gold producers out there. From day one, management knew that to generate real value the company would have to increase production and mine life. The recently completed expansion study incorporates production from two satellite deposits. Ore from these deposits will increase total production to over 200,000 ounces per year. Management expects cash costs to remain low at $555 per ounce as the company ramps up production to 200,000 ounces. Based on the 2017 resource update, each satellite deposit hosts roughly 400,000 ounces of proven and probable reserves. At the time, the two deposits were open in multiple directions, making them ripe for additional drilling to increase the resource. Since July 2017, the company has completed a drill program which focused on this expansion. Management expects to have a resource update out by the end of 2018. I could see the resource doubling in size without a lot of difficulties. Below is the map for the Fifteen Mile Stream deposit. Fifteen Mile is one of the satellite deposits, which hosts 432,000 ounces of proven and probable gold. Outlined in orange is the current resource estimate, and all the dots indicate the expansion drilling. Drill results continue to show that mineralization extends well beyond the current resource estimate. This is why I think the deposit could easily double in size. Is Atlantic Gold for sale? Yes. Using a gold price of $1,250 per ounce and its current 10-year mine life, the company is trading at 67 percent of its Net Asset Value. As the company continues to prove up the resource, the mine life will continue to increase, which in turn will increase the company’s Net Asset Value. Atlantic Gold has a lot of exploration upside. The company is now drilling 100,000 meters, focusing solely on exploration drilling, and I can see the multiple deposits cobbling together somewhere between 3-4 Million ounces of gold. The first target is 1 kilometer east of the Fifteen Mile Stream deposit. Initial drill results are encouraging and indicate a system like the Egerton-Maclean zone at Fifteen Mile Creek. Atlantic Gold would fit well into any mid-tier miner that wants a low-risk asset which is capable of producing 200,000 ounces for 10 years. The recent exploration drill program has the potential to delineate another mineralized system, which would make the company even more valuable. This company would fit well into a mid-tier, like SSR Mining that needs another safe jurisdiction gold mine. At a CAD$400 million market capitalization, there’s a handful of companies that could take a run at Atlantic Gold. **And just like that another stock gets crossed off my gold buyout list… Which you could’ve accessed for free in our **[**Market Intelligence Center**](https://katusaresearch.com/gold-stock-buyout-candidates/)**.** To help narrow down your search and research, consider becoming a member to [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)*.* With a membership, you’ll get immediate access to companies that I am personally investing millions of dollars into. Gold buyout season is heating up. Are you prepared? Regards, Marin Katusa --- # Why Courts Awarded This Billionaire A Whopping 6 Cents - URL: https://katusaresearch.com/why-courts-fined-this-billionaire-a-whopping-6-cents/ - Type: article - Published: 2019-05-17 - Updated: 2019-05-21 - Author: Marin Katusa Dear Katusa Reader, What do JP Morgan, Carnegie, Vanderbilt, and Rockefeller all have in common? Sure, their business ethics were questionable. Sure, they also made *boatloads* of money. Adjusted for today’s inflation, it would be well over $350 Billion. What they had in common was they were all portrayed as “greedy crooks” by the media at the time. The *Chicago Tribune* even dragged business magnate Henry Ford to court, after making very distasteful remarks about him in its paper. Ford ended up winning the case. **[The Chicago Tribune](https://www.chicagotribune.com/news/ct-xpm-1997-06-08-9706300080-story.html) only had to pay him six cents.** Yes, six cents. The Tribune never did pay the money. The pettiness of the media didn’t stop there… Major newspapers came together to create a new label for what they believed were immoral businessman. That term was **robber barons**. It was based on an analogy to the German robber barons – derived from the word *Raubritter*, for local feudal lords or bandits. In Germany, these robber barons would stop travellers for no reason other than charging them random taxes for just passing through… But in the U.S., the strategies of the these robber barons were much more sophisticated. Just to give you a taste of how elaborate their tactics were… Vanderbilt, for example, took money from high-priced, government-subsidized shippers, in order to not compete on their routes. In his 1843 book *Past and Present*, Thomas Coyne created the term “captain of industry” to describe a business leader who amassed massive fortune by making positive contributions. An example of a positive contribution would be philanthropy… building schools & libraries. Immediately, robber barons introduced an agenda where they too would be seen as captains of industries by the public. But more often than not, the business practices of robber barons were put in question… …And the disagreements between the business elite and newspapers introduced an era of flashy news and political shenanigans (similar to the *fake news *generation that we’re now living in). What many people don’t know is that a lot of the literature published on robber barons was *just factually wrong.* For instance, author Matthew Josephson wrote a best-selling, landmark book that came out in 1934 called* Robber Barons*. It was widely used as “evidence” that industrialists were greedy crooks. But it was riddled with factual errors. Instead of acknowledging the achievements of entrepreneurs, he was lumping them all together. Why am I telling you all this? Because you can profit from the timeless philosophies of the world’s best businessmen. **Here’s how…** In 1907, the government slid into the **1907 Bankers Panic, **also known as the **Knickerbocker Crisis**. (That name aimed to ridicule the bankers of Manhattan who all wore a special form of pants called *Knickerbockers*). Over a three-week period starting in mid-October of 1907, the New York Stock Exchange fell almost 50% from its peak the previous year. Banks involved in unregulated side bets and shady deals caused this near-recession… And a lot of businesses and banks throughout the country were on the brink of financial ruin. Guess who the government begged for financial help to prevent a complete financial disaster? Exactly….the much-hated robber barons. JP Morgan for example stepped in to bail out the United States economy with his own funds not once, but twice. The first was during the Panic of 1903… The second time was by stepping in to save the New York banks during the Panic of 1907. He pledged large sums of his own money, and convinced other New York bankers to do the same, to shore up the banking system. Whether you agree with the business practices of “America’s Most Wanted” or not, one thing remains true: **A selected group of individuals has amassed massive fortunes by being light years ahead of everyone else. ** And we can use their knowledge to our advantage. In fact, this is one of our core mantras here at Katusa Research. As you may know, I’m a big fan of history. I study failures so we don’t have to repeat them… And I study successes, so our members can make gains of 1,480%… 1,250%… and 1,053%, just to name a few. Back in December 2018, we put out a buy recommendation for a stock called Sun Metals (SUNM.V)… Fast forward to April 2019, and the **stock skyrocketed for a gain of 286%… in just 4 months**. And between the 4 major buy signals put out at the end of 2018, you could’ve seen gains of 20-40% within 3 months. Now my sources have confirmed another opportunity that has been on my radar for quite some time. And it’s directly related to the timeless business philosophies of robber barons. At first, I was hesitant to share my thoughts with the community. Truth is, I was waiting for a number of developments to occur and give me a green light. Long-time Katusa subscribers know that I *just* can’t put out recommendations if I don’t have 100% confidence in the opportunity and the company behind it… Let alone that I’m putting my money down as well into each money-making opportunity that I recommend… And now is the time. Short term, over the next 12 months, I can see this opportunity return 100-200%… And long term, there’s potential for more. Keep a close eye on your inbox for the next few days and I’ll explain how you can get in on this opportunity alongside me… (subscription box below). And how you can position yourself *just right* to profit from other junior companies that can skyrocket in this sector. Best, Marin Katusa --- # Cannabis - URL: https://katusaresearch.com/research/cannabis/ - Type: page - Published: 2019-05-16 - Updated: 2019-08-29 - Author: Marin Katusa # Cannabis Research --- # Own Them All – The Next Media Juggernaut - URL: https://katusaresearch.com/own-them-all-the-next-media-juggernaut/ - Type: article - Published: 2019-05-10 - Updated: 2022-10-12 - Author: Marin Katusa Since its release in 2009, James Cameron’s *Avatar* has held the all-time box office record for nearly a decade. With a budget of $300 million and an additional $150 million for marketing, *Avatar’s* total cost of $450 million was made back several times. The big revenue came from the international box office, to the tune of about $2.8 billion ($3.3 billion in 2019 dollars). *Avatar* was the first movie to break the $2 billion mark when not adjusting for inflation. In the process, it became the highest-grossing film of all time in dozens of countries, as well as globally. Its domestic North American box office record of $760 million ($900 million adjusted) would stand until 2015’s *Star Wars:** The Force Awakens* took over. Though more successful in North America, *The Force Awakens* would ultimately fall short of *Avatar’s* international sales, earning just shy of $2.1 billion ($2.2 billion adjusted). *Avatar 2* and *3 *are both currently in filming, and are expected in December 2021 and 2023, respectively. And they’ll have monster expectations to match the bar set by their predecessor. But that bar might be moving before they can make it to the start line… ## *****Endgame******* is Ending Box Office Records** Two weeks ago, *Avengers: Endgame* was released in theaters worldwide. A three-hour long marathon, *Endgame* is the culmination of the 21 movies that make up **Walt** **Disney’s (DIS:NYSE) ***Marvel Cinematic Universe*. ![Own Them All – The Next Media Juggernaut] *Endgame *is the second half of a two-parter. The movie’s prequel, *Avengers: Infinity War*, set many records of its own. Heroes at their best. Villains at their worst. It’s a great narrative. *Infinity War* came out a year ago and rocketed to a respectable 14th on the all-time top grossing movie list. It clocked in at just over $2 billion worldwide. But that was a glimpse into the success waiting in the wings… - **Originally projected to earn between $850 and $950 million in its opening run**** – **Endgame** opened for $1.2 billion worldwide. ** It smashed the previous record held by *Infinity War* of $640.5 million. *Endgame* also became the fastest film to break the $1 billion mark, breaking another record set by its prequel film. And as of the beginning of this week – its second weekend in box offices – *Endgame* broke the $2 billion mark. It hit $2.2 billion worldwide. By becoming just the fifth film in history to surpass the $2 billion mark, *Endgame* also earned itself a spot on the top 10 highest grossing movies worldwide, adjusted for inflation. Again, adjusting for inflation, the top spot is still held by Gone with the Wind. And rightly so. Who can resist that Clark Gable mustache? ![Gone with the wind] The chart below shows the top 10 movies in history by ticket revenues… ![Top 10 Blockbusters of all time, inflation adjusted] Keep in mind that at this point, *Endgame *has only been in theaters for two weekends. There’s plenty more revenue to come. Of course, as the chart below shows, box office gross sales usually level off sharply after the first few weeks… ![Cumulative Weekly Infinity War Box Office Gross] That said, if *Endgame *performs similarly to *Infinity War* over its release lifecycle, which is a conservative estimate, simple back-of-the-napkin math puts *Endgame* at $2.9 billion. That would be enough to set a new worldwide gross record. And earn a spot in the top 5 inflation-adjusted box office grosses. ## **What Shareholders Look For: ***Endgame*** Beats Expectations ** There’s no way shareholders wouldn’t be happy with how many records *Endgame* has smashed since its release. Investors are ecstatic… ![Walt Disney Share Price Before and After Endgame] Upon its worldwide premiere in Los Angeles on April 22nd, Disney stock took off as the foreign releases of *Endgame *on the 24th and 25th lead into the domestic opening weekend of April 26th. With the weekend numbers coming in Disney stock was up nearly 6% (an increase of $15 billion in its market cap) in one week after *Endgame’s* first weekend in theatres. $15 billion is a pretty big move off of one movie. And of course, options holders likely made significantly higher returns than 6%. Was this a one-time fluke? **No.** This is the Berkshire Hathaway of fantasy stories. Disney has made all the smart moves. ## **Could Disney Come Up With Another *******Endgame*******?** Of course, no movie studio can pull off blockbusters like *Avatar*, *Titanic*, or *Endgame* with a simple snap of their fingers. In the case of *Endgame­*, it took the culmination of 11 years’ worth of cinematic and media planning. Extraordinary vision, talent and luck are needed to make big hits. But Disney has been very aggressive with developing and acquiring intellectual property in recent years. Disney now owns it all. DC Comics has done such a crappy job of building their characters onto film. Maybe Disney will own them too. And if you own them all, you can milk them for sequels. Look at the pipeline of just three successful franchises over the next 6 years – *Marvel*, *Avatar* and *Star Wars* – now all owned by Disney. And any of the releases in this pipeline could be big enough hits for shareholders to take note: ![Upcoming Disney Films] This doesn’t even include other hit series like *Toy Story*, *Cars* or *Frozen*. In just the remainder of 2019 alone, titles like *Toy Story 4*, *Frozen 2*, and *Star Wars Episode IX: The Rise of Skywalker* could prove to be blockbusters that move the needle further for Disney. And we haven’t even mentioned Disney’s new **Disney** **Plus** streaming service to rival Netflix. For $7 per month, which is about half the price of HBO Now and a significant discount to Netflix, Disney wants to grab its share of the streaming subscription market. Now that Disney owns Hulu, ESPN and Fox… there is an abundance of content that people will line up to pay for en masse. What do you think our kids will do when they find out they can watch the *Frozen* or *Moana* movies on repeat? Your portfolio should be paying attention. The changing media landscape presents interesting investing and speculation opportunities. But what if Disney entered an area nobody thinks they would? What if Disney bought out Nintendo and vertically integrated their superhero franchises directly with the video game world? They would own their own eSports world as well. Disney has positioned itself to be a powerhouse in the digital frontier. Nintendo could be another Disney franchise. Imagine that, Super Mario at Disney Land. Hey Mario, where you going next? Disney Land! You’ve probably guessed that we have something big brewing. Stay tuned – there are a lot of ways to play the changing tech and media landscapes. Regards, The Katusa Research Special Situations Team --- # Katusa’s Education Center - URL: https://katusaresearch.com/education/ - Type: page - Published: 2019-05-08 - Updated: 2025-09-10 - Author: Marin Katusa #### Latest Educational Pieces [edit](https://katusaresearch.com/wp-admin/post.php?post=67391&action=edit) ### [The All Important “Echo” Market Cycle](https://katusaresearch.com/the-all-important-echo-market-cycle/) [Katusa Investment Insights](https://katusaresearch.com/KII/katusa-investment-insights/) [Marin Katusa](https://katusaresearch.com/author/anne-gonzales/) - Silent fortunes are made not during major booms or busts, but during the “echo” phase. After the dust has settled, true wealth generating investments show themselves. [edit](https://katusaresearch.com/wp-admin/post.php?post=64644&action=edit) ### [The Rate Rise Era and the Dragon](https://katusaresearch.com/the-rate-rise-era-and-the-dragon/) [Gold](https://katusaresearch.com/KII/research/gold/) [Marin Katusa](https://katusaresearch.com/author/anne-gonzales/) - The government of China has done a much better job controlling inflation than the U.S. which is about 500% higher than China’s. [edit](https://katusaresearch.com/wp-admin/post.php?post=64636&action=edit) ### [With All Eyes on Russia, Don’t Forget the United States’ Most Powerful Weapon – SWAP Lines](https://katusaresearch.com/with-all-eyes-on-russia-dont-forget-the-united-states-most-powerful-weapon-swap-lines/) [Katusa Investment Insights](https://katusaresearch.com/KII/katusa-investment-insights/) [Marin Katusa](https://katusaresearch.com/author/anne-gonzales/) - The current global shift in geopolitics will lead to the first major implementation of SWAP Lines due to war, as opposed to a global financial crisis. [edit](https://katusaresearch.com/wp-admin/post.php?post=64592&action=edit) ### [The Colder War is Heating Up](https://katusaresearch.com/the-colder-war-is-heating-up/) [Katusa Investment Insights](https://katusaresearch.com/KII/katusa-investment-insights/) [Marin Katusa](https://katusaresearch.com/author/anne-gonzales/) - A potential massive run on Russian banks, which host over $1 trillion in assets, is just the tip of the iceberg. [edit](https://katusaresearch.com/wp-admin/post.php?post=64577&action=edit) ### [Copper Pureplay Exposure](https://katusaresearch.com/copper-pureplay-exposure/) [Copper](https://katusaresearch.com/KII/research/copper/) [Marin Katusa](https://katusaresearch.com/author/mariazurbito/) - Identifying an early trend in the commodity space can unlock vast fortunes. And this is why I love the commodity business. [edit](https://katusaresearch.com/wp-admin/post.php?post=64037&action=edit) ### [Theory of Relativity](https://katusaresearch.com/theory-of-relativity/) [Copper](https://katusaresearch.com/KII/research/copper/) [Marin Katusa](https://katusaresearch.com/author/marinkatusa/) - As an investor, why should you sit in fear of volatility… instead of joining in mankind’s legacy and harnessing its extraordinary power to build wealth? [edit](https://katusaresearch.com/wp-admin/post.php?post=61399&action=edit) ### [A Guide to ESG Investing and How Much Money is at Stake](https://katusaresearch.com/a-guide-to-esg-investing-and-how-much-money-is-at-stake/) [Katusa's Education Center](https://katusaresearch.com/KII/education/) [Marin Katusa](https://katusaresearch.com/author/mariazurbito/) - There is another motive at play than just chasing big profits, Investing in ESG companies and funds makes you look good. [edit](https://katusaresearch.com/wp-admin/post.php?post=15488&action=edit) ### [The Way of the Alligator – Alligator Investing](https://katusaresearch.com/the-way-of-the-alligator/) [Katusa's Education Center](https://katusaresearch.com/KII/education/) [marinsvorinic](https://katusaresearch.com/author/marinsvorinic/) - The alligator’s ambush hunting strategy is very efficient and I believe The Way of the Alligator is one of the great secrets for achieving investment success. (5 min read). [edit](https://katusaresearch.com/wp-admin/post.php?post=58622&action=edit) ### [Ultimate Guide to Private Placements in Canada and the USA](https://katusaresearch.com/guide-to-private-placements/) [Katusa's Education Center](https://katusaresearch.com/KII/education/) [Marin Katusa](https://katusaresearch.com/author/marinkatusa/) - Private placements are in high demand with wealthy, knowledgeable investors. They allow you to buy large blocks of stock at discounted prices… while getting massive upside “kickers” in the form of warrants. [edit](https://katusaresearch.com/wp-admin/post.php?post=39977&action=edit) ### [Asymmetry: The Financial Secret That Can Earn You 10,000% Returns (No Joke)](https://katusaresearch.com/asymmetry-financial-secret-can-earn-10000-returns-no-joke/) [Katusa's Education Center](https://katusaresearch.com/KII/education/) [marinsvorinic](https://katusaresearch.com/author/marinsvorinic/) - If you know how to harness volatility, the natural resource sector can be a constant source of high-quality, asymmetric bets that build wealth for you. You can make returns in 10 months that take most people 10 years to make. (4 minute read). [edit](https://katusaresearch.com/wp-admin/post.php?post=36473&action=edit) ### [To Be a Great Investor, You Must Treasure This One Thing Most People Hate](https://katusaresearch.com/great-investor-must-treasure-one-thing-people-hate/) [Katusa's Education Center](https://katusaresearch.com/KII/education/) [marinsvorinic](https://katusaresearch.com/author/marinsvorinic/) - If you’re new to the markets, it’s easy to get scared of volatility. The media certainly makes it out to be a bad thing. But I believe it’s a landmark moment in an investor’s career when he/she realizes that, much like a powerful river, volatility can be harnessed, directed, and used as a tool. When that realization happens, a world of huge opportunities opens. (8 minute read). [edit](https://katusaresearch.com/wp-admin/post.php?post=35662&action=edit) ### [What is the Most Important Item When Analyzing a Balance Sheet?](https://katusaresearch.com/important-item-analyzing-balance-sheet/) [Katusa's Education Center](https://katusaresearch.com/KII/education/) [marinsvorinic](https://katusaresearch.com/author/marinsvorinic/) - Next year, the oil companies are going to have to start paying back the debts they took on from 2012 to 2015 (a time of high oil prices). One important key to being a good oil analyst is not to waste your time, especially on companies with bad financials and debt happy management teams. (7 minute read). 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I’ve written extensively about the coming reality check for the resource sector. There is a significant amount of debt coming due. Management teams are pretending everything is OK. Shareholders are left in the dark. But know this… ## **Higher Cost of Capital to Refinance Pre-existing Debt is Now Here.** Warren Buffett just smacked a sweet dose of reality into the resource sector. **Occidental Petroleum (OXY) **is America’s 4th largest oil producer. It just inked a deal with Buffett’s Berkshire Hathaway on a preferred share, $10 billion dollar deal that not only pays an 8% coupon… It gets better… Buffett’s Berkshire Hathaway also gets a half-warrant to buy up to 80 million shares of Occidental common stock at an exercise price of $62.50 per share. The share price of OXY is $57.35. The warrants are only at a 9% premium to the share price. OXY’s free cash flow for 2018 was $1.8 billion. The market cap of OXY is $43 billion. OXY employs 37,000 employees and contractors worldwide, with operations in the United States, the Middle East, and Latin America. OXY produces 658,000 barrels of oil equivalent per day. If any CFO in the resource sector didn’t get a chill when this press release came out — fire that CFO. ## **The New Normal Is Here — and It’s About Time…** Management teams are able to max out their option packages with vehicles called: - DSU – *Deferred Share Unit* - RSU – *Restricted Share Unit* - PSU – *Performance Share Unit* All of which, by the way, require no skin in the game – THEY GET THESE FREE. As debt continues to build, shareholders will be receiving less free cash from operations. Look, this isn’t meant as a rant. So much of our industry is run by individuals that don’t have a sound understanding of mathematics… The real cost of capital for resource companies just got a lot more expensive. If the Oracle of Omaha just slapped OXY with 8% preferred shares and a ½ warrant at a 9% premium to the market, the resource sector across the board will be paying higher rates moving forward. Now, I will let you in on a little secret I haven’t spoken about until today. A few in the sector know about it, but it’s time for everyone to know. ## **The Katusa Warrant** Rick Rule coined the phrase. Rick Rule has made millions from the *Katusa Warrant*. So has Doug Casey. I’ve taken a lot of abuse from other investors, bankers and management teams about my strict and disciplined approach with the Katusa Warrant. Coming from Balkan heritage, it’s in my DNA to withstand incredible abuse. And I can stand on the sidelines with cash longer than the executives with their burn rates can stay solvent. Not only have I been vindicated by Warren Buffett, but I think the Katusa Warrant will be the norm in the resource market moving forward. The Katusa Warrant is disciplined investing which aligns the investors and management. Why should management get 5-year full options at no cost basis – but investors get the shaft? I have done over $2 billion in financings in the resource sector. And management almost feel obliged to fight me on the Katusa Warrant. I want all investors to know that they crumble in their seats when I say, “*No problem, you make all your options half 18-month warrants with a minimum share ownership ratio for every employee who received an option, and I’ll take the same terms. It ends there. I win. Investors win. Management and investors are on the same page. Same terms*.” **On a side note, while I have your attention…** How the hell can management issue themselves PSU’s (Performance Share Units) when those exact same management teams miss guidance on production and earnings? All while the shareholders are booking massive losses. Not to mention… The balance sheets of most resource companies look like the term paper of a geologist taking a quantum mechanics course. It’s an absolute mess. Where I come from you get paid to do a job. 100% of the job. It’s just that simple. Let’s say you hired a painter to paint the exterior of your house. And he finished 80% of your house. Would you pay him in full and give him a bonus? Of course not! Guess what? Most of the resource sector does exactly that. You don’t get paid the full amount for doing 80% of the job. And you don’t get options and PSU’s for doing 80% of what you were hired to do. But in the resource sector they do. I can’t be the only one that finds that this is just awful and disgusting. I do believe we need more Warren Buffett type financings. And with the new money will come new rules and more discipline. Or else the money won’t be invested. It’s the natural evolution for the next leg of the resource bull market to start. But the management teams are a big part of the problem. ## **Compensation Based on Peer Comparisons** This whole compensation mess is based on peer comparisons. And these management teams convince their boards and investors to accept these incredibly ludicrous compensation packages. Or else these executives will go elsewhere. Well, it’s time for investors and boards of directors to stand up and say, “*Go*”. Guess what, there won’t be many places to go. And I look forward to the contraction of the resource sector on a corporate level. Too many one mine operators. Synergies would be quickly deployed and transferred to shareholders. The industry needs consolidation and economic natural selection will do its thing. So many useless executives, geologists and management teams are sucking on the tit of the resource sector investor. This only takes away from shareholder value. PSU’s, DSU’s, RSU’s and options should all be reconsidered. And with the need for new capital required to refinance the sector – expect a new play book. Investors have allowed the inmates to run the asylum. The time is now for investors to take back all their rights and not allow management teams with no skin in the game to skin the cat seven ways from Sunday. All while shareholders get scalped. ## **The Wall of Worry** This chart below is all the debt due every year in the mining sector until 2050. We have just entered the Wall of Worry. And you can see the great wall very clearly in the chart starting in 2019. ![Global Mining and Metals Debt Maturity Profile] Hundreds of billions will be required to Amend & Extend the debt. This time around, I don’t see cheap money allowing management teams to Extend & Pretend the debt situation is OK. The times are a-changing. In this month’s edition of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail), I go through all the debt in the gold sector in great detail. I discuss who the big losers will be. And who I think will be the consolidators moving forward. **More importantly, I discuss how to make money off this trend.** I do the same for the base metals sector and the oil and gas sector. And on that end, for the experienced investors out there… we have a lucrative options play that could make a lot of money if it works according to our thesis. You won’t find this in any other newsletter. Bob Dylan wrote a song that will never lose its luster: The Times They Are a-Changin’… in our Favor. Regards, Marin Katusa P.S. I just released a bombshell edition of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiewebsite) *two days ago where I revealed all the debt in the mining and energy sectors. It’s not something that management really wants you to see. Also in this month’s issue, I discuss a rare opportunity for you to profit like Warren Buffett just did with Occidental. It’s a trailblazing deal I will be putting up to $10 million into. If you’ve considered becoming a subscriber to my newsletter, you do not want to miss this issue – [sign up right here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiewebsite). --- # The Debt Time Bomb: Amend, Extend and Pretend - URL: https://katusaresearch.com/the-debt-time-bomb-amend-extend-and-pretend/ - Type: article - Published: 2019-04-26 - Updated: 2020-03-13 - Author: Marin Katusa *“Hey Marin, we don’t invest in gold companies for yield. We invest in gold stocks as a hedge to the overall markets. And for leverage on the price of gold.”* What a bunch of nonsense. Have you ever heard the phrase, “What a gold mine!”? That common, age-old expression was actually a positive reference to having something very valuable. Notably, a gold mine that paid its owners very well by producing gold. Yet in the last two decades (the span of my career), gold miners have been anything but responsible dividend payers to their owners – the shareholders. It’s a theme I’ve been introducing to my readers over the last couple of months. And this topic is picking up major steam. Investors (and capital) are starting to wake up. While executives have made fortunes running the larger gold producers, the shareholders have been given the shaft (no pun intended)! Cash and stock compensation for executives continue to grow. Yet, dividends to shareholders for the most part have gone in the opposite direction. It’s no wonder wealth funds like the Norwegian Sovereign Wealth Fund – with trillions under management – have been cutting weightings in the mining sector for a decade. Take a look… ![NorgesBank] Within a generation, the gold sector has gone from being one of the best yield producers in the global markets to one of the worst. To analyze the dividend history of producing gold companies over the last century was demanding. We spent countless hours in public and university libraries. Our team combed through the last 107 years of business newspapers on microfiche. I was hoping to find this data compiled by someone else, but we couldn’t find it. So we had to do it ourselves. You will not find this information anywhere else in the world. The chart below shows the average yield, since 1912, of gold producing companies. This includes the special dividends, where data could be found. The trend is crystal clear: Shareholders are getting less and less in dividends from gold producers. I’ll explain why later. ![Yield] ## **The Unwinding of Golden Leverage** The gold sector has treated shareholders very poorly over the last two decades. And I detailed it all when I published my piece on [The Golden Trap of Leverage](https://katusaresearch.com/the-golden-trap/). Look, unless you sold gold stocks in early 2011, share prices have fallen for most companies. There are a few exceptions, like **Kirkland Lake Gold** which is the top performing gold producer the last few years. It was a KRO pick in 2017 under CAD$7. And before that, **Newmarket Gold** (a pick at CAD$1.50 in 2015), which was bought out by Kirkland Lake at a 1:1 value. With a decade’s worth of languishing gold stock share prices, the appetite to keep funding these burning matchsticks continues to fall. Equity financings on the TSX and TSX-V are down 70% in a decade. Don’t believe me? Check out the chart below. ![Financings] With less equity money around, companies have had to turn to debt. Fueled by ultra low interest rates, companies have willingly loaded up on cheap debt. But you and I both know that the problem with debt is that you eventually have to pay it back. In the corporate world, there is no such thing as a *debt jubilee* – when the debt issuer has to forgive the debt. As you know, I spend a great amount of time focusing on balance sheets. And I’ve been intimately involved with a couple mine start-ups from exploration to production. Not to mention lots of involvement in financing the construction. You can learn a thing or two from my experience that analysts don’t pay attention to when they build their spreadsheets. Because of the Global Financial Crisis, the entire gold sector has adjusted its understanding of financing using cheap debt. Little did they know they are hooked on financial heroin. Its new understanding is just unrealistic… - **Most producers can’t even provide a respectable return with uber-cheap, 2.5-4% interest debt-money.** The real cost of borrowing money in the gold sector today is much higher than it was in 2011-2013. And make no mistake, the chickens will come home to roost. All of this reminds me of my favorite line in the gangster movie Goodfellas. The movie isn’t for everyone (a lot of swearing and gruesome killing; rated R/18A), but Robert DeNiro, Joe Pesci and Ray Liotta are great in the movie. Here’s the line… *Business bad?* *F*** you, pay me.* *Oh, you had a fire?* *F*** you, pay me.* *The place got hit by lighting?* *F*** you, pay me.* Bankers aren’t as ruthless as the mob. But the shareholders will be wiped out just the same. If the debt burden is too high, very little will be left for the shareholders’ (equity) side of the ownership. Never ever forget: Debt almost always takes priority over equity. And by now you’re wondering how I plan on profiting off of all of this… ## **Marin, What About Your “Extend & Pretend” Theory?** Over the years, I’ve written in great detail about the oil patch and how the massive debt issues would be extended by access to capital looking for yield. (Here’s [a link where I discuss Extend & Pretend](https://katusaresearch.com/what-will-happen-to-all-the-debt-in-the-oil-patch/).) In this scenario, the existing loan would be refinanced. The term of the loan would be “extended” and the company and bankers would “pretend” everything is okay. The oil patch [played out exactly as I wrote](https://katusaresearch.com/important-item-analyzing-balance-sheet/) a few years back. The worst companies went bankrupt, but most managed to kick the can down the road another few years. In the May issue of Katusa’s Resource Opportunities, I will revisit a report I wrote four years ago that made mainstream media news. This time, unfortunately for the shareholders, the outcome will be different. It’s all in the math. I believe we are reaching a point in the **energy **AND **gold **sectors where two things will happen: - Much higher corporate interest rates will be required to refinance these non-performing assets. Because they were put into production in a low-cost debt environment to “Extend & Pretend” the loan.Obviously, you want to avoid being a shareholder of these companies. - Larger companies will be looking to acquire assets that enable the company to increase their “debt flexibility”. This means increasing their asset base to get lower debt costs across the board. It’s kind of like the “bigger is better” and the “too big to fail” concept. Neither are correct, but that is where the market will be going. You will see single mine producing mid-tiers, in all commodities, merging. The question will be… which management keep their plush corner offices and which ones will move onto their next venture? The one benefit is most of the mining community is getting a bit long in the tooth and they don’t want to stay on. So this issue won’t be as big of a deal as in the 2011-2013 merger bonanza. Now, you can either buy these fiscally disciplined producers or you can buy the companies that they will be targeting. I’m focusing on the later because there’s better upside if you pick right and sit tight like an alligator. Why take this approach? Be it base metals or precious metals, world class discoveries are few and far between. And, it’s cheaper for majors in the current market to buy a world class deposit than the actual cost to find the deposit themselves. - **Over the last decade, senior gold producers have spent on average $74 per ounce acquiring projects and companies.** - **Over the same time span, they’ve spent $136 per ounce discovering ounces.** It doesn’t take a rocket scientist to see it’s cheaper to buy the project, than it is to go from grassroots to discovery. Now let’s take this one step further… Remember there’s 70% less money around for financing gold projects than there was in 2009. This means that only the very best projects and management teams are going to get funded (this is a good thing). For the rest, it’s going to be very tough sledding. There’s no room for error in these markets. Now, tack on a strong USD and rising costs of capital (higher interest on the debt) and it’s downright ugly. ## **Things Are Heating Up For Our Portfolio** Most people can’t wait for the next episode of Game of Thrones. Count me among them, because “winter is finally coming”. But it’s coming to the resource sector as well. Sorry gold bugs, “winter is coming”. But my team and subscribers can’t wait until I publish the final results of another ground-breaking chapter in my Golden Debt and Leverage series. **On May 1st, I will reveal the summary data of all the debt in the resource and energy markets to KRO subscribers.** This report was such a monumental task that our data feed providers blocked my analysts for reaching the feed cap – TWICE! There are two charts in particular that I know will be immediately replicated by institutions and brokerages, and I’m happy to let them. Imitation is the greatest form of flattery. You’ll want to know the date of the next **debt time bomb** in the resource and commodity markets. While most people are concerned with the U.S. government debt… Smart investors looking to make spectacular bets will be paying attention to the catalyst dates of the corporate debt time bombs. And if you’re not a subscriber to ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)***, consider signing up so you’ll be the first to access the research and investment thesis. Until next week, Marin P.S. I’m hitting the site trip and conference circuit throughout the month of May. 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We reserve all legal rights and remedies available to us. ## **Customer Service Contact** [Email Customer Support by clicking here](https://katusaresearch.com/contact-us/) Phone: 778-737-7381 Customer service hours are from 8am – 4pm PST Monday to Friday excluding stat holidays ## **Katusa Research Office is located at:** Suite 530 – 800 West Pender Vancouver, British Columbia, Canada V6C 2V6 Last Updated: Sept 2025 --- # Einstein’s Secret Investment Formula - URL: https://katusaresearch.com/einsteins-secret-investment-formula/ - Type: article - Published: 2019-04-19 - Updated: 2019-05-24 - Author: Marin Katusa Did you know only one of the original Seven Wonders of the World exist today? The Great Pyramid of Giza is the only remaining member of the Seven Wonders that Philo of Byzantium wrote about in *‘On the Seven Wonders’* over 2,200 years ago. Although there is considerable debate on who originally created the ‘Seven Wonders of the World’—something no one can debate is what I am going to talk about next. There are three incredible quotes Albert Einstein made regarding compound interest. The first two you have probably heard, the third is not known as well and leads towards his secret investment formula. The first, “compound interest is the Eighth Wonder of the World,” and second, “compound interest is the most powerful force in the universe,” are famous. But the third and lesser known one, from Einstein, is the quote I think is undebatable. ## **Einstein’s Secret Investment Formula has Created Financial Fortunes** “*He who understands it, earns it … he who doesn’t … pays it.”* For the subscribers who grew up watching wrestling in the 1980’s and thought Andre the Giant was the Eighth Wonder of the World, you really need to pay attention to today’s missive. Andre the Giant was awesome, but nowhere near as awesome as compound interest. Let me differentiate between ***compound interest*** and ***simple interest***. *Compound interest* will make your money grow much faster than simple interest. With compound interest you make interest not only on the principal amount, but also on the interest you receive. Think of it this way – interest *on* interest. With *simple interest* you only make money on the principal. There is no “interest on interest” factor. Compound interest grows your money faster because growth applies on two items – the Principal *and* the Interest. If you are a low risk investor, stick to compound interest because it’s better than simple interest. However, things are different in a low interest rate world. The investors with cash who have been conservative, prudent and safe have been punished because of the low interest rates paid to exactly those who should be getting better rates. The savers have become the prey. But there is a solution to this predicament that I will get to shortly. For example, savings accounts have interest rates so low they might as well be nonexistent. The actual real interest rate being loaned to companies is considerably higher than what we are getting paid by the banks. This is a Tale of Two Interest Rates – the *bank rate* and the *street rate*. I will be featuring this reality in groundbreaking detail per sector for subscribers in the upcoming May issue of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/). It will truly be an epic report. - **The low interest rate environment has created a very scary dilemma for investors. ** Investors have ventured into paying up for yield, which means paying more for the underlying asset. This is risky, because the yield might be 2.5%, but now there is risk to your principal. As Warren Buffett said, there are two main rules in investing: - Don’t lose money. - Don’t forget rule #1. Buffett is a [great investor](https://katusaresearch.com/warren-buffett-just-try-mislead/), and his words above are ones to live by. But what if I’m able to take the math behind compound interest and combine it with value investing that Buffett has preached his whole life? What I am about to share is 9th Wonder of the World. ## **Introducing Katusa’s Investment Trifecta** **Katusa’s Investment Trifecta** is based on the concept Einstein so correctly stated was the Eighth Wonder of the World. By combing through years of historical data, we would like to present one of the most powerful investment concepts known. (Side Note: Because we have downloaded so much data from our expensive data sources, we actually hit the data cap – twice! – trying to get a complete picture that I’ll detail in the May KRO. This is one of the largest research projects we have ever completed!). Katusa’s Investment Trifecta explains a consistent pattern of making extraordinary gains over the long term with: - Interest on the Principal. - Interest on the Interest. - Increasing Share Price. This method isn’t advertised much because frankly, there aren’t very many ways to execute it in real life. That’s because – usually – either the balance sheet of a company isn’t bullet proof, or the share price is overvalued because investors are chasing yield. But it does work. For example, **Exxon** did just that for 100 years. If you bought 200 shares of Exxon back in 1980, this $876 investment would be worth $1,220,215 before taxes and broker commissions using Katusa’s Investment Trifecta strategy. Now, if you just bought and held at the same time, your $876 in 1980 would be worth $266,768 before taxes and broker commissions. All you had to do is invest $876 in 1980. But let’s say you didn’t have $876 in 1980. I’m sure you could have scrounged up $160. If you invested $160 in 1980 into Exxon using Katusa’s Investment Trifecta, you would have just over $219,000 before taxes. Yes, the math works. Do I have your attention now? Let’s say you are old like Doug Casey and you were buying stocks in 1962, what would the returns look like? Below is the green line that shows using Katusa’s Investment Trifecta vs just buying and holding on the same stock. ![180419 - Exxon KII] Here is the best part of this. You aren’t buying some speculative exploration company with no revenue in the middle of some shit hole where the locals hate you. With Katusa’s Investment Trifecta, you are buying industry peer producing low risk stocks, that pay dividends and are the top producer in their sector. If you are a millennial today who has very little money, rather than buying the next gadget or wardrobe to look like you are from the 1980’s, buy stocks that meet the Katusa’s Investment Trifecta criteria. Plan for your future now. With as little as a $1000 purchase in low risk stocks… by the time you retire your position could be worth $500,000-$1,000,000. Even better, by the time you are in your 80’s your $1000 purchase could be worth over $3,000,000. This the power of Einstein’s 8th Wonder of the World, compound interest. But it’s the 9th Wonder of the World, Katusa’s Investment Trifecta that will make you and your estate millions with only $1000 invested today. It’s not just Exxon. If you bought Chevron, you get an even better result. It’s not just the oil sector. We can prove Katusa’s Investment Trifecta works for the banking, tech and medical sector. Now, of course, this data is based on historical data. But the math works. And the formula works. Now is the time for your money to work for you. Because of my background in mathematics, this is something I have toyed with for years—and I’ve decided to publish the strategy to all, for free. You don’t need to pay thousands to sign up to my premium newsletter. But to find out which stocks I am personally buying, at what price and when… you need to subscribe. I have found two stocks that are cheap and not followed by main stream media and investors. They have a clean balance sheet, a moat around their business (aka Buffett approved) and pay above industry average yield (interest paid to shareholders) on the stock. Not only will we make interest on both the principal and interest, but the share price will go up – so we are going to have what I call the Investment Trifecta. ## **The First Investment Trifecta Candidate**… One of the world’s most successful value investors (one of Warren Buffett’s disciples) is buying the stock. This Buffett prodigy is now one of the largest investors in the company. This company has: - No debt. - Clean balance sheet. - History of increasing dividends. - Management get paid more from their dividends than their salaries. - Stock is cheap. - High barrier of entry (as Buffett calls a moat around their business). It’s a perfect Katusa Investment Trifecta stock. I will have a complete update on the stock in this coming month’s issue of *Katusa’s Resource Opportunities*. ## **The Second Katusa Investment Trifecta Stock…** This company is one I am looking to buy more of. It should be in the portfolio of all serious resource investors. Not only has one of the wealthiest people in the world bought lots of stock – at a higher price – so have his family members and close friends. And other Billionaires use their products and want the company shares also. This story is better right now than it has been at any time in its past. And it’s cheaper now than when the billionaires were buying. It’s rare occurrence that retail investors can get a cheaper price than the billionaires who are the largest shareholders in the company. This company also has: - Clean balance sheet. - History of increasing dividends. - Stock is cheap. - Management get paid more from their dividends then their salaries. - High barrier of entry (as Buffett calls a moat around their business). In both of my Investment Trifecta stocks—we are buying at prices lower than what the insiders who run the company have paid for their own shares. We get to buy the stock cheaper than the billionaires who paid higher prices. These are stocks with real FREE CASH FLOW. I know most analysts don’t understand this concept in the resource sector, because Free Cash Flow is the unicorn metric in the mining business. In theory… they know about it, but it’s rarely seen. Free Cash Flow is the unicorn of mining. Free Cash Flow is one of the most important metrics for shareholders to understand. For mining to become in vogue again with the big generalist funds, Free Cash Flow will be a must. **Without Free Cash Flow, you – the shareholder – do not get paid. ** Why? **Remember, management gets paid before shareholders. The debt holder gets paid before shareholders. Without real Free Cash Flow, the shareholders are left with the “shaft”, and it’s not the mine shaft. The shareholders usually are left with nothing. It’s time investors get paid. ** I cannot emphasize the importance of Free Cash Flow. Just remember what Einstein said himself, “*He who understands it, earns it … he who doesn’t … pays it.”* We’ve done the hard research, it’s now time to collect our earnings. Compound your wealth with Katusa’s Investment Trifecta stocks. These aren’t speculations. These are realities. I plan on adding more companies to the Katusa Investment Trifecta portfolio when their metrics meet my criteria. Companies like Exxon have already done this in the past. And more will follow. I’ve already put thousands of hours into doing just that. So, if you want to save yourself the time, and do your portfolio and family a favor – by taking the step to becoming a member of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/). Regards, Marin --- # Oil Stock Value Monitor - URL: https://katusaresearch.com/oil-stock-value-monitor/ - Type: page - Published: 2019-04-18 - Updated: 2025-09-10 - Author: Marin Katusa If you’re looking to find value in the oil sector, you’ve come to the right place. Katusa’s **Oil Stock Value Monitor** evaluates North American oil and gas firms by comparing their Proven and Probable Reserves against enterprise value. ** Table Glossary:** boe/d = Barrels of oil equivalent per day MMboe = Millions of barrels of oil equivalent per day EV/boed = Enterprise Value divided by current production (barrels of oil equivalent per day) P/CFO = Market Cap divided by Cash From Operations [**Click here to go back to Katusa’s Market Intelligence Center**](https://katusaresearch.com/katusa-market-intelligence-center/) Disclaimer Although the information on this website is believed to be accurate, none of it should be considered solely reliable for use in making actual, real money investment decisions. Katusa Research is a distributor of data supplied by third parties. We are confident in the quality of this data, but none of it is guaranteed to be accurate or complete. Katusa Research does not recommend making investment decisions strictly based on it. NOTE: These are not recommendations. This is a starting point for further research and the data is updated weekly. --- # Gold Stock Buyout Candidates - URL: https://katusaresearch.com/gold-stock-buyout-candidates/ - Type: page - Published: 2019-04-18 - Updated: 2025-09-10 - Author: Marin Katusa Of all the ways to make money quickly in the gold market, few can match the power of “the buyout.” This is the transaction when a gold miner sees an opportunity to grow and buys all the shares of a smaller gold company – often at a large premium. The result is an overnight windfall for the smaller company’s shareholders. You can read our educational report on how to locate these companies right here. Below, you’ll find our current list of potential candidates based on our proprietary Gold Stock Buyout System. [To get our actionable Gold Buyout stock recommendations as they come, consider becoming a member of our [premium research service](https://join.katusaresearch.com/kr-products-services/).] ***Please note:*** *– This data is updated weekly and is for informational purposes only. It does not provide investment recommendations.* *– An entry in green highlight indicates a former candidate that was recently bought out.* Disclaimer Although the information on this website is believed to be accurate, none of it should be considered solely reliable for use in making actual, real money investment decisions. Katusa Research is a distributor of data supplied by third parties. We are confident in the quality of this data, but none of it is guaranteed to be accurate or complete. Katusa Research does not recommend making investment decisions strictly based on it. NOTE: These are not recommendations. This is a starting point for further research and the data is updated weekly. --- # Commodity Bargain Monitor - URL: https://katusaresearch.com/commodity-bargain-monitor/ - Type: page - Published: 2019-04-18 - Updated: 2026-07-06 - Author: Marin Katusa Market Intelligence Which commodities are cheap, and which are running hot? This monitor tracks the trailing three-year return of 16 major commodities — from gold and silver to oil, uranium, and the grains. When one falls more than 50%, it lands on our bargain radar. ## 3-Year Commodity Returns Trailing total return by commodity — sorted cheapest to hottest Cheapest (3-yr) Sugar −36% over 3 years Biggest gainer Silver +169% over 3 years On the bargain radar 0 commodities None down >50% right now Bars turn gold when a commodity is down more than 50% over three years. ## What the Commodity Bargain Monitor shows Each bar is a commodity’s **total price return over the past three years**, measured from spot and futures prices — not mining-company ETFs, so the numbers reflect the commodity itself. They’re sorted from the deepest losers at the top to the biggest winners at the bottom. The idea is simple. Resource markets are brutally cyclical: prices overshoot on the way up and collapse on the way down. The best entry points show up precisely when an asset is **hated, ignored, and deeply discounted** — so a commodity that’s fallen more than 50% over three years earns a spot on the bargain radar and turns gold on the chart. ### How to read it Green bars are commodities up over three years; red bars are down; gold bars are down more than 50% — the bargain zone. Right now nothing sits in that zone, which tells its own story: after a strong run across metals and softs, there are fewer obvious bargains than there were a couple of years ago. That’s exactly when patience matters most. - Spot & futures prices — the commodity itself, not miner stocks. - 16 commodities across precious & base metals, energy, uranium, and agriculture. - Down more than 50% over three years = a bargain-radar candidate. ## Frequently asked questions ### Which commodities are the cheapest right now? The chart above ranks all 16 live, cheapest first. As of mid-2026 the grains and softs sit at the bottom — sugar, soybeans and corn have posted the weakest three-year returns — while none is down more than 50%, so nothing is on the bargain radar today. ### Are commodities cheap or expensive right now? It’s a split market. As of mid-2026 the metals have already run hard — silver is up ~169% and gold ~115% over three years — while the softs lag, with sugar down ~36%. Nothing is down more than 50%, the threshold that historically marks deep-bargain territory, so patience matters more than chasing. ### What is the best-performing commodity of the last 3 years? Silver, up roughly 169% over the trailing three years as of mid-2026, with gold next at about 115% — both rankings update live in the monitor above. ### Why are commodity prices so cyclical? Supply is slow to build and slow to shut down, while demand swings with the economy. That mismatch produces long boom-and-bust cycles — the core of resource-market investing. Keep exploring ## More free monitors Gold · Bitcoin ### [Bitcoin vs. Gold Market Cap](https://katusaresearch.com/bitcoin-gold-market-cap/) How far has “digital gold” closed the gap on the real thing? Gold · Macro ### [Gold / S&P 500 Ratio](https://katusaresearch.com/gold-sp500-ratio-visualization/) Are hard assets cheap or expensive versus stocks? Live charts ### [Market Data](https://katusaresearch.com/market-data) Build your own chart from gold, silver, oil, bitcoin and more. [Read: Gold’s Funeral Phase →](https://katusaresearch.com/golds-funeral-phase/) [Read: Oil’s Phantom Barrels →](https://katusaresearch.com/oils-phantom-barrels/) [Read: You’re Not Late →](https://katusaresearch.com/youre-not-late-the-frenzy-hasnt-started/) Go deeper ## Get the research behind the data — free to your inbox. [Get Katusa’s free insights](https://join.katusaresearch.com/subscribe/) **Disclaimer.** For informational purposes only and not investment advice or a recommendation. Returns are computed from third-party spot and futures price data and are not guaranteed to be accurate or complete. Always do your own research. --- # Australian Gold Stocks and the Commonwealth Takeover – Part 2 - URL: https://katusaresearch.com/australian-gold-stocks-and-the-commonwealth-takeover-part-2/ - Type: article - Published: 2019-04-12 - Updated: 2019-04-24 - Author: Marin Katusa Historically, Australian gold stocks have traded at a discount to their North American peers. It’s been an odd phenomenon considering Australia is a safe, mining-friendly jurisdiction with a currency like Canada’s. I have written extensively over the last 12 months about the [Commonwealth takeover](https://katusaresearch.com/australian-gold-stocks-and-the-commonwealth-takeover/). I’ve explained before how the Australian miners, buoyed by a weak Australian dollar and mining-friendly regulations, have been cash flow machines for the last 12 months. Now these Australian miners are sitting on big cash positions and high share prices. - And when you’ve got a lot of cash and a high share price, it’s time to go shopping for a new asset. So let’s take a look at who wants to go shopping… ## Big Gold Producers and the Australian Interest The chart below shows the production profiles for the world’s major gold producers. ![Major Gold Producers: Production Profiles] The Barrick-Randgold merger followed by the Newmont-Goldcorp merger are leaving the rest of the senior producers in the dust. The chart below compares the newly formed Barrick Group versus a completed Newmont-Goldcorp and Newcrest Mining. It is evident that Newcrest is going to need to pick up the slack. ![The Big Three: Senior Gold Producers] Newcrest needs to increase its production, and I don’t think they do that by merging with Agnico-Eagle or Kinross. The most cost-efficient way for Newcrest to increase production and reserves is to leverage its high share price in Australia and use it to buy a North American listed mid-tier producer like **Pretium** **Resources (PVG:TSX)** or perhaps even **Detour** **Gold (DGC:TSX)**. From a strategic standpoint, Newcrest should be looking at earlier stage non-producing assets such as **GT Gold (GTT:TSX-V)** in British Columbia, Canada which is close to their recent investment in Imperial Metals’ Red Chris Mine. **But Newcrest Mining isn’t the only Australian gold company looking for new gold assets…** I believe there are two other large Australian gold producers who are looking for new assets. The two other companies, both of which I met with at the recent conference in Toronto, are **Northern Star Mining** **(NST:ASX)** and **Evolution Mining (EVN:ASX)**. Northern Star recently acquired the giant Pogo deposit in Alaska. The management team of Northern Star are a group you want to pay attention to. Smart, young and aggressive, they are the future of mining. I met with the original Japanese owners of the deposit, and they believe there is no further exploration upside. However, if I had to bet on who will get the better of that transaction, my money is on Northern Star. If Northern Star is right, they paid an incredibly cheap price. But, if they don’t find any new ounces, they paid a fair market price for the remaining years of production from Sumitomo (a Japanese metals company). Overall a smart strategy by the team at Northern Star. The chart below shows the fundamentals for Newcrest, Northern Star and Evolution Mining. ![Australian Senior Gold Producer Fundamentals] And below, you’ll find a chart which shows the reserves and the resources for the same three companies: ![Australian Senior Producers] I believe the figures in the chart above are very understated. The Aussies use lower gold prices to value reserves in the ground than their North American peers do. Think about it this way: If gold is $2,000 per ounce, lower grade ore can be mined economically because you need less gold extracted per tonne of rock to cover your costs. The opposite can be said if gold is $1,000. Many engineers use $1,300 gold to design the “optimal” mine scenario. Which means that if gold is $1,200, the pit is designed incorrectly and material which should really be classified as low-grade or waste ore is actually sent to the processing facility. This is inefficient and leads to higher costs and less gold production than expected. It also causes mine lives to appear to be longer than they really are. The flip side of this is precisely what I think is happening in Australia. Let’s take Northern Star as an example. They use a gold price of $1,071 to value their reserves. Evolution Mining uses an even lower price – $964 per ounce. This means their reserves and resources are underestimated. Their mine lives are longer than they appear, and their operations will be more efficient and lower cost as well. The Aussies are under promising and over delivering. The North Americans are over promising and under delivering. That is a key reason why I became a significant shareholder in Newmarket Gold in 2015, which is now Kirkland Lake. Their crown jewel is the Fosterville gold mine. I noticed that the company was valuing its reserves using a gold price of $1,175 per ounce. Everyone thought the mine life was going to be very short, but mathematically, it was underestimated. Because of the success of Fosterville, the price of Newmarket stock went from under CAD$1.00 per share when I first wrote it up in mid-2015 to Katusa subscribers to the present share price of CAD$42.20 per share. Over the next 18 months there will be many asset sales, and these Aussie producers are going to be very active. All three will also be active in taking equity positions in non-producers – or at least I would be, if I were them. If I was an advisor to Newcrest, I would tell them to buy Lundin Gold now. I’d also tell them to buy 19% of GT Gold. Based on all of this, I’ve been actively looking for the best gold companies to put my money into. And I’ve narrowed the list down to 4 gold stocks that I see as prime takeover targets. Subscribers to [***Katusa’s Resource Opportunities ***](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiewebsite)know exactly which companies I’m talking about. These are the ones I’ve put not only countless hours of my life into researching, but also millions of my own dollars into. If you want to see which gold companies I’m holding in my personal portfolio and fund, consider signing up. Regards, Marin Disclosure: *I do not own GT Gold.* --- # Katusa Market Intelligence Center - URL: https://katusaresearch.com/katusa-market-intelligence-center/ - Type: page - Published: 2019-04-12 - Updated: 2026-08-05 - Author: Marin Katusa Katusa Market Intelligence Center # Free market data, live charts, and a real-time feed of resource financings. Live commodity and stock charts, gold and bitcoin gauges, and every Canadian resource private placement the moment it files. All of it is free to use. For informational purposes only. Nothing here is a recommendation — it’s a starting point for your own research. Free tools ## Explore the Center Financings New ### Private Placement Monitor Every Canadian and US private placement the moment it files — issuer, raise size, pricing, and terms, straight from public filings and updated continuously. [Open the Monitor →](https://katusaresearch.com/private-placement-monitor/) Live charts ### Market Data Interactive charts for gold, silver, copper, oil, uranium, bitcoin and more — build your own from almost any ticker, updated continuously. [Open Market Data →](https://katusaresearch.com/market-data) Commodities ### Commodity Bargain Monitor Three-year trailing returns across the major commodities. When one falls more than 50%, it lands on our radar — that’s where deeply out-of-favor assets tend to hide. [Open the Bargain Monitor →](https://katusaresearch.com/commodity-bargain-monitor/) Gold · Bitcoin ### Bitcoin vs. Gold Market Cap How bitcoin’s market cap stacks up against gold’s over time — digital gold versus the real thing, tracked side by side. 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These are not recommendations — they are a starting point for further research. --- # About - URL: https://katusaresearch.com/about/ - Type: page - Published: 2019-04-10 - Updated: 2026-07-01 - Author: Marin Katusa About Katusa Research # An independent investment research firm founded by professional investor Marin Katusa. Starting from scratch, Marin has built a large personal fortune through his ability to find great investments. During his career, he has sat on the board of a public company, arranged over $2 billion in financings, and written the *New York Times* bestseller *The Colder War* and the Amazon #1 bestseller *The Rise of America*. Marin’s insight has been featured in *The Wall Street Journal*, *The New York Times*, Bloomberg, and CNBC. ![Marin Katusa] **Marin Katusa**Founder & Professional Investor ![Marin Katusa signature] $2B+ Arranged in financings 1M+ Air miles traveled 500+ Resource projects visited 100+ Countries on the ground Insight featured inThe Wall Street JournalThe New York TimesBloombergCNBC Bestselling author ## New York Times & Amazon #1 bestselling author. Marin is the author of two bestsellers — *The Colder War*, a *New York Times* bestseller, and *The Rise of America*, an Amazon #1 bestseller with a foreword by Robert Kiyosaki. [Read The Rise of America →](https://riseofamerica.com/) Free tools & education ## Helping individual investors navigate a complex world. Explore a large library of educational material and live data tools — and become a smarter investor. Learn ### Education Center A deep, free library breaking down resource investing, private placements, and the forces that move commodities. [Visit the Education Center →](https://katusaresearch.com/category/education/) Screen ### Market Intelligence Center Gold and oil stock screen results, buyout candidates, and other natural-resource data. For informational purposes only. [Open the Intelligence Center →](https://katusaresearch.com/katusa-market-intelligence-center/) Track NEW ### Private Placement Monitor Every Canadian resource private placement, the moment it files — issuers, raise size, and terms, from public filings. [Browse the Monitor →](https://katusaresearch.com/private-placement-monitor/) What people are saying about Marin Katusa “ As far as I’m concerned, Marin is the next Warren Buffett. In the resource area, there’s nobody that’s even a close second to Marin. I’d consider him something of a genius. **Doug Casey**Chairman of Casey Research “ Marin has worked directly with and financed many companies of well-known individuals in the resource industry, and has become one of the most trusted and well-connected dealmakers in the junior resource sector. **Rick Rule**President & CEO, Sprott U.S. Holdings “ Marin is one of the few people who truly understands oil and mining from a technical, financial, and operational perspective — and still keeps a focus on making money for shareholders. **Keith Hill**CEO, Africa Oil Premium services ## Ready to go deeper with research, analysis, and actionable guidance? [View Premium Subscriptions](https://join.katusaresearch.com/subscribe/) ## Get in touch 530 – 800 West Pender Street Vancouver, British Columbia, Canada V6C 2V6 Customer Service: [778-737-7381](tel:+17787377381) [Contact Us](https://katusaresearch.com/contact-us/)[FAQ](https://katusaresearch.com/frequently-asked-questions/)[Terms & Conditions](https://katusaresearch.com/terms-conditions-use/)[Privacy Policy](https://katusaresearch.com/privacy-policy/)[Disclaimer](https://katusaresearch.com/disclaimer/) --- # Saudi Aramco – A Peek into the World’s Most Valuable Company - URL: https://katusaresearch.com/saudi-aramco-a-peek-into-the-worlds-most-valuable-company/ - Type: article - Published: 2019-04-05 - Updated: 2024-09-10 - Author: Marin Katusa What company made more profit last year than Exxon, Apple, Amazon and Facebook combined? Is it General Electric, Ford or Canopy Growth? No – it’s **Saudi Aramco**. Over the last several years, Saudi Aramco has been responsible for 1 out of 8 barrels of oil consumed worldwide. That’s a lot of oil production considering global oil demand is 100 million barrels per day. I think you’d agree with me that given those 2 previous statements, this company is one of the most important businesses operating in the world today. Only the secrecy of the Rothchild’s wealth supersedes the mystery and ambiguity of the oil reserves of Saudi Aramco. For decades, the financial performance and oil reserves have been one of the company’s best kept secrets. That data was limited to a tiny circle of executives and government officials. Now, thanks to a corporate bond offering, audited financial statements and verified hydrocarbon reserves… that data has been released. And it’s **big**. I’ve followed Saudi Arabia and Saudi Aramco for years. In 2016, I [wrote a piece](https://katusaresearch.com/3-keys-the-news-outlets-are-missing-on-the-saudi-aramco-ipo/) stating that the new Saudi King, Mohammed bin Salman, would be a game changer for the country. In my New York Times Bestseller, ***The Colder War*** I wrote a whole chapter on Saudi Aramco. Let me condense it down to a simple short essay. In 1933 when a Concession Agreement was signed between Saudi Arabia and the Standard Oil Company of California (now Exxon Mobil), Saudi Aramco was formed. Over the following decades, the Saudis and their partners would grow the business into the world’s largest oil business and the world’s most profitable company. In 1973, the Saudi government bought a 25% interest in Aramco, increasing that interest to 60% the following year. In 1980, the Saudi government increased its interest in Aramco to 100% and to this day still retains 100% ownership in Saudi Aramco. Today, Saudi Aramco doesn’t just produce oil, it refines it as well. The company operates one of the world’s largest refining businesses, with net throughput of 3.7 million barrels per day. The largest refinery in North America is not “Buy American”, but rather a Saudi Aramco owned refinery. - #### **How ironic is it that Saudi Aramco ships Saudi oil… to get refined on American soil… in a Saudi owned refinery… to sell to Americans?** You can’t make this stuff up. Yes, you’re reading that right, the largest oil refinery in North America is owned by Saudi Arabia. It’s the Motiva refinery in Port Arthur, Texas. And it has refining capacity of 635,000 barrels per day. Motiva was originally owned through a joint-venture with Shell. But the Saudis acquired 100% of the operation in 2017. Do not bet against the Saudi King Mohammed bin Salman or against Saudi Aramco. ## How Much Oil Does Saudi Aramco Produce? In 2018, Saudi Aramco produced 13.6 million barrels per day of oil equivalent, including 10.3 million barrels per day of crude oil and condensate. Saudi Aramco is by far the largest oil producing company in the world. Below is a chart which compares Saudi Aramco’s production to the other super majors. ![2018 Saudi Aramco and Super Major Daily Production] Let’s take a closer look Saudi Aramco’s production on a *per field* basis. You’ll see 5 oil basins make up 70% of Saudi Aramco’s total oil production. ![Saudi Aramco Oil Production Breakdown per Basin] ## **How Close are the Saudis to Running Out of Oil? ** Contrary to many articles and pieces of research I’ve read, the short answer is **not even close**. Conventional production alone is expected to last over 50 years. Once unconventional production kicks in, that can easily double. Saudi Arabian hydrocarbon formations host 256 billion barrels of oil equivalent proved reserves. That’s enough to satisfy over 50 years of production at current levels. Over 200 billion barrels of proven reserves are crude oil. Below you’ll see the proven reserves remaining for each of the key Saudi Aramco fields and the Reserve Life (Proven Reserves ÷ Production) for each field. ![Key Saudi Aramco Oil Fields] - #### **Make no mistake – Saudi Aramco is the behemoth of all oil companies. ** According to the reserve report released by [third-party petroleum engineers](https://www.rns-pdf.londonstockexchange.com/rns/6727U_1-2019-4-1.pdf), on December 31st 2018, more than 80% of the Kingdom’s proved crude oil reserves were in hydrocarbon reservoirs that were less than 40% depleted. Compared to other oil super majors, Saudi Aramco crushes the competition in terms of reserves. Below is a chart which compares the proven reserves of Saudi Aramco versus the super majors. ![Saudi Aramco and Super Major Proved Reserves] ## **What are Saudi Aramco’s Production Costs?** Blessed with world class hydrocarbon reservoirs, the Saudis produce barrels of oil at a fraction of the cost of the rest of the world’s largest oil companies. A good way to compare oil company production costs is by using the lifting cost per barrel calculation. This metric takes total production costs divided by total production. It’s an apples-to-apples metric which allows you to compare any oil company’s financial statements very quickly. A low number indicates low cost production, whereas a high number would indicate high cost production. Below you will see Saudi Aramco’s dominance in lifting costs when compared to the other super majors. ![SAudi Aramco vs Super Major Production Cost] For further comparison, Saudi Aramco has far lower lifting costs than even the most efficient and largest U.S. shale producers. Below is a chart which compares Saudi Aramco’s production costs to large U.S. shale oil producers. ![Saudi Aramco vs Major Shale Producers] Remember the whole “War on Shale” the media was babbling about in 2014-2016? Don’t bet against Saudi Aramco – you will lose. ## **Peak Oil?** I’ve read so many nonsense and ill-advised conspiracy nut job pieces on Peak Oil. There is no Peak Oil. The release of audited financials and reserves should silence a lot of critics of Saudi Aramco. For years there have been many “experts” suggesting that the Saudi fields were depleted, and that the Saudis didn’t really have low cost production. This report suggests otherwise. And as per usual, Saudi Aramco is one step ahead of the herd. Just as I stated in January 2016, I will say it again: Do not bet against MBS—you will lose. The futures for Saudi Aramco and MBS look very bright, even at $45 oil. And even brighter at $55 oil. And incredibly bright and powerful at $65 per barrel or higher. The oil markets are very dynamic and ever changing. It may surprise you that oil is the best performer out of any major commodity this year. It’s never been more crucial to be up to date. My team and I spend hours every week monitoring all corners of the oil sector. If you don’t want to spend countless hours grinding through due diligence on your own, *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite) *members get access to the best of my research every month. For a taste, check out some of my free oil market research like our [Oil Stock Value Monitor](https://katusaresearch.com/oil-stock-value-monitor/), in our Market Intelligence Center. Regards, Marin --- # Four Rules for Investing in Junior Stocks - URL: https://katusaresearch.com/four-rules-investing-junior-stocks/ - Type: article - Published: 2019-03-29 - Updated: 2019-07-31 - Author: Marin Katusa *“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.”* -Warren Buffett It’s no secret that to be a successful investor or speculator, you have to govern yourself according to a set of rules. And I can’t find any better core rule than the famous Buffett quote above. It’s one that is the cornerstone of my investing career. If it’s not taped to your fridge or your multi-screen trading desk, it should be. But how can you actually put this rule into practice? And what are the common mistakes that new investors make over and over again that violate this rule? Every week I get an inbox full of emails from new readers, subscribers and seasoned veterans. Today I’ll introduce you to the four most common problems that investors have while investing in junior mining stocks. So let’s get started… ## **Rule #1 – Don’t Blow Up** My first big experience behind the scenes of a bull market was the extraordinary spike in the price of uranium around 2006. I saw euphoria first hand. Brokers were making a killing, accredited investors were making a killing, retail investors were making a killing. I made a killing. A bull market almost always makes even the smartest people throw caution and risk right out the window. Share prices of companies with nothing more than uranium in their name were flying through the roof, everyone was making a fortune. New uranium companies were being created by the day to explore domestic foreign ground for the radioactive lust dust projects. Gurus were marketed like geniuses by every publishing house. And lucky for them, spell check was created so they could now spell uranium and the Athabasca Basin. Then reality set in. The bubble popped hard. Companies need to prove their business plans, catalysts, projects and assets. And only back the best management teams with skin in the game at the same price as yourself. When bubbles kick in, people forget the basics like delivering on real revenue or buyout potential. Especially if their market caps are in the stratosphere. If they don’t… look out. You’ll find yourself holdings shares of the next famous hindsight story of a pyramid shaped stock. That’s one with a rapid rise up, and an equal rapid fall down. Take Mega Uranium from 2004-2013… *![Mega Uranium Share Price]* What was once a 5,230% gain, turning every $2,500 invested into $130,825… is now a 98% loss. And that’s a huge blow up of your capital if you bought into the mania near the top (which many do). So that brings me to my first rule: *Don’t blow up*. Sounds easy, right? Well, it’s not. When everyone around you is making a fortune in Bitcoin, marijuana, gold or lithium your first instinct isn’t to sell, and miss out on higher returns. This is the [*Dunning-Kruger Effect*](https://www.kiplinger.com/article/retirement/T064-C032-S014-a-risk-that-could-cost-you-everything-dunning-krug.html) in action. Penned by then Cornell University psychologists David Dunning and Justin Kruger, they found a cognitive bias where poor performers at something had no clue they were incompetent. This leads to an inflated self-assessment of your abilities and makes you think you’re much better at something than you really are. The *Dunning-Kruger Effect* is best illustrated in the simple chart below…. ![Dunning Kruger Effect] It takes firsthand and direct experience in a sector to truly understand it. And it’s why I put my research together for best and worst cases in a particular sector every month for my subscribers. It keeps me sharp, in the game and on the lookout. You can apply that hockey stick rise at the beginning of the *Dunning**–**Kruger Effect* chart to almost any recent mania market like Cryptos or Cannabis. In the past it has applied to uranium, gold, silver, oil and tech stocks. No market sector is immune. It will happen again. So how do you put limits on yourself, protect your capital and your profits to not blow up? - **In June 2008 I first published the *Katusa Free Ride* formula…** I told my subscribers to lock gains on all stocks and to de-risk their portfolio by taking a *Katusa Free Ride*. Many subscribers went ballistic saying that I wasn’t bullish enough and brought unnecessary caution to the table, taking profits and de-risking positions. In fact, one-third of our paid subscribers specifically asked for refunds because they thought I was bearish and flat out wrong because oil was going to the moon. A monthlater, oil peaked at $145 per barrel. And within 3 months we were in the depths of the GFC(global financial crisis). Oil went from $145 per barrel to under $30 per barrel during that time. The *Katusa Free Ride* formula saved me and the subscribers that heeded my advice. Yes, a stock pick might fly higher, and you WILL get upset that you lost out on profits if you sell too early. But prudent investing is where the *Katusa Free Ride* becomes instrumental to building your net worth. People need to book paper gains into realized profits. Paper profits don’t mean much in the real world. What better way to ride the wave of a stock than to remove your risk capital and play with house money? There is nothing like O.P.M. – *Other People’s Money* – to play the game with. It is a simple formula that tells you how many shares to sell to return your original investment. Take your initial capital and profits off the table. You can do this by taking a Katusa Free Ride, where you recoup your original investment and profit and let the rest ride with house money. Only you know what your risk tolerance is. But I’m not afraid to cut a winning or a losing position. ## **Rule #2 – Position Sizing: Don’t Put Your Whole Portfolio at Risk ** Over the years, I have seen the position size mistake happen countless times with novice junior miner investors. A new investor believes in the pitch of a guru and goes all in on a junior mining stock. The entire portfolio (say a $50,000 portfolio for example) is almost entirely made up of one speculative junior. That’s irresponsible. Sorry to break this, but most gurus don’t even buy the stocks they pitch. And even worse, many are compensated and paid to talk about stocks. If the guru has no actual dollars and skin in the game (with full disclosure on cost base) run as far away as you can. Allocating 5% (for speculations) and 10% (on investments) depends on risk tolerance. Anything higher is a recipe for disaster. If you’re starting out, err on the conservative side. Ask yourself this. If a speculative stock you own goes to zero would you be comfortable with… - Your $50,000 portfolio dropping to $20,000 because you allocated 80% to one stock that just dropped 75%, or - Your $50,000 portfolio dropping to $48,750 because the one speculative stock dropped 75%? Only you can answer this. But the name of the game is long term success, not overnight wonders. Limiting a position size helps to manage your overall portfolio against the worst-case scenario. It is prudent to structure your portfolio so that you’re not overweight in any one stock. I’ve been guilty of overweighting some of my positions in the past. I don’t pretend to be a genius or a saint. But I share this all so you don’t make the mistakes that I have made in the past. And please do not ever invest with the money needed to pay your mortgage, tuition or other essentials in life. ## **Rule #3 – ****NEVER use Margin to Invest and Speculate in Junior Mining Stocks** Unless you have a biblical tolerance for risk in crisis situations, you’ll get crushed. Keep in mind that 99.99% of people who can fog a mirror should not use any leverage tools for investing. Taking a mortgage or line of credit to invest in the markets is taking excessive risk in this sector. You will set yourself up for hardship. If you are jeopardizing your standard of living for yourself or your family, don’t even consider it. If you’re a novice or intermediate investor that is new to investing in resources and juniors, just don’t do it. There’s no sense to impoverish yourself by taking irresponsible risks. If you’ve built up a great tolerance for risk (and this takes 10+ years of many extreme emotional swings and cycles—and it’s still incredibly stressful) then you can start to *consider* it. When I first started out, I took some insane risk and I don’t recommend that experience. I currently will not use leverage investing in juniors. Remember, never risk any cash and capital that you cannot afford to burn up faster than the Hindenburg. These are juniors – the riskiest and most rewarding stocks on earth. With leverage you can easily amplify your losses to exceed more than 100%. If you have cash set aside for your kid’s college tuition, your mortgage, and health expenses, those should always be a priority over speculative investments. Don’t be a gambler. Be a [wise alligator](https://katusaresearch.com/the-way-of-the-alligator/). And be a risk taker when the odds are in your favour by [placing asymmetric bets](https://katusaresearch.com/asymmetry-financial-secret-can-earn-10000-returns-no-joke/). ## **Rule #4 – There Will Always be Another Opportunity** Stocks are the opposite of true love. Have you ever been in love? If you have been lucky enough to have experienced true love, you know it’s a once in a life time feeling. Stocks are the exact opposite. The prudent strategy is to take a profit or cut a loss and move on. There is no working on the “relationship” with stocks. If the company isn’t doing what you expected, sell and move on. There are no therapy sessions or hoping things will change. Like trash, some things need to be thrown out into the garbage and incinerated for good – no recycling necessary. And be aware of that dangerous emotional drug, *Hopium*. There is no forgiving in successful stock speculation. If management have lied or over promised and they fail to deliver. Sell and move on. There is no room for “hope”. Don’t *hope* that a stock you own will get to the price it once was whether you’re sitting on a profit or loss. You’ll be greatly disappointed, jaded, dejected and clouded. Don’t *wish* upon the market for what you want to happen either. Position yourself for what the odds outline will happen in certain scenarios. Sometimes, for whatever reason, an investment might cause you stress to the point that you cannot sleep or are overly distracted from your daily life. If this happens, sell enough stock to alleviate the situation. Life is too short. Have fun. **There will always be another opportunity**. Speculation is a journey where the reward is money and the experience, but it’s not for everyone. If your stress level becomes intolerable, you’re either over-invested or speculating just isn’t for you. That’s ok, you’ve found out more about your own personal tolerance. Regards, Marin --- # Global Economy: The Dollar, Gold, and Interest Rates - URL: https://katusaresearch.com/global-economy-the-dollar-gold-and-interest-rates/ - Type: article - Published: 2019-03-22 - Updated: 2019-08-27 - Author: Marin Katusa My office is right in the heart of Vancouver’s financial district above an exchange where you can get dollars, gold or most any other international currency. Directly across the street from me is the old Vancouver Stock Exchange. From here, the hub of the global junior resource market, I am as close to the action as can be. All major Canadian banks are within walking distance. As are the major brokerages and investment banks. It’s my belief you need to be where the action is if you want to be involved in the hottest new mining and venture deals – especially in the early stages. I love being in the trenches and especially love being first to a story. But sometimes, you need to look at what’s outside the trenches in order to solidify a thesis. For me, this means taking a 30,000-foot view of the global economy. It’s important to know what’s happening at the top level to help guide your investment decisions at the micro level. ## **The Global Economy from a Momentum Macro View** Below is a heatmap which shows the economic momentum of major nations and trading zones. This economic momentum is calculated using a variety of indicators such as Gross Domestic Product and monetary and fiscal policy, along with national indicators of economic productivity and sentiment. The red boxes indicate months when economic momentum was below the 12-month moving average. The green boxes indicate months when economic momentum was above the 12-month moving average.![Global Economic Momentum Heatmap since 2014] Judging by the amount of red on the right side of the table, it’s safe to say that most of the developed countries in the world have recently seen a slowdown in economic conditions. Let’s take a deeper dive. ## **The Global Economy Through the Eyes of Manufacturers** The *Purchasing Managers Index* (PMI) is a solid gauge for economic activity. The PMI index is a monthly factual survey from participants in the manufacturing and service sectors. Below is the Manufacturing Purchasing Mangers Index for the United States, China and the Eurozone. A number above 50 is positive and indicates economic expansion, whereas a number below 50 indicates economic contraction. Manufacturing and service sectors are the lifeblood of the economy. You’ll notice that each of the PMI Indexes has been taking a nose dive. China and the Eurozone are now under the 50-mark showing economic contraction. This isn’t a good sign. With economic conditions worsening both domestically and abroad, it’s not surprising that the U.S. Federal Reserve continues to backpedal on the number of interest rate increases it’s planning for 2019. This past Wednesday, the Fed announced they were holding rates constant – which everyone expected. What surprised the market however, was the Fed’s prediction for zero rate hikes for the rest of 2019. This is down from the 2 forecasted increases last year and 1 increase forecasted from the [December 2018 meeting](https://www.federalreserve.gov/monetarypolicy/fomcpresconf20181219.htm). I can’t say I’m surprised that we’re continuing to see a slowing in the pace of interest rate increases from the U.S. Federal Reserve. Federal and consumer debt in the United States has soared like stocks in the cannabis sector. The U.S. Federal Reserve knows this. Jacking up interest rates now is the equivalent of a financially tapped out home owner imposing a 19% interest rate on their own mortgage. Using data from the St. Louis Fed, I’ve charted U.S. government interest payments on its debt versus national GDP. ![United States Federal Interest Payments vs GDP] Since 2004, interest payments relative to GDP have increased from 2% to over 3%. A 1% increase may not sound like a lot, but I’ll bet a $277 billion increase does. - **That’s the difference between the federal government’s quarterly interest payment in 2004 and its last payment in 2018. ** As the U.S. economy stagnates, this debt payment becomes an increasingly larger percentage of GDP. Given the change in stance from the Fed on future interest rate levels, the U.S. dollar should be front and center on everyone’s radar. You’ll see in the chart below that the U.S. dollar has been appreciating versus major currencies for the past year. The green line indicates the technical trendline which acts as support. It has bounced off this line several times. If the U.S. dollar index goes below the trendline, we could see the U.S. dollar head lower against most major currencies. ![US Dollar Index] ## **How Do Steady Rates and a Falling Dollar Affect Gold?** If the Federal Reserve continues along this path of fewer interest rate increases than initially forecast, this would be a positive for gold and gold equities. Expectations for fewer interest rate increases would cause the U.S. dollar to depreciate, which would in turn cause gold – which is denominated in U.S. dollars – to appreciate. - **Under this thesis, you could invest in physical gold, and make a nice return. But I’m betting millions that the big money will be made in the gold equities.** That’s because those stocks are highly levered to the price of gold. If gold goes up even $100-200 per ounce, I think some gold developers and producers could go up 100% or more. But the problem is, [you need to be careful which ones you pick](https://katusaresearch.com/the-golden-trap/). Because not all gold companies have been managed responsibly. I have invested millions into my two top gold stocks. My top stock is testing resistance levels on a daily basis and looking to break out of a tight 14-month trading range. It’s up 41% in the last 3 months. Three years from now, I can see readers going back and kicking themselves for not owning this stock in their portfolio. Subscribers to my premium newsletter, [Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/), already know the name of this company. It is without a doubt my highest conviction gold stock. And one I’m backing with millions of my own money. Regards, Marin --- # The Secret Central Bank Gold Transfer – Operation Fish - URL: https://katusaresearch.com/the-secret-central-bank-gold-transfer-operation-fish/ - Type: article - Published: 2019-03-15 - Updated: 2019-04-17 - Author: Marin Katusa *“Gold is a relic of barbarism and should be discarded by all civilized nations as a medium of exchange.”* *-John T. Goss, addressing the U.S. Senate in 1894* By the early summer of 1940, Belgium and the Netherlands were defeated. France was on the brink of surrender. The Nazi war machine took control of the French Channel coast… …a mere twenty one miles from England’s doorstep. In a desperate move to protect the nation’s wealth and ensure the purchase of weaponry from America, newly appointed Prime Minister Winston Churchill and the Bank of England began transferring gold bullion to the Bank of Canada in Ottawa. They called this Operation Fish. The move would allow the war effort to continue if London were to fall. Churchill would then run the Commonwealth from Montreal, Canada. ## Operation Fish – Moving Gold Across Oceans England couldn’t spare the aircraft needed for the transatlantic transfer of gold. The move would have to be by boat. Transferring the Empire’s gold by boat across the Atlantic Ocean at the peak of Nazi naval dominance was not an easy decision to make. England had tried doing the same thing, during World War 1. But one cargo ship, the SS Laurentic, carrying nearly 1.4 million ounces of gold (USD$1.8 billion in today’s prices), was sunk by mines laid from a U-boat. And German U-boat technology had improved greatly between the First and Second World Wars. Right from the onset of the war, in the first month of September 1939, German U-boats sank 50 ships. Operation Fish’s first run, escorted by the ancient WWI battleships HMS Revenge and HMS Resolution, left Plymouth on October 7, 1939. - **Bound for Halifax, Nova Scotia, the shipment was loaded with over 600,000 ounces in gold bars. ** - **At current gold spot prices (USD$1,300 per ounce) that is USD$780 million of gold. ** What began as a small secret operation to ensure weapons purchases from America quickly turned into the largest transfer of wealth from country to country in history. Over the course of the war, over 25% of total Allied shipping capacity had been sunk in the Atlantic. And yet, not a single shipment of Operation Fish had been lost. - **By 1945, the Bank of England had transferred more than 48 million ounces of gold by boat across the Atlantic Ocean. That is over USD$60 billion at current gold prices.** That’s a lot of effort for a “barbarous relic.” Or at least the Central Bank of England certainly believed so at the time. Maybe that time has come again? ## Central Bank Gold Stockpiles are Growing Since 2010, central banks around the world have added 152 million ounces to their reserves. In 2018, central banks added nearly 23 million ounces. That’s up 74% from 2017. - **This is the highest annual gold purchase rate increase since 1971, and the second highest rate in history.** In 2018, Russia was the biggest buyer of gold. The Russians funded their gold purchases by selling U.S. Treasuries, a process known as “de-dollarizing”. It makes all the sense in the world that the Russians want more gold and less U.S. dollars. Turkey, Kazakhstan, Hungary, India and Poland rounded out the top six. Below is a chart which shows central bank buying by major gold hoarding nations. ![Central Bank Gold Reserves Chart] According to the [World Gold Council](https://www.gold.org/goldhub/data/monthly-central-bank-statistics), an additional 23 million ounces are expected to be acquired in 2019. With this, central banks will hold nearly 1.3 billion ounces, controlling over 10% of the global gold market. This is a drastic change from just over a decade ago when central banks were a net exporter of gold. According to the World Gold Council central banks dumped over 155 million ounces into the market between 2000 and 2009. Below is a chart which shows central bank activity in the gold market since 1990. You’ll see that from 1990 to 2009 central banks were net sellers of bullion and since 2010, they have been net buyers. ![Central Bank Activity in Gold Bullion] You don’t have to look far for a reason why gold purchasing has accelerated over the last few years… Brexit… petrodollar dominance… sanctions… global market instabilities… trade wars… Cyber wars… Real wars… Regardless of the reasons behind it, the question remains: If central banks are going to continue acquiring record amounts of this **“**barbarous relic,**”** where are they going to get it? ## New Gold Discoveries Have Fallen Over the Last Ten Years In the chart below you’ll see how many new ounces of gold have been discovered in the past two decades. You can clearly see the downtrend since 2006. ![Annual Gold Discoveries] If you look at the major gold producers, both gold reserves and grades have fallen dramatically. [![Major Gold Producers: Attributable Reserves & Grade]](https://katusaresearch.com/wp-content/uploads/2019/03/GoldProducers-Reserves.jpg-MJ-min.jpg) The big drop is not solely due to reserve depletion from production. It is also due to asset sales. It’s no secret that many of the major gold producers overspent in the last cycle and they have been forced to unload assets now to pay off their debt. I’ve published [important gold charts to watch in the past](https://katusaresearch.com/the-most-important-charts-for-your-gold-stocks-right-now/). It’s how you make money in today’s stage of the commodity cycle. I have a saying you need to know – *Grade is King, but Metallurgy is Queen*. So let’s first explore the Grade conundrum, then explore the metallurgical issues the sector is facing. ## Gold Grade is King – The Worst is yet to Come for the Majors In the chart below, you’ll see cumulative gold resources along with the average grade. While the majors have added over 100 million additional ounces since 2007, the average grade has fallen by 50%. ![Major Gold Producers: Attributable Resource & Grade - Gold Transfer] Declining reserve and resource grades are a bad sign. It means that for every tonne of rock mined, the producer is going to extract less gold. In order to keep production levels stable, producers must increase manhours and expand milling capacity. Both of which are costly and negatively impact cash flow and profits to shareholders. It’s not just you and I that know the quality of gold reserves and resources are declining. The majors know it too. It’s a key reason why we are seeing consolidation within the gold sector. ## Gold Metallurgy is Queen Even most within the mining sector give me a puzzled look on their face when I state that *Gold Metallurgy is Queen*. The fact is, the metallurgy of extracting the gold from the rock is getting more complex. The trend is your friend, and the deeper we go, the more complex the metallurgy of “fresh rock” (sulphides) gets. This is the “dirty” little secret of the gold industry. An interesting study I have completed is this. Many of the gold discoveries that make up the higher-grade gold ounces discovered are in fact refractory. Refractory gold can still be produced. However, it means higher costs to extract the gold from the physical encapsulation of the disseminated gold particles. Roasters aren’t cheap. Clean, easy to leach oxides are becoming more and more rare. This is why there’s a premium value for oxide projects. Grade will always be King. But without a strong Queen (good oxide projects or clean met from sulphide projects), you will never have an enduring regime. My last three weeks have been spent on the road. They were filled with meetings with the largest and most innovative gold producers on the planet. And the most high-profile gold developers. The industry is in full transition as most recently seen by the Joint Venture between Barrick and Newmont’s Nevada operations. I detailed all my thoughts and ideas generated from these meetings to my subscribers this last week. You’ll find all 26 pages in the March edition of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiewebsite). My team and I put every asset from every gold major through the ringer. We laid out all the reserves and production post mergers including all the headline dominators: Newmont, Barrick, Goldcorp, Rangold. We also speculated further on the Master’s Chessboard. If you’re a gold investor, you need to prepare for the next moves. Will **Kirkland Lake Gold** buy out **Pretium Resources**? If so, at what price? The coming Commonwealth takeover of the Australian producers of their Canadian counterparts is in full swing as recently seen by this week’s Newcrest purchase of 70% of Red Chris mine in B.C. Anywhere between $2.5-5.5 billion in gold assets (operating and development) will hit the market this year from divestures from the majors. This has massive implications. Make sure you’re paying attention. And don’t forget, Grade is King, Metallurgy is Queen. Regards Marin --- # Ultimate Guide to Private Placements in Canada and the USA - URL: https://katusaresearch.com/guide-to-private-placements/ - Type: article - Published: 2019-03-02 - Updated: 2026-07-27 - Author: Marin Katusa Private placements are in high demand with wealthy, knowledgeable investors. They allow you to buy large blocks of stock at discounted prices, often with additional upside in the form of warrants. Private placements are among the most attractive investment vehicles because of their terms and advantages. Despite this, you’ll rarely see these deals on mainstream financial media. ### Table of Contents - 1. What is a Private Placement? - 2. Why Would I Want To Buy a Private Placement? - 3. How Risky is a Private Placement? - 4. Why Do Companies Offer Private Placements? - 5. What Do I Need to Participate in a Private Placement? - 5.1 Accreditation Differences Between Canada and the US - 6. What’s the Difference Between a Canadian and US Private Placement? - 7. Types of Private Placements - 7.1 Brokered - 7.2 Non-Brokered - 7.3 Bought Deal Financing - 8. What Are Reg A and Reg D Offerings? - 8.1 Reg A - 8.2 Reg D - 8.3 Reg A+ - 9. Common Buzzwords in Private Placements - 10. Private Placement vs IPO: What’s the Difference? - 11. How Do I Buy a Private Placement? - 11.1 Example of a Private Placement Purchase - 12. Where Can I Find Private Placements to Buy? - 13. External Resources ## 1. What is a Private Placement? A private placement is an opportunity for an investor to buy shares of a company directly from the company. Most investors know you can buy and sell shares in the open market; fewer realize you can privately buy shares from both public and private companies. In a private placement, a company creates new shares and sells them directly to investors—outside of regular stock markets. These deals don’t take place on exchanges, so you can’t look up details on Yahoo! Finance. The dollar amounts are often much smaller than splashy IPOs, which keeps them off the front pages and out of mainstream conversation. Some private placements are structured as *debt offerings*, where the company sells interest-bearing instruments. This guide focuses on *equity offerings*—newly created shares issued to investors. ## 2. Why Would I Want to Buy a Private Placement? Large investors value negotiated pricing and allocation size without pushing the market around. Public companies often price private placements at a discount to the current market price—sometimes up to ~20%, commonly tied to VWAP (subject to regulatory approval). This encourages sophisticated investors to participate and avoids moving the price while they build a position. Savvy investors also value **warrants**—rights (not obligations) to buy additional shares at a preset **strike price**, typically above market, providing leveraged upside. ![Stock warrant example of Katusa Gold] ## 3. How Risky is a Private Placement? All the usual risks of buying a stock remain: business failure, liquidity constraints, timing, and in private companies the possibility of never going public. - Fixed purchase price (reduced volatility risk) - Discount to market - Potential free upside via warrants - No broker commission The unique additional risk is the **hold period**—shares are often restricted (commonly four months), limiting your ability to exit during that time. ## 4. Why Do Companies Offer Private Placements? Companies raise capital for sales expansion, acquisitions, drilling/mining programs, product development, and more. Private placements can be faster and cheaper than bank loans or public offerings, though they dilute existing shareholders. Warrants can add future dilution when exercised, but they also bring in capital at higher prices than the original financing. ## 5. What Do I Need to Participate in a Private Placement? In the U.S., Canada, and many other jurisdictions you generally must be an **accredited investor**. Typical criteria include: - Net worth over $1M in financial assets (definitions vary; U.S. excludes primary residence) - Income of $200k ($300k with spouse) for the last 2 years with expectation to continue - (Canada) $5M in total assets including real estate, net of debt Allocations can be cut back if deals are oversubscribed. Management and institutions may receive priority. ### 5.1 Accreditation Differences Between Canada and the US U.S. rules are defined primarily in SEC Regulation D (Rule 501). Canada references National Instrument 45-106. Criteria are similar but not identical; always check the specific forms you’ll sign. ![Who is an accredited investor in the USA] ## 6. What’s the Difference Between a Canadian and US Private Placement? Process is similar. Verify cross-border eligibility and ensure you meet your home-country accreditation standard; forms for foreign investors typically follow their home regulations. ## 7. Types of Private Placements ### 7.1 Brokered Private Placement A brokerage raises funds from clients and channels them to the company, typically for a 6–10% fee—common for larger raises or when a small-cap needs distribution. ### 7.2 Non-Brokered Private Placement Investors place funds directly with the company—useful when management can raise capital through its own network. ### 7.3 Bought Deal Financing An underwriter buys the entire allotment at a set price, then resells to clients/the public. ## 8. What Are Reg A and Reg D Offerings? These are SEC exemptions that let companies raise funds without a full SEC registration like an IPO (the financing itself still requires filings/approvals). ### 8.1 Regulation A - Cap of $50M - Under $20M: investors don’t have to be accredited - $20–50M: non-accredited allowed with caps (10% of income or net worth); accredited not capped ### 8.2 Regulation D - Generally only accredited investors (up to 35 non-accredited allowed but uncommon due to complexity) ### 8.3 Regulation A+ 2015 update to Reg A creating tiers ($0–20M and $20–50M). Frequently referred to simply as “Reg A”. ![Regulation Offerings Table] ## 9. Common Buzzwords in Private Placements Accredited Investor Qualifies to participate in private placements. See section 5. Debt Offering Capital raise via notes/bonds (interest expense, no share issuance). Contrast with **Equity Offering**. Equity Offering Newly created shares issued to investors; dilutive but not inherently negative if priced appropriately. Exercise Using **warrants** to buy shares at the **strike price**. Expiry The date on which a warrant is no longer valid. Free Trading Shares not subject to restrictions; typically after the hold period ends. Hold Period Restriction window (often 4 months) during which privately placed shares can’t be sold. Offering Memorandum Legal document for private companies doing a private placement; similar purpose to a public-company **Prospectus**. Private Placement Company raises capital directly from private investors via equity or debt. Prospectus Legal disclosure for public-company offerings, filed with the SEC (U.S.) or relevant regulator. Reg A / Reg A+ / Reg D SEC exemptions; see section 8. Rule 144A Offering sold to Qualified Institutional Buyers (often debt; may include Reg S for non-U.S. investors). Strike Price Predetermined price at which **warrants** can be exercised. Warrants Rights (not obligations) to buy additional shares at the strike price before expiry; many private placements include warrants. ## 10. Private Placement vs IPO: What’s the Difference? IPOs are when private companies sell shares to the public for the first time (usually alongside a new exchange listing) and typically happen once. Private placements can occur at any time—public or private companies may use them repeatedly to fund operations and growth. ## 11. How Do I Buy a Private Placement? First ensure you qualify as an accredited investor and that the placement is open to your country. Request an allocation, prepare funds, complete subscription documents, and send payment (often wire transfer). ### 11.1 Example of a Private Placement Purchase Example narrative (Joe Smith, accredited U.S. investor, applies for a Canadian private placement, receives a partial allocation, completes paperwork, wires funds, and receives shares/warrants in his brokerage after closing). Note: shares are restricted during the hold period. ## 12. Where Can I Find Private Placements to Buy? Only buy placements in companies you’d be happy to own on the open market. Monitor news for companies on your watchlist; strong terms can be a signal to begin deeper due diligence. Subscribe to our list to be alerted when we publish private placement opportunities. Live tool ### The Private Placement Monitor Every current private placement and financing on the Canadian exchanges (TSX, TSX-V, CSE and NEO) — size, terms, structure and status — in one place, updated as deals file. [Open the Monitor →](https://katusaresearch.com/private-placement-monitor/) Back to top ↑ ## 13. External Resources - [British Columbia Securities Commission](https://www.bcsc.bc.ca/industry/issuer-regulation/raising-capital/private-early-stage-businesses) - [Ontario Securities Commission](https://www.osc.gov.on.ca/en/SecuritiesLaw_ni_20150219_45-106_amendments.htm#3807s15) Back to Table of Contents ## Related Reading - [Asymmetry: The Financial Secret That Can Earn 10,000% Returns](https://katusaresearch.com/asymmetry-financial-secret-can-earn-10000-returns-no-joke/) - [How Small Investors Can Hit It Big in Financings and Private Placements](https://katusaresearch.com/how-small-investors-can-hit-it-big-in-financings-and-private-placements/) - [Blindfold Profits: The Greatest Business to 10–20x Your Money](https://katusaresearch.com/blindfold-profits-the-all-time-greatest-business-to-make-10-to-20-times-your-money/) --- # The Golden Trap - URL: https://katusaresearch.com/the-golden-trap/ - Type: article - Published: 2019-02-22 - Updated: 2019-04-24 - Author: Marin Katusa *You know the day destroys the night* *Night divides the day* *Tried to run, tried to hide* *Break on through, to the other side* As I write this, gold is flirting with breaking through $1,350 and it’s getting everyone excited. Well, the gold bugs that is. But will gold break on through to the other side like the Lizard King, Jim Morrison, sang so many moons ago? Every two-rate newsletter that didn’t mention gold a couple years ago now has a gold promotion with their “latest resident gold expert” (Note: nothing more than a well marketed desk jockey). That alone tells you that retail investors are starting to get interested in gold. The many franchises of newsletters don’t waste time marketing things that don’t sell subscriptions to the retail audience. **Gold is Getting Hot Again on the Institutional Side** Bankers who I knew well during the 2011 gold bull top are back at it attempting to raise equity and clip their fees. Below is a chart showing gold sentiment on a weekly basis back to 2009. As you can see, we are touching the upper bound of the DSI level. My friend Brent Johnson at Santiago Capital pointed out to me that between Jan 1, 2000 and today, that the DSI (Daily Sentiment Index) on gold has hit 90 and over 220 times. 98 was hit in August 2011. Since then the highest DSI was 91 in Jan 2018. The DSI is just slightly above 85 today, which means we are inching close to the highest DSI ever. This can be interpreted many ways… Some can argue this indicator is bearish, others will interpret that as bullish. I personally believe it’s a sign of caution. Make sure you only own the best names in the sector – as the odds are that gold can correct from here, before it takes off. **What the Gold Commitment of Traders is Saying Right Now** A positive sign for gold is the non-commercial positioning in gold is still at very low levels. It means institutions and fund managers have not been major participants in the rally yet. Below is a chart which shows the Commitment of Traders Report for Non-Commercial long positions in gold. This chart is actually quite bullish… Late last year we were at the lowest positioning level in 3 years and now we have moved off the bottom. - **If gold is going to go on a run, we will need to see continued increases in non-commercial long positions. ** On top of all of that I just went through, February is the 4th strongest month of the year for gold seasonality strength. You can see this in the chart below… **What Really Moves the gold Markets?** The fact is, until the **major funds** and **sovereign wealth funds** start buying into the gold story, the equities and the metal won’t start its major ascent. Let’s first discuss the obvious. Yes, it’s true that: - Governments have increased their take via taxes, permits, royalties… - The “cheap and easy” gold has been mined out. - Timelines and costs to build new mines have increased. - Unions have increased their share of production, increasing labor costs. - Every new ounce produced cost more to produce than the previous ounce. But an interesting stat we found is this: **Since the year 2000, executives made more in compensation per ounce produced than their predecessors… ** And it’s a much higher multiple than a mine manager in the 1950s–1970s. It’s hard to find all the data on this going back to 1900 (we tried). But we are confident from the data we have closely examined that since 2000, executives have taken a much larger chunk of the “gold” than has been given to shareholders when compared to any time in the past. This was accomplished through high salaries, large compensation packages and unbelievable change of control provisions. **But the biggest reason shareholders have received the mine shaft over the last 8 years:** - **DEBT on the balance sheet** The problem with debt is that you eventually need to pay it back. You can’t just dilute it away (especially when priced in USD the last decade). Let’s dig a bit deeper to see what happened in the gold sector over the last decade. Just before the Global Financial Crisis (GFC) in 2008, the gold sector was nearly 1:1 on the ratio of equity raised per year to the debt carried on the balance sheets. This means that for every $1 of equity raised, $1 of debt was added. Everything changed after the GFC. Executives went wild on debt. With readily available cheap debt at low rates, the bean counters who keep the books found a new “market” to fund the company’s growth profile. However, we will soon see that this cheap debt is anything but cheap to the shareholders. **The Gold Equity and Debt Chart Below is Stunning…** Gold production is the “gold” line. In blue, you can see the equity raises (selling shares to investors for cash) for the gold sector. They peaked in 2009 and trended downwards for the next nine years. Debt taken on by the sector is in red. The debt load increased by over 300% during the same time frame. In 2007, global gold production was 83 million ounces. That same year, $16.7 billion was raised in equity for the gold sector. And the gold sector carried about $17.7 billion in debt. To make it simple, let’s call it a 1:1 equity to debt ratio. Eleven years later, gold sector production had increased by 28 million ounces (33%). **But the debt within the sector increased by $54.4 billion (307%).** In total, $4.15 billion of equity was raised in 2018. This represents a 75% decrease in equity raised compared to 2007. Your key takeaway: - **The gold sector went from an “almost” 1:1 debt to equity ratio in 2007 to over 17:1 a decade later!** It’s safe to say that the gold sector took part in the “easy/low debt” binge after the Global Financial Crisis. There are some fundamental questions you need to know… And there is a definite investment angle to profit from the coming collapse and unwinding of the *Golden Leverage*. My subscribers have seen this in action in my newly released February issue of *Katusa’s Resource Opportunities*. **I just got filled on a gold stock I believe could gain 50-100% within the next 4 months**. Not to mention, **our last recommendation in Dec 2018 is up +177%… and still climbing.** If you’re not already and you’re considering becoming a member of my premium research service, [**click here**](https://subscribers.katusaresearch.com/forever-royalties-checkout/). Regards, Marin --- # Critical Terms for Achieving Private Placement Success - URL: https://katusaresearch.com/critical-terms-achieving-private-placement-success/ - Type: article - Published: 2019-02-10 - Updated: 2020-03-10 - Author: Marin Katusa It’s private placement week at Katusa Research. As I mentioned on Monday, every essay this week is dedicated to helping you harness the incredible wealth-producing power of private placements. (You can read essay #1 [here](https://katusaresearch.com/learn-secret-might-never-buy-regular-stocks-2/), essay #2 [here](https://katusaresearch.com/secret-making-1000-natural-resources/), and essay #3 [here](https://katusaresearch.com/join-one-worlds-elite-investment-clubs/)). In any field of knowledge, there is a language you have to learn in order to get along… a set of terms insiders use to describe what’s going on. The field of private placements is no exception. In today’s essay, I’ll cover some of these critical terms First, you need to know there are two kinds of private placements. One, the “**brokered**” kind. And two, the “**non-brokered**” kind. In a brokered private placement, a brokerage house acts as a middleman between the company and investors. The broker raises the money from clients and directs it to the company. The broker receives a commission in the 6% to 10% range for performing this service. This usually happens when it’s a large financial raise or when a junior needs the help of a broker to drum up interest. Some brokers have large client bases who like to participate in private placements. Getting access to a large base of investors can make it attractive for a company to go down the brokered financing route. The management teams who have large followings themselves can go down the “non-brokered” financing route and cut out the middleman (broker) to save on finance costs. In a non-brokered private placement, the investors place their money directly with the company. This saves a lot of money on fees for the company. Non-brokered financings are typically done by companies with access to good contacts and networks. They have “reach,” so they don’t need to pay a broker. I prefer to participate in non-brokered financings. Cutting out the middleman means more money goes to the company. Second, investors in private placements may face what is called a “**lock up period**.” This is a four-month window when the investors are not allowed to sell their shares. There are situations in which there are no four-month trade restrictions, but for most junior private placements there is a lock up period. Lock up periods ensure private placement investors hold their stock for a period of time and do not “flip it” for instant profits. This rule somewhat promotes longer holding periods. I have no problem with lock up periods. I invest in private placement deals where I like the long-term prospects of the company. But the lock up period is something every investor should be aware of. Third**, **as an investor in private placements**, **you need to always keep in mind the familiar term “**there are no guarantees.**” Investing in a company through a private placement is not a guarantee of success. It carries the same downside risks as investing in a company through conventional means. In order for me to participate in its private placement, a company has to meet all the same rigorous requirements I have for every other investment. It must be piloted by skilled managers who own substantial amounts of company stock (skin in the game). It must have the right financial structure. It must be operating in the right places in the world. It must be a good value. I always include this warning – **there are no guarantees** – when I tell people about private placement investing. Private placements are such great investment vehicles that it’s easy to forget they carry risks just like other investments do. Brokered financings… non-brokered financings… lock up periods… there are no guarantees. Now you know the key private placement terms and what they mean. Regards, Marin Katusa --- # Blindfold Profits: The All Time Greatest Business to Make 10 to 20 Times Your Money - URL: https://katusaresearch.com/blindfold-profits-the-all-time-greatest-business-to-make-10-to-20-times-your-money/ - Type: article - Published: 2019-02-08 - Updated: 2019-04-24 - Author: Marin Katusa Certain people just have “IT”. They are rare, but when you meet one, you know it. Ross Beaty is one. He just has “IT”. He is a winner. Of all the people with “IT” in the resource sector I have gotten to know, none have the style and gravitas of Pierre Lassonde. If he didn’t choose to conquer the mining sector, Pierre has the grace and style of a movie star who could have played James Bond. He once made a comment to me at a dinner that resonated with me: “Stay hungry my friends”. It was like I was having a conversation with the real-world version of ‘The Most Interesting Man in the World’. But rather than watching the bearded debonair gentleman pitching Dos Equis beer… I’m looking across the table at a living legend who is sharing the secrets to his success. Over an amazing 40+ career in the mining industry, Pierre has pulled off a lot of incredible deals. I even saw him do something I’ve never see anyone do: He got Rick Rule to pick up a big dinner check. (Love you Rick!) If you’ve invested in the mining sector for a while, you’ve definitely heard of **Pierre Lasonde**. Pierre is the billionaire founder of the huge mining royalty firm Franco-Nevada. Pierre is a legend in the resource business. Pierre is literally the coolest person I know in mining. He is a ‘Style Connoisseur’ as well as a wine connoisseur. His charm captures people’s attention… everyone in his vicinity gravitates towards every word he says. Even his accent makes you feel every word has a deeper meaning than it does. Pierre’s passion for life and business is contagious. He’s also taught me a valuable lesson. He looked me dead in the eye and said “*Regardless where you are in the world, make sure you get home for the weekend to be with your family.*” I’ve taken his advice as an axiom I live by. As we were drinking an amazing Cabernet Sauvignon that he selected, Pierre gets into the details of one of the biggest success stories in the history of mining. It’s how he and his longtime partner Seymour Schulich took a struggling energy company with $2 million in cash and a market cap of less than $10 million… and transformed that company into +$15 billion mining powerhouse. The story of Pierre’s first mining site visit should be in a movie… (I’ve been in the industry for over 15 years, and this is one of the funniest stories I’ve ever heard). Before our legend was a billionaire wine connoisseur, he was an ambitious young resource entrepreneur looking for his big score. Like most mining entrepreneurs, he organized a site visit to showcase the potential of his projects. Well, not only was this his first mining site visit, the company did not have a lot of money left in the bank account… and really needed to impress its investors. Pierre needed to impress one large fund manager in particular. This fund manager flew in from Europe and was considering the company as an investment. Pierre wanted to get him to invest in the company and help the struggling venture. As this large fund manager checked into the hotel, Pierre had a full slate of two days with geologists and site tours planned. As is customary on site visits (and I’ve been on hundreds of these), the group has a dinner together before the next day’s activities. It’s a way to get a feel for management and the other investors and the company. The large fund manager didn’t show up to dinner. Not a good start. The next morning, the group waited for the big fund manager to come down from his room. He was one hour late. So, Pierre phoned the fund manager’s hotel room, and was told, in a European accent: *“Oh Pierre, I cannot come to the site visit today, I am extremely busy.”* Pierre was really down. But since they already had the day’s trip organized, they went ahead with the site visit without the big European fund manager. That night, the fund manager was a no-show for the group dinner. The second morning, the same thing happened. The group waited for an hour for the fund manager. Like before, a phone call was made to his room. Again, he answered the phone and said: *“Oh Pierre, I cannot come to the site visit today, I am extremely busy.”* Feeling deflated, our young entrepreneur moved forward with the planned site visit. He wondered why a fund manager would travel all the way from Europe to Nevada for a two-day site visit and not attend either day. He found out the next morning. As a good host would do, Pierre wanted to say goodbye to the European fund manager who he intended on impressing and getting a lead order from. However, the fund manager was late again. He missed breakfast and was on the verge of missing his flight back to Europe. A phone call was made and the fund manager rushed to the airport. Pierre noticed that the woman the fund manager met at the elevator before he went to his room, on the first day, was the same woman that came out of the elevator with him as he left for the airport. Pierre used his last few moments to try to obtain a lead order from the fund manager. Pierre said it was unfortunate that the fund manager was too busy to make the site visits. They contained so much potential. The fund manager said to him… “*This was the most pleasant site visit, and very promising!”* After hearing all that from Pierre, I asked, “Did you get the lead order from him?” Pierre responded, “I did, and he made a fortune!” That was one of many, many stories over a two-hour dinner. But the dinner got me thinking about our mining legend. What more can he and his company do in the mining space? Lots. I’ve tracked the mining space for many years, but one space I’ve had a keen interest in has been the royalty and streaming business. **It Is Simply One of the Best Sectors To Be In Right Now** For example, since Jan 1, 2008, the royalty/streamers index I created have significantly outperformed the gold mining index. And it’s outperformed the actual price of gold itself. The chart below shows how the royalty index (in yellow) has delivered over 200% gains since Jan 2008. On the other side, the GLD (Gold ETF backed by “gold”) returned just under 50%. And the actual miners have delivered negative returns during the same time. **This one chart tells us that we need to be exposed to the royalty/streaming companies.** But many people have stayed away from the royalty/streaming companies because they appear to be expensive relative to the miners using traditional financial metrics. **The Ultimate Royalty ** Katusa Research has spent almost a year working on our **“Ultimate Royalty Report”** that we will publish on **February 17th, 2019**. In this report, we will break down all the different financial metrics you need to know about the sector. You don’t even have to like gold or mining to see the opportunity. You just have to like making money. Special connections or being rich are not needed to see incredible gains from this business model. And not just in mining. For example… - The A&W Revenue Royalties Fund (AW.UN) collects royalties on every sale at the burger restaurant. **It’s up 200% over the last decade** (not including its lucrative distribution). - Texas Pacific Land Trust (TPL) is a boring old real estate business. But their disruptive model for collecting royalties on oil-rich land in Texas has made investors incredible returns… **TPL is up 476% in the last 3 years** - Altius Minerals (ALS.TO) is a royalty company with its hands in at least half a dozen commodity sectors. And it made early shareholders incredible returns from 2001-2007 **Altius went up 5,600% from 2001 to 2007.** - Ligand Pharmaceuticals (LGND) partners with early stage drug companies and earns royalties on drug sales after approval. **Ligand is up 12,650% from 2010 to 2018.** Make no mistake, making 50 or 120 times your money does not happen often. But you can see how getting an early piece of royalty companies, that steamroll old business models, can be very, very lucrative. The unusual royalty company in our new report has one of the most profitable and disruptive “upside kickers” I have ever seen – where three years from now you could be seeing potential 1000% gains or more. **This is the reason why I’m staking my reputation on this one pick and making this a monster personal investment for me.** I never touch an investment opportunity that doesn’t have a rock-solid margin of safety. When I put millions of dollars of my own money on the line, the opportunity better have near 100% conviction. And the upside [has to be asymmetrical](https://katusaresearch.com/asymmetry-financial-secret-can-earn-10000-returns-no-joke/). And that’s where I’m at with this opportunity. The underlying company will stuff money into your pockets over and over – no question. I explain it all in my report. But it’s the amazing upside that has me building a very large position in this one ticker symbol. I’ve spent nearly 12 months putting this report together from start to finish. If you want to get in on this opportunity – easily one of the biggest of my career – look for my brand new subscribers-only royalty report, coming out on **Sunday February 17th **and consider signing up to get the name, ticker symbol and the full story. I think this company is also a huge buyout candidate… and you’ll never guess who I think the buyer is going to be (hint: it’s one of the most valuable companies in the world right now). The next time I have dinner with our Billionaire Style Connoisseur – the King of the royalty business model – he will have more exciting stories to share. And I hope to have a killer one of my own. Regards, Marin --- # Is Oil the Ultimate Value Trap? - URL: https://katusaresearch.com/is-oil-the-ultimate-value-trap/ - Type: article - Published: 2019-02-01 - Updated: 2020-02-19 - Author: Marin Katusa The Canadian Oil Patch is the most beaten-up and hated-on oil sector in the world. Over the past few months, the Canadian oil sector has been more volatile than I can remember. Between Trump tweets, pipeline debacles in Canada and OPEC production decisions… it’s been a treacherous time for oil and gas producers in Canada. It took oil prices nearly two full years to recover from their January 2016 lows. And in the span of less than two months, that recovery has been decimated. Especially with the United States benchmark crude oil price dropping below $50 per barrel. In Canada, the producers gave up on profit as they were practically giving away their production, as prices fell to $20 per barrel. Below is a chart which shows the price per barrel (USD) of North American crude benchmark oil prices. The Canadian oil patch worked through what is known as a “*negative differential*” for years. A negative differential is a fancy way of saying that American benchmark oil (WTI) sells for a premium to the Canadian benchmark (known as Edmonton Mixed Sweet). On a specific gravity and sulphur basis, the two crudes are reasonably similar. Yet Canada’s oil sells for a huge discount. The green line in the chart below shows the differential between Canadian benchmark crude oil and WTI for the last three years. It’s substantial. **Why Does Canadian Oil Trade at a Huge Discount?** Canadian oil sells for a big discount for a few simple reasons. First, Canada produces more oil than it can efficiently refine through its domestic crude oil refineries. In Canada there is less than 2 million barrels per day of refining capacity. For comparison, the United States has over 18 million barrels per day of refining capacity. Secondly, Canada does not have the pipeline capacity to export crude oil to the United States. Never mind export capacity to the west coast— it’s not happening for many years. The supply glut could be solved easily if there was enough pipeline capacity to ship the crude to the United States refineries and to the coast to be shipped to Asia. But there is not. The end result is a large supply glut and a substantial discount in price for Canadian crude oil. This past fall, Canadian light crude differentials were approaching $40 per barrel. This means that if American crude oil was selling for $60 per barrel, the light oil in Canada (Edmonton Sweet) was selling for $20 per barrel. Those with a sharp eye will notice the differentials have narrowed considerably over the last few months. They have gone back to levels not seen in several years. The reason for this was government intervention. Recently, The Alberta provincial government has stepped in and ordered a production cut of 325,000 barrels per day. That’s very un-free market of the Canadian Province. Or one can say very OPEC-ish of Canada. The government also said they’d buy rail cars to help move crude south to American refineries—how dumb. It’s a band-aid solution instead of a long term, safer solution. Did you expect anything better from the Canadian government? Normally, government intervention in oil production is only used as a tool by nations that operate State Owned Enterprises (SOE) and OPEC. It’s one thing to tell government workers to cut production. It’s another to tell a public company with thousands of shareholders that they have to cut production. That said, something needed to happen. And it was easier to lash out on the shareholders than to hurt the uneducated, unscientific based protestor’s feelings. Hey, the protestors are working for someone’s agenda—it just isn’t for the best interest of Canadians. The federal government has been useless at pushing through the Trans Mountain Expansion Pipeline. With that pipeline tied up for the foreseeable future waiting for a National Energy Board decision, there’s little visibility into things improving. And that has a massive effect on the confidence in the stock price of Canadian oil companies. Below is a chart which shows the two-year performance of Canadian oil and gas producers. There really has been nowhere to hide… Now I could provide a dozen more metrics our team has run that show a pattern of increasingly undervalued companies. You might think it must mean that there’s a whole bunch of great oil and gas companies to load up on, right? Wrong. **For long-term investors, the Canadian oil sector as a whole is stuck in what I call a “value trap.” ** **Until oil prices rise significantly or the Canadian Dollar collapses further to the U.S. Dollar. Pipelines won’t be coming to the rescue anytime soon.** A value trap refers to a situation in which a company’s share price has been hammered so that it appears to be cheap – just like in the Canadian oil patch. But what many unsophisticated investors miss is *why* the stock is cheap. Until that reason is eliminated or solved, anyone who invests capital into the company is stuck in a languishing stock. Hence the term “trap”. If the Canadian government had its act together… And had gotten a pipeline decision finalized, construction going… And all looked promising… I’d be more inclined to say we have broken free from the “trap.” However, that’s not the case in the Canadian oil patch. We’ve yet to see if Canadian producers will cut production. Nor have we seen the rail cars purchased. And the pipeline situation is still a mess. **Where are the Crazy “Bargains” in the Canadian Oil Sector?** If you could buy a $15,000 Rolex for $5,000 would you? How much is it *actually worth* and to *who*? The answer is *exactly how much someone else is willing to pay for it. *And right now, investors are not willing to pay much for Canadian oil stocks. We have been watching the situation very, very close. We are familiar with many of the operations and teams in the land of maple syrup. One situation we’re monitoring closely is multibillion dollar market cap companies falling out of favor. They’re falling safes that have yet to hit the floor. Back in in the **[July 2017 KRO](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiwebsite)**, I made a bold prediction about the U.S. and Canadian oil patch. Albeit a bit early… ***Seven Generations Energy**** **(VII.TO, US ticker SVRGF)** is the premier condensate producer in Canada. Condensate is a heavy hydrocarbon chain which is part of the natural gas molecule. These condensates are worth as much or sometimes more than the equivalent amount of oil.* *Seven Generations Energy has an enormous acreage position and produced over 150,000 barrels of oil equivalent last quarter. The company completed an initial public offering in the fall of 2014 and has since traded as low as CAD$12 per share and as high as CAD$33 per share.* *Right now, shares of Seven Generations are trading at 1-year lows and can be had for CAD$22 per share. **I believe the share price hasn’t bottomed out yet. Condensates are priced based off the oil price. In a weak oil market, the market for condensates will be weak…*** *I will wait on the sidelines as I think the shares will break under CAD$17 per share and then drift lower with time.* Not too long after, Seven Generations stock drifted lower with no end in sight. But even in the **“*Value Trap*”** there is the **“*Value Trap Bounce*”**. **A handful of stocks in the Canadian oil sector are looking very ripe for the picking right now.** These are stocks that have potential for quick 50-100% gains in under 2 months. And long term, if oil turns around, these former market darlings could gain 2x or even 5x long term. But which companies can withstand the “echo” markets? The *echo* is the long, drawn out, sideways trading period where only the strong companies survive and thrive. This is where analytics comes in. Our research team has looked at all the key metric for companies in the Canadian oil patch. We then ran them through the ringer using… - A bearish case, $45 per barrel WTI - Current prices, $47 per barrel - A bullish case, $55 per barrel We wanted to see if the dividends were safe and what the cash flows of the companies were. And we did just that for our subscribers in our recent issue of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite). *Note: Companies and results are blurred out of respect for our paid subscribers* Out of these 14 companies, there was a few standouts. **And there was one in particular that was head and shoulders above the crowd. It was steadfast enough for a full blown recommendation.** And one that I’m very comfortable having in my portfolio. Regards, Marin P.S. This particular oil company is a producer that’s been in business for over a decade and run by one of the most reputable people in the business. It pays a healthy dividend and has incredible cash flow. To learn the ticker symbol of this company and the price I’m buying at – [click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite) to become a subscriber to *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite)*[*.*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail) --- # Newmont Just Dumped More Fuel on the Gold Bull Market - URL: https://katusaresearch.com/newmont-just-dumped-more-fuel-on-the-gold-bull-market/ - Type: article - Published: 2019-01-25 - Updated: 2019-04-24 - Author: Marin Katusa Earlier this week, Newmont Mining (NEM) rocked the gold world when it announced its $10 billion purchase of Goldcorp (GG). The all share deal will give each Goldcorp shareholder nearly a 1/3 share of Newmont. Not having much to cheer about, Goldcorp shareholders (I didn’t own any) will be happy to take the 17% premium. But it’s a better deal for shareholders than the rumored Newcrest Mining deal. It was offered to the board of Goldcorp at no premium just before Christmas. When this deal is complete, Newmont/Goldcorp will be the largest producing gold company in the world. It will pump out between 6 and 7 million ounces of gold every single year for at least a decade. Newmont will also strengthen its balance sheet through operational efficiencies which could add up to $100 million and noncore dispositions that will occur post merger (shares in juniors, non-core assets, etc). **Newmont is Preparing for the Next Bull Market in Gold** This isn’t a short sighted move by the aptly named Gary Goldberg, CEO of Newmont. Newmont recognizes the core value of Goldcorp’s flagship assets. No question Goldcorp made some missteps and there will be a lot cut from the combined entity in the next 24 months. But when the gold price rises in the next gold bull market, this could look like a genius purchase. Shares of Goldcorp got slaughtered since 2011. Take a look at this multi decade low in late 2018… **What This Means for Junior Gold Stocks** For one thing, this acquisition of Goldcorp will be a slow and drawn out corporate process. People will be let go and projects will be shelved and sold. But what does it mean for junior gold speculators? The two recent mega mergers will limit investments into juniors by the majors and takeovers, as the big two (Barrick 2.0 and Newmont) execute their synergies and divestitures. In the table below, let’s take a look at the significant stakes in smaller gold companies that Newmont currently owns. At most, Newmont will maintain their interest in any future financings. But after this week, another $1 billion in acquisitions won’t be at the top of mind for Newmont. **Never Fear – When Gold is Near** Anyone with an internet connection these days knows how strong the U.S. stock market has been over the last 9 years. Cheap money fueled an exceptional rally that drove indexes to new highs. But financial heroine (cheap money) only can last for so long. And when the junkies can’t get their fix, look out. The financial withdrawal that the global markets will experience will be unlike anything ever experienced. Just like junkies, the previous dose won’t get the same high. And the debt levels are near O.D. (overdose). In December 2018, there was a mass exodus of capital from the major U.S. indexes. Selling pressure was fierce and led to the first negative year for the S&P 500 since 2011. I have long said that gold and gold stocks should make up a portion of one’s investment portfolio. Especially during periods of economic uncertainty. President Trump shut down the government over a fight about building a border wall in Mexico (power politics at play). Meanwhile, he’s also in the middle of a trade war with China. The markets are uncertain. Gold is certain. Gold has lasted thousands of years and will last another thousand. Below is a chart which shows the historical returns for gold and the S&P 500. You’ll see that in all the major corrections over the last 20 years, gold has been a strong performer. Look no further than historical corrections in the S&P500 to see how gold can act as a hedge: The historical use for gold was as a hedge against disasters, whether they be political or economic. And it can pay off during turbulent times as shown above. **Gold’s Mojo is Rising** I’ll be the first to admit, gold has been a lousy sector to invest in over the past 5 years. Even with massive ten baggers on Northern Dynasty and Newmarket Gold (which became Kirkland Lake), its been a market that has tested my own testicular fortitude. And Patience. My big bet on Nevsun Resources played out well. But I’ve had some smaller bets that haven’t worked out and I cut my losses and moved on. Out of the hundreds of data sets we track for precious metals including mine reserves, commitment of trader reports and others… We are big fans of looking at sentiment. We want to know who’s talking about gold and how they’re talking about it. And we have just the tools to tell us. Right now, our sentiment indicators are flashing a massive green light. It’s showing an upwards spike in gold sentiment. **In fact, over the last month positive mentions for “gold” and “gold stocks” have achieved a 65% increase over the month previous.** This coincides with a rising gold price and the price of gold equities. Gold stocks could just be the #1 investment of 2019. And a prudent investor or speculator needs to be positioned accordingly. **Here’s How We’re Preparing for a Golden Bull Market** Long-time readers know I’m a big fan of holding some physical gold and even silver. But there’s a much, much better way to profit off a rising gold price. And that’s by holding underlying gold equities. And with the recent $10 billion takeover of Goldcorp by Newmont, it sets the stage for a massive shakeup of efficiency in the industry. The best will get better and this news will spark massive interest in *what’s next*. I’ve got in-depth research on every publicly traded gold producer in the world. It doesn’t give me a crystal ball but it narrows the field big time. I have an extensive rolodex with the best management teams in the business. Proven teams that have discovered, developed and operated world class operations. With gold spending much of 2018 under the radar thanks to Bitcoin and Marijuana, its recent move is getting attention. The time to pick up gold stocks is before they make their next 50%, 100% or 300% move in short order. That’s when a much wider audience will look to jump in. Volumes will swell, traders will come in and you’ll see gold newsletters coming out of every corner. But there’s still a window to scoop up the best of the best gold companies before that happens. And that’s exactly what I’m doing with millions of dollars of my own money. I am buying world class assets, in the top jurisdictions, with the best management teams. If we’re at the start of a major rally in gold, look out. In the February issue of [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite), I am publishing the details of two gold companies I believe will be bought out in 2019. And what price to buy those two companies. I plan on having myself and subscribers positioned to profit, so make sure you are too. And I will be putting even more money into select companies over the coming months. So stay tuned. Regards, Marin --- # eSports Paving the Way for the Video Game Industry - URL: https://katusaresearch.com/esports-paving-the-way-for-the-video-game-industry/ - Type: article - Published: 2019-01-20 - Updated: 2019-04-24 - Author: Marin Katusa **Editor’s Note: ***From time to time the Katusa Research Special Situations team looks deep into different sectors. Over the next three days, we’ll introduce you to a monster profit generating machine and the company leading the charge.* Three months ago, we first released a special report on the video game industry. In that report, we talked about how the growth of eSports was outpacing that of traditional sports leagues. At the time of writing, the 2018 League of Legends World Championships were still under way. Last year the finals took place in the Incheon Munhak Stadium in South Korea, one of the stadiums built for the 2002 FIFA World Cup that was jointly held by South Korea and Japan. Two years ago, the 2017 League of Legends World Championship Finals drew in nearly a then-record 58 million viewers. How about the most recent championships? Well, take a look for yourself… Last year, a mind-blowing ***205 million*** League of Legends fans tuned in to watch the Finals. To put that number in perspective, the total viewer count of the Super Bowl, the NBA Finals, the World Series and the Stanley Cup Finals combined barely makes up 75% of that number. eSports is big. And it’s only just getting started. **A Global Phenomenon** In 2016, Activision Blizzard announced the formation of the **Overwatch League**, a sports league based on their popular first-person shooter game **Overwatch**. The following year, twelve teams were established, and in 2018 the first competitive season was held. Following the first season’s success, an additional eight teams were added for the upcoming 2019 season. With city-based teams like those found in traditional sports, the Overwatch League is aiming to capture the interest of regular sports fans, who are more familiar with this model than those used in other eSports. For instance, as you can see from the graphic above, my own hometown of Vancouver BC is host to the Vancouver Titans. This team was purchased and put together by the Aquilinis, owners of the Vancouver Canucks – an NHL team. The Vancouver Titans logo shares the same color scheme as that of the Canucks’ team jerseys – and not only that, but home games for the Titans will be played in the Rogers Arena, where the Canucks play their own home games. While we don’t expect all of the local die-hard Canucks supporters to suddenly turn into eSports fans overnight, there’s no denying that the Aquilinis are banking on converting at least some of the hometown crowd through tying the two brands together. And with twenty teams spanning the globe, the Overwatch League is definitely setting itself up to attract more than just the usual video game crowd. Another good example is the NBA 2K League, which is an eSports league joint venture between the NBA and Take-Two Interactive, developers and publishers of the NBA 2K series of basketball video games. Currently, of the 30 different NBA teams, 21 of them have an eSports gaming team participating in the NBA 2K League. By leveraging the established fan base that each NBA team already has, the NBA 2K League is aiming to channel fans of each NBA team directly into their eSports equivalent. And eSports is gaining legitimacy, not only by appealing to spectators and fans, but also to players as well. The NBA 2K league pays each of its contracted players $32,000-$35,000 in base salaries per season. This is without counting any endorsement deals or tournament winnings. While this might not sound like a whole lot of money, players also receive benefits such as free housing as long as they are contracted (complete with relocation compensation), medical insurance, and even retirement plans. In fact, players in the NBA’s minor league – the G league – were only making $26,000 per season until the reveal of NBA 2K League salaries caused protests from the actual basketball players in the G league. Only as of recently do athletes in the G league now make $35,000 per season – in line with their NBA 2K League eSports counterparts… And while not all eSports follow this traditional sports league model, those that don’t make up for it in other ways: with tournament prize pools. As the chart above shows, eSports prize pools feature some pretty serious money, especially for the video games where players aren’t paid any salaries and instead can only rely on tournament winnings. Dota 2 was previously the premier example for this, with no set player salaries but their equivalent of a “world championships” called The International. The total prize pool was USD $25.5 million. Fortnite has decided to kick things up a notch, announcing a total tournament prize pool for 2019 of USD $100 million. It’s more than double what Dota 2’s prize pool was for all tournaments in 2018, combined. $100 million is a serious amount of money – a number that has drawn attention from both aspiring eSports athletes and casual fans alike. And we wouldn’t be surprised to see other games follow suit with larger prize pools next year. Regards, The Katusa Research Special Situations Team --- # Is This the Fastest-Growing Gaming Company in the World? - URL: https://katusaresearch.com/is-this-the-fastest-growing-gaming-company-in-the-world/ - Type: article - Published: 2019-01-19 - Updated: 2019-04-24 - Author: Marin Katusa **Editor’s Note: ***From time to time the Katusa Research Special Situations team looks deep into different sectors. Over the next three days, we’ll introduce you to a monster profit generating machine.* You’ve probably never heard of the seventh-largest company in the world. The top six – Apple, Google, Microsoft, Amazon, Berkshire Hathaway and Facebook – are household names. But the current seventh-largest company didn’t even rank in the top 10 in 2017. But it owns a social media network actively used by 15% of the world’s population. It owns the leading online video streaming platform in China. It owns the largest online library in China. It owns the *top three* music streaming services in China. It owns the Chinese equivalent of Google Ads. The list goes on. But the fifth-largest company in the world – Tencent – is a video game company. It started in 2007, when the Stanford-educated president of Tencent, Martin Lau, decided to get serious about video games. Tencent’s revenue was **a trivial USD$500 million**, and Martin wanted to change that. So he came up with a strategy. He scoured the continent for the best games he could find, then adapted them for the Chinese market. When the games were broadcast through Tencent’s instant messaging service, “QQ,” they were instant hits. Martin realized the insanely profitable future of Tencent. Over the last decade, Tencent has invested heavily in video games, both in internal production and external investment. It now holds a large stake in most of the largest gaming companies in the world. This includes Activision-Blizzard, Grinding Gear, Ubisoft, Miniclip, Riot, Supercell, Glu, and Epic Games (maker of Fortnite). Despite setbacks, Tencent remains among the fastest-growing video game companies in the world. It earns more revenue from video games than Activision-Blizzard, Electronic Arts and Apple… combined. And the company’s **full-year revenue for 2018 is expected to be USD$38 billion. ** **A Recipe for 7,500% Growth in One Decade** To get from half a billion to $38 billion in under ten years, Tencent developed a formula that helps them create new “Fortnites” on a commercial scale. When Tencent started getting into games, piracy had destroyed game sales in China. But the sales of virtual goods such as skins and weapons were strong… and climbing. So Tencent settled on a strategy of distributing games for free, and earning a profit on in-game purchases (sound familiar?). Steve Gray is an ex-Electronic Arts employee who began running Tencent’s game production division in 2009. He says that the company deliberately chose not to create many of its own games. Instead, Tencent has decided to find the best-in-class games that have already been developed. And then the company adapts them to the Chinese market. Once linked to the massive, billion-person WeChat user base, Tencent receives instant feedback on what is working and what is not. Then, it can make incremental changes to the type of gameplay and features players want until it hits the jackpot. This allows it to “moneyball” video games. But the real key to Tencent’s success lies in its technology. It developed the capability to support tens of millions of concurrent gamers. Companies that launch a video game on Tencent *have* to be able to support that many gamers at once. This has granted Tencent the Midas touch: Any game they develop or have developed for them is nearly guaranteed phenomenal success. Take mobile games, for instance. In 2017, Tencent decided to dabble. So they developed a **M**ultiplayer **O**nline **B**attle **A**rena (MOBA) game in-house called Honour of Kings. Within months, it had become the most popular smartphone game in China by number of daily active users. **A High Chance for a Homerun for Every At-Bat** Other video game companies have a problem. They work in near-obscurity for years. They’re suddenly thrust into the limelight with a billion-dollar hit, then slowly fade into the shadows. For example, you’d probably never heard of Epic Games before Fortnite, and it remains to be seen if they can strike gold again! But because of its process of fine-tuning games to players, Tencent isn’t a one-hit wonder. They can hit a homerun nearly every single time. Imagine making a movie with Netflix. They have data – down to the second – on what viewers love to watch and re-watch. That makes it easy to make a movie people will love. Tencent has a decade of video game analysis for hundreds of millions of players. They know what people will love… and more importantly, what people are *going* *to* love. So when the company picks out a new game, you know that’s where video game players are going next. And Tencent has cemented a five-year distribution partnership with the company we’re going to release a report on tomorrow. Using their data analysis, they can choose any game they want. And they’ve chosen one that combines an RPG with a shooter, a concept that is completely unique in the Chinese market. Tencent knows that it fills a long-term, unexploited niche in the market, and they have given it their stamp of approval. And the Tencent stamp… means a company can be set up to make billions. **The Great Video Game Wall of China ** But for any video game company that wants to release a video game in China, there’s a catch. Every video game released in the country has to go through an arduous approval process with the Chinese government. Less than 20% of games are ever approved. And the Chinese government shut down the approval process for most of 2018. That means games like Fortnite, which have yet to be approved for sale in China, have not made any money off the huge Chinese gaming market yet. And there’s another blockade in the battle to get into China… Western-based video game developers must have a Chinese partner to be able to publish their games in the country. But the company we’re profiling today has already received approval to sell their flagship game in China. That game could be set to hit prime time in 2019 and beyond with Tencent’s massive push behind it – in the biggest and best video game market in the world. Remember that vision that Tim Sweeney of Epic Games had of people paying for in-game items instead of purchasing the game wholesale? He took that single idea to the U.S. population and made a mint in under a year. **A major hit means the potential of blockbuster returns for early investors** One main hurdle for investors is that most video game companies are private. When they hit a big score and the title goes mainstream, they are profit turning machines. Games like League of Legends and CrossFire can rake in over $100 million *per month*. But since most video game companies are private, investors can’t participate. But you’re in luck. The Katusa Research Special Situations team knows the names of several opportunities to play the sector. Video games are to Millennials and Generation Z what television and radio were to Baby Boomers. It’s what the Internet boom was to Generation X. Don’t let a mega trend slip by again. Regards, The Katusa Research Special Situations Team --- # A Tax Write-Off That Turned into a Billion-Dollar Franchise - URL: https://katusaresearch.com/a-tax-write-off-that-turned-into-a-billion-dollar-franchise/ - Type: article - Published: 2019-01-18 - Updated: 2020-02-19 - Author: Marin Katusa **Editor’s Note: ***From time to time the Katusa Research Special Situations team looks deep into different sectors. Over the next three days, we’ll introduce you to a monster profit generating machine and the companies leading the charge.* In 2012, Tim Sweeney had a vision of the future of video games. Over the previous two decades, he had been instrumental in many of the advances in the industry. He had created one of the most popular gaming engines in the world. And his company developed some of the most-played titles ever. Now, he had a radical vision: He believed that the best way to make money off of a great video game was to give it away – for free. The company he owned, Epic Games, lacked the resources to pivot in this new direction. So he turned to a growing Chinese video game conglomerate for a $330 million cash injection. Using part of the investment, his company developed a little game called **Fortnite**. The game failed to receive much attention from gamers. And after five years, it looked as though the company would write it off altogether. But in 2017, Epic Games was finally ready to make its move. Tim Sweeney’s vision was about to come to fruition. Seeing the wildfire success of a game called PUBG, Epic decided to fine-tune Fortnite using PUBG’s gameplay. In just two months, Fortnite was converted into a “battle royale” game. It’s a game type in which 100 players fight to the death on an ever-smaller battlefield. And Epic began to distribute it for free. The move worked far better than Tim could have ever imagined. In the last 18 months, Fortnite has become an international phenomenon. It has amassed over 125 million players, with 80 million playing it every month. And true to Tim Sweeney’s vision, those players are shelling out real money for skins, battle passes, celebratory dances, and other in-game items that distinguish them from their peers. And it’s making the creators an absurd fortune. The average Fortnite player who spends money in the game pays an average of more than $80. That’s more than twice what the game would normally sell for. Last year alone, **Tim’s vision made Epic Games more than $3 billion in profit.** The best part is that the success of Tim’s theory wasn’t luck – and it’s easily repeatable. Americans now spend more time playing video games than they do driving. And they’re spending more money *inside of* – not *on* – video games than they ever have before. That’s why Epic Games just raised another $1.25 billion in cash. They know that even though they made billions in profit in 2018, **they can do even better in 2019… and again in 2020.** ## **Same Vision, 400% Larger Market** Long-time Katusa Research readers have heard this before: The most important factor in a new investment is the people behind it. For example, Fortnite’s success was due to the foundation laid by Tim Sweeney, its experienced, fearless leader, back in 2012. Tomorrow, we’re going to profile the leader of another company. He’s Stanford and Wharton educated, and has achieved some huge career wins. Long before Tim decided to pivot Epic Games, this CEO that we will introduce you to tomorrow had already predicted the new direction that video games were headed in. He saw how big video game revenues were going to get, and precisely how games were going to make money in the future. Only he had an even bigger vision. He decided to take on the biggest video game market in the world: China. His plan was to create: - The highest-quality, lowest-cost independent video game development studio in Asia. - A company where video game developers could pitch their games and get financed (think: Netflix). - A school that would train new video game programmers and artists. - Video games that were free to play, but made money from microtransactions. - Video games that were perfectly tuned to their target market for maximum profitability. So he did. ## **The Pixar of Video Games** He opened a new video game school in China. The school receives 30,000 applications a year, and accepts less than 5% of those. From this pool, his company can hand-select the best talent in the world to work on their video games. The team in place at his company has already worked on more than 30 AAA titles. These are games that have grossed hundreds of millions of dollars *each* – including Fortnite. They’ve already released a successful video game. It made more than $60 million off of just $3.5 million in development costs. They have partnered with the same Chinese company Epic Games partnered with, meaning they have access to promotion to over a billion people (unlike Epic, they did not lose any equity in the deal). And they have developed a flagship game that is just about to be launched to that huge audience. Tomorrow, we’re going to talk about their joint venture partner – it’s a company you’ve probably never heard of – and how they can “moneyball” nearly any game they partner with to incredible success. We’ll discuss why China, not the United States, is the best place in the world to develop a video game right now. And show you how one man’s epic vision could easily eclipse Epic Games. Think of the visionaries of past decades. Imagine investing alongside Bill Gates and Microsoft in the ’80s… with Michael Dell and Dell Computer in the ’90s… with Steve Jobs and Apple in the ’00s… with Elon Musk and Tesla in the ’10s… All of these companies had leaders who envisioned a future that was different than anything ever before. Regards, The Katusa Research Team --- # $2,000 Gold and the Secret Gold Rally Hiding in Plain Sight - URL: https://katusaresearch.com/2000-gold-and-the-secret-gold-rally-hiding-in-plain-sight/ - Type: article - Published: 2019-01-11 - Updated: 2020-02-19 - Author: Marin Katusa What if I were to tell you that gold is within earshot of all-time highs. You’d call me crazy. But I’m not. Below is a chart which shows gold prices denominated in Canadian, Australian and U.S. dollars.![Gold Bullion Prices Around the World] You’ll notice gold went on a tear in all currencies from 2000 to 2012. However, after that, gold priced in U.S. dollars has under-performed. Gold priced in Canadian and Australian dollars has been very strong and is within striking distance of all-time highs. Below is a chart which shows gold performance in Canadian, Australian and U.S. dollars since 2012. ![Gold Bullion Performance] The reason for this out-performance in Canadian and Australian gold pricing is due to U.S. dollar strength versus Canadian and Australian dollar weakness. Lots of news outlets will lead you to believe there’s a race to the bottom in currencies. And while this may sound dire, it’s great for resource companies in the right jurisdiction. Right now, there’s a small handful of companies that are making a killing and cashing in on **“****$2000 GOLD”**. Gold *prices* in Canada and Australia have risen faster than *production costs*. It creates a large windfall thanks to the currency depreciation. Take a look at the chart below which shows the average free cash flow generated per ounce of production for Australian producers compared to North American senior producers. ![Free Cash Flow Generation per Ounce Produced] Cash positions and valuations for Australian gold miners are the highest they’ve been in 5 years. It’s a far cry from the multi-year lows we are seeing in our North American gold markets. ## **Safe Haven and Speculation – Gold and Gold Stocks are an Important Part of My Personal Portfolio ** And I’m not the only investor accumulating physical gold and gold shares. This need for a safe haven… an escape from the dollar… and a hedge against the stock market is setting up gold for a massive run. If the U.S. Fed continues to raise interest rates and pops the stock market bubble… investors are going to come fleeing into the one safe haven that’s stood guarding your wealth over the last 4,000 years: gold. And if the system keeps chugging along… Then the $7+ trillion that central banks around the globe have pumped into the markets over the last 6 years is almost certainly going to kick off a massive wave of inflation… sending gold prices soaring. On top of that, emerging powers like China, India and Russia continue to be active buyers of gold bullion. ![Reported Gold Reserves in China, India, Russia, and Turkey] Not to mention the doomsday clock is closer than ever to midnight because of the growing instability of the Trump Presidency, the European Union and Middle East. The way I see it, if there’s one investment that’s almost guaranteed to shoot to the moon over the next 10 years… it’s gold. ## **Gold Could Already Be on Its Way Up** Gold has actually been in a quiet rally for a while. You’ll notice gold bull markets all follow a similar pattern where prices start a steady climb and then begin to rise faster and faster. Obviously, you want to get in as early as possible. But most investors don’t understand when the switch from bear to bull actually happens. If you don’t know what you’re doing, it’s easy for the start of a new rally to look like it’s still part of a downtrend. One strategy to add to your arsenal is to use my*** Katusa Keys*: ** ## **My Millionaire Blueprint for Gold Investors – Katusa’s Keys** **Katusa Key #1: People** If you’re like most people (myself included), at some point you’ve partnered someone was unproven, dishonest, incompetent, or all three. It’s easy to get caught up in a good story and invest without making sure you have solid partners. But when you buy a stock, you become a business owner. That’s why you should treat your money with respect and only partner with proven winners. Winners tend to keep on winning. ![Gold's Incredible Bull Markets Chart] **Katusa Key #2: Projects** My strategy pinpoints companies that have large, high-quality, tier-one potential resources. You need to find projects that are attractive to large producers and funds. …So that it can get bought out at large premiums. **Katusa Key #3: Value** When you buy a pair of shoes, you want to pay a good price. When you buy a house, you want to pay a good price. You don’t want to overpay. Yet, when it comes to investments, many people cast aside the idea of buying bargains. They get excited about a company’s story and they just buy stock. They don’t pay any attention to the price they’re paying… or the value they’re getting for their investment dollars. **Katusa Key #4: Promotion** Even the best assets in the world need promotion by strong management teams. If a company has great potential, the rest of the world needs to know about it. If the world doesn’t know about it, there won’t be anybody around to buy shares and drive up the company’s value. **Katusa Key #5: Catalysts** What is it about the company that will drive up the price? Is it working on a big discovery? Is it furthering the development of a high-quality asset? These questions must be asked and answered before you make an investment. One or more catalysts must exist that will drive a company’s share price higher. [![Katusa Research Subscribers Gains]](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite) **Katusa Key #6: The Numbers: Past, Present, and Future** It’s not just about the basics of a balance sheet you learn in a business class. The key to picking a great stock is really understanding if a company can pull off their business plan. You need to know things like head grades, recovery rates, off-site costs and hundreds of other bottom line items. Normally, it takes investors months or years to dig through all the paperwork and find what they need. At Katusa Research, we’ve built an advanced analytics program to accelerate this process, our ***“Midas Code”*** trading technology. We spent well over six figures having this technology developed by a team of brilliant programmers and analysts. They brought several intelligence platforms and data vaults all together into one advanced computer engine that can analyze and compare thousands of investment variables. The* “Midas Code”* can calculate any metric or value I need with a few clicks of the mouse. For example… If I wanted to find a gold company in Canada that has more than 2 million ounces of gold… a market cap of less than $1 billion… more than $10 million in cash… and less than $200 million in debt… this program will pull up every company that fits those criteria in seconds. My six *Katusa’s Keys* along with the “*Midas Code*” is how I’ve succeeded in the gold and resource markets for almost two decades. **In the February edition of the newsletter, I am publishing my research on two producing Canadian gold stocks that I believe will be bought out in 2019 for exactly the reasons mentioned above. ** And I intend on investing millions into both of this producers. Bet right, sit tight. Do your portfolio a favor and find out why legends in the business like Doug Casey have me manage his resource portfolio at ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiewebsite)***. I hope you’ll consider joining me. Regards, Marin Katusa --- # A Breakthrough For Novice Investors: What are Reg A and Reg D Offerings? - URL: https://katusaresearch.com/a-breakthrough-for-novice-investors-what-are-reg-a-and-reg-d-offerings/ - Type: article - Published: 2019-01-05 - Updated: 2020-02-10 - Author: Marin Katusa If you’re a veteran of the private placement world, you’ve seen the terms “Reg A” and “Reg D” thrown around on occasion. Those are short for “Regulation A” and “Regulation D”. These types of offerings are special SEC exemptions for private companies trying to raise money from investors. Here’s what sets Reg A and Reg D offerings apart from regular private placements. Both regulations allow companies to forego having to register their stock with the SEC. This means less paperwork, less time, and less cost for the company. Companies love this because they don’t have to go through all sorts of legal rigmarole when compared to an IPO. This can help the company scope out investor interest without spending too much on legal and professional fees before actually going public. Companies looking to do Reg A and Reg D offerings still need to register the financing itself with the SEC and get approval. Thus they’re not inherently more risky than any other private placement. - **There are good reasons for a private company to go with a Reg A placement to raise capital instead of a more “traditional” method. ** For example, Reg A is more favorable in a seed round with private investors. In other words, Reg A and Reg D offerings are just private placements under a different name. ## **So, What’s the Difference Between Reg A and Reg D?** There are a lot of fine details that differentiate the two. But from the investor’s perspective, here’s what matters: **Reg A Deal:** - Are capped at $50 million. - Under $20 million, **investors don’t have to be accredited** to participate. - Between $20-50 million, non-accredited investors can still participate, (but their maximum allocation is capped based on the higher of 10% of their net income or 10% of their net worth) - Accredited investors are not capped. In other words, even if you’re not an accredited investor, Reg A offerings can still be a great way for you to get access to the benefits associated with a private placement. Provided, as usual, that you would be willing to buy into the company without a private placement involved. **Reg D Offerings:** Are generally only open to accredited investors. Technically, up to 35 non-accredited investors may participate. But the amount of extra headache and cost involved generally makes it not worthwhile for companies to include non-accredited investors in their Reg D offerings. That’s why it’s best to think of Reg D offerings as only being available to accredited investors… Unless specifically mentioned otherwise. **Reg A+ Offerings:** Now if you’ve been around the private placement block, you may also have seen the term “Reg A+” thrown around. This came about as the result of a change that the SEC made to the Reg A guidelines in 2015. It expanded Reg A into its current split between the $0-20 million tier and $20-50 million tier of capital raises. This new expansion to the original Reg A rules is what’s known as Reg A+. - **Reg A+ is the “new” Reg A.** So regardless of whether a company announces a new placement as a Reg A or Reg A+ offering… it’s still the same thing. Keep watching the [KR Private Placement Monitor](https://katusaresearch.com/private-placement-dashboard/) for news on companies with deals under the Reg A and Reg D banners. -Katusa Research --- # Could There be a Copper Wipeout? - URL: https://katusaresearch.com/could-there-be-a-copper-wipeout/ - Type: article - Published: 2019-01-04 - Updated: 2019-04-24 - Author: Marin Katusa On Wednesday, January 2nd, CEO Tim Cook halted Apple stock and stated that the company’s earnings would fall well short of analysts’ expectations. A key reason behind the revenue miss was slowing Chinese demand. Tim Cook made the shortfall about the “trade wall” but he forgot to mention that iPhones aren’t even a top 5 phone in China. Maybe Apple’s overpriced products aren’t what the mainland Chinese want? Anyways, to a bigger theme, slowing Chinese demand… Slowing Chinese demand is becoming a key theme for equity and commodity markets alike. And while a few less iPhone sales won’t affect the copper market, global consumer spending habits and economic health certainly will. Make no mistake, I am very bullish on the long-term prospects for copper. I believe the world will become more electrified, which means increased copper demand. However, in the short run, macroeconomic signals are telling me that we could see one more wipeout. Below I’ll tell you what the data and my analysis are saying. 51.4 billion pounds of copper was consumed globally in 2018. This represents a 1.08% increase over the same period in 2017. The chart below shows annual copper consumption since 1995. The average annual copper consumption growth rate since 1995 has been 3.16%. However, over the last few years growth rates have slowed significantly. The average growth rate from 2015 to 2018 is around 0.83%. The consensus long-term estimates by most analysts is that copper will see a 2.5% annual increase in demand. At this rate, global shortage of copper would occur in the mid-2020s. And that can only be resolved by higher copper prices to bring on higher-cost production. But, 1% copper growth doesn’t cause higher copper prices. In fact, the copper price would *decrease* as supply would exceed demand over the next few years. **Charts to Watch #1 – Copper Forward Curves** I have been paying very close attention to the forward curve (which is what forward hedges are based on). The futures curve are prices expected by buyers and sellers in the months and years ahead. And it has been decreasing a lot over the past six months. You’ll see that the expected prices today are much lower than six months ago. Here’s an example… On July 3rd 2018, copper prices were expected to be around $3.00 per pound in January 2020. Today, copper destined for sale in January 2020 is expected to sell for less than $2.60 per pound. Below is a chart which shows monthly copper demand. The blue line shows global demand excluding China. It’s clear that copper consumption is actually slowing down. The question is, will China still consume the red metal as it has in the past? Or will China’s consumption also cool down? **Charts to Watch #2 – Global Copper Inventories** Inventories have declined in recent months, but are nowhere near alarming levels. Below is a chart which shows copper inventories at both places like the Shanghai and London Metal Exchanges (*on* exchange), as well as private warehouses (*off* exchange). The sum of “*on*” and “*off*” exchanges equals the global inventory level for copper. **Charts to Watch #3 – Copper Days of Supply** Let’s take this a step further and divide total global inventory levels by global demand. This ratio generates a number I like to call “Days of Supply.” A high number indicates there is no shortage of supply and is bearish for copper prices. A low number indicates there could be a supply crunch on the horizon and would be bullish for copper prices. Right now, the copper market is sitting at around 10 days of supply, based on known inventories and consumption levels. Given that days of supply has dropped from 20 to 10 in the matter of months, we can infer that demand is outpacing supply. The billion-dollar question is, how are inventory levels going to stop falling? Is supply going to increase, and match consumption levels? Or will consumption levels fall? I believe that in the short term, it will be the latter. I think we are going to see weak copper consumption out of China and the emerging markets, which accounts for over 50% of global consumption. If I’m right, copper prices are going to remain under pressure for the short term. **Top Copper Stocks and Their Performance in 2018** Below is the sector performance of copper companies as an index. You can see that being exposed to copper producers has been a tough place to be. I have been intimately involved in the copper sector for almost 15 years. I’ve been on the board of one of Canada’s largest copper producers for 13 years now. I have firsthand experience taking an exploration project to production. It’s been an incredible learning lesson. And one that I’ve taken to help improve my investment and speculation moving forward. I want to increase my exposure to copper, but timing is key. I have updated the performance of all the copper producers year-to-date. The universe of copper producers that make up the indexes above are in the chart below. You can see all of the publicly listed copper producers and their year-to-date share price performance. An interesting “mining fact” to think about: This time ten years ago, the copper universe would have had 80 companies listed. **Today there are 29 companies**. Even though some of the world’s top copper producers have fallen over 20% year-to-date, some will fall a lot more before they have their day in the sun again. The above price carnage all happened as the price of copper fell from $3.30/lb to the current $2.64/lb. Let’s be totally clear, there is a global economic slowdown happening. There are many reasons for this, but the stronger U.S. dollar relative to other fiat currencies is a big concern for the emerging market. A strong U.S. dollar makes commodities (and the debt associated with those projects) more expensive for the emerging markets (especially when the emerging market nation’s currency is depreciating). And increasing interest rates means borrowing those U.S. dollars will be even more expensive for companies in the emerging markets. This results in less demand for commodities from the emerging markets and China. This slowdown will cause copper consumption rates to fall from its 30-year average of 3% to 0-1% growth. Or even negative growth in copper demand within the next 36 months. Copper production above $2 per pound is quite stable over the next 24 months. Yes, I know all the copper bulls will troll me online because of this statement. Do as you please. There will be no shortage of copper in the next couple of years, regardless of if copper is $2.50 a pound or $2 per pound. As prices decline, copper producers and developers will see their share prices fall significantly. This is what will cause what I am calling the *copper wipeout*. And then the cycle will begin again, because the cure for low prices… is low prices. Again, I have set myself up with a high percentage of cash (in U.S. dollars) for when the coming Copper Wipeout occurs. I don’t know when it will happen, but I believe it will and will prepare accordingly. **I will only be buying the following two kinds of companies:** - World-class, lowest cost quartile operating companies with strong balance sheets at massive discounts - Drilled out world-class discoveries that will be bought out by larger companies Those will be the first to rebound post Copper Wipeout. Then as those stock prices surge, the market will look further down the food chain for the next win. This means the development and exploration companies will see an influx of buying. But that will be after the wipeout begins to recover. Everything I write in *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite)* is what I am doing with my own money in the resource markets. Companies like Freeport (which was once the copper king) will be crippled by their debt in a rising interest rate environment. Add to that Freeport’s exposure to AK-47 nations, and the once “Best Copper Miner in the World” will lose its title. Then it’ll either merge or sell off its best assets to stay alive. Commodities are a cyclical business, as are the reigning champion producers. The entire copper production landscape will change after the next wipeout. **That said, I have my wish list of copper producers I want to buy.** My eyes are laser focused on a few stocks, but until the wipeout occurs, I’m waiting to pounce. I believe the share prices of even the best producers will go lower. Then there will be an incredible opportunity to make a tidy fortune. Regards, Marin --- # Three Big Ideas to Make a Fortune in 2019 – And Your VIP Invite - URL: https://katusaresearch.com/three-big-ideas-to-make-a-fortune-in-2019-and-your-vip-invite/ - Type: article - Published: 2018-12-28 - Updated: 2024-10-16 - Author: Marin Katusa **Editor’s note**: In today’s year end issue, you’ll find three big investment ideas we wrote about in 2018. But this is no bland “retrospective” list. These ideas could make you a fortune in 2019 and beyond. We hope you and your family have a great holiday season and wish you a healthy and prosperous New Year. **Idea #1: The Commonwealth Takeover and Rise of Gold Stocks** Gold is up 8% in the last 6 months and many gold stocks – especially Australian companies – are up hundreds of percent. For the first time in two decades of keeping track, Australian mining financings have been greater than the Canadian mining financings on the TSX/TSXV. Many Australian gold stocks are on a tear because of the currency exchange. Over the past few years, the Australian dollar has depreciated significantly relative to the U.S. dollar. This created a windfall for Australian gold producers, who have seen domestic gold prices rise faster than domestic production costs. The result was a huge increase in free cash flow for the Aussies. We can see several Australian gold producers look to takeover some of their weaker Canadian counterparts. It could become a buying frenzy. Now is the time for them to go shopping – [read the full story here](https://katusaresearch.com/australian-gold-stocks-and-the-commonwealth-takeover/). With Gold knocking on the door to $1,300 and beyond in these volatile markets, 2019 could be the springboard year gold speculators have been waiting for. Marin has millions of dollars invested in the sector and is placing big bets on a handful of companies. **Idea #2: Betting on the Hottest Metal Over the Past 3 Years – Vanadium** Vanadium was one of the best performing metals of 2018. And Vanadium stocks caught a bid and hit the primetime, appearing on the radar of investors and speculators alike. Vanadium has incredible properties which increase the strength of alloys containing it, such as rebar which is heavily used in construction. China has just raised their steel rebar limits. And Vanadium is also used in everything from jet engines to dental implants. Here’s everything you need to know about Vanadium – [full writeup here](https://katusaresearch.com/the-hottest-metal-in-the-world-right-now-vanadium/). **Note** – On January 2nd, 2019 Marin and his team will publish the next issue of *Katusa’s Resource Opportunities* where he will reveal a brand-new Vanadium speculation. You won’t find this company on any stock screen or hear about it anywhere else. Paid subscribers will be among the very first to hear about it – [Click Here to subscribe to *Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). **Idea #3 – The Uranium Sector has all the Hallmarks of a Perfect Setup for a Contrarian Investor** Uranium is hated. It’s cheap. It’s out of favor. For the past few years, uranium mines have been shutting down all over the world. Earlier this year, Cameco’s Key Lake and McArthur River mines shut down. They are two of the lowest cost, highest grade producing mines in the world. Cameco even came out on July 25th and extended the McArthur River shut down. Think about that for a second. If an operating mine that happens to be one of the highest grade and largest mines in the world cannot break even, then either the price of the commodity is too low, or the world doesn’t need the commodity anymore. The built and operating nuclear reactors negate the latter. So, we can all agree that the price of uranium is too low to produce. Marin recently gathered Doug Casey, Frank Curzio, Rick Rule, Grant Williams, the former U.S. Secretary of Energy – who are invested heavily in the uranium sector – and another special guest together for an interview. The end result was a webinar that goes into great detail on why many big investors are betting big on uranium stocks today – [click here](https://subscribers.katusaresearch.com/uranium-webinar-v3/) to watch a replay of the webinar. **Bonus Idea:** **How to Acquire the Most Powerful, Most Valuable Commodity of All – Your Exclusive Invite** If you’ve invested in resources for some time, you know we can’t overstate the importance of getting the best information before others. Information is the most powerful, most valuable commodity in the world. Knowing the right people and getting the right information is how Marin made a 1,450% gain in Ryan Gold…. 4,160% gains in Prophecy Resources… 2,440% gains in Lithium One… and 1,852% gains in Uranium Energy Corp. And of course, it’s how he made a 1,000%+ gain in Northern Dynasty. We bring all this up because one of the ULTIMATE ways to gather the best investment information in the world – the **2019 Vancouver Resource Investment Conference** – is just around the corner. It’s being held on January 20th and 21st at the Vancouver Convention Centre West. As you may know, Marin finds this conference so valuable that he partnered with Cambridge House International to co-produce it. He personally makes sure this conference has great speakers and thinkers like Frank Holmes, Rex Murphy, Nick Hodge, Brent Cook, Nolan Watson, Frank Curzio and more. To all readers, here’s to a healthy and prosperous 2019! Regards, The Katusa Research Team --- # Trump Need’s NOPEC, not OPEC - URL: https://katusaresearch.com/trump-needs-nopec-not-opec/ - Type: article - Published: 2018-12-14 - Updated: 2019-04-24 - Author: Marin Katusa A surprise event with a major impact is known as a Black Swan. The theory was made famous by Nassim Taleb in his books *Fooled by Randomness *and later in *The Black Swan*. In his books, Nassim argues that many of the world’s greatest feats are in fact black swan events. In the finance world, fortunes are made by those who anticipate Black Swans and lost by those who don’t. A relatively unknown piece of US legislation from the year 1890 has the potential to derail the global oil industry in what many would consider as a black swan event. The **O**il **P**roducing and **E**xporting **C**artel (OPEC) is a group of 14 countries that produce one-third of global oil production. The countries in OPEC are: Algeria, Angola, Ecuador, Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Republic of Congo, Saudi Arabia, United Arab Emirates and Venezuela. While not officially included in the group, Russia now plays an active role and is present at major OPEC meetings. Coining the new groups name “OPEC+”. Below is a chart which shows the most recent monthly production for each country in OPEC+. On December 7th, OPEC+ announced a combined production cut of 1.2 million barrels per day of crude oil based on October 2018 production levels. The deal implies a reduction of 800,000 barrels per day from OPEC nations, and a 400,000 barrel per day reduction from the “Plus” group, namely Russia. All told, it works out to 1% of total global production coming offline. The supply reduction was felt immediately as oil prices rose 6% on the news. This came much to the dismay of President Trump. Trump is never shy of sharing his opinion, especially when it comes to oil prices, which he has stated many times are “artificially to high”. President Trump has made it his number one goal to put American interests above all others at seemingly whatever the cost. If he really feels so strongly about OPEC+’s decision-making process, then there’s a tool that he could use to dissolve the cartel. Trump’s NOPEC card: The Sherman Antitrust Act of 1890 The Sherman Antitrust Act of 1890 was passed by Congress and signed into law by US President Benjamin Harrison. The law attempts to prevent the artificial raising of prices by restriction of trade or supply. The goal of the act is to protect consumers from single producers controlling the price of a product and gauging the consumer. **Trump and the Sherman Act** There’s a little-known amendment to the Sherman Act which President Trump could use to derail the cartel and lower oil prices. The amendment removes what is known as the “state immunity shield”. Ironically, both Senator Barack Obama and Senator Hilary Clinton both voted in favor of this amendment in 2007 but the bill died in Congress. At the heart of the bill, it allows state owned organizations to be treated as companies, rather than as a part of the state. It means national oil producing companies like Saudi Aramco could be sued under US antitrust law for anti-competitive attempts to limit global petroleum supply, and the consequent impact on oil prices. With almost certainty these state-owned producers would be found guilty of price manipulation and limiting supply to increase profit. Signing something like this bill into law could be something right up President Trump’s alley, or at least the threat of using the Sherman Act to protect America’s interests. It would effectively put in motion dissolving the big bad OPEC, “the bullies who have been gauging American consumers”, as Trump puts it. It fits his America first mantra and would be a feather in his cap heading into the 2020 presidential election. Pulling the trigger on a bill like this would definitely sour relationships between the US and OPEC nations. But, from an oil reliance perspective, the Black Swan potential of the Sherman Act has never been better. Since 2008, American reliance on OPEC crude oil has fallen by over 50%. Most of the crude that the US imports now comes from Canada. The chart below shows American crude oil imports by destination since 2000. The United States produces significant quantities of light oil, which it blends with imports of heavy crude oil to make refined products like gasoline. Historically Venezuela was a key supplier of heavy crude oil to the United States. Venezuela used to supply 1.5 million barrels per day but today only supplies 650 thousand barrels per day. Over the past 5 years, the Canadian oil sands have become the dominant supplier of heavy oil for American refineries. If Trump pushed through the Keystone XL pipeline expansion, it would more than make up for the Venezuelan heavy crude imports. The Keystone XL expansion pipeline from Alberta to the Mid-West United States has the capability itself to supply 830,000 barrels per day. Canadian heavy oil producers would happily sign up for 20-year commitments to supply crude oil to the United States. Safe and secure crude oil supply, lower gas prices and dissolving the price gauging OPEC nations. It’s almost a layup for Trump and his band of “America First” staffers. All it takes is a little creativity and the oil market would have one heck of a black swan event. Savvy investors don’t outperform the markets by following the herd. The savvy investors think outside the box and look for opportunities where others cannot see them. Regards, Marin --- # Is Bitcoin Dead? - URL: https://katusaresearch.com/is-bitcoin-dead/ - Type: article - Published: 2018-12-07 - Updated: 2019-12-10 - Author: Marin Katusa I’ve been a professional speculator in the resource industry for almost two decades now. One year ago, I wrote a cautionary article on the cryptocurrency sector. I got more hate mail in my inbox that week than I had for any other article, “*You’re a moron*”, “*This is the future*” “*You’re crazy*” etc… At the January 2018 VRIC, which is cohosted by Katusa Research and Cambridge House, I invited out the most followed guru in the crypto space to give his take on where the crypto world is going. Even though I published my thoughts that the price of Bitcoin and the whole sector as a whole was in bubble territory, I kept an open mind. My goal was to create a forum of positive debate between the crypto world and my world. The debate has been viewed over 100,000 times and I did my best to create a fair debate. This past week Bitcoin fell below $4000, down a whopping 70% year to date. But this isn’t a bash piece. I’ve been watching Bitcoin develop since 2010. I even told my good friend and business partner Doug Casey that it had the potential to change SWIFT (Society for Worldwide Interbank Financial Telecommunication) in an internal memo while we worked at the same firm back then. Yes it’s true, I introduced Bitcoin to the Casey Research world in early 2010. As with any new sector, there are going to be mega highs and mega lows. The key is to not buy into the hype at the top and blow yourself up. Unless you’re an ultra-early adopter it’s always better to let the market implode. And then pick up pieces of the remaining businesses at fractions to what they were trading at during the boom. It is the [Way of the Alligator](https://katusaresearch.com/the-way-of-the-alligator/). **So What Do I think will Happen to Bitcoin and Cryptocurrencies Now?** You will see more downside pressure as the Uncle Sam comes after his due taxes and accounts are forced to sell to pay the tax man. There will be attempts to rally the price, but there is still a lot more cleansing to happen. We have not seen the bottom in Bitcoin. **Bitcoin Aftermath – New, Better Companies Will Emerge from Crypto Ashes** Veteran investors from the dot-com crash or the resource sector have seen this game before. The dot-com bubble of the late 90s played out exactly the same way. Hundreds of companies rode the soaring wave of investor sentiment in order to cash in on the hysteria. Hysteria can only support valuations for so long, and eventually fundamentals take over. The collapse of the technology sector resulted in many businesses being put to the test. Were their business models capable of sustaining themselves without the hype to prop it up? For many companies, the answer was *no*. Over 75% of tech companies founded during the bubble went bust. However, from the ashes of the dot-com bubble would come some of the most recognizable names of our time. Amazon, Google, eBay. Many of the most familiar household names today not only survived the crash, but came out stronger for it. The chart below shows how the information technology weighting of the S&P 500 has grown to the point where it once again comprises a quarter of the S&P 500 index by value. This is close to where it was at the height of the dot-com bubble. The moral of the story is this. After all the hype and mania is gone, the right companies will still be left standing. And they will be thriving. And I foresee similar things happening in the crypto/blockchain space. Regards, Marin --- # Australian Gold Stocks and the Commonwealth Takeover - URL: https://katusaresearch.com/australian-gold-stocks-and-the-commonwealth-takeover/ - Type: article - Published: 2018-11-30 - Updated: 2019-04-24 - Author: Marin Katusa One of the biggest stories in the resource sector this year is how well Australian gold stocks have performed. They’ve absolutely crushed their peers in the western hemisphere. Below is a chart which shows the huge out performance of the Australian gold producers over their North American listed cohorts. You can see the gap in returns is very wide. While the gold market has been lousy in North America, in Australia things are much brighter. And this will lead to what I call the *Commonwealth Takeover™*. **Why Have Australian Gold Stocks Outperformed Their North American Counterparts?** Dilution, Dilution, Dilution. Dilution destroys shareholder value. In the current resource market, a lot of companies are trading at a big discount to their Net Asset Value (or NAV for short). This is one of the most critical FTDs (*Financially Transmitted Diseases*). However, when a company is trading above its peers on a NAV basis, management will want to take advantage of their financial valuations. They do this by taking over the best assets that are trading at significant discounts to their NAV. The end result is a rise in shareholder value. Put simply, the company will use its shares as currency and go out and buy another company in hopes of boosting shareholder value. Right now, there is a small group of gold producers that have seen their share prices go on an absolute tear. And they’ve got more cash on their balance sheet now than they’ve had in the past 5 years. The market has rewarded this situation. Australian gold producers have seen an average return of over 150% since January 2015. While the gold market has been lousy in North America, in Australia things are much brighter. **Interesting Stats: Australian Stock Exchange Financings** 2018 is the first year ever that Australian mining financings have been greater than the Canadian mining financings on the TSX/TSXV. Below is a table which shows the annual financings in the mining sector for both the Australian Stock Exchange and the TSX/TSXV. Not only have the Australian mining companies raised more money than their Canadian listed peers, but they did so with 65% fewer financings. What does this mean? The Australians have fewer “keep the lights on” financings. These are financings for what I call *zombie companies*. The Australian companies have raised a higher percentage for domestic production and exploration than their Canadian peers (a testament to the pro mining government in Australia). **Gold and the Australian Dollar** Over the past 3 years, the Australian dollar has depreciated by 11% relative to the U.S. dollar. This created a windfall for Australian gold producers, who have seen domestic gold prices rise faster than domestic production costs. The result was a huge increase in free cash flow for the Aussies. Don’t believe me? Take a look at the chart below which shows the average free cash flow generated per ounce of production for Australian producers compared to North American senior producers. Cash positions and valuations for Australian gold miners are the highest they’ve been in 5 years. **The Commonwealth Takeover is About to Begin** Australia is part of the British Commonwealth. As is Canada. Most gold companies are listed and funded via the Canadian stock exchange (TSX and TSX-Venture). Thus I’m calling this the *Commonwealth Takeover*. Right now, the Australian producers are in a stronger financial position to buy out their weaker Canadian peers. So let’s break it down. **Australian Gold Stocks Stacked Up Against North American Gold Stocks ** Below is a chart which compares the Australian mid/large gold producers against the North American listed senior, mid-tier and junior producer peer groups. You can see the Australian producers went from being much cheaper than their North American peers in 2014 to now more expensive. Now is the time to go shopping. It’s time for the Australian gold producers to use their elevated share prices and fat bank accounts to prey on the underperforming North American market. Below is a table which shows who I believe are the top 7 companies looking at buying or merging with North American listed producers. Take a company like **Newcrest Mining (NCM:ASX)** for example. This Aussie gold producer is going to produce around 2.4 million ounces in 2018. Newcrest has over CAD$1.2 billion in cash right now and generates over CAD$450 of free cash flow per ounce of production. That type of free cash flow makes North American gold executives blush. On a free cash flow per ounce produced basis, there isn’t a North American listed senior gold producer who can compete with that type of profit margin. But, I bet they’d all like to partner up with someone like that. Ian I know you’re reading this, what do you think? **What Assets are Australian Gold Producers Looking For? ** When it comes to gold assets, there’s something for everyone. There’s short term arbitrage available to nimble Australian producers who want to pick up cheap North American producers. An open pit gold mine in Canada is going to have similar production costs and similar currency fluctuations. Many quality gold assets in North American companies are trading at discounts to what they’re worth in Australia. The times have changed. In 2015, NewMarket Gold (led by Doug Forster) was brilliant in scooping up Crocodile Gold which was an Australian gold producer. Katusa Research was the first to publish research on the transaction with a full analysis and I disclosed I was buying just under 10% of NewMarket. I published [that report in May 2015](https://katusaresearch.com/an-easy-arbitrage-opportunity-the-next-new-gold/) for all to see for free on my website. Shortly after, **Kirkland Lake** **(KL:TSX)** swept in and took over Newmarket Gold and netted Katusa Research’s first 1000% gain. Kirkland Lake then went on to be the best performing North American gold producer. The Australians are taking one out of the Canadians’ play book now. And that’s leveraging high valuations into partnerships with North America’s largest producers. I could see some of the big Australian names go this route, likely merging with **Goldcorp (GG)** or **Newmont (NEM)**. It’s an opportunity to build a company with outstanding operations in all safe corners of the globe. All while monetizing a higher NAV. Checkmate. We’ve already started to see some rumblings of the Aussies coming across the pond. **Northern Star Resources (NST:ASX)** recently acquired the Pogo deposit in Alaska from **Sumitomo (TYO: 5713)** for CAD$338 million. Pogo averages 300,000 ounces of gold production per year at 13 grams per tonne and still has another 10+ years of mine life. This was a great deal for Northern Star. I’ve met the Northern Star management team, they’re tenacious and well on their way to building a world class gold mining company. I have a proprietary database of every producing asset owned by North American producers. I have my list of potential take out candidates. **Newcrest (NCM:ASX)** or **Evolution Mining (EVN:ASX)** are not going to waste time and money buying up 50,000-ounce producers. I’d argue there’s 2 or 3 mines in North America which are for sale. And a small handful of others that could be acquired if they got creative with a third-party. It’s important to remember that we are deep in the trenches and the North American resource markets are very tough right now. But quality assets are being eyed by those in *predator* mode. I’ve been writing to my paid subscribers of ***[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiewebsite)*** about the coming *Commonwealth Takeover*. I’ve published which companies and assets are most likely to be taken out and the reasons why. I do believe that 2019 will be a memorable year for the Aussies. Position yourself accordingly. Regards, Marin Katusa *Note: I do not have any positions in the companies mentioned above.* --- # The Fundamental Guide to Investing in Gold, Gold Stocks, and Gold Mining Companies - URL: https://katusaresearch.com/gold-stocks-investment-guide/ - Type: article - Published: 2018-11-16 - Updated: 2020-11-24 - Author: Marin Katusa Gold is a unique asset class that many investors consider to be an essential part of diversified investment portfolios. If you’re wondering whether or not you should be adding gold to your own portfolio, read on to find out the benefits of owning gold, and what your options are for doing so. Table of Contents - 1. Why Should I Invest in Gold? - 2. Is Gold a Safe Investment? - 3. How Do I Invest in Gold? - 3.1. Physical Gold - 3.2. Physical Gold ETFs (Exchange-Traded Funds) - 3.3 Gold Futures and Gold Derivatives - 4. Gold Mining Stocks - 4.1 The Majors - 4.2 What are the Three Largest Gold Producers in the World? - 4.3 Mid-Tier Gold Producers - 4.4 Gold Development Companies - 4.5 Gold Royalty & Streaming Companies - 4.6 Junior Gold Exploration Companies - 5. Why Invest in Junior Mining? - 6. Gold Funds and ETFs - 7. How to Invest in Gold Stocks - 8. What are the Risks of Investing in Gold Mining Companies? - 9. What are the Best Gold Stocks? - 10. What’s the Gold Mining Lifecycle? - 11. What are the Different Types of Gold Deposits? - 12. How Do You Read Mining Drill Results? - 13. Common Mining Terminology ## 1. Why Should I Invest in Gold? ![Unrefined Gold Nugget] Gold has long been considered an investment class of its own, separate from the stock market and even other commodities. It has a long history of value thanks to its brilliant shine and resistance to rusting and dulling, which helped it become one of the earliest forms of currencies used in history. The earliest known gold coins were first produced around the 5th or 6th century BC – though gold was already being traded in other forms well before then. The use of gold in physical currency wouldn’t fade until the early 20th century, finally stopping with the end of the gold standard in the U.S. in 1971. Some people consider gold a “barbaric relic” – a remnant of a bygone age, when paper currency and fiat money didn’t exist. They think that gold’s only intrinsic value is found in jewelry, and its various industrial uses, such as in electronics. On the opposite end of the spectrum, other people believe that gold possesses intrinsic value, thanks to its long history of use as a currency. These people believe that thanks to its distinct characteristics, gold makes for a unique investment asset. If you’re reading this, then it’s likely that you fall into the latter camp. Although if you don’t, there’s also no denying that gold as an investment retains value simply because *other people think it’s valuable*. So even if you personally believe that gold is indeed a “barbaric relic”, don’t forget that the rest of the investment industry at large would disagree. That’s why gold continues to be a hot traded commodity and should be seriously considered in any diversified portfolio. **Some reasons you might want to add gold investments to your portfolio:**** You think the economy and/or the markets are full of uncertainty and want a safe haven for some of your money. ** You’re worried about inflation. ** You think the U.S Dollar will fall. ** You want to diversify your portfolio into something that has very little correlation with the debt or equity markets. ## 2. Is Gold a Safe Investment? Physical gold is considered to be a safe investment because of its stability over the long term. So, in short: yes. One of the reasons gold is a popular investment in many portfolios is because it tends to perform well during times of turbulence in the markets. During periods of prolonged economic decline, [gold tends to outperform stocks](https://katusaresearch.com/broad-stock-market-correction-mean-gold-stocks/). While gold isn’t immune to short term rises and falls, in the long term it has holds its value. And when it comes to physical gold, you’ll never have to worry about losing all of your investment. If you’re looking to invest in gold funds or gold companies instead, the answer is a lot less straightforward. While the performance of gold funds and companies is closely correlated with the price of gold, there are lots of other risk factors inherent to public companies that can adversely impact the safety of your investment. A big sell-off in the markets, like in the case of a stock market crash, might not affect gold prices, but publicly listed gold companies will still feel the heat. And just like in any other sector, there are individual factors at play as well when it comes to picking and choosing gold companies. Even the best gold project in the world can be mismanaged into the ground by an inept executive team. So, if you’re planning on investing in gold funds and gold companies, you’ll still need to do your homework. ## 3. How Do I Invest in Gold? ![Physical gold bullion 100g and 5g and 500g] There are several different ways to invest in gold: - Physical gold, - Futures and other derivatives, - Gold stocks, - Funds such as ETFs. ## 3.1 Physical Gold High purity investment-grade gold is also known as gold bullion, from the French word “bouillon” (boiling), based on the melting houses which created the bars and coins from raw material. The term is also applied to silver, so silver bullion refers to high purity investment-grade silver. Holding bullion is a common form of security for investors that dates back to ancient times. It historically performs well during times of financial insecurity because it’s trusted more than any currency due to its relatively finite nature. The price of gold typically rises during times of insecurity and is often also used to hedge against inflation. Investors flock to it to help their assets weather a financial storm. ### **How to Invest in Gold Bullion** If you want to invest in gold bullion (or physical gold), the process itself is quite simple. The first thing you want to do is make sure you have a good storage solution. After that, acquiring the gold and storing it can be as simple as visiting your local bullion exchange or precious metals retailer. Ordering online is another convenient way of purchasing your bullion – even reputable and trusted gold retailers like the Royal Canadian Mint now offer their products through an online storefront. The problem with this, of course, is the actual execution. Take storage for instance – there’s a good chance you’ll want to store it yourself, but where exactly will your safe be? Will you place it under your floorboards, or bury it in your backyard? How many people will know where it is and what the combination is, on the off chance you’re incapacitated in an accident and unable to handle it yourself? If you’re worried about loose lips and opportunistic thieves, perhaps you’d prefer professional storage, as well as storage insurance? These are questions you’ll have to consider and answer, based on your own security preferences. You don’t want to end up like [famed gold investor and world’s first ‘bullionaire’](https://katusaresearch.com/beware-of-the-greatest-insider-gold-trade-scheme-ever/), Bernard Baruch. As a general rule of thumb, small quantities of gold can be safely kept at home, or at a safe deposit box at a local bank. Professional storage is better when it comes to large quantities of gold – you wouldn’t want a large chunk of your wealth to get wiped out alongside your home in, say, a natural disaster. ![Gold buillion warehouse] Now for most people, the idea of “storing gold bullion” involves large stacks of gold bars, piled high to the ceiling. That’s what’s often shown in movies and on TV. But unless you’re a central bank or multi-billionaire, the reality of storing physical gold is a lot less exciting. ### **What are Good Delivery Gold Bars?** The gold bars that most people envision when they think of gold storage are known as “Good Delivery” gold bars. “Good Delivery” refers to the name of a set of guidelines issued by the London Bullion Market Association, outlining the proper requirements for the gold bars used for settlement in the London bullion market. Nowadays, these standards have been adopted worldwide, and when you hear the phrase “central bank gold reserves”, these Good Delivery bars are usually the bars involved. The Good Delivery gold bar weighs 400 troy ounces. In other words, they’re worth over $750,000 USD at current gold prices, as of time of writing. Most people wouldn’t be able to afford a single bar – let alone a pile of them! **Most common sizes of gold bars for consumers:** A more recent alternative standard is the gold “kilobar” – a gold bar weighing exactly 1 kilogram. These have gained in popularity since their size makes them much more manageable for use in investing and trading, but they’re still not cheap – over $60,000 USD at current gold prices, again as of time of writing. Instead, the bars most gold investors purchase are smaller, 1-ounce gold bars – and these are small and thin enough to hide in the palm of your hand. Gold coins, ranging from a single gram up to a single ounce or more, are also popular choices for gold investors, and like bars they also come in many different weights that makes it easier to purchase a specific dollar amounts’ worth. A more recent alternative standard is the gold “kilobar” – a gold bar weighing exactly 1 kilogram. These have gained in popularity since their size makes them much more manageable for use in investing and trading, but they’re still not cheap – over $60,000 USD at current gold prices, again as of time of writing. Instead, the bars most gold investors purchase are smaller, 1-ounce gold bars – and these are small and thin enough to hide in the palm of your hand. Gold coins, ranging from a single gram up to a single ounce or more, are also popular choices for gold investors, and like bars they also come in many different weights that makes it easier to purchase a specific dollar amounts’ worth. **Don’t worry about needing to have a separate room of your house set aside for gold storage – even a small bank safe deposit box will be able to hold hundreds of thousands of dollars’ worth of gold. The last thing to keep in mind is that any physical gold you purchase will usually come at a premium to the current market price of gold. This gold premium is typically around 3-4% higher than the current spot gold price for one ounce of bullion. That’s due to the extra costs involved in smelting down and minting these smaller gold products, and in general, the bigger of a bar or coin you buy, the smaller the premium you pay. There are other features that can add to the price premium of a gold bar or coin. The U.S. government, for example, guarantees the weight, content and purity of each gold coin issued by the U.S. Mint. As a result, these coins can cost more than similar coins offered by private mints. ## 3.2 Physical Gold ETFs (Exchange-Traded Funds) People who want exposure to gold bullion without physically taking possession can look at purchasing Exchange-Traded Funds, or ETFs. Physical gold ETF’s (or funds) hold gold bullion, and so their price is based on the current price of gold. Some even allow you to redeem your shares for physical gold. Examples of those funds include the **Sprott Physical Gold and Silver Trust (CEF),** **SPDR Gold Shares (GLD),** **Aberdeen Standard Physical Gold Shares (SGOL)**, **GraniteShares Gold Trust (BAR)** and the **VanEck Merk Gold Trust (OUNZ)**, to name a few. The fees collected by these physical gold funds are used to pay for the storage and management of the gold bullion. So, the fund’s performance isn’t a perfect copy of gold prices – but it’s pretty darn close. And it gives investors the benefits of owning physical gold without the hassle. Some ETFs even provide leveraged returns relative to the price of gold, giving owners two or even three times the return when gold goes up. The reverse is also true as these ETFs will also go down two or three times more when gold prices fall. These products are generally more intended for short-term speculators. ## 3.3 Gold Futures and Gold Derivatives More sophisticated investors can also consider derivatives such as gold futures, or options on gold futures. Such derivatives can replicate the performance of gold prices without the same capital or storage requirements, and without the fees buying an ETF would entail. Warning Though: Derivatives and derivative trading strategies can be difficult to understand. And since it’s very easy to lose your entire investment in derivatives, this is not for the novice investor. As such, we won’t be going into any further detail here. ## 4. Gold Mining Stocks Gold stocks are publicly traded companies whose primary business is related to the gold mining sector. While there are several peripheral industries related to gold such as the jewelry industry, they lack the same kind of direct exposure to gold that gold mining companies have and so aren’t usually considered by gold investors. The performance of gold stocks closely tied to that of gold itself, but that performance is also usually leveraged. If gold moves up by a certain amount, gold stocks can go up by several times that amount. The reverse, however, is also true: if gold goes down, gold stocks can also slump much harder, as the chart below shows: ![Gold vs Gold ETFS 2010-2020] Gold stocks range from small junior exploration companies all the way up to multi-billion-dollar senior producers, known as “majors”. ## 4.1 The Majors In most sectors, there are a handful of giant companies that dominate the industry. They own the biggest projects. They employ the most people. They have the biggest bank accounts. They have the best access to capital. And it’s no different for gold. For example, a small group of large companies mine most of the world’s gold. These include the two largest gold miners, Barrick Gold (GOLD) and Newmont Goldcorp (NEM). Most majors have been around a long time and have relatively stable businesses. They own a diversified mix of projects around the world. Their market caps range from $5 billion to over $300 billion. Many pay dividends. All of that means majors are less volatile than smaller companies. They’re more appropriate for conservative investors. But majors still carry risk. A big decline in the price of gold will cause their profits and share price to decline. There are numerous large gold miners that you can invest in. These are companies that you’ll find on major exchanges like the NYSE and the TSX. You usually won’t get any surprises with these companies because to get to the size they have, they need to have a certain amount of stability, cash flow, and a diversified portfolio. While they can still provide excellent price performance relative to gold, the downside is there isn’t as much room to grow. ## 4.2 What are the Three Largest Gold Producers in the World? ### **1. Newmont (NYSE: NEM)** ![Newmont] Not only the world’s most valuable gold producer, Newmont is also the world’s largest gold producer. Newmont most recent (Q3) 2020 FY production guidance of 6.0 million Au ounces (attributable) is unchanged since their Q2 results, with an AISC of $1,015/oz. In 2019, Newmont had an attributable global production of 6.772 million Au ounces. Newmont has operating assets and projects in the United States, Canada, Mexico, Peru, Suriname, Argentina, Ghana and Australia – as well as two notable joint ventures with Barrick: Nevada Goldmines in Nevada and Pueblo Viejo in the Dominican Republic. The Nevada Gold Mines JV (with Barrick) is currently the world’s largest gold producing complex in the world with three of the world’s top 10 Tier One gold assets. Newmont has the world’s largest gold exploration budget of US$268m ### **2. Barrick Gold (TSX: ABX)** ![Barrick Gold] The world’s second largest gold producer by market cap is also the world’s second-largest gold producer. Barrick’s most recent (Q3) 2020 FY production guidance of 4.6-5.0 million Au ounces is unchanged since their Q2 results, with an attributable All-In-Sustaining Cost (AISC – or the cost to produce the gold) of $966/oz. In 2019, Barrick had an attributable global production of 5.575 million Au ounces. Barrick has operating assets and projects across the United States, Canada, the Dominican Republic, Argentina, Chile, Zambia, Cote D’Ivoire, Tanzania, Democratic Republic of Congo, Mali, Saudi Arabia and Papua New Guinea. It has two JV’s with Newmont: Nevada Goldmines and Pueblo Viejo. One of the world’s most famous gold mines, Porgera in PNG, is operated under a JV between Barrick and China’s Zijin Mining. - **Barrick has the world’s second largest gold exploration budget of US$210m.** ### **3. AngloGold Ashanti (NYSE: AU)** ![AngloGold Ashanti] The world’s third largest gold producer by total ounces is only the ninth largest gold company by market cap. AngloGold Ashanti, headquartered in Johanessburg, South Africa, is South Africa’s most valuable mining company with a market cap of ~ $US9.975B. It has a primary listing on the Johanessburg Stock Exchange (JSE: ANG) and secondary listings on the NYSE (NYSE: AU) and Australian Securities Exchange (ASX: AGG). After prolonged Covid-19 related mining shut-ins in South Africa, AngloGold reinstated its 2020 FY production guidance of 3.0 – 3.1 million Au ounces (attributable) in time for its Q3 production results. AngloGold has producing mines in the Democratic Republic of the Congo, Ghana, Guinea, Mali, Tanzania, Australia, Argentina, Brazil. This year it sold off its remaining South African assets to Harmony Gold, including Mponeng, the world’s deepest gold mine and SA’s second largest. AngloGold has the world’s third largest gold exploration budget of US$140m. ## 4.3 Mid-Tier Gold Producers Mid-tier producers aren’t tiny early-stage businesses… but they aren’t majors. They’re somewhere in the middle. Mid-tier companies are still large companies, with market caps ranging from $1 billion to $20 billion (depending on the industry). Mid-tier producers typically have a narrower asset base than majors. For example, a gold major might own eight large mines around the world with a couple smaller projects, while a mid-tier producer might own two or three large mines. Mid-tier producers typically have more room for growth than majors. They are often acquisition targets. But because mid-tier producers have less asset diversification, they carry more risk than large, diversified companies. If a mid-tier producer runs into a big problem with just one of their projects, it’ll cause a big swing in its profitability and a big swing in its share price. Making money in mid-tier firms means doing a lot of homework on their relatively small asset bases. ## 4.4 Gold Development Companies Development firms with great assets are a unique group of gold companies. These companies aren’t tiny exploration firms with no assets. But they aren’t producing any gold of their own yet either. Development firms own one or more resource-stage projects that aren’t in production yet. Investors have to be very careful with development firms. They have great potential… but they can have major factors working against them. They can face government opposition. They can be located in remote areas of the world. They can require billions in capital to develop. For example, a company can own a giant gold and copper deposit, but if it’s in a remote location, turning the deposit into a mine could require billions of dollars of investment. Having said that, if you buy the right development firm at the right time, the gains can be well worth the risk. ## 4.5 Gold Royalty & Streaming Companies A royalty, by the simplest definition, is when a company pays money upfront in exchange for a guaranteed percentage of future revenue or profit. Unlike a stock investment, it isn’t tied to the perceived value of the company but instead, to what it’s actually producing. Closely related, but slightly different from a royalty, is a stream. Like a royalty, a stream involves a company paying money upfront. Unlike a royalty however, instead of receiving a percentage of the revenue, streams receive a percentage of the actual product produced – in the case of a gold stream, that would be the physical gold produced. Companies that focus on building portfolios of royalties and streams are called royalty companies. Despite the name, royalty companies can own both royalties and streams in their portfolios. When it comes to the mining industry, a royalty company often fronts the money for developing and building a mine. Once the mine is built and rocks are coming out of the ground, that’s when the royalty company will start making their money back. Since mining is a risky business, you won’t see any royalty companies making deals with junior-stage explorers, because there’s very little guarantee that their investment will ever actually pay off. That’s why you’ll only see royalty companies stepping in to provide capital for very advanced-stage projects that have already been drilled out, with feasibility studies done, and are looking to go into production. In summary: - A royalty is when the company receives a percentage of revenue or profit. - A stream is when the company receives a percentage of production. - Royalty companies can own both royalties and streams. ## 4.6 Junior Gold Exploration Companies Exploration firms are the “bloodhounds” of the resource business. They raise money and explore for resource deposits. You’ll often find them in jungles, deserts and frozen wastelands. They’re generally less well known and traded than larger companies. Typically, funds and institutional investors are prohibited from investing in junior gold stocks for liquidity reasons. Exploration firms have market caps that are typically in the $5 million-$1 billion range, which is tiny when compared to a major like Barrick (Barrick is several hundred times larger than most explorers). The most common exploration business model is to find an area that might have gold deposits, raise money from investors, then start drilling holes in the ground. If the explorer finds a significant deposit, it will sell the deposit to a larger company. Of course, the odds of success aren’t great, and the risks are high. But if you’re looking for stocks with the potential to climb 100%… 500%… even 1,000%, you should be looking at junior exploration companies. Juniors have [much greater potential to register huge gains](https://katusaresearch.com/junior-gold-stocks-soar-even-when-gold-doesnt/) in a short time than larger stocks. Take Northern Dynasty for example… ![Northern Dynasty 1000% Winner] The reason is simple… It’s much easier for a $200 million junior to grow 10-fold than it is for a mature $200 billion giant to grow 10-fold. That doesn’t mean the $200 billion giant is a poor investment, it just means that it’s not an ideal vehicle for someone looking to make giant returns in a relatively short amount of time. Keep in mind that a $200 million junior is worth just one-tenth of one percent of a $200 billion major. The junior has plenty of room to get much bigger. But the odds are greatly stacked against success. Less than 1% of explorers will find a significant deposit. The vast majority burn through their cash and find nothing. However, there is a small group of people who are habitually successful when it comes to finding large resource deposits. If you invest with proven, honest operators, you can make large returns in the exploration sector more consistently. **Junior mining companies can offer stellar returns to an individual investor who believes in the potential of a particular company, but in exchange, there’s a lot of risks involved. With junior gold stocks you’re much more likely to lose all your money, whereas with well-established, senior gold producers, there’s a much smaller chance of that happening, even if gold hits a downturn. ## 5. Why Invest in Junior Mining? It’s important to note that juniors can be exploration firms, royalty firms, or even firms that have current production. The label “junior” only concerns their size and is often also called “small cap”. In addition to their potential for massive growth, juniors often have features you like to see as an investor… **Juniors are much more likely to have management teams with large ownership stakes in the company. ** The management teams of juniors are more likely to have “skin in the game.” This ensures that management’s interests are aligned with ours. This contrasts with the directors and C-suite of larger companies, who rarely have a meaningful portion of their wealth in the company’s stock. **Juniors are more likely to be the targets of takeovers by large companies. ** This can result in junior companies being purchased at large premiums. Buyouts aren’t always in your best interest (sometimes your holdings will be worth more than the purchase price), but they generally are. **Juniors have a lot less analyst coverage than large caps. ** A $200 billion giant could have over 30 different professional analysts covering the stock. They’ll analyze the company inside and out. Their research will be read by the world’s largest investment managers, and the market will generally have a pretty good idea of what the company’s worth. It’s not uncommon for a junior company, on the other hand, to have ZERO professional analysts covering it. The management at some juniors can go a whole year without fielding a call from a professional analyst. The lack of widely disseminated information about juniors allows investors to get a big “information edge” in this market. It makes it possible to find pricing inefficiencies and uncovered opportunities. The market isn’t swarming with professionals looking under every rock. You can think of it like this: would you rather take your child on an Easter egg hunt with 100 other kids or with 5 other kids? Your child will have a lot more fun and find a lot more eggs competing against just 5 other kids. ## 6. Gold Funds and ETFs Instead of investing in individual gold companies, some choose to invest in a portfolio of gold stocks instead. They accomplish this by investing in gold or precious metals focused mutual funds and ETFs. These might be either actively managed funds that focus on gold stocks in order to provide long term returns, or passively managed funds that mimic gold equity indices. Physical gold ETFs, mentioned earlier, generally fall into the latter. ### **Active and Passive Gold Investing** Active and passive are two very different approaches to the world of investing, and that’s no different when it comes to gold funds. Each has their own pros and cons and the question of which one is better depends on the individual investor’s preferences and risk appetite. Active investing is, as the name implies, is a more hands-on approach. The ultimate goal of active investment is trying to pick the best apples in the orchard. This usually means having someone who can actively manage which companies to invest in, such as a hedge manager. Investors who go this route are counting on the experts’ expertise in selecting the best companies in the sector. Passive investing is generally considered a more risk averse approach. People who take this approach focus on buying the whole orchard (and hoping that the good apples out number the bad). Active investing has higher risk/reward, while passive investing tends to offer more stability. **Pros of active investing:**** Potential to “beat the market”. ** Freedom to choose the companies & reallocate dollars quickly. **Pros of passive investing:**** Usually cheaper to get into (less fees). ** Simpler because it doesn’t require as much attention. Whether active or passive, mutual funds and ETFs allow people to easily invest into a managed portfolio of holdings. One benefit of investing in funds is that depending on which one you invest in, you may be able to reduce your risk exposure by not putting all your eggs in one basket, as opposed to if you were to invest in a single gold mining company. Investing in a fund also means that you won’t have to worry about managing a portfolio of equities yourself if all you want is broad exposure to the gold sector – the fund takes care of that, albeit for a fee. Two good examples of such gold funds are the VanEck Vectors Gold Miners ETF (GDX) and the VanEck Vectors Junior Gold Miners ETF (GDXJ). ## 7. How to Invest in Gold Stocks ![Stock Price Chart] If you want to invest in gold stocks, you’ll need to find yourself a stockbroker. Setting up an account with a stockbroker is what lets you carry out transactions on the stock market. There are two different kinds of stockbrokers: full-service brokers, and discount brokers. **Full-service brokers**, as their name suggests, are companies that provide the whole spectrum of investment services. In addition to helping you buy and sell stocks, they also provide services like portfolio management, market research and analysis, legend removals, and so on. **For more information on how to choose a full-service broker, [visit this article](https://katusaresearch.com/eight-questions-to-ask-when-hiring-your-stock-broker/) for a list of questions you should be asking when you’re shopping for a full-service broker. **Discount brokers**, on the other hand, generally provide none of those extra investment services mentioned above. Instead, they’re merely trading platforms that allow their clients to execute buy and sell orders on the stock market, with no extra frills attached. That said, the reason why they’re called “discount” brokers is because, as you may have guessed, their commission fees are lower – usually a fixed, flat-rate amount, like $10. - **Regardless of whether you’re placing a $5,000, $50,000, or even $500,000 dollar trade, your fee will stay $10.** While you do save money on fees with a discount broker, the trade-off is that you end up losing access to the services provided by a full-service broker. Participating in a [private placement](https://katusaresearch.com/guide-to-private-placements/), for instance, is a process made a great deal easier by having your full-service broker deal with things like the delivery of physical share certificates. Among seasoned investment veterans, it’s not unusual to find people who have accounts with both types of brokers. For example, an investor might choose to use a discount brokerage account for day trades and short-term positions, while retaining a full-service brokerage account for long-term positions and private placements. **At the end of the day, whether you choose a full-service broker or a discount broker – or both – depends on your investment goals and needs. Understanding your own financial objectives will help you decide which solution suits you the best.** ## 8. What Are the Risks of Investing in Gold Mining Companies? When you invest in gold mining companies, it’s important to remember that in the long run, the performance of your investment is still largely tied to the performance of gold itself. A weak gold price environment isn’t good for any gold company, and so before you make an investment in gold companies, the first thing you need to ask yourself is whether you believe gold prices will do well. Of course, most gold mining companies won’t accurately mimic the exact price performance of gold. That’s because there are a lot of issues that gold mining companies can face when trying to build and run a mine, just like when mining for any other commodity. They might run into trouble with the local government or suffer from other geopolitical issues like a trade war. Staffing could be affected by a pandemic outbreak or even just a labor strike. They could find that the gold they’re mining is lower in grade than initially projected. The list goes on and on. For junior gold companies, which are still exploring and developing instead of producing, there are even more risks involved. For starters, the company might not ever find economically viable gold deposits before going bankrupt! Besides that, there are other risks like the company failing to attract enough interest to fund their drill programs, weak gold prices killing interest in grassroots gold exploration, or having a weak executive team mismanage an exploration program for an otherwise promising asset. Just as is the case with any other investment, there are many risks inherent to the gold mining industry. Make sure you clearly understand them before you commit any of your capital. ## 9. What Are the Best Gold Stocks? When you’re trying to find the right gold stock to invest in, there are many factors to take into consideration. The most important question you should ask yourself is, what kind of investment are you looking for in your portfolio? There’s no such thing as the best gold stock for everyone, because people have different investment objectives, and appetites for risk tolerance. If you’re looking to diversify in something conservative for wealth preservation, physical gold ETFs and other large gold funds would be what you’re after. Your primary considerations in this case would be questions like how closely their holdings mimic the price of gold (Do they hold physical gold or options? Are they leveraged?), what their fee structure is like (Is the fee fixed or performance based? Is the return capped?), and how volatile the stock is. - **If you want more safety, but also some income generation on the side, then you might want to check out dividend-paying senior gold miners. ** For companies like these you’d want to see how healthy their balance sheet and cash flow are, how stable their dividend has been historically, whether or not there are any geopolitical issues that might hamper their future revenues, and so on. If you’re looking for growth, then junior gold miners would be your play. For companies like these you’d need to consider how experienced the management team is, where their assets are located and how developed they are, whether they’ll be able to fund their exploration programs or if they’ll need to go to the public markets for capital soon, and more. Figuring out what the best gold stock to invest in can be tricky because the criteria for “best” can differ depending on what your portfolio needs. That’s why it’s important to be educated, and to do your due diligence when it comes to making investment decisions. Don’t just trust anyone that tells you what “the best gold stock to invest in right now” is, without doing some homework first. ## 10. What’s the Gold Mining Lifecycle? ### ### **Exploration:** The first step to starting a gold mine is finding a place with enough gold in the ground to make mining it worthwhile. Getting past this stage isn’t easy and involves a lot of geology, chemistry, drilling and sometimes luck. First, companies start by staking a claim. Sometimes they’ll do this themselves if they have a geologist who’s already got a property in mind, and sometimes they’ll pay to buy a promising project. Either way, this location will already have been flagged as having potential, through low-level prospecting work like rock chipping or panning. After this, the company will commence early-stage exploration work. There are several different methods here that will be used – airborne magnetic surveys, grab and channel sampling, trenching, and so on. Regardless of what kind of work is done, they all serve the same purpose – to confirm that there’s an unusual or “anomalous” amount of gold present, and to highlight possible targets for drilling. Drilling is where fortunes are made or lost. Drill rigs are nicknamed “truth machines” because there’s no arguing with what your drill results tell you. Of course, your drill rigs won’t tell you anything if you’re drilling in the wrong places to begin with, which is why the work preceding the drilling is just as important. Once enough drilling has been done, companies can then use their drill results to construct a model of their deposit in order to get a 43-101 mineral resource estimate. Often, companies will continue drilling even after they’ve established an initial resource estimate, in order to further prove out their deposit. It’s been estimated that fewer than 0.1% of prospective sites actually end up as a productive gold mine, and only about 10% of the gold deposits in the world have enough gold to warrant development. Keep in mind that throughout the exploration stage, companies aren’t making any money – and without cash flow, they must rely on outside sources like private placement financings to fund their exploration programs. You’ll often see companies raise money multiple times while they’re still drilling out their properties. ### **Development:** If the company has a sizeable resource and things are looking good, they can proceed to the next step – a preliminary feasibility study, or prefeasibility study, for short. This is where basic work is undertaken by the company to see if it’s potentially worth turning the project into a full-fledged mine, and significant issues and other potential challenges are flagged. Following the prefeasibility study, the company can choose whether they want to keep advancing the project or abandon it because it’s not economically feasible. If they go with the former, they’ll move on to the feasibility study, which is a much more in-depth report than the prefeasibility study that lays out all of the logistical, technical, and financial requirements of building an operating mine on their deposit. If you’re wondering why a prefeasibility study is even necessary before the feasibility study, it’s because feasibility studies are very expensive. They can represent 1%, or even more, of the total cost of building a mine. As such, the prefeasibility study is there to ensure companies have good information to work with when they’re considering whether to go forward with the much pricier, full-fledged feasibility study. After the company gets a positive feasibility study, secures the funds necessary, gets all the appropriate permits and licences they need, and greenlights the construction of a mine, this is where the physical work begins. Generally taking between one and five years, this is where the construction of the physical mine, as well as the infrastructure needed, actually takes place. If the feasibility study was properly conducted, there won’t be any major surprises at this point, but it’s not uncommon to see minor hiccups along the way here. ### **Operation:** Once the development stage is complete, mining companies can move into the operation stage and begin extracting the ore that will be processed and refined into gold. The amount of ore that’s mined often depends on the price of gold. When the price of gold is high, lower quality ore, or ore that’s more costly to mine, may be worth producing, while when prices are low it might not be. Depending on the size of the deposit, mines can remain operational for up to 30 years, or even longer. In many cases, a company will also keep developing a deposit even while it’s being mined, to see if there’s more gold beside or even below their mine that could be feasibly extracted later on. ### **Decommissioning:** After all the gold that’s profitable to mine for has been removed, a mine must be decommissioned. This involves dismantling infrastructure and rehabilitating the land, a process also known as land reclamation. Often a mining company is required to monitor the site for years after the mine has closed. Named after [Pierre Lassonde](https://katusaresearch.com/dinner-billionaire-wine-connoisseur/), the founder of the royalty giant Franco Nevada, the “Lassonde Curve” is a chart that represents the life stages of a mining company. It’s very intuitive, and yet it’s pretty simple. I regularly refer to it to help my subscribers understand the context of an investment opportunity I’m proposing. The “Lassonde Curve” is definitely one of the these “sector basics” you’ll want to grasp. Finding deposits, building the mine, and then eventually extracting the resource takes years and hundreds of millions, or even billions of investment dollars. As companies evolve through these stages, they tend to grow in size and decrease in risk. In many ways, these stages are similar to a human lifecycle. We start out as a child, grow awkwardly through puberty to become a teenager, then a young adult, and eventually a mature adult. Well…most of us, anyways. And at each of those stages, people tend to take less risks. It’s similar with resource companies. These are the four basic lifecycle stages: **junior explorer, junior developer, mid-tier producer, and large-cap producer.** ![Lassonde Curve Junior Miner Life Cycle] ## 11. What are the Different Types of Gold Deposits? There are many different types of gold deposits, each with their own characteristics. Some of the most well-known and prolific types of deposits include: - **Placer deposits**, - **Epithermal gold deposits**, - **Carlin-type deposits**, and - **Copper-gold porphyries**. Concentrations of similar types of deposits often occur in large regions that have undergone the same geological processes over a widespread area. The massive Witwatersrand Basin of South Africa, most prolific of all the gold-producing regions in the world, is thought to have formed from placer deposits. The Carlin trend of northeastern Nevada, named for the town of Carlin it runs through, is home to the eponymous Carlin-type deposits that have propelled Nevada into becoming one of the top gold producers in the world. If you’re examining at a specific company’s gold project and want to better understand its geological characteristics and any challenges the company might face in developing it, it can help to look at other gold projects of the same type of deposit – particularly if they’re in close proximity – to learn more. ## 12. How Do You Read Mining Drill Results? When it comes to gold drill results, there are a lot of different factors at play. The first thing you’ll see is the length of the **drill intercept** and the **grade** – but that’s only scratching the surface. In general, the longer the interval, the lower the grade needs to be. Finding a small zone of extreme high-grade mineralization like say, 20 meters of 5 grams per ton (g/t) gold, is effectively the same as finding a large area of low-grade mineralization, like 100 meters of 1 g/t gold. However, this is where the depth of the intercept comes into consideration. Although the contained gold may theoretically be the same, it’s much easier to mine out a deposit that’s 20 meters wide at 5 g/t gold than it is to mine out a deposit that’s 100 meters wide at 1 g/t gold, since there’s less ore to remove. This doesn’t matter much near the surface, where cost-effective surface mining techniques like open pit mining can make lower grade deposits economic to mine. If the drill intercept is deep underground, however, the higher costs of underground mining can make lower grades very unattractive. Gold prices play a significant role here as well – if the price of gold goes up, then previously uneconomic gold deposits may suddenly find themselves economically feasible. That said, any mines whose grades are so low that their operating costs are on the razor’s edge between profit and loss should be avoided. - **As a general rule of thumb****, 100 meters of 1 g/t gold – 100 gram-meters (length times grade), or the equivalent, can be considered an excellent drill result. ** - **If the drill intercepts are shallow and near-surface**** (within 300 meters of the surface), however, a shorter interval or lower grade between 0.5-1 g/t gold can still be promising.** - **If the drill intercepts are at depth (300 meters or more from the surface****), you’d want at least 5 g/t gold, ideally with a thickness of more than 5 meters.** For the most part, anything lower than 0.4 g/t gold is nothing to get excited about. By the same token, beware of extremely short high-grade intercepts – 10+ g/t of gold may look stunning on the news release, but if it’s a 0.5 meter interval of 10+ g/t gold within a 5 meter interval averaging 2 g/t gold at depth, then depending on the deposit type it might warrant follow-up work in a future drill program, but it’s not promising anything by itself just yet. Speaking of the deposit type, that’s also very important to take into account. In Carlin-type deposits or copper-gold porphyry type deposits, lower grades in the ballpark of 0.5 g/t are the norm. However, these deposits tend to be very large and near surface, which makes these deposit types still economically feasible to mine. With **vein-type gold deposits like epithermal gold deposits**, however, you might find an extremely high-grade vein north of 10 g/t gold that’s only 2 meters wide but extends for hundreds of meters. - **There can be other things to consider as well – for example, is this a step-out hole, or an infill hole? ** If it’s an infill hole, are the results in line with surrounding drill holes’ and do they create continuity in the orebody? If it’s a step-out hole, is it down trend from previous zones of mineralization or is it a new target? If you see drill results that you aren’t sure how to interpret, make sure you ask the right questions. Never simply take drill results at their face value! ## 13. Common Mining Terminology Adit The horizontal opening to an underground mine from surface level. Alloy A combination of a metal with one or more other elements. Steel, for example, is an alloy of iron with carbon, and typically several other elements as well. Apparent Width The width of a **drill intercept** as reported. Also known as **Apparent Thickness**. Since **deposits** often lie at an angle that don’t line up perfectly with drill holes, **drilling** will yield intercepts that are longer than the actual amount of **mineralization** present in a deposit. As such, these intercepts reported in apparent width are not truly indicative of the amount of mineralization present. Contrasts with true width; if you see a set of drill results that don’t mention anything **true widths**, you can assume that what’s being reported are apparent widths. Assaying The act of testing **ore** samples to determine the amount of minerals it contains. These samples can come from **drilling**, rock chip sampling, **grab** **sampling** from riverbeds, and the like. Base Metal A blanket term for metals that aren’t **precious metals**. They are more common, and hence less expensive, than precious metals. Examples include aluminum, copper, lead, nickel, tin and zinc, to name a few. Bedrock The solid rock underlying the loose soil or dirt that comprises the topmost layer of the ground. Borehole The hole made in the ground by **drilling**. Bulk Sample A large sample of ore from a mineral **deposit**, considered to be representative of the orebody it’s taken from, and used in order to analyze a deposit’s **metallurgical** properties. Byproduct A secondary mineral product or metal recovered alongside the primary commodity. Silver is often produced as a byproduct of gold mining, for instance. Capital Expenditure The amount of upfront capital required to build a mine. Often abbreviated as CapEx or capex. Carlin-type deposit A type of gold deposit first discovered in Nevada, characterised by mineralization that’s invisible to the naked eye, meaning it can only be found by **assaying**. Claim A mining right that allows its holder the exclusive right to explore and develop a mineral substance within a given area. Core Samples A solid cylinder of rock extracted from beneath the surface by **drilling**. These are usually cut in half vertically, with one half sent for **assaying** while the other half is kept for record keeping purposes. Also known as **drill** **cores**. Concentrate An intermediate product of the **refining** process, where most of the waste material has been removed, leaving primarily the desired mineral. Deposit A natural accumulation of rocks and minerals resulting from natural geological processes. Mineral deposits are the target of mining companies. Development The process of turning a mineral **deposit** into an operating mine. Diamond Drilling **Drilling** with a diamond bit, which allows for a solid core of rock to be recovered from underground in order to be tested for **mineralization**. Directional Drilling The process of **drilling** at an angle other than straight down. Because **mineralization** doesn’t always occur in perfect vertical and horizontal lines, directional drilling can help a company better identify the true characteristics of their deposit. Drilling The process of digging a hole into the ground in order to test for **mineralization** beneath the surface. Drill Intercept Points at which a drill hole “intercepts”, or runs into, **mineralization**. These sections of mineralization are also known as **drill** **intervals**. Drill Program A mining company’s plan for **drilling**, usually to achieve a specific goal such as expanding currently known **mineralization** through **step-out** **drilling** or better defining an **orebody** with **infill drilling**. Drill Rig The machine used in the process of **drilling**. Environmental Impact The effect that building and operating a mine will have on its surroundings. Environmental Impact Assessments are required for any prospective mine site. Exploration The process of discovering and proving out a mineral **deposit**. Feasibility Study A feasibility study is a technical, in-depth report on the economic viability of a mine. Feasibility studies are conducted after **prefeasibility** **studies** and go into much more detail than the latter. Feasibility studies cover all aspects of developing and operating a mine, including, but not limited to, the technical, financial, environmental and legal concerns. The entire lifecycle of the mine is taken into consideration, from initial **capital** **expenditures** and infrastructure requirements to **tailings** management and land **reclamation**. An accurate and thorough feasibility study will also help prevent scheduling delays and cost overruns. As a result, feasibility studies can be quite expensive to undertake, as they require a tremendous amount of technical, financial and engineering analysis. Flotation A mineral processing method where ores are selectively separated based on whether they’re attracted to or are repelled by water. First used in the mining industry, it’s also now used in the water treatment and paper recycling industries. Geochemistry The study of the chemical makeup and processes of the Earth itself. In mining, geochemical work is undertaken to determine the chemical composition of rocks, water, riverbeds and such, with the intent of identifying abnormally high occurrences of minerals that could potentially suggest the presence of a mineral **deposit**. Geological Survey Work undertaken to determine the geological characteristics of the ground beneath a certain area. Geological models help mining companies better understand the characteristics of a potential mineral **deposit**, which allows them to better design their **exploration** and **development** programs. Geophysics The physical characteristics of an area of ground, such as the conductivity, gravity, or magnetism. Iron **deposits**, for instance, have an extremely noticeable effect on the Earth’s magnetic field, making magnetic surveys a powerful tool when searching for iron. Grab Samples Samples of rock taken from a prospective **deposit** to determine if they contain meaningful quantities of desirable minerals, as part of early-stage **exploration** work. Generally, grab samples are only taken of rocks with visible **mineralization**. Grade The proportion of desired material that a **deposit** contains. In general, the higher the grade, the better the deposit, though technological advances and necessity have made lower-grade deposits more economically viable in recent years. Heap Leaching A relatively new **refining** process that involves placing crushed **ore** or processed **concentrate** onto a liner resting on a slope. An appropriate chemical is sprayed onto the “heap” that selectively turns the desired mineral into a liquid solution. This mineral-bearing solution naturally drains by gravity to the bottom of the slope, where it’s collected in a pond for further processing. Heap leaching is one of the cheaper and easier to implement refining processes and is extremely economic even at low mineral **grades**. Infill Drilling **Drilling** designed to test for **mineralization** between previously drilled holes. This helps confirm the continuity of an **orebody**. Karat The measurement of how pure the gold in a gold product is. The maximum is 24. 24 karat gold is pure, 24 out of 24 parts gold – in other words, 100% gold (though in practice, it’s more like 99.99% gold). 12 karat gold is 12 out of 24 parts gold, or 50% gold. Leaching A mineral processing method in which the **ore** is first dissolved into a liquid by application of a chemical solvent before extraction of the desired mineral. There are several different leaching methods such as **heap** **leaching**, in situ leaching and tank leaching, each with their own advantages and disadvantages. Life of Mine Also known as **LOM** or **mine** **life**, this is the amount of time that a mine is expected to stay in production. Metallurgy In the context of mining, metallurgy refers to the exact composition of metals and compounds that make up the **ore** in a mineral **deposit**. This is important when considering which extraction method to use for a given deposit. For instance, **Heap** **leaching** generally works well with oxide ore deposits, whereas sulphide ore deposits are generally amenable to **flotation** processes. Miller Process Used to extract gold using chlorine gas to heat the gold to its melting point. The impurities then separate and go to the surface of the molten gold. While it’s quick and relatively simple, gold refined with this typically has 99.5% purity. Mineralization An area in which the amount of a particular mineral rises to anomalous, and potentially economically extractable, levels. Also referred to as a **mineralized** **zone**. NI 43-101 National Instrument (NI) 43-101 is a Canadian standard for reporting on mineral projects. First created after the infamous Bre-X scandal, NI 43-101 ensures that mineral projects are assessed in a scientific, professional manner. If a mineral **deposit** has an NI 43-101 compliant technical report, that doesn’t necessarily mean it’s a good project – it just means that the company isn’t lying about the results they’ve gotten from the work they’ve done. Comparable standards include the Australian JORC and the South African SAMREC. Open Pit Mine A type of **surface** **mine** where extraction is carried out from an open-air pit on the surface. Ore The resource-bearing rocks, generally comprised of several different minerals and metals, that make up a mineral **deposit**. In a mine, the ore is the “raw product” that’s extracted from the ground, before any processing. Orebody A significant, continuous concentration of a desired mineral or material in a given deposit. A single project can contain multiple orebodies and defining the characteristics and boundaries of these orebodies can be achieved through rigorous **drilling**. Outcrop An exposed rock on the surface. These are typically examined in mining exploration to see if they carry abnormally high amounts of precious minerals, hinting at further **mineralization** underground if they do. Overburden The “regular” soil and rock that lies on top of a mineral **deposit**, which must be removed to mine the deposit. Sometimes also referred to as waste material. Overburden is generally not hazardous as it’s usually not subjected to any processing and is often reused in the **reclamation** process. Placer Deposit A type of deposit where heavier minerals are separated from their source rock by gravity over a long period of time. Precious Metal A set of rare metals that are less chemically reactive than other metals, preventing them from oxidizing and rusting easily, which made them popular as currencies throughout history. There are several precious metals, but the most prominent ones are gold, silver and platinum. Contrasts with **base metals**. Prefeasibility Study A prefeasibility study is the first step in determining whether a **deposit** can be turned into an economically viable mine. While providing a first look at what project economics and mine **development** will look like, prefeasibility studies also provide a surface look at, and highlight, potential issues such as **environmental** **impact**, **capital** **expenditures**, permitting requirements, and community response, to name but a few. If the company chooses to proceed further with development after completing a prefeasibility study, the issues brought up in the prefeasibility study will be more closely examined to construct a full-fledged **feasibility** **study**. Private Placement A direct sale of shares from a company to individual shareholders at a pre-determined price. Often used by junior mining companies to raise funding for **drill** **programs**; see our [Private Placement](https://katusaresearch.com/guide-to-private-placements/) guide for more information. RC Drilling RC drilling stands for Reverse Circulation drilling. RC drilling is cheaper than **diamond** **drilling** but does not produce a solid core for sampling as RC drilling smashes the rock underneath. The rock cuttings produced are recovered and can still be used for resource analysis but results from RC drilling are generally less precise than those obtained from diamond drilling. Reclamation The process of returning a formerly active mine site to the condition it was in (or as close to it as possible) before mining began. Recovery Rate The proportion of the desired mineral that can be obtained from a **deposit**, after all extraction and processing has taken place. If a company has a million ounces of gold in their gold deposit and a recovery rate of 80%, they will only walk away with 800,000 ounces of gold in their pockets. Refining The process of removing impurities from **ore**, leaving more of the desired mineral. Reserve A reserve is a subset of a **resource** that’s known, usually via at least a **prefeasibility study**, to be economically viable to recover. You’ll often see these referred to along the lines of “**NI 43-101** Mineral Reserve Estimates”, indicating that they’re compliant with the NI 43-101 standard. Mineral reserves are broken down into two categories: **Proven and Probable**. • **Proven (or Proved) reserves** are reserves that are economically feasible to extract with a high degree of confidence. Losses that naturally occur when the **deposit** is mined are accounted for. • **Probable reserves** are reserves that are economically feasible to extract with a reasonable degree of confidence. Losses that naturally occur when the deposit is mined are accounted for. If you’re an investing veteran, you may have seen the term Possible reserves used before. Possible reserves are not used when reporting mineral reserves. However, the oil and gas industry use Possible reserves in lieu of a resource to denote reserves that have a low chance of being economically feasible to extract. Resource A resource is the amount of mineral or other desirable material in a **deposit** that’s considered to be reasonably extractable. You’ll often see these referred to along the lines of “**NI 43-101** Mineral Resource Estimates”, indicating that they’re compliant with the NI 43-101 standard. Resources are broken down into three categories: **Measured, Indicated, and Inferred**. • **Measured resources** are resources estimated to exist with a high degree of confidence. These resources have usually been proven out thoroughly with lots of drilling. • **Indicated resources** are resources estimated to exist with a reasonable degree of confidence. • **Inferred resources** are resources estimated to exist with a low degree of confidence. It’s usually inferred from a deposit’s geological characteristics, without having been verified by drilling or similar work. Royalty An agreement wherein another company receives a fixed percentage of the revenue from an operating mine, usually in exchange for upfront capital provided as funding for **capital expenditures**. A common type of royalty is the **Net Smelter Return (NSR)**, which is share of the revenue received from the actual sale of the mined material following transportation and **refining** costs. Contrasts with a **stream**. A royalty can also refer to a share of the revenues or profits of an operating mine paid to the local government, in exchange for the right to own and operate said mine. Royalty Company A company that provides capital to mining companies looking to build and **develop** their mines, in exchange for a **royalty** on said mine. Royalty companies often own multiple royalties and can generate steady income from the operating mines in their portfolio. Smelting A type of processing in which high heat and chemical agents are used to melt, separate and extract metals from **ores**. Step-out Drilling Drilling intended to expand a deposit’s **mineralized** **zone**. This helps expand the boundaries of an **orebody**, or possibly even discover new ones. Stream An agreement wherein another company receives, in physical form, a fixed amount of the mineral or material extracted from an operating mine, usually in exchange for upfront capital provided as funding for **capital** **expenditures**. Contrasts with a royalty. Strip Ratio The ration of the amount of **overburden**, or waste rock, that needs to be removed relative to the amount of actual mineral-bearing **ore** extracted. The higher the strip ratio, the more waste that needs to be removed to get at the desired mineral, which makes it more expensive to keep mining. Surface Mining A type of mining where extraction is carried out directly on the surface. **Open pit mining** and strip mining are two examples of surface mining techniques. Contrasts with **underground mining**. Tailings The leftover materials that result from mineral processing. Unlike overburden, tailings are often hazardous since they’re a result of **refining** processes that can include chemical solvents and the like. Proper management and storage of tailings play a significant role in the **environmental** **impact** and **reclamation** considerations of any mine. True Width The “real” width of a mineral **deposit**. Also known as **True** **Thickness**. Since mineral deposits are often found at an angle, a hole **drilled** straight downwards will also intersect said deposit at an angle, giving a longer intersection, and providing the illusion that there’s more **mineralization** present than there actually is. True widths can only be calculated once the characteristics of a given deposit are well understood; before then, any reported drill intercepts will be **apparent** **width**. Underground Mining A type of mining where the deposits are located deep underground, and tunnels and shafts must be dug into the ground in order to access the **ore deposit**. Contrasts with **surface** **mining**. Vein Veins are long sections of **mineralization** which formed as a result of mineral-laden liquids filling in cracks underground through hydrothermal action. They are popular targets for mining **exploration**. Wohlwill Process Used to extract gold using an electrolyte solution of hydrochloric acid and gold chloride. Under the influence of an electric current, the gold moves to a cathode. The impurities are left as residue. --- # Tax Loss Selling is About to Begin – Are You Prepared? - URL: https://katusaresearch.com/tax-loss-selling-is-about-to-begin-are-you-prepared/ - Type: article - Published: 2018-11-16 - Updated: 2019-12-05 - Author: Marin Katusa As you read this, the calendar is halfway into November. For some folks, this means heading south to a warm place like Florida. For some, it means breaking out the winter coats and hats. For top resource investors, it means tax loss selling bargain season. It means Christmas comes early…and the presents can lead to hundreds of thousands – even millions – of dollars in extra profit. At the end of the year, investors and speculators start looking at their portfolios and formulating plans to reduce their tax bills. This means deciding if positions should be held to get short-term gain tax treatment or long-term gain tax treatment. But more often than not, it means deciding to sell stocks based on factors that have little to do with their underlying values. If you’ve read my work for a while, those words should trigger your interest. You know that most of the time, the market places the correct value on assets. But not all the time. As investors, we find our edge during those rare times when buying and selling decisions are not made based on values, dividends, or cash flows. But instead on external factors like fund redemptions, tax considerations, or fear the world is about to end. These periods are one of the only times that values seriously decouple from prices. In other words, when selling decisions are based on factors that have little to do with underlying values, we – the patient [alligators](https://katusaresearch.com/the-way-of-the-alligator/) – can strike and pick up assets for bargain prices. This is exactly what happens at the end of a brutal resource year like the one in 2018 in the resource market. Investors dump stocks simply to lock in losses or gains because their upcoming tax bill is first and foremost in their minds. That’s why the next seven weeks are called “**tax loss season**” in the global markets. I think this tax loss season will be particularly painful for some stocks. This has been a brutal year for venture type stocks. Take a look at the YTD performance of the venture heavy TSX-V: The TSX-V is down 29% for the year. And this includes many crypto, cannabis, resource explorers and other tech ventures plays that are down even more. Especially for those HODLers. That is why I believe certain companies will experience extra selling pressure, which means lower share prices. Simply because those who have locked in gains on certain stocks over the last year (crypto in January or Cannabis in September) will be extra diligent to lock in losses elsewhere in order to lower their tax bill. Losses in cannabis, crypto, precious metals and resources alike could spell an ugly tax loss season. If this materializes it could spell opportunity if you choose right. **Do you know which gold producers have a *Katusa – All-in Sustaining Cost* of gold under the spot price of gold? **That means you include their AISC and all general & administrative costs on top. I.e. the REAL costs. We do. **Do you know which energy companies are making money at $25/lb uranium or oil prices at $55/barrel or lower?** We do. These are just some of the data we monitor every day, hunting for the best world-class projects on sale. (Note: Keep your eyes here and in your inbox for a very special 360 degree series I will publish very soon on uranium). **Will Tax Loss Selling Hit the Gold Sector in 2018?** Yes. Below is a chart which shows the performance of gold bullion along with senior, mid-tier and junior gold producers. Surprisingly, the seniors are leading the charge down. This is a telling sign of where institutional and passive fund money is going. Unquestionably, it’s been an ugly year for gold stocks. And this group are prime candidates for tax loss selling. Investors will want to rid their portfolio of the have nots and put more money into the *have’s*. And the last 90 days have been truly terrible in the gold markets. Earlier this year in an edition of my premium research service,* [Katusa’s Resource Opportunities,](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk)* I wrote: *The senior producers, which you would think are the safe, stable businesses, are actually the worst performers – down nearly 30% year to date and likely to continue their downtrend during tax loss season. Barring a substantial move in the gold price, I think gold producers are going to be under serious pressure for the remainder of the year.* *Tax loss season is around the corner, and I think many investors who own these “safe and stable” large producer names will be hitting the bid. Assuming I’m right, this should provide a great setup for getting into many de-risked companies after the washout.* Lo and behold that prediction came to light for alligators thinking of pouncing. In late October, Goldcorp, which is one of the world’s top 5 producers of gold, was trading at its lowest level in 16 years. Think about how hated the gold sector is becoming. The last time Goldcorp (GG:NASDAQ) traded below $9 was in 2002. This was back when gold was trading for under $300 an ounce! **The Real Boxing Day Bargains** Though tax loss selling comes around every year, this season’s opportunities may prove to be particularly juicy for investors. However, stocks that are already under pressure now may not be out of the woods yet. Had you been an alligator in the 2015 tax season, 2016 treated you very well. Companies with proven, low-cost deposits in safe jurisdictions, led by strong management teams are the kind of companies that we look out for at Katusa Research. And of course, this applies across the entire resource sector – not just gold. Tax loss season may be prime time for building portfolio positions, but that doesn’t mean you get to skip your due diligence. You still have to find the right companies to buy. **A discount means nothing if the product you’re buying is still worth less than what you’re paying for it.** But luckily for our *Katusa’s Resource Opportunities* subscribers, we’ve already done all of the leg work for them. We are constantly filtering through companies in the resource sector, updating and reassessing valuations, in order to find out which companies are worth their share price. And at the end of the year, when tax loss selling is in full swing, my readers will know which companies they should be looking out for – and what the right price to pay for them is. I will be announcing my number one tax loss candidate for 2018 on December 5th, in the next edition of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite)*. Do yourself a favor and let the best show you how it’s done. Do it. Just do it. Regards, Marin Katusa --- # Post U.S. Mid-Term Election Signals: Trump Bump or Trump Dump - URL: https://katusaresearch.com/post-u-s-mid-term-election-signals-trump-bump-or-trump-dump/ - Type: article - Published: 2018-11-09 - Updated: 2019-04-24 - Author: Marin Katusa A handful of new records were set this year in the U.S. mid-term elections. Record voter turnout and record campaign financing. In my October 2018 edition of my *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=blgtrumpdump)* newsletter, I outlined to subscribers that I believed this year’s midterm election would see some of the highest voter turnout ever for a midterm election. My theory proved correct. Over 114 million votes were cast in 2018. In comparison, the 2014 election saw 83 million votes cast. One insane number to note: Political parties spent $5.2 billion on this year’s midterm election. For fun, let’s compare to the campaign spending here in friendly Canada. During the last federal election in 2015, total spending was only CAD$130 million. It’s unbelievable how much money is thrown into U.S. politics. Democrats outspent the Republicans yet again, by spending $2.5 billion. Republicans spent $2.2 billion. The total 3rd party spending came in at $480 million. ## What are the economic impacts from the mid-term elections? With a Democratic controlled house and a Republican controlled Senate, there is sure to be more gridlock on the legislative front. What both parties both agree on is that government spending on infrastructure will do more to stimulate the economy than further tax cuts. If both sides can come to an agreement, a significant fiscal plan for infrastructure could provide a tailwind to the U.S. markets. But with such an infrastructure bill will probably come a higher minimum wage hike. I think big funds are anticipating this and you could see a continued melt-up in the major U.S. indices for the rest of the year. Looking further out, it’s important to note that the U.S. debt to GDP ratio is approaching all time highs. This is a scary number. If a country is overspending in good times like we have today, then what is the U.S. debt level going to balloon to if there is a long-term market correction or recession with higher interest rates? Below is a chart which shows U.S. the debt to GDP ratio. The higher the number, the higher the amount of debt there is relative to GDP. ## What Happens to the U.S. Dollar After Mid-Term Elections? The initial kneejerk reaction post mid-term election is a weakening of the U.S. dollar relative to other major currencies. However, I believe this is likely just a data point in a long-term term trend of a stronger U.S. dollar. The U.S. Federal Reserve is going to continue to raise interest rates through 2019, which is bullish USD. Additionally, U.S. federal trade policies will continue to remain protectionist. Again this is bullish for the U.S. dollar. Below is a chart which shows the performance for the USD against a basket of currencies. I have also outlined the U.S. dollar breakout and its new uptrend. ## What Happens to Commodities After the Mid-Term Elections? A strong U.S. dollar does not bode well in the short term for precious metals. Gold is priced in U.S. dollars, which means when the USD appreciates in value, gold will act in the opposite manner. Of course, in times of crisis you can get both moving in the same direction, though I do not see today as one of those moments. In the long term though, I see gold heading higher. At some point the chickens will come home to roost and the combination of rising interest and record U.S. debt will capitulate. The resulting economic situation will not be pretty but will be positive for gold and gold producers. For copper and the rest of the base metals, I don’t see much change from the mid-term election results. Protectionist policies in the U.S. will remain the norm for the next 2 years. This will cloud the short-term investment thesis for base metals. I suspect we are going to be in for a volatile end of the year. I outlined my investment thesis for the remainder of the year in my latest edition of *[Katusa Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite)*, , complete with my top tax loss candidate ideas. I am excited about the potential fire sales on the horizon and I am loaded with more cash than ever before to take advantage of every opportunity. Regards, Marin --- # The Hottest Metal in the World Right Now – Vanadium - URL: https://katusaresearch.com/the-hottest-metal-in-the-world-right-now-vanadium/ - Type: article - Published: 2018-11-02 - Updated: 2019-04-24 - Author: Marin Katusa One of the trendiest metals on the tip of investors’ tongues right now is vanadium. The metal is named after Vanadis, a Norse goddess. Vanadium is very ductile, malleable and corrosion-resistant. It’s rare for vanadium to exist as a free element and it’s usually found in minerals such as vanadinite, carnotite and magnetite. Thus, metallurgy is the key question when you find a large amount of vanadium. Vanadium has incredible properties which increase the strength of alloys containing it, such as rebar which is heavily used in construction. China has just raised their steel rebar limits (*raised the bar*—no pun intended). Vanadium is also used in everything from jet engines to dental implants. This past weekend I was down at the Katusa/Cambridge House Gold and Silver Summit in San Francisco. The main theme was precious metals, but I couldn’t escape questions about vanadium. Here’s why… Below is a chart which shows the price of vanadium over the past 3 years. I’ve seen this type of small sector hype many times before. And so have you with lithium and cobalt. Like those two niche metals, many “vanadium” stocks have spiked in price, returning doubles and triples in a short time. And some have even become 5 baggers in the month of October alone. Those kinds of gains are enough to hit everyone’s radar screens. Traders, investors and “me-too” companies alike will start piling on the momentum train. **Here’s what you need to know about Vanadium** Vanadium is a small, niche sector. In 2017, global consumption was roughly 95,000 tonnes (209 million pounds). For comparison, in 2017 the world consumed roughly 23 million tonnes of copper (50 billion pounds). Below is a chart which shows annual vanadium consumption since 2007. Vanadium is mainly used as a stiffening agent in steel. Around 90% of annual vanadium production is sold to the steel sector. This makes the 2 industries highly correlated. The majority of vanadium production comes from 4 countries: China, Russia, South Africa and Brazil. So why is everyone getting excited? There are a few reasons why the vanadium sector has been exploding. **Vanadium Excitement Reason #1: Steel demand and changes to Chinese building codes** The steel sector itself is correlated to the health and strength of economies around the world. As economies expand and develop they need vast amounts of new infrastructure. A lot of this infrastructure requires steel, which in turn requires vanadium. Building codes in China are edging closer towards building codes in places like the U.S. and Europe. For example, in the U.S., you’ll find steel has about 0.1 kilograms of vanadium (3.4 ounces) per tonne of steel. Whereas in China, you’d find a tonne of steel contains about 0.05 kilograms (1.7 ounces) of vanadium. One of the main catalysts that spiked interest in the metal is new steel regulations that China will be imposing in November 2018. The new Chinese regulations are phasing out Grade 2 rebar which uses no vanadium in favour of grades 3, 4 and 5. Each of these new rebar grades requires vanadium. The higher the grade, the more vanadium that is required. **Vanadium Excitement Reason #2: Utility scale battery storage** Renewable energy projects are springing up around the globe. But the biggest issue with renewable power is that it is intermittent. You can’t generate much in the way of solar electricity in the middle of the night. That’s why battery storage is so crucial to large scale renewable power. Think oil production before pipelines and rail takeaway. This is going to happen and will be a major game changer for electricity generation dynamics. Vanadium flow batteries are now being pilot tested as a solution to industrial scale battery storage issues. But it is still very early stage. If vanadium flow batteries do become a go to metal for utility size energy storage, it would open up a huge amount of new demand for vanadium. **Dirty Secrets in the Vanadium Sector** Just because the vanadium sector is small, doesn’t mean that vanadium is rare. Vanadium is actually fairly common, and can be found as a secondary metal in many types of deposits. Most of these secondary deposits contain low grade vanadium mineralization. But at current vanadium prices, those marginal deposits become economic. Which opens up a plethora of new potential supply. This is very similar to the crappy/low grade copper and nickel projects which magically turned into cobalt projects last year. You will see many crappy uranium projects now be touted as vanadium stories. It’s neither cheap nor easy to produce a radioactive material. Buyer beware. The second dirty secret is that there is actually a sizable amount of production capacity which is currently offline. Total production capacity in the vanadium market is around 150-160 thousand tonnes per year. But right now, production is only around 95,000 tonnes. A large amount of vanadium is produced through Chinese co-production facilities, which produce both steel and vanadium. Some of these facilities are currently shutdown or operating at lower capacity rates. It’s no secret China has a huge pollution problem. To curb some of these effects the government has forced the closure of several large steel and vanadium facilities. **Katusa’s Vanadium Outlook and Play** I believe that both steel and battery manufacturers will want to secure a long-term supply of low cost, metallurgically recoverable (metallurgy that actually works) vanadium production in a non-AK47 nation that is friendly to mining. I do like commodities that don’t just depend on continued growth in China. Vanadium has the benefit of growth demand from China. But the reality is, 30-40% of global vanadium demand is directly correlated to the Chinese rebar market. If Chinese rebar demand slows down or contracts, vanadium prices will pull back significantly. In these niche markets it’s important to not get too over exposed. Be careful and invest only with speculative capital that you can truly afford to lose 100% of. I’ve been looking for years for the right vanadium project. I have a database of every single deposit globally. Do not invest in any projects that are using anywhere near current spot prices in their economics. I specifically asked a large producer of vanadium if he could get an off take at $25 per pound, while vanadium was $32 per pound and he couldn’t lock in a hedge or off-take. So, if you are going to play a niche market like vanadium, make sure you are using say $15 per pound not the current $30+ per pound spot price. Also, make sure you invest with a management team that not only understands the niche metal markets, but have direct success in the niche markets. Just because you know how to finance or build a mine, doesn’t mean you understand the complexities of the niche markets. Niche markets are very different than the large commodities such as copper or gold. If you want the real deal – follow the link for details on my premium research service, [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite). *Katusa’s Resource Opportunities* is what I am doing with my own money for exposure to the vanadium market. Regards, Marin Katusa --- # How Video Games Make Hundreds of Millions of Dollars Per Month in Microtransactions - URL: https://katusaresearch.com/how-video-games-make-hundreds-of-millions-of-dollars-per-month-in-microtransactions/ - Type: article - Published: 2018-10-30 - Updated: 2019-04-24 - Author: Marin Katusa The incredible profit making model in video games is called “microtransactions”. And it has become the new standard for making massive amounts of money from video games. Traditionally, video game developers took on the sunk costs of developing, marketing, and publishing video game titles. Once the video game was published, they would rely on sales of the game in order to make their money back. However, in the past few years, the rise of microtransactions has completely changed how video game developers approach game design. Under the old model, let’s say there was a video game – *Grand Theft Auto*, for example – that you wanted to play. You would head down to your local game store, pay them $60, and you would get your copy of the game. You would then play it until you were bored of it. You’d then sell it back to your game store, lend it to your friends, or let it collect dust. Either way, the publishers of the game had already taken your money and were done with you. Microtransactions have trumped that revenue model. Nowadays, you can still buy *Grand Theft Auto*, but the game itself will come with its own online shop. In this online shop, you’ll be able to find in-game items that you might not be able to get from just playing the game itself – cool cars, fancy guns and new “skins”. These are all virtual, of course. And all with a real-money price tag attached. To see what a big deal this is, in the chart below look at how microtransactions (in dark blue) are outpacing traditional game sales. To many of us, the idea is ridiculous. “*Why pay money for virtual items? They aren’t even real!* Yet as you can see from the chart above, the revenue share of microtransactions in video games has far outstripped that of the traditional models. It generated over three times as much cash on the PC platform last year as actual game sales did. Even for larger gaming companies, which originally relied on the traditional model of revenue generation, the revenue shift has been steady. With their *Xbox Live Marketplace*, Microsoft was the pioneer in this monetization model. Since then, mobile games have helped turn microtransactions into a widespread social norm, particularly with the plethora of popular free-to-play, or “F2P,” games. Pokémon Go, Angry Birds, Candy Crush, and Clash of Clans are just a few of the more well-known examples of games that have made money off of the growth of millennials and their ever-present cellphones. Regards, Marin Katusa & The Katusa Research Team sions in the publications. Katusa Research and the respective authors do not guarantee that the expected profits or mentioned share prices will be achieved. --- # The Top Video Game Stock Poised to Soar Over the Next 12 Months - URL: https://katusaresearch.com/the-top-video-game-stock-poised-to-soar-over-the-next-12-months/ - Type: article - Published: 2018-10-29 - Updated: 2019-12-11 - Author: Marin Katusa Investors absolutely love the video game business. Last week Katusa Research put out a series of research essays on the video game sector. In case you missed last week’s research, we’ll get you up to speed quick. On Day 1, [you learned about a sector](https://katusaresearch.com/this-one-sector-just-may-become-the-biggest-bull-market-in-the-history-of-the-world/) that will knock “old sports” off its pedestal. And how some of the biggest athletes in the world are getting involved in video games – in a big way. On Day 2, [we revealed how a single video game called Fortnite](https://katusaresearch.com/fortnite-the-single-game-that-made-1-billion-in-the-first-five-months-of-2018/)made $1 billion in just the first five months of the year. On Day 3, we introduced you to [the video game and publishing giant, Tencent](https://katusaresearch.com/on-the-shoulders-of-giants-the-next-fortnite/). It owns the world’s largest gaming and social media companies. And it’s one company that can make or break a video game. The key takeaway from all our research is this: Video games are a massive industry that you need to pay attention to. It’s where Bitcoin was in 2016. Where cannabis stocks were in 2015. **The video game industry has the potential to be a massive bull market. ** Developers are in high demand. And so is investor appetitive in games that can make an impact. The good news is that a game doesn’t even have to be a hit to make money. Games that aren’t even discussed in North America are making hundreds of millions of dollars of revenue per year for the companies that own them. One of the best grossing PC games of all time—another free-to-play shooter—is a game you’ve probably never heard of before. In fact, if you asked your kids, chances are pretty good that they’ve never heard of it before either. *CrossFire*, developed by a South Korean company and first released in China in 2007 by Tencent, is a game that never really took off outside of Asia. In 2014, *CrossFire *had the highest revenue of any video game in the world. By 2016, it had raked in a total of $6.8 billion. Even more important, the cash flow has been consistent since 2013. Another benefit for the developers of video games is that the cost to produce the game is recovered very quickly. The launch of *CrossFire*, a game that is virtually unknown outside of China, recovered its full capital cost to build the game in the first four months after release. Other than minor costs to maintain the game with new options, the full revenue is essentially converted into earnings for the owner of the game. The major success of *CrossFire *proves that a game does not need to be on the tip of every kid’s tongue to make an absolute fortune. **Video Games will no Longer be a Well-Kept Secret** You still don’t really hear anyone talking about video games. News stations might talk about the latest hot game or app release. And business shows might discuss earnings at big video game companies such as Electronic Arts or Nintendo. For the most part, though, video games seem to get glossed over by the media, as if they are irrelevant. The industry is dominated by established developers like Take-Two Interactive Software Inc. and Electronic Arts Inc., which crank out predictable updates to franchises like *Grand Theft Auto *and *Madden *(now in its 29th version). There are a few massive investment opportunities sleeping just beneath the surface of the water here—unseen by most. A few small companies have moonshot potential. And thus there is an opportunity to make a once-in-a-generation asymmetric bet. The Special Situations team at Katusa Research is looking deep into several opportunities right now. **What to Look for in a Startup Video Game** An important metric to look at for any game is the **“retention rate**.**”** The retention rate refers to the percent of people who are still playing the game after a certain period of time (in essence, how “sticky” the game is). When you open up your phone and look at your apps, you probably see some that you haven’t used in months. Others you probably haven’t even touched since installing. It’s the same for video games. With fast internet, it’s very easy for people to download a new game, try it out once and never play it again. So it’s important to see how many new players are still playing the game days or weeks down the road. Retention rates fall most sharply between the first day a user downloads a game and seven days after. After that, it typically only falls by a couple of percentage points each day until the 30-day mark. After a month, retention rates stabilize. **That’s why 7-day and 30-day retention rates are the most often used benchmarks when analyzing a game’s staying power.** Regards, The Katusa Research Team --- # On the Shoulders of Giants – The Next Fortnite? - URL: https://katusaresearch.com/on-the-shoulders-of-giants-the-next-fortnite/ - Type: article - Published: 2018-10-25 - Updated: 2019-04-24 - Author: Marin Katusa Today, we want to give you a peek behind Fortnite’s success. From their monetization model to their gameplay, they’re doing everything right… And making billions as a result. But they haven’t done it on their own. Two Chinese companies, one a massive corporation and the other a small gaming company, played a large part in Fortnite’s success. **The One Company That Can Make or Break a Video Game** You may have never heard of Tencent before. It’s one of the largest companies in the world. It owns: - The world’s largest gaming company - The world’s largest social media company - One of the world’s most valuable technology companies - One of the world’s largest venture capital firms and investment corporations - Most of China’s music services, which are the world’s largest and most profitable Everything Tencent touches turns to gold. But where they really make their money is in games. As of March 2018, it is the largest video game company in the world. In the second quarter of 2018, 48% of Tencent’s revenue ($5.3 billion) came from gaming. That’s more than seven times Fortnite’s revenue in the same time period. Tencent’s huge position in the market has turned them into a video game powerbroker. A deal with them is a stamp of approval on a game, and a near-guarantee of success. When Tencent became the exclusive distributor of Fortnite in China, they quickly amassed 10 million pre-registrations for the game. They’ve helped make top games in the world, like Clash of Clans, League of Legends and Honor of Kings – the highest-grossing mobile game in 2017 – into household names. How? For one, Tencent rakes in a lot of money. In their latest quarter, they earned more than $2.5 billion in profit. So they can throw massive amounts of money behind every new game release. Tencent also owns messaging and social media app WeChat. Through the app, they can promote new game releases to more than 1 billion monthly active users. But the biggest value a Tencent partnership offers to games like Fortnite is access to the largest gaming population in the world: China. In China, games face stringent approval requirements by the government. But a partnership with Tencent all but guarantees a new game’s approval. **The Company That’s Making the Next Fortnite** Fortnite also owes its success to a small Chinese gaming company. That company was responsible for a big portion of Fortnite’s development. And now, the company is making its own game – in China, the best place on earth to make and launch a new video game. Game development in China is extremely cheap. For example, the company we’re talking about launched its first game in 2012… and made a 1,300% return on its investment. Games can be produced and iterated extremely fast, which is important when you’re creating the next Fortnite. And competition in China is still limited, since there are no Activision Blizzards or TakeTwos there yet. Tomorrow, we’re releasing a special coverage report. Inside the report, we’ll reveal the single company that is ready to launch the next Fortnite in China. They have partnered with Tencent in a big way. And they’ve already procured vital approval for their new game with the Chinese government. You won’t find this company with Google. “Games” isn’t even in the name. But it’s got some of the biggest names in gaming behind it. And it’s ready to take off. Expect the most comprehensive report on the video game sector in your inbox tomorrow. And in it you’ll find the analysis on the company we believe will make a big splash in the sector. Regards, Katusa Research --- # Fortnite – The Single Game That Made $1 Billion in the First Five Months of 2018 - URL: https://katusaresearch.com/fortnite-the-single-game-that-made-1-billion-in-the-first-five-months-of-2018/ - Type: article - Published: 2018-10-24 - Updated: 2023-08-01 - Author: Marin Katusa In [yesterday’s essay](https://katusaresearch.com/this-one-sector-just-may-become-the-biggest-bull-market-in-the-history-of-the-world/), we talked about an enormous culture shift and the mass adoption of video games. And that this shift is happening *right now*. Today I want to show you how much money is involved. And how much investors stand to profit… Over the past year, a new game called **Fortnite** has taken the world by storm. The game is based on a relatively new game type called *battle royale*. 100 players fight in a free-for-all to be the last man standing. Fortnite Battle Royale went from idea to launch in under twelve weeks. It took even less time for the game to find huge success. On the day it launched into early access in July 2017, it had one million players. Within two weeks, it had amassed 10 million unique users. Currently – just over a year after launch – the game has over 125 million players. **This makes it the second-most popular video game of all time. ** The unique and addictive game-play of Fortnite has taken over players’ lives: - More than 30% of Fortnite players have skipped school to play, and 20% have skipped work. - NHL players are so addicted to the game that some coaches want to ban it while the team is on the road. - Parents are hiring Fortnite coaches to help their kids win. Says one parent: “*It’s like soccer lessons for your kids*.” - People are leaving secondary education and promising careers behind to play Fortnite professionally. **If Fortnite were a website, it would be one of the top five in the United States. ** That’s how fast and widespread the culture shift into video games is. **Living the Livestream: Players Making Millions Off of Fortnite** One of the students who decided to forego college is Tyler “Ninja” Blevins. After graduating from high school, he decided to become a professional gamer. He now live-streams his Fortnite game-play on Twitch. It’s a site where people watch others play games, for 6-8 hours a day. His combination of personality and skill has caused subscribers to flock to him by the thousands. Gaming is his full-time job. Ninja makes money from ads, subscription fees, merchandise, and sponsorships. He even gets donations (his largest to-date is $40,000). It’s been estimated that **he makes about $500,000 a month**… But in interviews, he suggests that **he makes closer to seven figures every month**. In September 2018, he took a two-day break in order to participate in a charity tournament. He won the tournament – and $1 million for the charity of his choice. But it cost him more than $100,000 a month in lost subscribers. Ninja also made history in September 2018… He was the first video game celebrity to get on the cover of ESPN magazine. Tyler “Ninja” Blevins isn’t alone as a celebrity digital athlete. Tens of millions of people pay to watch other people play Fortnite. In five months after its launch, the game had received 1 billion views on YouTube. A recent tournament had over 42 million views. **A Billion-Dollar Gamble… On Dance Moves** But here’s the thing: Epic Games (the developer of Fortnite) is giving away the full version of the battle royale game *for free. * They made a major bet that they could make more money from in-game items. We’re talking things like costumes, cool-looking weapons, and “battle passes.” Buying a battle passes unlocks certain content. For example, it provides limited weekly challenges, player skins, dances, and harvesting tools. These extras make Epic Games a lot more money than they would have made from just selling the game. The results so far have been… staggering. In its first 200 days on Apple’s App Store, Fortnite brought in $300 million (it was only released on the Android platform two months ago). And it continues to rake in enormous sums of money for Epic Games. **Between January and May of 2018, Fortnite netted $1 billion in revenue.** The gamble is paying off at the player level, too: - Nearly **70 percent** of Fortnite players **spend money** on the platform. - Those players that do spend money have **spent an average of $85**. Multiply these two numbers together, and you end up with an average of about $60 spent by every Fortnite player. PlayerUnknown’s Battlegrounds (PUBG) is Fortnite’s main competitor in the battle royale genre. It costs $30 to buy a PC copy of PUBG, as opposed to Fortnite, which is free to play. But on average, each Fortnite player has already spent twice as much on Fortnite as it would have cost to buy PUBG! **A Game So Successful It’s Making *Other* Stocks Take Off** In 2012, Epic Games was valued at $825 million. Bloomberg estimates that by the end of 2018, it could be worth more than $14 billion – nearly a 1,700% gain. Fortnite’s epic success isn’t just giving its developer a boost… it’s making other stocks skyrocket as well. There’s **Funko (FNKO:NASDAQ)**, a company that makes tiny cartoonish action figures with oversized heads. They look like something you would find in a Happy Meal. Since the company announced they’re making a line of Fortnite figures, the stock shot from $6 to a high of $31, as the chart below shows: Another company, **Turtle Beach** **(HEAR:NASDAQ)**, makes high-end gaming headsets that are marketed to give gamers a competitive advantage. They make almost half of all gaming headsets sold in North America. In just under 8 months this year, the company’s stock rose from $2 to $32: Here’s Turtle Beach’s CEO Juergen Stark explaining their stock’s rapid rise: *“Because ‘Fortnite’ is free, there’s this opportunity to buy peripherals,” he said. “Instead of spending $60 on a game, they can spend $60 on a headset.”* And then there’s **Tencent**, a massive Chinese media company. It snatched up 40% of Epic Games in 2012. On paper, they’ve made more than $5 billion on their $330 million investment. Tencent is a huge company that you must take note of… we’ll discuss them more tomorrow. In the video game industry, Tencent is known as the kingmaker. It has the ability to turn a small game into a massive hit – which means boatloads of money for early investors. No matter where you look, the massive culture shift towards video games is making huge sums of money. Activision Blizzard is one of the biggest names in the world in gaming. Look at their performance over the past five years: Just a handful of big games have driven the stock up nearly 800%. **The Next *Fortnite* Is Out There – Here’s Where to Find It** Even though there are massive gains to be made in video games, lots of investors are still not paying attention. Maybe it’s because finding a good investment in the video game industry is really hard. Start with a list of the couple hundred gaming companies in the world. Then take out the ones that are already juggernauts, like Activision Blizzard and Electronic Arts. And take out the ones that have already taken off, like Turtle Beach – they don’t have the kind of upside we’re looking for. Then remove all the private companies, like Epic Games, and the ones that are no longer independent, like Supercell. Then remove the tiny ones that do not have the resources to actually make a full game (mid-size games can cost north of $10 million to make). Then cross off the ones without experienced leadership and vital distribution partnerships. And get rid of those that do not own a free-to-play game that can attract a high volume of users and get them to pay large amounts of money, like Fortnite can. As you’ve seen, video gaming is a gold mine. But you’ve got to know where to look for the gold. **Katusa Research has found a company that meets all of these vital criteria. ** **And you’ll be able to access the full report on it tomorrow.** And yes – we will reveal the name, ticker, and full analysis on the sector and company. If this company hits their distribution milestones with their partner, their game is set to take off. Just like Fortnite. Regards, Katusa Research --- # The Video Game Sector Just May Become the Biggest Bull Market in the History of the World - URL: https://katusaresearch.com/this-one-sector-just-may-become-the-biggest-bull-market-in-the-history-of-the-world/ - Type: article - Published: 2018-10-23 - Updated: 2019-04-24 - Author: Marin Katusa For 42 years, Stage One at Burbank Studios was home of the Tonight Show. Johnny Carson and Jay Leno used the stage to entertain millions with their sharp wit and peculiar antics. They shared the stage with presidents, heads of state, and world-famous celebrities. Celebrities still come. But they are not there to interview or perform anymore. Stage One has been retrofitted with two long tables, each with six chairs. The tables hold a dozen high-powered computers between them, and three massive 200-sq. ft. screens hang above. The bandstand has been replaced by a bank of analyst desks. One backstage room now houses “shoutcasters,” who provide play by play on the event. And another has “observers.” These people watch every movement made by the occupants of those 12 chairs. Stage One is now host to live broadcast video game tournaments, better known as “**eSports**.” For those paying attention, new media has replaced old media almost overnight. And there’s lots of money to be made in this changing of the guard. **Kids Are Already Training for the *Next NFL*** The entire setup at Burbank Studios is for professional digital athletes. These athletes are mostly young adults between 17 and 26 who compete live in front of an audience of millions. They’re participants in the Overwatch League – a video gaming league with two divisions in 12 cities across the globe. The game they are playing, Overwatch, is only a little over two years old. But it already has 40 million players. **More importantly, the game is raking in more than a billion dollars a year!** Owners of teams in the league include big players in sports, like Robert Kraft, (owner of the New England Patriots) and Francesco Aquilini (owner of the NHL’s Vancouver Canucks). Nate Nanzer, vice president of Activision Blizzard and commissioner of the Overwatch League, said… * “There’s going to be kids who can say ‘I play professional Overwatch for the same guy that Tom Brady plays for.’*” Steve Bornstein was once president and CEO of ESPN, responsible for much of its success in the early ‘90s. Later he became the president of ABC Sports, and a short while later, the president of ABC. Then he moved on to become the president and CEO of the NFL Network. Now, he’s the chairman of eSports at Activision Blizzard. A reporter asked why he decided to shift his career from traditional sports to eSports. Bornstein borrowed a quote from all-time hockey great Wayne Gretzky, who said: *“Skate to where the puck is going.”* “When I left the NFL, the only thing I saw that had the potential to be as big was the eSports space,” he told Wired Magazine. “What fascinated me was just the level of engagement, the fact that we measure consumption in billions of minutes consumed.” When Bornstein joined ESPN in the early ‘80s, it was only four months old. Critics of the new network slammed the channel. Who would watch a channel devoted entirely to sports? Fast forward and that thinking sounds absolutely crazy today. So if you’re asking yourself right now, *who would fill a stadium or watch a channel devoted entirely to video games?* You will look back and see how crazy that sounds. For Blizzard’s live broadcast of the Overwatch League, the answer to who would watch is easy: LOTS of people. And huge emphasis on the LOTS. The league reached nearly 11 million unique viewers across all platforms during its Grand Finals earlier this summer. And it reached an average of 280,000 viewers per minute on the popular streaming platforms Twitch and MLG (Major League Gaming) during its opening week. If you don’t recognize the names Twitch and MLG… You will. Very, very soon. **A Whole New Concept of Sports Is Kicking Off** Just last week, Nike signed its very first endorsement deal with an eSports athlete. Jian “Uzi” Zihao will be featured alongside NBA Superstar *LeBron James* in the latter’s newest marketing campaign, “Dribble & _____”. “Uzi” plays for the Chinese League of Legends team Royal Never Give Up (RNG). RNG also has endorsement deals with some companies you may have heard of before, such as Mercedes-Benz and KFC. This may be the first time you’ve seen eSports athletes advertised alongside big-name traditional sports athletes. But it won’t be the last. A staggering 380 million people will watch video games being played this year, a gold mine for advertisers. But the opportunity in video games is far, far bigger than that. If eSports are the new NFL – like Bornstein said – then video games are the new *sports*. The numbers show it. More than 2.3 billion people will play video games this year, with 200 million more coming online in the next two years. And the time they spend playing video games has risen by 50 percent in the past decade and a half. So what is propelling new media to replace old media *now*? **From Jay Leno to Activision Blizzard** First, demographics are changing fast. The generation that watched Carson and Leno is shrinking. The next generation – millennials – have become the largest population group in the United States. And instead of watching TV, they’re playing video games. It’s not just millennials who are turning to video games in droves. It’s also every generation after them. More than half of Gen Zers play video games for several hours each day. And older people are picking up video games too. The average age of a video gamer is now 37. **From Pong to *Fortnite*** New models and modes of gaming have made video games more accessible than ever. And to people from every generation. It’s much cheaper to play a game now than it is to watch cable TV or go to the movies. The old model of expensive one-time game purchases has transformed into a free-to-play model. This is where companies make money selling in-game items. The clunky old arcade consoles – and even the newer, expensive Xboxes – are fading out in favor of mobile and PC games. The up-front cost for gamers is now a fraction of what it used to be. **A Waste of Time to a Profitable Way of Life** Meanwhile, culture *has* already shifted. Video games used to be considered a waste of time and of life. Now, they have become an activity that people want to invest in. And if you’re not paying attention, you’ll be too late to make money on the massive tidal wave of profit coming in video games. While kids are still in middle and high school, they’re dedicating their lives to gaming. For example, Stefano Disalvo plays on the Blizzard Overwatch League. At 16, he decided he wanted to become a professional eSports player. He was still a high school student in Toronto. This won’t *be* the norm. It *is* the norm right now. When something accessible becomes *a way of life* for the entire next generation, you want to invest in it – fast. **Video Games Are Eating the World** Think of the industries that were upended when the iPhone entered our lives: newspapers, TV, computers, music, photography, transportation… and now health care. This shift in the marketplace towards video games is going to decimate entire industries: - Instead of going to malls, young people will hang out and talk to each other inside of video games. Your kids or grandkids likely already do. - Instead of going to the movies, young people will watch reruns of people playing video games. - Instead of watching sports, young people will go to packed arenas and watch people play video games live. This is happening all over North America and Asia right now. The global video game industry is expected to top $160 billion in 2020 – and continue annual double-digit growth rate for a decade. It’s going to create juggernauts as big as Apple and Uber. And right now, a few of those future mega-companies are still tiny. In tomorrow’s essay, we’re going to look at some of the players in the video game market that have already made it big. And you’ll see just how they became massively successful. We’ll start with one of the hottest games out there – Fortnite, owned by Chinese gaming giant Tencent… Regards, Katusa Research --- # Is Your Portfolio Ready for the Greatest Demographic Shift in History by the Millennials? - URL: https://katusaresearch.com/is-your-portfolio-ready-for-the-greatest-demographic-shift-in-history/ - Type: article - Published: 2018-10-19 - Updated: 2019-05-01 - Author: Marin Katusa Don’t look now but millennials are not just knocking on the door, they’re about to break it down. The economy depended on the spending habits of baby boomers the last three decades. The success and failure of many companies depended on the spending habits of those same baby boomers. It was *all* about the baby boomers. But that is no longer the case. You must pay attention to the Millennial Generation (those born 1981-2000) right now. And here’s why… The most recent U.S. Census indicated that millennials already outnumber baby boomers by more than 15 million. Population demographics and spending trends are changing fast. As you can see in the chart below, the young demographic (the millennial generation in red) has taken over as the largest population group from the baby boomers. *Source – U.S. Census Bureau Data, April 2018* Today, investors want to invest in an industry with super-fast growth that has a large young audience of Millennials. And let’s not forget the next up and coming population group – Generation Z (those born in 2001 and later). According to data compiled by Bloomberg, Generation Z will overtake the millennials in population number sometime by 2020. The shift in numbers from boomers to millennials and eventually to generation Z comes with a massive shift in dollars. While baby boomers’ spending is being phased out, millennials’ spending is rapidly taking over as the driving force of the economy. I see this generational “changing of the guard” happening in my own office. For the first 15 years of my career, I was the “young gun” in the resource sector. Now that I am one of the largest financiers in the industry, I find myself the oldest person in my own office and have the grey hair to match. Everyone else in my office is a millennial. And the nominal spending power at their respective ages is the highest of their peer generations. As the chart below shows, millennials account for a bigger share of the spending on cell phone services, eating out, and transportation than the baby boomers and Gen X-ers do. *Source – U.S. Bureau of Labor Statistics Data, (2016 Data – published Aug 2018)* Anyone not paying attention to the economic rise and coming spending power of millennials and Gen Z will regret it. It’s one of the greatest cultural, demographic and economic shifts in history. Think of Blockbuster CEO Jim Keyes, who made a bold statement to Motley Fool in 2008: “*Netflix is not even on the radar screen in terms of competition*.” Netflix was a tiny company at the time. Only trading at about $4 a share. But Mr. Keyes wasn’t paying attention to the beginnings of a massive demographic, technological and cultural shift. One that would see millennials cutting the cord and turning to subscription-based streaming video. Within two years, Blockbuster was bankrupt. Netflix is now worth about $400 per share. Or a 10,000% rise in under a decade. People who missed out on the Netflix rocket ship regret not seeing the direction millennials were moving earlier. Fortunately, they’ll get another chance. And it’ll likely be even bigger this time. **Millennials are Disrupting the Status Quo** It’s crazy to think… But thanks in large part to the relationship habits of millennials, the U.S. divorce rate has been sliced by 18% from 2008 to 2016. Below is a chart that shows how the divorce rate held steady and actually fell when looking at different generations… Millennials are taking their time to get married. They’re finishing school. They’re getting their careers on track and they’re getting their finances in order. But that’s not all… - Millennials are turning to *On-Demand Education* like Coursera and YouTube versus traditional methods of schooling. - They were among the first groups to embrace the “Gig Economy” and solicit their skills to make money on the side through sites like UpWork and Freelancer.com. - Instead of going to the grocery store, they use food delivery services like Skip the Dishes and meal prep delivery services like Fresh Prep. - Instead of taking cabs and staying at hotels, they take Uber and stay in AirBnB’s. - The youngest ever self-made billionaire is a millennial by the name of John Collison (aged 27) who founded the online payment company, Stripe. - And perhaps the next youngest self-made billionaire will be an Instagram and social media celebrity – Kylie Jenner. I’m sure by now the name (part of the Kardashian clan) needs no further explanation. **What’s Next for the Millennial Generation – Prepare to Profit** By now you’re asking yourself this: *“How the hell do I spot and make money from all these trends and disruption of the status quo over the next 10-20 years*?” Next week Katusa Research will release a series of editorials in our **Prepare to Profit Series**. It will cover one industry that is rapidly emerging as the next big bull market. It’s a market where crypto was in 2016, meaning few even knew it existed. It’s where the cannabis market was in 2014. Now, I bet you’ve wished you had a chance to go back in time and load up on cryptos and weed stocks. I bet you wished you could get up to speed quick and deploy capital in some quality investments in those sectors, at the time. Who wouldn’t? Then you’ll want to make sure you’re receiving *Katusa’s Investment Insights* emails next week… Because I will reveal what this emerging sector is and also my favorite pick. Regards, Marin Katusa --- # Rumor Has It – This Gold Company is Getting Bought Out - URL: https://katusaresearch.com/rumor-has-it-this-gold-company-is-getting-bought-out/ - Type: article - Published: 2018-10-12 - Updated: 2019-05-01 - Author: Marin Katusa Two Americans sat in a plush office on the 27th floor of a tower in Hong Kong. Their eyes were fixated on the live action coming across their TV screens. Across the street, a horse race was thundering to a dramatic finish. But seated in their plush office chairs, Bill Benter and Paul Coladonato were only interested in the lines displayed on three computer monitors. Those lines showed every bet they had made on the race. The citizens of Hong Kong bet more on horse racing than anyone else on Earth. And that particular race, on November 6, 2001, was a historic one. Rollovers from six previous races in which no one had won the jackpot had resulted in a larger pot than ever before. More than 1 million people placed bets. For 16 years, two of those bettors had fastidiously studied every factor that could affect a horse race: from the temperature on race day to what the horse ate for breakfast to wind speed. They surrounded themselves with people who were experts in their field – developers, journalists, analysts, and other bettors. Together, they had carefully crafted a horse racing betting algorithm based on about two dozen factors. Now, they were all-in on the race of a lifetime. “*We hit it*.” The instant the race ended, the computer-executed a program that determined which bets had won. 35 bets had perfectly called the finishers in two of the three races, yielding a sizable cash return. And one bet had called the top three finishers in all three races, netting the two men the grand prize: $16 million. They would never claim the winnings. After all, in the past decade, they had netted over $1 billion exploiting the Hong Kong horse race betting market, simply by making calculated and educated guesses. Over the past month, I went deep into my data and analysis bunker to do the same. I leaned on my experience, my Rolodex and my analysts. Together, we set up shop to make educated guesses on who will buy whom in the resource space. One of the exercises we did was to breakdown the ownership stakes of major resource companies. ### **Who do the Gold Majors Currently own Shares In?** It’s common for large gold companies to buy pieces of smaller producers or developers before buying the whole company. Buying a small stake in a company acts as a blocker, dissuading other suitors. In the next few tables, you’ll see a summary of which smaller gold companies the majors are investing in. And then I’ll provide my raw take. ### **Goldcorp:** [![Goldcorp holdings]](https://katusaresearch.com/wp-content/uploads/2018/08/Goldcorp.png) Can David Garofalo even buy out another junior? Under his watch, Goldcorp has been quite active investing in the junior exploration sector as seen in the table above. In addition to the list above, Goldcorp bought out both Exeter ($247 Million) and Kaminak ($520 Million) under Garofalo’s leadership. Garofalo thus far has failed to move Goldcorp’s needle. His next move will definitely need to move Goldcorp’s needle and buying a non-producer doesn’t move it. I do not see Goldcorp buying 100 percent of any company on the list above any time soon. The company is on the hunt for a project that will move the needle for shareholders. There have been many rumours floating around that Goldcorp is looking at making a move at Detour. If I was David Garofalo, I would go after Clive Johnson’s **B2 Gold (BTO:TSX)**. A company like B2 Gold would move the needle for Goldcorp and the assets fit into Goldcorp’s strengths. ### **Barrick Gold (ABX:TSX)** [![Barrick Holdings]](https://katusaresearch.com/wp-content/uploads/2018/08/Barrick.png) An obvious takeout candidate for Barrick is **Midas Gold (MAX:TSX-V)**. But that won’t happen until Midas’s permit is close to being issued. Midas CEO Stephen Quin and his team have a winner on their hands. I believe Midas will be bought out late 2019 or early 2020 by Barrick. Open Disclosure: I have been a major shareholder of Midas twice in the last 8 years. I am no longer a shareholder. Barrick has their hands full until the merger with Randgold is integrated. Until then, I don’t see any juniors being bought by the new Barrick. ### **Kinross Gold (K:TSX)** [![Kinross Holdings]](https://katusaresearch.com/wp-content/uploads/2018/08/Kinross.png) There are a lot of rumours that **Victoria Gold** **(VIT:TSX-V) **is close to being bought out. Kinross is still feeling the effects of the failed Red Back Mining $7 Billion dollar takeout. Again, B2 Gold would be a great addition to Kinross but I just don’t think Kinross can afford B2. That is unless B2 CEO Clive Johnson is willing to run the new Kinross. Now there is an interesting scoop for you. ### **Newmont Mining (NEM)** [![Newmont holdings]](https://katusaresearch.com/wp-content/uploads/2018/08/Newmont.png) There was a strong rumour floating around that Newmont would be buying out **Continental Gold (CNL:TSX). **With the horrific and tragic issues that have occurred to the employees of Continental in Colombia, I don’t see Newmont making the move. I just don’t see Newmont buying out 100 percent of Continental as Colombia is not its strength. On the other hand, the struggling **TMAC** **(TMAC:TSX) **is an interesting candidate. I can see an Australian underground miner making a deal with Newmont for their shares in TMAC and making a move for 100% of the company. I’ve said it in the past and I will say it again, the Pebble project which is owned by **Northern Dynasty (NDM:TSX)** is a natural fit for Newmont. I know all the political/social issues with Pebble, but that doesn’t change the fact it is a world class asset that’s not owned by a major mining company. ### **Teck Resources (TECK)** [![Teck resources company holdings]](https://katusaresearch.com/wp-content/uploads/2018/08/TeckRes.png) Now that Teck’s completed the build out of Fort Hills with Suncor, (Teck CEO) Don Lindsay can no focus once again on moving the needle. I don’t see Teck buying out 100 percent of any of the names above. However, I could see Teck buying out a chunk or all of **Nexa (NEXA:TSX)**. A wealthy family trust owns about ½ of Nexa and the trust will be sellers of the Nexa stock. ### **South32 (S32:ASX)** [![South 32 gold holdings]](https://katusaresearch.com/wp-content/uploads/2018/08/South32.png) **Trilogy (TMQ:TSX) **is a very interesting and promising company, and we spent a lot of time looking at this one. That said, South32 needs to make Arizona Mining (who it acquired in August 2018) a success before they buy out Trilogy. ### **Agnico-Eagle (AEM or AEM:TSX)** [![Agnico Eagle holdings]](https://katusaresearch.com/wp-content/uploads/2018/08/Agnico.png) I’m convinced Agnico will make a big move. Management are aggressive and have the balance sheet and ability to move quickly. I wouldn’t be surprised if Agnico and Yamana are talking about doing a joint bid on Detour, [which I wrote about before](https://katusaresearch.com/the-right-price-are-pretium-resources-and-detour-gold-for-sale/). Australian Gold Producers may be the most active group consolidating the Canadian listed developers and producers. Note: We have been working on a complete list for our paid subscribers. ### **Gold Winners and Losers** The gold sector has not had a world class (+5M ounces), sexy gold discovery in a number of years. The market is desperate for a real substantial gold discovery. Over the past couple of months there have been some notables, but nothing earth shattering. With so many companies flush with cash, where is the money going? Below is a chart which shows gold sector exploration budgets compared to annual gold discoveries over 2 million ounces. The red bars show gold discoveries since 1990 (in millions of ounces). The blue bars represent the global gold sector annual exploration budget. As you can see from the chart, the gold sector is spending significant money on exploration – but has little to show for it in the last couple years. For the past 5 years, roughly $4 billion has been spent on exploration per year. In that same time period, there have only been 10 discoveries, with a total of 59 million ounces discovered. This may sound like a lot. However, in 2017, the gold sector produced 107 million ounces. So, five years’ worth of exploration – 59 million in discovered ounces – represents only half a year’s worth of production. Looking at the chart, what can we conclude? Well, some may think the geologists today are not like the geos of the good old days, even with the new gadgets. Others will say the low-hanging fruit (gold) has all been found, and it is harder and more expensive to find new gold. Or maybe there are many exploration teams in the sector that should not be allowed to flip burgers at McDonald’s, let alone run an exploration company. Theories aside, in the non-AK-47 nations, gold is getting a lot harder and more expensive to find. So with limited new discoveries, I believe the most efficient way to build a gold company is through the acquisition of development stage or underperforming producing assets. I have invested millions behind this concept directly into only a handful of precious metals companies. And I have a target of watchlist companies that I will pull the trigger on when tax loss season brings their share prices into my alligator hunting field of view. ### **Spill the Beans Marin – My #1 and #2 Favorite Gold Stock** There are two gold companies that I kept off the lists above on purposes. I have invested over $10M into my two top gold stocks, and have just purchased another $1.5 million dollars’ worth in the last 15 days. **The larger of the two recently announced a piece of news that put its valuation based on *Enterprise Value to Ounce Produced* at a market cap 200% higher than it currently trades at**. In 3 to 5 years, subscribers and I will look back at this company and say to ourselves “*Wow, that stock was cheap in 2018*”. It is without a doubt my highest conviction gold stock. The second, much smaller and less known will be bought out by an Australian producer looking to increase their gold production pipeline. And there’s nothing like using the current gold price weakness to buy positions in your favorite, most undervalued gold companies. Regards, Marin P.S. To learn the name of my two top core gold stock positions, consider becoming a member of my premium research service, [*Katusa’s Resource Opportunities*](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=frntsubmnulnk). For a brief window, you have the opportunity to buy this stock at the same prices as market makers, top brokers and investment bankers. --- # Your VIP ticket to the San Francisco Silver and Gold Summit – The Katusa Advantage - URL: https://katusaresearch.com/your-vip-ticket-to-the-san-francisco-silver-and-gold-summit-the-katusa-advantage/ - Type: article - Published: 2018-10-05 - Updated: 2019-07-31 - Author: Marin Katusa One of my major goals in founding Katusa Research is to level the playing field in the natural resource sector… to provide individual investors with the insight and tools they need to compete with large funds and connected players. According to the huge amount of positive reader feedback, we’re achieving that goal. Through our educational efforts, exclusive videos, and profitable investment recommendations, members are getting the “Katusa Advantage” and sitting at the top of the resource investment pyramid. I’m writing today to make sure you’re aware of another great resource we’re making available to you, **absolutely free**. Once per year, Cambridge House International and I bring together the world’s top precious metals investors and entrepreneurs to the **2018** **San Francisco Silver & Gold Summit**. The show has a long history of success, as it has been running for many decades. This year, it’s being held at the Hilton Union Square in San Francisco, California on October 28th – 29th, 2018. This summit is a more intimate version of the Vancouver Resource Investment Conference. With a tighter capacity, it allows for a personal, private setting to get to know some of the best names in the resource industry. Every year, I personally pick the speakers. This year, we’re bringing many names that are familiar to you. Alongside me, we’ll have **Rob McEwen**, **Grant Williams**, **Rick Rule**, **Frank Curzio**, **Amir Adnani**, **Doug Casey**, **Jeff Clark**, **Keith Neumeyer** and many more. My team and I will have our boots on the ground on the conference floor and on the stage, interviewing companies and meeting with key management behind the scenes. I’ve spent many years in this gauntlet, and I know exactly what to look for in a great opportunity and speculation. I encourage Katusa Research readers to come say hello and attend if they’re in the area. For more information on the companies, speakers and agenda, [click here](https://cambridgehouse.com/e/silver-and-gold-summit-2018-75/speakers). As a special bonus, I’ve arranged for you to get [complimentary tickets](https://cambridgehouse.com/register/75). To get them, enter the promo code “**KATUSAGUEST**” at the checkout. During this conference, attendees hear fantastic presentations from top industry players. They see me “interrogate” company management in my search to find great investments for myself and readers. And just as importantly, they get the chance to speak one-on-one with company executives, fellow attendees, and professional investors like myself. We’ve made it a truly great event for folks who want to stay on top of the precious metals market. This conference is about making money. And I believe the precious metals sector has massive upside from these levels. I’m investing a lot of money in a handful of deals that I’m looking to move my needle. Attending the conference will be a tremendous way to arm yourself with the knowledge and connections you need to make the biggest possible returns. Towards the end of the day, I always bring the best of the best on stage for an ad-hoc session that always makes the audience leave craving more. Below is a video from last year with me getting the best out of **Doug Casey**, **Frank Holmes**, **Rick Rule** and **Mike Maloney**. I hope to see you there. Regards, Marin Katusa --- # The Marijuana Meltup – Is October 17th Independence Day or Reality Day for Cannabis Investors? - URL: https://katusaresearch.com/the-marijuana-meltup-is-october-17th-independence-day-or-reality-day-for-cannabis-investors/ - Type: article - Published: 2018-09-28 - Updated: 2019-05-01 - Author: Marin Katusa If you’re a cannabis investor then June 19, 2018 was probably one of the best days of your lifetime. It was on this day that Prime Minister Justin Trudeau announced the legalization of marijuana across all of Canada. After passing with a 52-29 vote, Canadian government officials agreed that October 17th would be the date that legalization would take place. This four-month time span produced extraordinary gains for investors. Everyone is bidding for a piece of the pie to see if cannabis stocks will become the next big thing. I’ve seen so many *next big things*, I’m immune. Or maybe I’m just getting on in years. **What is the Current State of Cannabis Legalization?** A larger look at North America as a whole indicates that Canada’s role in the legal cannabis industry is a huge one. Few states in the U.S. have made this move to date in comparison. All green areas in the image below depict legal or decriminalized cannabis use. By volume alone, it’s clear that legalization in Canada could shape the market for the entire continent. But you and I need to know if this major change is too good to be true. Will cannabis stocks provide a windfall for those who saw this coming? Or are the gains largely baked into the cake? Let’s explore some of the things to keep in mind as October 17th approaches. **Budding Excitement** Both investors and companies alike are turning their attention to unique areas of opportunity within the cannabis industry. Large deals seem to be happening on a regular basis. There are individuals who want to diversify their portfolios. And there are major corporations looking to almost monopolize certain parts of the industry. Things are changing fast. The cannabis sector is going through a wild transformation right now. Companies are vying for market share in legal markets that are opening up around the world. Companies like Canopy Growth and Aurora Cannabis are hell-bent on capturing market share. This is a trend that’s expected to continue. Data and trends suggest that before long (even as soon as the year 2020) only four growers will be responsible for over 60% of Canada’s cannabis demand. Are these the stocks to put your dollars in before they get too big to afford? Or is it the underdogs and IPOs that should be getting more attention? According to Stats Canada, nearly 1.3 million people consumed cannabis at least once a week in 2017. Total expenditures were over CAD$5.5 billion last year. Below is a chart which shows cannabis consumption in Canada. The 740 million person European market is the next region to be taken by storm. Many cannabis players are already setting up shop across the pond. Cannabis is still illegal in many European countries. But, it’s estimated that over 10% of Europeans consume cannabis on a recreational or medical basis. Let’s say that’s an exaggeration and it’s really 3% of the population which consumes cannabis. This works out to 25 million people. Now let’s assume Europeans consume the same amount as Canadians. This works out to about $4,300 on an annual basis, per consumer. This back of the napkin math indicates a potential market size of over $100 billion. That said, it’s going to take years for countries to get on board. Germany is the most advanced when it comes to medical and cannabis regulation. We’ll likely see companies use the German regulations as a template for approval in other countries as the sector matures. Below is a map which shows the likely path towards recreational cannabis in countries across Europe. **Alternative Cannabis Investments** Most investors thinking about cannabis investments tend to stick to traditional opportunities like growing and dispensaries. However other budding niches are rapidly emerging. The infused beverage market is a clear opportunity. Alcohol, sports recovery drinks, and cosmetics with CBD infusion are poised to enter the market. However, the biggest potential market is the pharmaceutical market. Sleep aids and anti-opioids are areas which could see cannabis breakthroughs. It makes sense in this context when we explore some of the larger deals that have hit the market as of late. Like CanniMed, a biopharmaceutical leader, which was acquired in early 2018 for CAD$1.1 billion. Emerging sectors of technology could bring promising aspects to the industry as a whole. Everything from lab testing equipment to growing procedures to roadside testing for police officers could be enhanced. This is akin to someone selling picks and shovels, or in the case of Levi Strauss – jeans to miners. The medical side of cannabis has also shown immense promise in the last few years. And with new funding, even insurers may add cannabis to medical drug plans. Options that are more user-friendly and that help bridge the gap for new adopters could also find themselves in a favorable position. Case in point, edibles and infused beverages have been shown to find more and more marketplace acceptance. Companies that can pivot into this niche could boom after October 17th. **The Ugly Side of Cannabis Company Valuation** So much of the movement in the cannabis stock market is happening at a rapid pace. And investors who are relatively new to the game may not be looking at all of the variables. After hype, hope, and momentum die down, valuation is key. I’ve seen this countless times on the TSX and TSX-Venture where the most famous cannabis companies are listed. **Let’s use several major sectors as examples of market size and participants…** The gold sector’s top 5 producers have a combined market capitalization of $50 billion. In 2017, roughly 106 million ounces was produced. This gives the gold sector a market size of approximately 127 billion ($1,200 / ounce x 106 million). This means that the top 5 producers make up 39% of the market. Using the same math, the top 5 companies in the oil sector make up 48% of the global market. So what does the cannabis sector look like? The top 5 cannabis producers have a combined market capitalization of $34 billion. The Canadian market place is only $4.2 billion, which is 8 times the size of the market. Now let’s add in the United States. California is worth $3.7 billion, and Colorado is worth around $1.65 billion. According to a major Canadian bank the total US cannabis market both legal and illegal is $50 billion. So, by this metric Canada plus the United States is $55 billion. Using this combined market, the top 5 cannabis producers make up less than 100% of the potential market. One can take it a step further and add on the $100 billion potential market in Europe. Now the total market size is $150 billion. Which means major cannabis producers would be less than 30% of the total potential market. So is the market as overvalued as you think? It is in the short term for sure. It’s going to take years for countries to get on board. That’s why you need to know the ins and outs of your cannabis investment. GMP certification (*Good Manufacturing Practices*), export licenses, extract licenses, access to strains. These are just a handful of questions you need to be asking cannabis management teams. Not to mention asking if companies are fully funded for multiple buildout stages. Or if they are going to need to go back to the capital markets for cash. Many investors might be hazy and in dream world if they think 100x multiples of cash flow will last as stock price valuations. Anyone remember the crypto, silver, or uranium bubbles within the last decade? Another element to consider is the government’s ability to roll out major changes to the law. Justin Trudeau’s announcement included a time frame of roughly 8 to 12 weeks to implement adjustments across the nation. It was supposed to be complete by mid-September. We’re now looking at the middle of October before legalization is actually here. But who’s to say if there will be any red tape in the way. The longer the market has to wait, the more instability there could be. If there is any change to the October 17th date, a sharp correction in cannabis stock prices could follow. **Final Thoughts** The stock market, and particularly investments in the cannabis industry, are still volatile. For a sector that’s still so young to see so many 9 and 10 figure deals has some investors excited and others frightened. And retail is now involved in a large way. So be diligent and do your homework before you make a bold move at today’s prices. **There are still excellent companies that can make headway in these markets with 5x and 10x potential**. But also plenty of others with obscene levels of froth. There are plenty of upside opportunities in companies that are on the cusp of key catalysts if you know where to look. And we’re monitoring this special situation closely. Regards, Marin --- # Avoid the Con Artists. Here’s the Critical Demand Secret in the Copper Market - URL: https://katusaresearch.com/avoid-the-con-artists-heres-the-critical-demand-secret-in-the-copper-market/ - Type: article - Published: 2018-09-14 - Updated: 2019-05-01 - Author: Marin Katusa Copper is a vital element used in nearly everything around you. It’s used for plumbing in houses and factories. Since copper is also a wonderful conductor of electricity, it is used in power lines, electric motors, wiring, cars, and appliances as well. This aspect – copper’s excellent electrical conductivity – makes it a critical part of the electric vehicle (EV) revolution. For example, an electric vehicle requires three times more copper than conventional internal combustion engine vehicles. On average, a car with an internal combustion engine uses 55 pounds of copper. A hybrid uses about 110 pounds, and an EV uses 165 pounds of copper. I’m long term bullish on copper, especially companies that produce a specific kind. Which I’ll get to in a moment. **What are the Copper Signals Flashing?** In the last ten years there have been 9 major copper discoveries, totalling 319 billion pounds. This may sound like a lot, but it’s not. From 1990 to 1999, there were 106 major copper discoveries, totalling 1.1 trillion pounds. Below you’ll see the total quantity of copper discovered annually from 1990 to 2018. Not only are there less pounds being discovered, it’s costing a lot more to find them too. Below is a chart which shows the cost of the copper discovered, based on annual exploration budgets. Costs have jumped from less than $0.01 per pound to $0.07 per pound of copper discovered. That’s a 7-fold increase in 2 decades. That’s alarming. And it’s not like you can just say “*hey, we need more copper, let’s turn on the next copper mine*.” Copper production is not like the shale oil and gas sector, where you can drill multiple wells and increase the production from the same patch. At a mine, your production is fixed. And rarely do mines achieve 100% production because things always go wrong. Mining is a tough, tough business. And when you look at the previous 3 years, there was no major global copper discovery. For two reasons: First – there’s less money in the sector to be spent on exploration. Second – these projects are getting harder and harder and deeper and deeper to find. Because we’ve been really benefiting from prior generations of exploration. That’s generally the cyclical nature of these things. Because the resource markets have been so horrible the last five years, there’s been very little money going into it to replace pounds produced. Hence, why you’ve seen the reserve grade go from just under 1% 15 years ago to 0.37% today. As shown in the chart below. This chart gives you a good idea of how tough it’s going to be to produce copper in ten years. And if you take a look at the copper days of supply over the long term, the supply is starting to dry up. Yet, the price isn’t responding. So what gives? **Copper’s Dirty Secret – What Majors Look for in World-Class Projects** It’s called “clean concentrate.” Copper concentrate is what a miner sends to a smelter after the rock that contains the copper is crushed and ground. Following that, the copper is extracted and concentrated. The smelter turns that copper concentrate (which is usually anywhere between 22.5 – 30% copper) into the copper we use in buildings and manufacturing. When a copper producer sends its concentrate to a smelter, it can contain nasty stuff like mercury, arsenic, and antimony. When copper concentrate has high levels of these “nasties,” it is called “*dirty*” concentrate. A producer can get “penalized” for dirty concentrate (meaning it gets less per pound of copper than it does for “clean concentrate”). And some smelters flat out refuse dirty concentrates when there is an excess supply of it. The global smelters are in high demand for “clean concentrate.” You probably didn’t know this, but for years, smelters have been dealing with this secret by “blending” the dirty concentrate with clean concentrate. Chile is the world’s largest copper-producing country. And it’s giant Escondida mine is showing higher *nasties* compared to when it first started producing many years ago. Many of the large copper-producing mines will go through the same thing. The Asian smelters who are now dealing with a high supply of dirty concentrate can dictate smelting fees, which means the dirty concentrate producers are getting slaughtered. This means that BHP, Rio Tinto, MMG, and Freeport are all dealing with this very dirty secret. Nobody is talking about this, but they will be soon. This is a small nuance that can have huge effects on a copper investment. A company can have a lot of copper in the ground, but dirty concentrate production can kill it. And your investment. Smelter logistics play another important role. Where will the copper company send their copper concentrate to? Access to a port is just one of the many concerning issues to check off the list. What happens if the closest smelter already has enough copper concentrate? This will mean additional transportation costs and lower copper producer profits. To sum it up I am very bullish on top-tier, world-class copper deposits that have the following qualities: - Low-cost production, - Clean concentrate, - Located in safe jurisdictions. It’s by owning assets with those qualities that safe, large capital gains will be made. It’s by owning those assets that copper investors can make a fortune in the electric vehicle boom. And, as the metallurgy and the geology changes, copper has a lot more impurities in it. So, the copper price the producer receives will be subjected to additional penalties stemming from down blending and treatment charges by the smelter. Smelters are going to need clean concentrate to blend with this dirty concentrate. You’ve got to know what the final product is. It’s not just geology. It’s not just the engineering, the logistics, and the cost. You have to understand the metallurgy. **The Copper Buyouts Have Begun** In this phase of the cycle, I think we’re going to continue to see some major consolidation from the bigger companies. Take the recent $6 per share offer for Nevsun (one of my top 2017 recommendations) by China’s Zijin Mining. Because they’re seeing exactly what I’m publishing and they know internally that they haven’t replaced their reserves that they’ve produced. And now, large copper producers don’t want to play a game of catch up which could take upwards of 15 years. Right now, they can buy something at a 50%, 60%, or 70% discount to what it would cost them to go and find themselves. That’s where I think the sweet spot right now in the current market is. And it’s where I’m going to be putting my big bets. Regards, Marin --- # Putting the Summer Doldrums in the Rear-View Mirror: What’s Next for the Resource Sector - URL: https://katusaresearch.com/putting-the-summer-doldrums-in-the-rear-view-mirror-whats-next-for-the-resource-sector/ - Type: article - Published: 2018-09-07 - Updated: 2019-05-01 - Author: Marin Katusa The end of summer is near. That means brokers, bankers and management teams are straggling back into the plush offices of downtown Vancouver and Toronto. Many of them are coming back to smaller accounts and market caps than when they took off for their vacation homes. The posterchild sectors of high risk capital in the first half of 2018 were the 3 C’s; Cannabis, Crypto and Cobalt. Today, crypto and cobalt stocks are heavily underwater. Cannabis stock are trading at levels that make most stock market bubbles blush. I’ve never been a big fan of the hype sectors. Call me boring, old fashioned and value investor oriented. I don’t put millions of dollars into the pipedream of some market individual who is unblemished with success. But the colossal busts that happened this year will set the stage for a chaotic and opportune next 4 months **Tax Loss Selling Season is Upon Us** Investors that got overzealous in the crypto and cobalt markets are facing 70-80% losses. I wouldn’t be surprised to see those companies trade down to their cash per share valuation. I don’t like it when people lose money in the market. It pains me. It’s why here at Katusa Research we are extremely patient and selective in our investments. **What’s on the Radar at Katusa Research for the Next 4 Months? ** While everyone else is watching the 3 C’s hoping for a bounce, I’ll be watching the 3 T’s. Trump, Trade, and Tax Loss. Trump and Trade are the 2 most important influencers in the commodity markets today. Trump and Trade are fueling extreme instability in both the prices of the commodities themselves and those companies which produce it. This volatility is going to fuel a serious tax loss selling season, which is only going to make matters worse. One my main outlooks for the year was a strong U.S. dollar. I was two months early on my call, but it has certainly come to fruition. The emerging economies are and will continue to be extremely weak. I don’t see significant strength in emerging market currencies before year end. In contrast, the economy and sentiment are looking strong and confident in the United States. Even though President Trump wants a weaker currency to remain competitive in global markets, the U.S. Dollar will remain the King of Currencies. Below is a chart of the U.S. dollar index which shows the performance of the U.S. dollar against a peer group of currencies. As the index moves higher, it indicates a stronger U.S. dollar and weaker competing currencies. This is a trend I expect to continue: A strong U.S. dollar, and U.S. centric negotiating tactics by President Trump will result in the exact opposite of what Trump wants—that being the strongest currency. If you think you’ve seen the last headline of “*Commodity Prices Sink on Trade War Scare*”, think again. Below is the performance of major commodities on a year to date basis, you’ll see the impact the 2 T’s (Trump and Trade) have had on the commodity sector… The base metal markets have been taking it on the chin all year, especially over the last few months. On a year-to-date basis, zinc is down 27% and copper is down 20%. The trade spat between the United States and China sparked fears that global growth would slow considerably. Unsurprisingly, the Katusa Copper Producers Index has been getting crushed. The performance of physical copper along with large producers and mid-tier/small producer indices is shown below. Fortunately for *Katusa’s Resource Opportunities* subscribers, we were invested in a company with a world class copper-gold project. It bucked the trend, and we recently sold it in the portfolio a few months ago for a 60% gain. Long term, I believe copper is going higher but not just yet. Due to the 3 T’s, I expect copper to remain between $2.50 and $2.80 for the rest of the year. **All That Glitters Isn’t Gold** The gold markets have not faired any better. Below are year-to-date results for physical bullion, senior producers and the mid-tier and junior indexes. To keep my subscribers up to date between our monthly issues, I send out alerts to my subscribers keeping them informed on the volatility and outlaying my investment thesis. We’ve assembled our watchlist and our now waiting for our prices to hit. I think we may get filled on our first tranche sooner than we think. But I don’t see gold going on a massive run anytime soon. I think we’ll see gold trade between $1,100 and $1,200 for the rest of the year. **Australian Gold Companies on our Radar** What I find very interesting is the outperformance of the Mid-Tier Australian listed gold producers over the North American listed producers. Below is a chart which shows the outperformance by the Australian listed gold producers compared to North American listed gold producers. The Aussie gold producers should be looking for fodder here in North America by preying on the weak underperforming names. Canadian resource projects are trading at a significant discount to their counterparts in Australia mainly because of the political risk now established in Canada under our weak federal government. If I was a cashed up Australian miner, I would be on the next flight over and loading up on cheap gold reserves and production. It is always my goal at Katusa Research to find the next big score. I pride myself on being able to see not where the ball is now, but where it is going in the future. The best athletes in the world see how plays are going to develop before anyone else. Whether you’re a Payton Manning fan or Tom Brady fan, I’d say it’s hard to argue against saying both of them were exceptional at finding the exploitive play. And when they do, they capitalize on the opportunity for a big score. I believe the Trump trade spat is creating some unique opportunities in certain undervalued sectors. One such sector is extremely hated and ripe for a massive bounce. It’s barely appeared in mainstream headlines (and we track them all). And you won’t hear about it in any other outlets. It’s not *sexy*, but it makes money (a LOT of it) and has tremendous upside. And that’s why this company has my attention. Katusa Research just published on one of the most undervalued under the radar producers that you have most likely never heard of. No other newsletter writer we know have has even mentioned this stock never mind actually published a full in-depth analysis KR style. It’s a hated sector that’s seen more bankruptcies than most. Most people I talked to about this company didn’t even know it was a public company. I believe the protectionist moat that governments are placing around their industries will be very lucrative to this speculation. This company is run by a world class management team that has put over $500 million of their own money into this venture to make it work. If you’re a *Katusa’s Resource Opportunities* subscriber, you know exactly the company I’m talking about. And I think it will make a big splash in the next 6 months. And if you’re not a subscriber, [consider signing up](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiewebsite) to learn the name and incredible story behind this behemoth that’s about to take advantage of 2 of the 3 big T’s… Trump and Trade. I believe I’m going to at least double my money with this pick and get paid along the way. Regards, Marin --- # If Kirkland Lake Gold is Hunting Juniors like an Alligator – Who is on Its Radar? - URL: https://katusaresearch.com/if-kirkland-lake-gold-is-hunting-juniors-like-an-alligator-who-is-on-its-radar/ - Type: article - Published: 2018-08-31 - Updated: 2019-08-26 - Author: Marin Katusa One major mistake I made in 2017 was selling Kirkland Lake (KL.T) too early. Today it is by far the best performing North American listed gold producer from a share price perspective. I recommended Kirkland Lake to my subscribers at $7 per share. Last month, the stock cracked $30 per share. Kirkland Lake Gold is a company that I am very familiar with. And I have owned it several times. The company started out like most do. Several management teams and ideas came together at the right time. And in the right sequence. The first meeting the new management team at Crocodile Gold had in 2015 was with me in my Vancouver office. After the meeting, I bought 10 percent of the company. [The first report published](https://katusaresearch.com/an-easy-arbitrage-opportunity-the-next-new-gold/) when I opened the doors of Katusa Research was on this company. In fact, the first institutional level report published on their new business plan with Crocodile Gold becoming Newmarket Gold was the report I published. Newmarket Gold merged with Kirkland Lake Gold, and under Tony’s leadership, Kirkland Lake has become the $5 billion powerhouse it is today. Then in the November 2017 issue of Katusa’s Resource Opportunities titled “*Get Ready to Buy: Bargain Season is Coming*”, I recommended **Kirkland Lake Gold **to my subscribers. The market failed to recognize the cash flow generation of the newly merged company, and the incredible assets that came from the Newmarket side of the transaction. A company with such high-quality assets and cash flow should have been trading at a premium. Instead, it was trading at a significant discount. One of my favorite peer comparison metrics is the Enterprise Value per Ounce multiple. It’s an apples to apples comparison between a company’s Enterprise Value (Market Cap + Debt – Cash) and its gold production. At the time it had an enterprise value per ounce of gold produced much lower than its peer group… This was just one of many comparables I published in the report to my subscribers. Another comparable I used was the company’s cash flow per share compared to its peer group. The chart below shows the Price to cash flow of the intermediate gold producers from 2016. At the time of that Nov 2017 publication, the stock was trading at CAD$8.29. But I was not comfortable buying at those prices. I wanted to buy it like an alligator under CAD$7.00. And that’s the guidance I wrote to my subscribers: *There is no need to rush out and buy a full position and wait for the repricing back to the peer group. This will take alligator-like patience. Accumulate stock slowly and always buy on weakness; do not overpay for the stock.* A couple of weeks later, patience prevailed. We were able to purchase the stock under the buy target. My investment thesis was proving correct over the next several months as the market started to wake up to Kirkland’s potential. Take a look… Months later, Kirkland Lake Gold was the top performing gold stock in the first quarter of 2017. We closed our position with a big gain. Yes, I sell too early. I know. My wife tells me all the time. So does Doug Casey. But they have both done incredibly well with me. To succeed in resource stocks, you must be willing to stalk assets and wait for exactly the right time to buy. When the stars align and we get a great price on one of our stocks, we strike. As I often say, you are the alligator. Your list of assets is your prey. By “stalking,” you’ll get them at the right time, at the right price. **Now it’s Kirkland Lake’s Turn to Justify its Share Price** Today, Kirkland Lake is Eric Sprott’s largest publicly disclosed resource position. He owns 22 million shares, roughly a CAD$560 million piece of the company. Other companies have seen their share prices depreciate in these tough precious metals markets. Meanwhile, Kirkland Lake shares have appreciated sharply. Given this unique situation, I believe Kirkland Lake should backfill their share price. It’s a polite way of saying that Kirkland Lake is expensive relative to its peers. Eric, Tony, and the crew at Kirkland Lake are smart. I believe they will use their “currency advantage”, aka expensive stock, to buy an undervalued gold producer. Management know this. I know this. Investment Bankers know this. And now you know this. So, why am I focusing on Kirkland Lake? Because the share price is ahead of itself. And management, being smart, will use their “expensive share price paper” to take over an “undervalued” producer and improve the value of Kirkland Lake. Below, I detail my methodology for finding these next takeover targets. **Who Will Kirkland Lake Buy? Katusa’s Gold Producer Takeover Methodology** I called a meeting of the Katusa Research brain trust and we got to work. For those readers that want to know the criteria that we used, here you go. First, you want to identify single producing projects that are: - Not owned by majors; - Located in [non-AK47 nations](https://katusaresearch.com/use-ak-47-indicator/); - Producing at least 75,000 ounces of gold per year. I’ll save you some time and tell you this. There are over 600 producing gold mines in the world. I ran the criteria above through more filters and cross-referenced my mining database. I then eliminated the following: - Low-grade projects; - Projects with short mine lives (less than 8 years with no exploration potential); - High-cost mines (cash costs of more than $800 per ounce; general rule of thumb – if cash costs are $800, all-in sustaining costs could be as high as ~$1,200 per ounce). Again, I’ll save you the time. I came up with a list of 89 potential mines. From the remaining list, we combed through each individual project. This is the criteria that we used: - Who would it be a good fit for? - Does mining the deposit need a unique skill set which discourages many potential suitors? - Are there any potential synergies with mines operating nearby? - Is there some low-hanging fruit to be plucked which creates extra value for the buyer? Kirkland Lake Gold has the market cap (CAD$5.3 billion) and the cash (CAD$400 million) to make significant waves in the gold sector. I believe gold is going lower and gold equity prices will drop with it. I also believe that tax loss season (just a few months away) will add to the selling pressure, and that this will happen to even the most likely takeout candidates. If you’re a director or on the management team of a gold company, you need to know if you’re on their radar. I’m ready. My subscribers are ready. Are you ready for the coming race for the best undervalued gold assets in the world? Regards, Marin P.S. From the original list of 600 possible mines, I’ve targeted **four** companies that I believe could be acquired by Kirkland Lake. And I’ve just published those names and tickers to subscribers of my premium research service, *Katusa’s Resource Opportunities*. To learn more about becoming a subscriber – [click here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiemail). --- # Does Your Favorite Mining Company Have Cash in the Bank – Let’s Find Out - URL: https://katusaresearch.com/does-your-favorite-mining-company-have-cash-in-the-bank-lets-find-out/ - Type: article - Published: 2018-08-24 - Updated: 2019-05-01 - Author: Marin Katusa The situation looks bad for the junior mining, crypto and blockchain heavy TSX-Venture exchange. Take a look… So is there a saving grace? Maybe. On a cumulative basis, mining companies have better cash positions now than they have in the last six years. Below is the cumulative cash position for the TSX-Venture mining sector since 2004. Cumulative cash positions in the sector today total over CAD$2.2 billion. This is the most cash held in companies’ bank accounts since the end of the bull market in 2012. Taking a deeper dive into these cash balances is important to see the true health of the mining sector. Below is a chart which shows the median cash position for each year since 2004. The current median cash position is a little over CAD$400,000. The cash position has been improving since the bear market low in 2015. Take note that in the mining world, $400,000 is peanuts. To be frank, it is barely enough to keep the lights on. Let alone create any shareholder value. (Side note: I always get the comment “*Yeah, but Marin, we are going to bring a major to joint venture in our projec*t”. Good luck. The smartest prospect generators never allow themselves to have less than $2 million in the bank. The majors know how to read a balance sheet. And they will use the limited cash balance to *their* advantage.) No meaningful mineral exploration can be done with a couple hundred thousand dollars. Even if the company comes up with positive geophysics or grab/trench samples, more money will have to be raised to complete further exploration. More money means share dilution. Then the share price will suffer. And so will the shareholders. In the current market, avoid companies with less than $2 million in the bank like the plague. Unless you’re a hard-core gambler. Being an alligator and selective with your speculations is crucial to making money in the resource space. **Many Mining Companies hold a lot of Cash in the Till** There are more companies with over CAD$5 million in cash right now than there have been since 2012. This is good because it funds exploration and fuels company takeovers. Below is a chart which shows the number of companies with over $5 million in cash. This makes for an interesting situation in the markets. Commodity prices are getting hammered, but there are over 90 companies that are flush with cash. I am following these companies very closely. A smart management team will use this cash in a bear market to create significant shareholder value. **Should we be Buying New Positions Now?** Not yet. I have built my core positions in my two core gold companies (I bought a lot more of one earlier this month) and will add more during market weakness. And I am also fine-tuning my spreadsheets for new positions on my watch list. Many companies are hitting valuations and prices faster than I thought. The alligator is getting ready to pounce. But not yet. The old investment saying is “*buy* *when there’s blood in the streets*”. But resource investors should take that saying with a very large grain of salt. Bear markets can last a long time and share prices can always go lower. I believe we have not seen the worst of it yet. **The Gold Price and the U.S. Dollar** Next up, you’ll see a few charts which lead me to believe we are still at least a few months away from a major buying opportunity. And we have to be prepared for any capitulation that can happen. First, we should not fight gravity. Below is a chart which shows the price of gold since the beginning of the year. There is nothing that tells me from a technical or fundamental perspective that the price of gold has bottomed out. This is a very ugly chart with gold breaking below $1,200 per ounce. The next chart is the U.S. dollar index. This index measures the U.S. dollar against a basket of currencies (Canadian Dollar, Euro, Swiss Franc, and others). Right now, the U.S. dollar index is hovering at YTD highs. A high number indicates U.S. dollar strength. I don’t see any reason that the U.S. dollar will weaken. I’ve been writing about a strong U.S. dollar for many years now. And I hold about 60% of my cash position in USD. The rest is in Canadian dollars, my home currency. Over to an important industrial metal, the price of copper is breaking down. Prices have rapidly deteriorated from $3 per pound in a matter of a few weeks. A chart of year-to-date copper prices is below. I wrote in my 2018 outlook that I expected the U.S. dollar to be strong, and I cited it as the main factor in suppressed commodity prices. Nothing has changed in this view. I know I sound like a broken record in saying I want to be an alligator and wait for prices to come to me. But from the charts I have put together, I do not see a scenario in which the market does not deteriorate further. I am a major bull on copper, and I have been on the board of Canada’s third-largest copper mine for 12 years. But that does not mean that the price of copper will not experience near-term downward pressure. What we want and what we must prepare for are two different things. I have built my entire career and net worth off of being patient and a contrarian. It tests my patience often. But readers and subscribers are writing to us in droves. They’re starting to “get it”. **Where to Target Your Buys in Resources** Right now, there are a handful of companies I would love to own. But I am practicing discipline and waiting for lower share prices. Because why pay more than you have to. And when the buying starts, there are only two types of companies I want in my portfolio: - **Takeover targets ** - **World-class companies. **These are the ones that I want to build long-term core positions in. And add to my position during periods of market weakness I know what you’re thinking: *Marin, I don’t spend $100,000 per year on data terminals and services. Where can I find takeover targets? * To start your search for gold stock takeover targets, take a look at our free [Market Intelligence Center](https://katusaresearch.com/gold-stock-buyout-candidates/). And remember we are in a marathon, not a sprint. Our strategy is proven to work if you stick with it. **Keep your eyes on your email inbox. **In next week’s *Katusa’s Investment Insights*, I’ll reveal a company that’s an alligator on the prowl for junior mining stocks. Regards, Marin --- # This Powerful New Uranium Production Technology Could Rock the Sector like Fracking Did for Oil - URL: https://katusaresearch.com/this-powerful-new-uranium-production-technology-could-rock-the-sector-like-fracking-did-for-oil/ - Type: article - Published: 2018-08-10 - Updated: 2020-02-14 - Author: Marin Katusa Driven by huge increases in connectivity and computing power, technology is advancing at an exponential rate. This means that not only is conventional change is occurring… but the rate at which it is occurring is also speeding up. Depending on where you stand, this is either thrilling and lucrative… or confusing and harmful. For example, think about the ride-sharing service Uber. Uber caused a massive change in an entrenched industry in just a few years. One day, the taxi business is big and powerful. The next day, it’s road kill. You also have Netflix gutting movie-rental chain Blockbuster in just a few years. Those kinds of tectonic industry shifts used to take a lot longer to play out. Sometimes decades. But when you spot a technology that is surfing on the wave of change, you need to pay attention. Especially in the resource markets. Because it could be the edge that sends one stock soaring while the other ones remain stagnant. **Much Wiser Uranium Technology ** The last time the Uranium sector had a significant technology that was a game changer was the implementation of ISL (**I**n-**S**itu **L**eaching) in the U.S. in the late 1960’s. I may be dating myself, but it wasn’t until after my first rodeo in the uranium cycle that ISL was renamed to ISR (**I**n-**S**itu **R**ecovery). Why? It had nothing to do with any advancements in technology. Instead, the industry players got together and it was a result of the “promoters” believing ISR as a name would be better received by the public than ISL. Isn’t the industry clever? Leaching vs. Recovery. It’s the same technology, just different words. The only major improvement to ISL uranium production since its inception was the evolution to W-ISR (**W**arm **ISR**) production. (pronounced – *wiser)*. I’ve written and spoken about the advantage of WISR since 2013. It’s shallower, has no concrete foundation header houses, zero miles of insulated and buried water piping connecting the injection wells to production zones and then to the header house, and no radioactive concrete facilities to reclaim. This results in cheaper uranium production costs. Yes, for the record, the industry didn’t get together and come up with WISR. It was me because it was easy to understand. WISR = Warm ISR = The “Wiser” way of profiting from uranium. I digress. Back to my thesis. When I first started in Uranium, Kazakhstan produced less Uranium than Slovenia and nobody talked about Kazakhstan. It was a combination of ISR and WISR that took Kazakhstan from a 0 producer to producing 40% of global uranium production in two decades. ISR was a game changer in the uranium production industry. No different than fracking in the oil patch. **The Newest Uranium Technology in the Prolific Athabasca Basin** Most fund managers, newsletter writers, and speculators are taking guesses on what the effects of Section 232 will be on the uranium sector. The results will be positive. So rather than postulating, I’m having my subscribers focus on world class assets with the lowest quartile of production costs. The Athabasca Basin in Canada holds the highest-grade uranium and some of the lowest cost producer in the world. Every sound uranium investor should have exposure to the Athabasca Basin. And the Athabasca Basin is ripe for a new technology that could accelerate uranium extraction and movement. **Introducing SABRE (Surface Access Borehole Resource Extraction) Technology ** It’s a mouthful for sure. But it’s a new technology that can bring down uranium mining costs big time in the worlds highest grade uranium basin. This opens up projects that otherwise wouldn’t come into production because of their size. To be clear, the current version of SABRE will not be applicable to most U.S., African, and Eurasian deposits. But, the current version ***will*** make its mark on Athabascan Basin uranium production. Future versions of SABRE may be applicable to other regions. But for now, I’m focused on what SABRE can do for me today. SABRE is a promising new technology that can keep the mills on the Eastern side of the basin running at full capacity from various smaller, shallow satellite uranium deposits. At its core SABRE combines surface drilling & hydraulic borehole mining. The advantages are many. It’s not capital intensive (meaning it’s cheap to implement). Production volumes can be flexible. And the environmental footprint is small (that is a good thing). There are a few basic things that must happen to make SABRE work: - The uranium deposit must be less than 300m from surface; - There must be competent rock around the deposit; - Logistics to the uranium mill must be economic. *Photo provided by AREVA Resources Canada* **Which Uranium Companies Will SABRE Technology Work For?** Using my Athabasca Basin database and countless site visits to the different deposits in the basin, I’ve created my own set of metrics that would work for SABRE. I’m left with 35 known and drilled out uranium deposits that make up over 300 million pounds of uranium that I believe geologically meet the requirements for SABRE. Nobody has ever published this before. And if you hold any uranium stocks in your portfolio, you need to ask yourself this: “*how does SABRE affect my uranium holdings*?” Of the 35 uranium deposit candidates, 10 don’t meet the logistical distance and the surrounding rock competence to make SABRE work. That still leaves a little over 200 million pounds of uranium within 25 deposits that can be streamlined using SABRE. More importantly, what I like about SABRE is that it minimizes the permitting time, upfront capex, and surface disturbance and minimizes the surface footprint. SABRE is more like an oil well rather than a mine. And it has a cool name to boot! **How much Uranium would be produced from deposits as a *Satellite Deposit* using SABRE?** Today, very little production (other than uranium produced from “testing” the technology) occurs using SABRE. But, it’s very close to becoming a “new” method. With a great shot at becoming the new “norm” in the Athabasca Basin. By 2022, I think it’s sound to suggest that around 1 million pounds a year, per year, is possible in the Athabasca basin using the technology. And that’s just in the first few years. Just like any technology, it takes time to implement and integrate into the field. But by 2030, I can see a combined ~10 million pounds a year being produced via SABRE. And that’s on various different “satellite” deposits that are within 300km of a mill. Interesting enough, the minimum time (being very optimistic) to get a uranium mill permitted in the basin would be 5-7 years. But realistically, it’s closer to 10-15 years. Could SABRE push out the need for big standalone deposits like NexGen’s ultra-high-grade world class Arrow deposits? It’s an interesting thought exercise, and something I would really be paying attention to if I was a **NexGen** or **Fission** investor. (Full disclosure, I do not own any of either company. But have been a previous shareholder and sold both for a profit). Almost all of the 25 SABRE qualifying projects are owned by either Cameco, Orano (formerly known as Areva), or the Japanese consortiums meaning they have an incentive to implement SABRE. I did find a way for us to profit from SABRE. There is a pair of uranium juniors that do have projects which could use the technology. Right now, I wouldn’t give those companies any additional dollar value for their SABRE potential, but I don’t need too because they are very cheap on a fundamental value basis. But it’s phenomenal blue-sky potential. We aren’t in a market where I need to pay for potential. I have been to the projects and to the mills close to them. And more importantly, I’ve been on the roads that connect the two. I have known management for years and they are the largest shareholders of their company. (This is also another great sign of skin in the game and that they’re aligned with their shareholders). Understanding the logistics is key to picking the right SABRE contenders. **Building a Uranium Plant is Expensive, SABRE is not** How would the market react given the following scenario… Why build a multi-billion-dollar capex project that would require 5-10 years of permitting on top of finance and construction delays. Instead, bring a low cost, small footprint, quick to permit, SABRE uranium production project online. Which, by the way, can be economic sub-$40/lb uranium. Are those multi-billion-dollar projects economic at $40 uranium? Look up the details of the price assumptions used in their NPV calculations to answer that question. I know of two companies that would both become immediate takeover targets. We own one of them, which has a sub $200M market cap, in our *Katusa’s Resource Opportunities* portfolio. But, I doubt there will ever be a big (+10 million pounds) SABRE producing single mine over the next 10 years. I believe SABRE will work well with satellite projects (in a hub and spoke manner). This is where, for example, 5 projects each feed half a million pounds to the mills in a “Hub & Spoke” strategy for a combined 2.5 million pounds to be blended with the ”anchor” mine that feeds the operating mill. Let’s use a realistic scenario: This could work at the world’s largest operating mill of its kind, the McLean Lake uranium mill in the Athabasca Basin. Cameco’s Cigar Lake uranium production would be making up the “bulk” of the uranium supply that feeds the McLean Lake mill. Then the satellite uranium deposits, perhaps some owned by a “junior” using SABRE and delivering the uranium in a “Hub & Spoke” like manner would make up the remainder of the uranium that feeds the mill to operate at full utilization. (This is a hint for the stock sleuths that don’t want to pay for my service and want to do the research on their own – or you could save your time and subscribe to the best [right here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)) SABRE should be viewed as something that will help keep the mills on the east side of the basin full when its ore is blended with the existing built and permitted mega mines (like Cigar Lake or McArthur River when it comes back online). In theory, the satellite production from SABRE can delay Cameco and/or Orano’s need to buy a world class asset that is non-producing deposit from NexGen or Fission for years. (Note: I have nothing but respect for both geological teams who made incredible discoveries on both NexGen and Fission – so it’s not like I am trying to bring any negative attention to their projects. I am not. I am just being pragmatic). Now, I’m not being theoretical here. I’m being realistic. SABRE requires no underground miners. Actually, it requires no miners at all. It only requires a couple of drillers on the drill pad and a few truck drivers delivering the productions to the mill. Today’s technology allows most of the hard decisions to be made remotely (like in the oil patch) using ultra-fast and sophisticated computers. And the engineers can operate and moderate the production remotely from a central command post. This is no different than what happens at a frac field in the oil patch. **Success of SABRE is New, But SABRE is Not a New Uranium Technology ** I first came across SABRE back in 2013. At the time I found it interesting, but it was still a science project back then. Because of my experience in fracking, I took note, but I knew it would take many years. Over the last 5 years, there have been many modifications and SABRE 3.0 is currently underway and production results have been positive. And it’s actually producing uranium, albeit in small quantities (less than 500,000 pounds from one project this year). This is how technological progress happens in any resource extraction industry – it takes many years. Remember, it took the shale oil and gas sector twenty years and hundreds of billions to get to Fracking 2.0. We are still in SABRE’s early days. It’s the first year of implementation and many more improvements will come). And to put it into context, we are in the time where fracking was at in 2000. Only the die-hard uranium guys know about it, and those who do know about it, do not have the business savvy to profit from it. We are the first investment letter to discuss the details of SABRE publicly. And more importantly, which public companies have exposure to and will profit from the technology called SABRE. And now it’s on your radar too. Regards, Marin P.S. Uranium is starting to get a lot of attention as the spot price is up over 14% this month. Expect numerous promotions from newsletter “guru’s” promising 1,000% gains if you subscribe to their secret uranium formulas. Be uber careful who you listen to on uranium. The sector has been so down for so long that there are only a handful of individuals who really know the sector and how to profit from it. If the guru was promoting marijuana or crypto a few months ago and is now promoting uranium, stay away. Especially stay away from the “guru” whose firm doesn’t allow the “guru” to invest alongside you—they have no skin in the game. Over the last 15 years, I have been a major financier of companies within the uranium exploration, development, and production sector. I know for a fact I was the first to publish the absolute best way to play the uranium sector on a risk to reward basis. That company was in the July issue of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)*. Katusa subscribers have exposure to SABRE for free. We have written on the best value plays that have considerable upside which we get for free. One of the companies I own in my *Katusa’s Resource Opportunities* portfolio is my favorite way to take advantage of the SABRE technology. To learn the name of the uranium company I can see rising 200-500% in short order with any sharp rise in uranium prices, [click here to sign up](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail). --- # Eight Questions to Ask When Hiring Your Stock Broker - URL: https://katusaresearch.com/eight-questions-to-ask-when-hiring-your-stock-broker/ - Type: article - Published: 2018-08-03 - Updated: 2019-05-01 - Author: Marin Katusa My fund is one hundred percent focused on the commodity space. And I have tremendous experience dealing with many brokers from several different companies. Not only am I going to tell you the right questions to ask, but in the process, I will also explain why having a full-service broker is a good idea. We’re going to walk through some of the things that you should be asking your broker if you have one. And if you don’t, maybe this will help you consider getting one in the future. So let’s get you started…** ** **Question 1 – Do you have experience in and access to Canadian listed stocks on both the TSX and TSX-V?** The first thing you want to ask your broker, whether you already have one or if you’re shopping around, is whether or not he has market access. What I mean by that is access to the TSX Venture and the big board (the TSX). If you’re Canadian, it’s a lot easier. Just about everybody has access to these markets that I just listed. But if you’re an American, it’s actually much harder – and a lot of American brokerages do not have access to the TSX Venture. At Katusa Research we get emails all the time from subscribers saying, “*I can’t buy the stock because my brokerage house won’t let me*“. And sometimes that’s because they’re using a discount broker, or their current full-service broker doesn’t bother with the resource sector stocks listed on the Canadian exchanges. So the question you want to ask is: “*Do you have direct access to buy on the TSX, and the TSX Venture in Canada?”* Sometimes they’ll say, “Oh yeah, we do”. But what they’re actually doing is they’re buying the equivalent stock on the OTC bulletin board. It is not the same. The OTC board is not a primary listing and there’s not nearly as much volume in most instances. In most cases, a market maker will notice the volume and create a spread resulting in you paying more for the Canadian stock then you should be paying if you had direct access to the Canadian listing. That’s question number one: “*Do you have direct Canadian market access?”*** ** **Question 2 – What kind of deal flow do you have access to?** This is the second reason you should have a full-service broker (in addition to a discount online broker). And the second question you should ask is: “*What’s your access to Canadian resource deal flow like*?” Why? Because a broker who has a lot of deal flow on junior resource deals usually means he is active and experienced in the Canadian junior resource markets. Deal flow is an important piece of how I have built my funds and personal holdings over the years. A lot of deal flow helps you see where the money is going and what’s happening in the sector. The stockbroker you choose for Canadian resource stocks should have a solid grasp of the deal flow in the sector. He should know who is doing financings, who is buying new assets, and so on. This type of information won’t just be sent to you and every other client in a mass email chain. You need to ask for this information directly. Don’t be shy. Ask what current deals your broker is working on. Think of the broker as your employee.** ** **Question 3 – Do you have access to the right research reports?**** ** Research reports on the sector are one item that a lot of people forget about. If the broker says he has a lot of deals, then ask for his firm’s research reports on the deal flow he claims to have. There are over 1,000 companies in the mining sector alone. It’s almost impossible to do due diligence on all of them. But if you have access to a brokerage house where a broker states he has great mining or energy deal flow then its only logical that the firm will have a team of in-house analysts like the team at Katusa Research (but not as good!) who are doing due diligence on all the mining companies out there. So, you can read their reports for free because your fees for the full-service brokerage include access to such reports. That’s just part of the service that the broker offers. But you have to ask for that as well. It’s not expensive and, once again, you don’t have to be afraid just because you’re not a big client. It’s super simple for your broker to do, and it provides you with a lot of information from a brokerage firm’s perspective.** ****Question 4 – How quickly can you execute my trades?** Trading and execution is another important aspect of having a good full-service broker. What if you’re not in front of the computer all the time – how are you going to execute a trade? Remember, these brokers work for you. You’re their client so you want to inform them of things you want to be doing and companies you want to be buying. And they’ll do it instantaneously for you. You don’t have to go and log into your account and find a stock online and look up the ticker symbol. All you have to do is make a phone call or send an email. And that’s what they’re there for. If you think your brokerage account is too small to get personal service from your broker, just remind the broker that you are a subscriber to Katusa Research and it’s only a matter of time before you become a big client.** ** **Question 5 – Do you provide active management such as trading alerts, limit targets, crosses, and insider buying/selling and Private Placements?** Trading alerts are important. If you’re a busy professional or on vacation, you want a broker who is on the ball to keep you alerted to major movements in your portfolio. Things like… - Tax loss selling – you can ask them to identify targets for you. - Price Alerts – if a stock goes below a certain price, I want to buy it. Or if a stock hits a certain price, I want to sell it. Remember they’re getting a percentage of this trade so they want to get you invested in the market. But you have to ask for it. **Question 6 – ****Can you segregate my stock?**** ** Stock segregation is one issue that gets almost zero attention, and yet should really be closer to the forefront of your concerns. I actually went through this myself with Northern Dynasty last year. What stock segregation means is that your stock is actually put into an account where the brokerage firm cannot “lend” out your shares for a profit without asking you and paying you for the “loan” of your shares. The reason why this matters is because then your stock can’t be borrowed without your permission and you will get paid if you choose to lend out your stock. That’s what happened with Northern Dynasty. Brokerage houses were loaning out their stock to other people who were shorting the stock. Most clients had no clue this was happening. The brokerage firms were profiting from loaning out the clients shares without the client’s knowledge. But, the brokerage firms were not doing anything illegal. That’s because in the fine print, unless you have a segregated account and you request you shares never to be loaned out with your prior permission, the brokerage firm has every right to do so. You can be long a company and meanwhile, another trader is using your shares to suppress the price. Not cool. To avoid having someone borrowing your shares, you need to have your stock segregated. All you have to do is say: “*Make sure my stock is segregated so it cannot be shorted*.” **Question 7 – Is your broker experienced in dealing with Private Placements and Warrants? ** If your broker isn’t experienced with Private Placements, lifting legends off of restricted financings and exercising warrants, the hard truth is your broker isn’t up to par for the Canadian resource sector markets. Without a broker it’s very difficult and time-consuming to exercise your warrants on your own at a discount broker—I wouldn’t even bother trying. When most people start out, they’ll think “*I’ll save the money and do it myself. It’s no problem. I can do it at my online account, etc…” * It’s a lot harder than it initially seems. There’s a lot of paperwork and there’s a lot of time involved in doing this. If you have an experienced resource broker, it’s all done for you. And that’s one of the big perks of having access to one. **Question 8 – Are your fees negotiable? (Hint: They always are) ** Here are a couple of things that are happening in the brokerage industry. The big one that all retail investors should be looking at doing, whether you have a broker or not, is negotiating the cost of fees on a per trade basis. Ask the broker what his going rate is. Shop around to see what rates you can get. You can always get a better rate than the one offered. And if you know someone trying to find a full-service broker, send them these interview questions to help them narrow their search. Regards, Marin --- # The Absolute Worst Things You’ll Read About Uranium – A Katusa Short Report - URL: https://katusaresearch.com/the-absolute-worst-things-youll-read-about-uranium-a-katusa-short-report/ - Type: article - Published: 2018-07-27 - Updated: 2019-08-26 - Author: Marin Katusa I have one goal for all my subscribers: **Personal Freedom via Financial Independence.** I want you to have the ability to enjoy all that life has to offer – travel, family, and adventure. And the only way to do that is to grow your portfolio and become wealthy enough to be free to do as you please through financial independence. Even though I have achieved my financial goals, I still love coming to the office early and staying late. People always ask me, *why? Why do you still work so hard?* Simple. Three reasons: - I absolutely love what I do; - I love being the first to break a story; - By having such a large following, I can structure and negotiate deals that benefit my own portfolio and all of my subscribers at the same time. A couple of weeks ago, I sent out an alert to paid members of my research service. They were the first people in the world to hear about a ground-breaking new royalty company in the beaten down uranium sector. I caught all the stock “sleuths” off-guard with my *Independence Day Royalties* promotion. Not a single one got the stock right. I love messing with the peanut gallery pundits. Katusa subscribers heard it before investment bankers, brokers, and all other newsletter writers. I invested millions into the company at the same terms as my subscribers. I plan on making it a core holding in my portfolio for exposure to uranium. Subscribers had the opportunity to buy at the same prices and terms as me and company insiders. The last time uranium took off, uranium stocks soared 500%, 1,000%, and even 5,000%. The people that made those types of gains (me included) were invested in the metal well before the rocket ride – back when it was hated and a contrarian speculator’s dream bet. Fast forward to 2018 and the amazing setup in uranium continues. But sometimes you need to question your confirmation bias and go through a detailed counter-argument. This makes sure your convictions (and your money) are bet on the right direction. **No, Katusa has not become a doomsday analyst. I’ll leave that for the newsletter writers at Stansberry Research!** For the record, I’m a long-term uranium bull. And I believe it plays its part in the future of every nation’s diversified energy matrix. But today, I’m going to dump a truckload of gasoline onto the fire that is one of the most hated investment sectors – uranium. Since I have so many followers who write short reports, I decided to go about this report in the same way as how the “short report” groups do their work. And I’ll prove that even in the worst case scenario, uranium’s future is bright if you know how to play it. And I’m painting this bleak picture to show you why I just wrote a 7 figure check for a uranium company. **The Uranium Sector has all the Hallmarks of a Perfect Setup for a Contrarian Investor.** The point of this week’s letter is to paint the uranium sector in as bad a light as possible. And then if our investment can thrive in that environment and also thrive even more in a great uranium market, then we have a winner on our hands. Uranium is hated. It’s cheap. It’s out of favor. For the past few years, uranium mines have been shutting down all over the world. This year, Cameco’s Key Lake and McArthur River mines shut down. They are two of the lowest cost, highest grade producing mines in the world. Cameco even came out on July 25th and extended the McArthur River shut down. Think about that for a second. If an operating mine that happens to be one of the highest grade and largest mines in the world cannot break even, then either the price of the commodity is too low, or the world doesn’t need the commodity anymore. The built and operating nuclear reactors negate the latter. So, we can all agree that the price of uranium is too low to produce. I can visualize **Robert Friedland**, who is the ultimate resource stock promoter, pause during his talk on stage. He’d tilt his head, look into the crowd while squinting his eyes and calmly whisper into the microphone. He’d make it feel like he’s only giving the talk to you. As if you are extra special. Like some sort of secret wisdom that is passed on from generation to generation of billionaires: “*The share price is going to go so high, that you will need a telescope to see it”* Yeah, not so fast. Unfortunately, life is never that easy. And speculation is even harder. So, rather than writing a feel-good piece on uranium and all the reasons it’s cheap and *should* have a massive price appreciation, I want to try something different. What if I built a short case for uranium? And what if you can find a uranium stock that could do well in a bad uranium market (meaning the stock has value creation in a bad market). And what if it even has even more upside in a *decent* uranium market? You’d have a massive win on your hands. That was the task I gave myself 18 months ago. And I think I delivered. Here’s why. **DISCLAIMER: PLEASE READ THIS WHOLE REPORT****:** **Remember that this is an exercise of creating the equivalent of a “short report” on uranium. ** **A *short report* is painting the sector or company in the worst possible light, and it’s the opposite of being optimistic.** **I am doing this as an exercise only, to prove something in a realistic light:** **That if I can lay out the negative thesis for uranium and find a company that will prosper in the bad environment, then we are on to something big if the company also has big upside during a good uranium market.** Now, let’s nail down all the counterpoints of my uranium thesis to the core. **The Anti-Uranium Argument** I am going to present the worst-case scenario for nuclear energy and what that means for uranium. I kept the modeling realistic and very conservative. If a potential nuclear power site was questionable in regards to its financings or permits, we assumed the financing would not happen. And also that the plant would not be built. Only the power plants that are operating and currently under construction (and fully financed to completion) were included. The point of the exercise is to paint the worst possible scenario for the uranium sector, and if we can find an investment opportunity that will thrive in that case—we will do very well. Why? I’ve learned in life it never gets as bad as we ever think it will, nor as good as we ever hope it will. The reality is somewhere in between. And if we can do well in the worst case – then we should do quite well in a good case. I want to walk you through my case study—so invest 5 minutes with me that I believe could be a big winner for you in the coming years. **The Worst-Case Scenario for Uranium** My team and I created a very comprehensive database of every nuclear power plant in the world. It includes: - How much uranium each plant consumes annually, - What the economics on each MW (Megawatt) produced is, - Where in the lifecycle the plant is (how old the plant is and when it will be decommissioned). The harsh reality of the nuclear sector is that many power plants are too old. Some may get retrofitted to keep them running a while longer, but most will be shut down. This is mainly because the capital cost to upgrade them is too high for the current rate of electrical power. The chart below shows the amount of megawatts that, in a worst-case scenario, will come offline in the nuclear sector by 2040. This is when you should ask “*Marin, what the hell does the MW decrease mean in pounds of uranium per year?*” Good thing I figured you would be asking that question. Below is the chart in terms of pounds of uranium demand lost and the impact on global uranium consumption. We used the most aggressive shutdown scenario: From the graph above you can see that there will be just under 95 million pounds of global uranium demand (almost 60% of the total demand) lost by 2040. Remember, this is in the most negative planned shutdown scenario, But to be fair, logical, truthful, and balanced, we need to include the “new” demand for uranium, in pounds. We only included the approved and financed plants, and plants under construction. We didn’t include any plants that have been approved but have no financing in place. In the chart below, you’ll find the “worst case” for new demand. A little over 20 million pounds of uranium per year will be required to meet the new global reactor demand by 2030. And the beauty of spreadsheets is that we can overlay the global uranium reductions to global demand increases. Below you’ll see what you get per year in “net change” uranium demand through a worst-case scenario, up to 2030: The red line shows the decline of annual uranium required globally. **So, in a worst-case scenario (the most negative scenario I could come up with), there will be a reduction of 16 million pounds of uranium consumed in 2030. ** Currently, there are 169 million pounds of uranium (U3O8) consumed globally each year. That means, in a most bearish case, there will be a 9% reduction in the uranium demand in 2030. Let’s take this framework even further… If this is the case – you want to be in the lowest cost of production quartile in the world. So, if you need $50/lb uranium to build your project – you’re SOL (Shit Outta Luck). I can go on and on about how many projects are a complete waste of time (I’ve visited enough uranium projects in my career. The fact is most will never go into production. Remember this when the bull market comes and 200 new uranium explorers are formed. I get a chuckle seeing a lot of recycled projects that couldn’t fly at $137 uranium. And those projects are now being repackaged as the next greatest thing by a bunch of useless promoters and geologists. But I don’t really care to get into debates with management teams that are either too stupid to know better or are trying to be deceiving. **With Uranium Staying Below $50 Per Pound, How Do We Play Uranium Stocks?** Personally, I’m avoiding any exploration and development stories in Africa. Why? Let me use a case study from another commodity, copper. The copper mines of the Democratic Republic of Congo (DRC) have ultra-high copper grades of over 4% copper. However, these mines have roughly the same cost of production as the low grade big open pit Canadian porphyry copper mines with grades which are 10% of those in the DRC. Yes, you read that right. The 0.4% head grade mines in Canada make as much money as 4% copper mines in the DRC. Your eyes should pop out right now. I have shared this data with many industry professionals (analysts, bankers and fund managers). And after they go through the data, they are all surprised yet inclined to agree. Why do the DRC mines make the same money as mines in Canada? Several reasons: The lack of infrastructure, high electrical costs, high-cost of importing all supplies and maintenance, underground vs. open pit, and higher government takes are all factors that contribute. Now, would the DRC copper mines be competitive with the Canadian mines if they only had 5x the grade? Nope. What if they had the same grade? Not a chance. The point is, with the way the geology works in most African uranium deposits, the grades are nowhere near the high-grade Athabasca basin uranium projects. Nor do they have the infrastructure in place when compared to equivalent grade projects in the U.S and Australia. The fact is – the economics required to make most of the undeveloped uranium deposits economic are 3-4 times the current spot price. I know I will have so many haters argue this point. That’s fine. You go do it. I’ve been there, done the site visits. It was true ten years ago and it will be true ten years from now. **How You Can Make Serious Money by Leveraging an Increasing Uranium Spot Price** If uranium touches previous highs, there is no doubt those African projects will do well with the uranium leverage angle. Unfortunately, unless you’re a large holding company or utility, you can’t buy and sell uranium in the market without the storage fees crippling your speculation. It is not a tradeable commodity for retail investors like gold, silver, or oil are. Personally, I’ll stick with the highest grade, lowest quartile cost uranium deposits in politically stable jurisdictions. And I’m adding another investment to the two I already have in my *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)* portfolio. In the last major uranium bull market over a decade ago, there were hundreds of uranium companies. And their rocketing share prices were giving speculators astronomical returns. Like **Laramide Resources**, which soared over 14,000%. There was also **Denison Mines,** which soared 5,000%. Even the “Exxon Mobil” of the uranium sector, **Cameco**, soared 950%. Could we see returns like this happen again? In a word, yes. But just because I think my thesis is right, doesn’t mean a uranium bull market will happen today. The momentum has started to build—and 2019 will be the most interesting year for uranium since Fukushima. If you’re an alligator and you’re patient, you will position yourself very well. We might be early, but prepare your speculative portfolio accordingly and the returns just might move your needle like they did for me in the last uranium bull. Regards, Marin P.S. If you want to be first in line to get all the details about the most exciting IPO to hit the mining world in over a decade, then you will want to get all the details from our uranium special report. [To sign up and get the report immediately, click right here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiemail). Katusa Research was the first to the story and beat the big fund managers at their own game. Winning, it’s what we do. Personal Freedom through Financial Independence. --- # The Most Important Charts for Your Gold Stocks Right Now - URL: https://katusaresearch.com/the-most-important-charts-for-your-gold-stocks-right-now/ - Type: article - Published: 2018-07-20 - Updated: 2020-02-14 - Author: Marin Katusa This past week I was invited to be a keynote speaker at Rick Rule’s Sprott Natural Resource Symposium. And every year, gold is a key topic on everyone’s mind. Let me remind you of a very old saying… ** Gold** is the Currency of Kings ** Silver** is the Currency of Gentlemen ** Barter** is the Currency of Peasants ** Debt** is the Currency of Slaves In the long run, I’m very bullish on gold. But like all commodities, gold is very cyclical. The price of gold and other important data I’ll show you in a moment is something I’m paying very close attention to through my holdings. I’ve written big checks and made big buy orders on assets that I believe are very cheap and well-priced in today’s currency commodity markets. These are the types of companies I want to own. Why? Because I believe a major will want it in its portfolio in a few years. And all for reasons, I’ll explain further down in this missive. **Marin – Is the Commodity Bear Market Over?** It’s no secret that we’ve been in a commodities bear market for the better part of this decade. But just because the commodity bear has gone on for a long period of time, doesn’t mean that it’s over. Far from it. These bear markets can last for much longer than a speculator can remain solvent. As you’ll see in the table below, the current loss is right near the average loss for recorded bear markets. But when the market turns around (and it will) as shown in the next table, the average gains across commodities become astonishing. And any investor or speculator that’s been around the resource markets for a couple of years knows the famous line – *but wait, there’s more*. The share price of individual commodity stocks are highly leveraged to the price of the underlying commodity. And this causes the share price of the commodity stocks to soar many times higher. It’s where you see spectacular gains of 500%, 1000% and even 10,000%. To ride out any long downturn, I put all the companies that I hold through extensive stress tests. I do this to determine which will survive in a worst-case scenario. You need to do the same. But you can make a tidy fortune in a *Bust* and even the *Echo* that follows. This is the period of time where stock and commodity prices are flatlining and only the best stories can make you multiples on your investment. In the chart below, you could say that the gold price has been in an Echo phase since 2016… **This is How You Make Money in Today’s Stage of the Commodity Cycle** At this point, there isn’t crazy interest in commodities. But this is good because it allows you to pick up great assets for even greater prices. When there is interest in commodities, it’s speculators and investors that will bid up stock prices to crazy valuations (like blockchain, cobalt and marijuana booms that happened more recently). But when there’s little buying interest from the crowd, there will always be interest from another buyer – a larger company looking to increase their portfolio of projects. What’s bad for gold miners could be very good for gold stock investors for the next few years. Simply, gold miners are running out of gold and they need to replenish their reserves. They’ll do this by looking for gold in the markets. They’ll go on a buying binge to take out small and mid-cap companies with proven gold reserves. Why? In the chart below, you’ll see that it’s expensive for some large gold companies to replace their gold production. One of the things any business needs to know is its cost of acquisition. How much does it cost a restaurant to get someone in the door? How much does it cost an accountant to gain a new client? In the chart below, you’ll see what the real cost is for majors to buy gold. On average, it takes $113 for these majors to secure an ounce of gold. Gold majors also need to know what is the exploration cost per ounce discovered. In the chart below you’ll see what this cost is for many of the large gold companies. And in 2018, it’s estimated nearly $4 billion is being spent on exploring for gold… You can see that more money is spent on exploration near the peak of gold bull markets (like the recent one around 2011). But exploration budgets are proving steady in this Echo phase. **Gold Companies Raised Billions – Where are the Dollars Going?** Almost $10 Billion dollars of exploration has been spent in the last 24 months without a new major gold discovery. Compare this to 1990 when almost 100 Million ounces of gold was discovered with less than $2B in exploration. So, have geologists and exploration teams become more useless over the last 30 years, or perhaps is the “easy” gold found? There are no two ways about it. The chart below paints a bleak picture. It shows that annual gold discoveries are decreasing… Now, we can overlap the charts to really see the effects of the money spent and how much gold has been discovered… It’s no wonder shareholders of many gold stocks are pissed off. Management teams are not finding new deposits. Is it that their luck is just off? Or are the geologists terrible at their jobs? I don’t think that’s true for most companies (but definitely for some). In the chart below, you’ll see that gold discoveries greater than 2 million ounces (i.e. enough to make a big splash) are becoming increasingly rare… **The Gold Price and Effect on the Bottom Line of Gold Majors** The decline in the price of gold (now hovering around $1225) means less revenue for gold companies. It also means they’ll have less money to spend on project development and exploration. Since 2012, we have seen the exploration budget for the major gold companies decrease from nearly $4 billion down to $2.2 billion currently. The chart of annual exploration budgets for the majors is shown below. Major gold companies need to beef up their reserves by purchasing the best projects owned by smaller gold companies. But those projects need to move the needle for a major. Small projects need not apply. Shareholders will demand growth and they need to listen or they’ll start to see their investors look for the nearest exit. However, the elephant in the room is the Reserve Life Index. The Reserve Life Index is the expected number of years a company can continue to produce gold given its current gold reserves. It’s a back of the napkin calculation but it’s a reasonable indicator. The average major gold producer’s Reserve Life Index has declined should have at least 8 to 10 years of reserve life. The chart below shows the major producers’ reserve life index. The average Major Reserve Life Index has decreased by 40% over the last decade. That is not a good thing. At current levels, the average reserve life is 16 years. This may seem like a long time, but it’s not. Consider that it takes on average about 10 years to bring a new mine into production. What keeps the majors up at night is the next chart. It shows that the average grade of production of the gold mines has decreased by 31% over the last decade. As you’ll see, both total production and average reserve grade have decreased. This to me is a bigger issue for the majors than the Reserve Life Index. Since 2007, the average grade has decreased from 1.97 grams per ton to 1.35 grams per ton. This is a drop of 31%. It’s a simple fact that if you have two identical gold mines, one with high-grade ore and one with low-grade ore, the high-grade mine is going to produce more cash flow. As companies run out of high-grade operations, they are forced into building lower grade projects. **This makes a smaller producer or developer with a ****high-grade**** project that much more valuable.** Regards, Marin P.S. Right now, I am putting the finishing touches on my next report, where I analyzed over 600 producing gold mines and 2,500 development stage gold projects to uncover the next takeover targets. It’s a surprisingly short list of companies that I believe are suitable projects for gold majors and mid-tier producers. To gain access to my report where I reveal the names of those select stocks, you need to become a member of *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)*. --- # How Much of This Asset Class is in Your Portfolio? - URL: https://katusaresearch.com/how-much-of-this-asset-class-is-in-your-portfolio/ - Type: article - Published: 2018-07-13 - Updated: 2019-08-26 - Author: Marin Katusa It’s like going to the gym. You can’t expect to have the body of the Greek God, Adonis, without putting in the effort. You can’t outsource your personal workout. But you can work with the best trainers and the best nutritionists to help you achieve your goals. While these experts can help direct you, support you and encourage you, they can’t move your two feet, make you do a sit up or make you push the bar higher. Similarly, you have to decide what kind of investor you are. Are you a true speculator or just a passive investor that has a pipe dream about being a globetrotter and a fantasy life? Or do you see yourself as a fiery combatant, with a hunger to learn from every big success or big mistake. If you are true to yourself, your answer to the question could be, “*You know what, I don’t think I want to sacrifice my family, friends, watching football on Sunday’s with the boys and taking the kids to swimming lessons to become the best*.” For most people, this is not a sacrifice they’re willing to make. In that case, you need to find someone that’s willing to put in the long hours, grill the top executives and travel to the ends of the earth in search of the next big score. And the stage is set for big scores in resources. A few hundred grand today is the equivalent of $2 million back in the last resource bull market of 2010-11. That means that the capital in your brokerage or retirement account can buy a heck of a lot more value than it could back then when things were, quite frankly, insanely overpriced. Do not underestimate what tens of thousands or a hundred thousand dollars can do for you in the next 5-10 years. For some people, having cash ready will truly change their lives. And that’s why every speculative portfolio needs to have cash. **Marin, Get to the Point and Make us Some Money** I am very weary of the global markets right now. And I want to be positioned with considerable amounts of cash to take advantage of a major pullback, which I do expect. Again, I have no idea when the pullback will happen, but my gut is saying a big one is due. And I want to have cash available to take advantage of the fire sales that will take place. Over the last six months, we have continued to see signs that the global markets are jittery. Syrian bombs, Russian sanctions and Trump’s trade wars between all G8 countries are some of the many reasons to be cautious. Even in Canada, the federal government is fighting with provincial and municipal power-tripping bureaucrats. Safe havens such as physical gold tend to perform better in times of crisis; however, the equities don’t always follow the commodity. I believe this general market weakness and volatility will continue for the foreseeable future. This will have a negative impact on the share prices of many companies, including the best resource stocks. This will lead to two outcomes: - Consolidation, meaning the top-tier assets will get bought out by stronger companies. - Lower prices for most publicly traded companies. A term you may have heard before – or seen me write about – is the *Net Asset Value* of a company. Net Asset Value represents the true value of the company. It is not influenced by share price fluctuation, management teams, or paid promotion. Net Asset Value represents the intrinsic value of the business. It is based on the amount of cash the business is currently generating, the cash the company can generate in the future given its assets, plus the difference between total cash and total debt. It’s the purest form of company valuation and a building blocks for all my investments. I build my largest positions when companies are trading at a heavy discount to Net Asset Value. Alterra Power is a perfect example of buying a company which was trading at a 50% discount to its Net Asset Value. Yet it took several years before a suitor acquired the company, paying 97% of Alterra’s Net Asset Value. I wasn’t popular when I stood on a panel with Ross Beaty and Rick Rule and said that their geothermal companies were overvalued in 2009. But I pounced on shares of Alterra when the shares declined to the point where they were a screaming buy starting in 2014. I kept buying on major dips all the way to mid-2017. My thesis of picking up shares in a stalwart company paid off and concluded with a buyout. I believe this market weakness and volatility will create several significant opportunities for us to buy resource stocks at terrific discounts. It’s already allowed me and my subscribers to build positions in world-class companies that are trading significantly below their Net Asset Value. Nobody wants to waste their time reading an investment/speculative research letter unless it provides actionable opportunities to make money. **So, why am I so focused on raising cash for my portfolio?** I think that we will have an amazing opportunity to pick up incredible value in late 2018 and into 2019. The chart below is a very powerful chart that shows the current struggle of the Emerging Market Currency Index. This is only one indicator, but when I overlay the USD effect, I believe the USD is in the early stages of a breakout when compared to the EM index of currencies. The JP Morgan Emerging Markets index is not perfect, as it’s a composition of 10 nations (listed in the below table with their corresponding weightings). China should get a much bigger weighting, because frankly, where China goes, the emerging markets go. **The PetroDollar Effect** I have written a lot about the PetroDollar, and it was a key feature of my New York Times bestseller, “***The Colder War***.” Something that I want people to understand is that the success of the shale revolution will have profound geopolitical and investment effects. During my lifetime, the U.S. has never imported as little oil as they currently are. The chart below shows that for the first time in 40 years, the U.S. is importing less than 20% of the crude oil they consume. This has powerful effects globally. It means there are less PetroDollars globally now than at any other point in time in the past few decades on a percentage basis (remember, you need to net out the price difference in oil prices). **This means that the Emerging Markets (which have benefited from PetroDollar investments from oil-rich nations) will be finding themselves at a shortage to pay back the loans they have taken on in U.S. dollars.** Because of this, there will be a shortage of U.S. dollars in the emerging markets. In turn, this will lead to an economic expansion slowdown in the emerging markets, which will cool down the metal prices of most commodities in late 2018 to early 2019. For example, even though I am very bullish on the medium to long-term price of copper, the emerging market share of copper consumption is over 60% at present, as shown in the chart below. Of that 60%, China makes up a little over 80%, because China still makes up half of the global copper consumption as seen in the below chart. If China has a slowdown, copper is clearly a resource that will experience some price pressure in the short term. And how is China doing? The answer is *not great*. This past quarter, housing in China has slowed down a lot and has crossed into negative territory for the first time in 20 years. The chart below is the property investment YOY (year-over-year) percent change and the two-year moving average. Serious carnage will hit if the two-year moving average goes negative; and right now, I think it will. This is something we are tracking closely. If we zoom in a little and examine the month-over-month change, we see a breakdown that confirms the trend in the YOY change, as seen below. A chart that you’ll see in a moment and one that should spook all resource longs is the year over year (YOY) numbers of China Freight Volume. The last time the index was this low, almost all commodities dropped significantly, and with the resource stocks. I would expect the government of China to pick up infrastructure spending if the construction industry is slowing down. But the data below is showing that infrastructure spending is slowing down year over year as well. Not to mention, the two-year moving average is trending lower and lower, as can be seen in the chart below. Historically, I have noticed that Chinese government infrastructure generally picks up when freight traffic slows down, but this is the first time in 20 years that we are not seeing this relation. Both Chinese freight (exports) shown in the chart below, and their domestic markets are cooling down. **The Chinese Fortune Cookie says….** The U.S. and China economies matter more today than at any time in the past. I believe the rest of the Emerging Market nations are not in a position to pick up any slack if the Chinese economy takes a dive. A strong U.S. dollar will only compound the pressure on the Emerging Markets and put more strain on the Chinese economy. I am more convinced than ever that we must tread very carefully in all our speculative and investment decisions. In hot bull markets, there is room in the portfolio for “high fliers” or “punts”. I do not think this is the right time for those types of speculations. Now is the time to be protective, and only own the best assets operated by the best management teams. Unless a company is a core position, one I want to become a core position with compelling valuations and near-term catalysts or it is a takeout candidate – I will not have exposure to the position in the *Katusa’s Resource Opportunities* portfolio. **Skin in the Game – Money Where My Mouth Is** A personal policy I have for my newsletter is that I am only recommending stocks in the letter and buying tranches at prices I will personally buy stocks at. It’s my whole philosophy of “skin in the game.” I take knocks to the chin, but I keep my home run mindset intact. Cut your losers and let your winners win. Regards, Marin P.S. Today I’m well cashed up from some great recent core position wins like Alterra Power, Kirkland Lake, and Nevsun Resources. And I’m very excited about two companies that I’m betting very big on. My investment thesis is that this will be two junior stocks that are excellent takeout candidates. You can read all about them in my special research report, ***“Blockbuster Buyouts: 300% Gains from the Best Gold and Oil Juniors of 2018”. ***To learn how to gain access – [click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail). --- # The Gold Insurance Bet – The Day My Life Changed Forever - URL: https://katusaresearch.com/the-gold-insurance-bet-the-day-my-life-changed-forever/ - Type: article - Published: 2018-07-06 - Updated: 2019-08-26 - Author: Marin Katusa The absurdity of it all kept my mind off what was about to happen to me. Six years ago, my life changed forever. In late May of 2012, at the age of 33, I had a heart attack and emergency quadruple bypass surgery. And I learned that Discipline = Success, in all aspects of life. Not just investing. And today, I want to share a few lessons I have learned from personal experience. I’ve traveled to over 100 countries, including hundreds of site trips, hotels, and flights. Along the way, I actually lost track of what mattered in life. Early in my career, I started out with a financial goal in mind. I hit that number sooner than I planned, so I went and wrote a new number – not basing it on any real logic, but mainly to see whether or not I could achieve it. I was more than willing to put in the hard work, long hours and personal sacrifice, and I quickly found the journey more enjoyable than the destination. I hit my revised goal and kept rolling. Then the global financial crisis of late 2008 hit full force. I, alongside my subscribers, watched our portfolios get crushed. After that dreadful year, the resource sector came roaring back from 2009-2011, which were great years for the portfolio. But everything changed for me the day I was rushed into emergency heart surgery. I share this story only because there is what I consider to be an important lesson or two in it. **Lesson 1: Listen to your body** My career is based on being on the road, analyzing and looking for the next big score. But when I started having chest pains combined with an odd tingling running down my left arm and pain in my jaw and teeth, I knew something was wrong. I rushed to the hospital emergency room. **Lesson 2: If the first answer to your question doesn’t sound right (or logical), ask for a second or third opinion until you are satisfied** Call this the “*Gut Confirmation Bias*”. After I explained my condition, a nurse assured me I was just having anxiety, and she advised me to go home and take the prescribed anxiety medication. Based on my age and physical condition, she was certain that at worst, I was having a panic attack. Panic attack? Anxiety? My gut told me that wasn’t it. I *knew* it had to be something else. I requested more tests. The doctor still didn’t feel it was anything more than anxiety, and again I got the advice to just go home. But I knew something was wrong. I refused to leave the hospital until I saw a cardiologist. Makes sense, right? I was having heart pains; I didn’t want to listen to a nurse or a GP. My amazing wife stood by me the whole time in full support, and that made a world of difference. I am a blessed individual. Now, this is where the story gets interesting. When I finally got to see a cardiologist, he (again) said I was suffering from anxiety and that I should go home and rest. I requested an angiogram and he finally, reluctantly, agreed to run some tests if I promised to leave right after. By that time I had invested 40 hours in the whole ordeal. And the pain wasn’t any better. **The Gold Coin Insurance Bet** While I was waiting for an angiogram, the cardiologist said he guaranteed nothing was wrong with me. Well, I liked the odds… So I bet him a gold coin that he was wrong. Five minutes into the angiogram, the cardiologist screamed for a nurse to get the surgeon immediately. I asked him what was going on. That was when he said to me: “*I am sorry. You need emergency triple bypass open-heart surgery right now*.” It was the first time that my life literally flashed before my eyes, and I realized I’d been wrong all these years. During this ordeal, not once did I think about my money and success. All I could think of were things I hadn’t done with my wife and loved ones. I started to think about all the things I now realized I wanted to do. I thought to myself, if I only get one more chance, I am going to change what I have done up to this point. As I was being wheeled into surgery, one of the nurses recognized me. During the surgery prep, she and the surgeons started asking me questions about the stocks in their portfolios. I didn’t mind, actually – the absurdity of it all kept my mind off what was about to happen to me, and what might happen. Maybe that’s what they had in mind. I told the cardiologist that he didn’t need to pay me the gold coin if I came out alive, and then my last thought as the gas hit me was, “*One more chance, and I’ll…”* The situation inside my chest cavity was worse than what the angiogram had indicated: I needed a quadruple instead of a triple bypass. The cardiologist who performed my surgery told my wife and I that he couldn’t believe my heart was still ticking. I wouldn’t have lasted another week before a massive heart attack would have taken me out, due to all the blockages in my major arteries, he said. The main reason I write this personal experience is to reinforce the idea that you know yourself and your body better than anyone else – even doctors. If you aren’t getting answers you feel are right or the service you require, don’t be passive and just accept it. Request a second opinion. Go somewhere else. This applies not just in health, but in all aspects of life. Persistence often does pay off. **Lesson 3: Re-evaluate your goals** The third point of this story is goal-setting. What I neglected to do when I wrote down my financial goals was to include all my other goals in life – my health goals, exercise goals, charity goals, personal goals, and family goals, among others. Don’t forget about what really matters in life: a balanced portfolio of family and friends. And hell, I will also include work and money, because I love what I do, and all of these are important to me. So here I am, six years later. What can I add? Well, it’s time I re-evaluate, again, my own framework for investing/speculating and my own personal life. **Lesson 4**: **Cut ties with the anchors** If any stock in your portfolio is causing you stress, you either own too much and should sell some or all of it, or speculation and this style of investing isn’t for you. There is nothing wrong with trying investing and, after giving it a fair try, admitting it’s not for you. But I do believe the most prudent and successful way to succeed in speculating/investing in the cyclical resource sector is the way I am personally trying to go about it. Discipline = Success in resource markets and in all aspects of life. **Lesson 5: Tranche buying matrix** I spent the first 10 years of my career learning how to pick stocks (and even at that, I will continue to make mistakes). After hundreds of site visits and mistakes and successes on both the technical and financial side, I’ve found a framework that works for me. Almost as important as my due diligence framework is my framework on how I buy the stock and when and how to sell. For one, you should never load up 100% of your desired position into any one-buy order. I have given many examples of this in the past. Perhaps there are other fund managers and newsletter writers who have a mystic ability to buy only once and be set. But I have found (through direct experience) that the best results have been from buying in tranches. To keep things simple in my newsletter I have used four tranches, with each being 25% of my desired allocation with specific price guidance for each tranche. If the stock takes off like a rocket, I have skin in the game. If the stock retreats to a level I deem discounted to its intrinsic value, then I add to my position by taking my next tranche. Junior stocks can make wild moves when a big player buys or sells a chunk of stock in the open market. For me, it makes sense to buy in tranches instead of timing and moving the stock price. **Lesson 6: Position size** Never put more than 10% of the speculative portion of your portfolio into any one stock. I emphasize **speculative portfolio, **which means not the money you need to pay your mortgage, send your kids to school, and feed your family with. Better put, don’t speculate with any money that will affect your lifestyle and keep you from sleeping at night. I haven’t always followed this rule. And I believe everyone who speculates will come across this dilemma when they feel compelled by an opportunity. If you haven’t yet, your time will come and you need to recognize that it’s happening. All I can say is to make sure the speculation doesn’t blow up your portfolio. Readers and subscribers often ask me about my cash position (attack capital). Right now I am a little above 65% cash. Of that cash, I am about 60% in Canadian Dollars and 40% U.S. Dollars. Being Canadian, living in Canada, paying taxes in Canada, and speculating/investing in mainly Canadian listed stocks is the reason for the 60% weighting in the Canadian dollar. I continue to believe the U.S. dollar will outperform the Canadian dollar this year. **Lesson 7: Remember the Way of the Alligator** I like to put my money to work as much as anyone else, and sometimes impatience can get the best of you. That’s why I always recall [The Way of the Alligator](https://katusaresearch.com/the-way-of-the-alligator/). If you’re impatient and you’re always “doing something,” you won’t have the cash to buy up bargains during a crash. When you look at your cash positions as *big returns in waiting*, you’ll start to realize how powerful the alligator buying system is after one or two big hits. In recent issues of my paid research letter, *[Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail)*, I made the case for the potential overall market vulnerability. I talked about how it would affect the resource sector if that event occurred. And contrary to what many gold cheerleaders will tell you, all asset classes can be hit including gold and gold stocks. I believe that the case is still valid and maintain a level of cash to stalk my favorite stocks (that I place on a watch list). My current conclusion is that I want to only own core positions in companies that I believe will appreciate well over the next 3-5 years. I want to be flush with cash to redeploy if a major market correction happens. Then the alligator will be ready to prey on the best companies in the resource sector at discount prices. These are companies that I am willing to increase my position in during a major market sell-off. And also stocks I’m willing to buy shares in companies that I think will be bought out in 2018. **And stock buyouts are picking up…** You may have heard how Orion Mine Finance (private equity) bought Dalradian Resources (DNA.TO) a couple of weeks ago. This was the third company to be bought out on Katusa Research’s [Gold Buyout – Market Intelligence](https://katusaresearch.com/gold-stock-buyout-candidates/) page. Of the four takeout candidates in our paid members portfolio, two have already been taken down for a big gain and I believe the remaining two will be bought out by year-end. That is why in the next issue we are writing up the next batch of companies that I believe will be taken out. Right now, my team and I are going through a large matrix of potential gold, copper and base metal stock acquisitions that large caps could takeover and juice their balance sheets with. And we will be breaking them down to the likely ones that will happen in the pages of *Katusa’s Resource Opportunities*. 2018 could indeed continue strong as the “Year of the Buyout”. Regards, Marin Katusa P.S. My team and I recently put together a special report called, **“*Blockbuster Buyouts: 300% Gains from the Best Gold and Oil Juniors of 2018”***. In it, we break down the analysis that makes two junior stocks excellent candidates to be taken over by a major. I outlined my investment thesis for Nevsun, and we made a big score. Same goes for Alterra Power, and we made a big score (up 167% overall). Now, I’m putting my money where my mouth is with these two picks – and I believe they could get bought out before the end of the year. To get immediate access to this report and a year of my research with *Katusa’s Resource Opportunities*, [click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail). --- # How You Can Join One of the World’s Elite Investment Clubs - URL: https://katusaresearch.com/how-you-can-join-one-of-the-worlds-elite-investment-clubs/ - Type: article - Published: 2018-06-29 - Updated: 2020-03-10 - Author: Marin Katusa The Black Card. Going “*Wheels Up*”. The Knickerbocker Club. Skull and Bones. Bilderberg. The world is filled with exclusivity. There is the high-performance express lane that grants privileges to members. And then there is the lane for everyone else. The schoolyard principles continue into adulthood. *You can’t play with us because you’re different*. Or, simply, *we don’t want to let you into our club*. Members of preferential clubs get special privileges. They get perks. They get superior treatment. There are special clubs for when you fly. Buy the expensive ticket and you bypass the lines. After taking your seat, you sip champagne instead of getting elbowed by the fat guy in coach with a strong body odor. Whether you’re traveling, entertaining your kids, or anything else, getting the perks and skipping to the front of the line is good fun. You deal with less hassles. Things happen for you faster and easier. Given all this, it’s no wonder these types of clubs exist for investors. Members earn bigger returns in a shorter time. I’ve even seen members of this club turn every $10,000 invested into $100,000 in just a few years (a 900% return). I’m a member of such a club… and it’s served me very well over the last decade and a half. It’s made me incredible returns and been instrumental in accelerating my net worth by millions of dollars. Today I want you to join the club by introducing to you to one of the best vehicles to make money in resources, Private Placements. **Why Top Investors Love “Private Placement” Deals** Despite their power, private placements are one of the most exclusive and misunderstood financial vehicles on the planet. Yet, Private Placements are in high demand with high net worth investors and fund managers. Private Placements – or PP’s – allow you to buy large blocks of stock at a set price and at a discounted price to market. And if you know how to structure a PP, or follow someone who does, you may get a warrant kicker which makes the deal even better. However, because these deals do not take place on regular stock exchanges, you can’t look up the deal info on websites like Yahoo! Finance or Google. Also, the money involved in a private placement is often tiny compared to the money involved in a big name IPO like Tesla Motors. Many private placements raise $5 million to $25 million. This is less than 3% of a heavily-publicized tech IPO that raises a billion dollars. That’s why you’ll **never** see these deals featured on the front page of the *Wall Street Journal.* It’s why people on mainstream financial television never talk about them. This lack of mainstream popularity turns many folks off. Most people simply aren’t comfortable with investments they don’t see splashed over mainstream magazine covers. But if you’re like me, you realize this is a **GREAT** thing. If you’re like me, you realize investing alongside the masses is a sure way to lose money… while paying very high fees to brokers, money managers, and bankers. I love the fact that private placements are a small and uncovered area of the market. It means there aren’t millions of investors reading the same news stories and piling into these deals. It also means these deals are off the radar of billion-dollar investment funds. **Said another way, it means private placements are extraordinary opportunities for the small group of investors who are willing to do the necessary legwork and research to understand them.** Having said all that, investing in private placements isn’t easy. And thanks to the regulators, it’s not for everyone. If you aren’t accredited, the only way to get into a Private Placement is by either working for the company or using the “friend and family” exemption. Who you know does matter for Private Placements. And it’s what separates the “in crowd” with those still waiting outside in the cold. Unless you work for the company or use the “friends and family” exemption, to participate in a PP you must be an “accredited investor.” The term is slightly different around the world, but in the U.S. and Canada… An accredited investor is someone who can demonstrate an annual income that exceeded $200,000 (or $300,000 with a spouse) for the last two years and can reasonably expect to earn the same or more for the current year. You can also be considered an accredited investor by having a net worth of over $1 million. In other words, you have to have a quite a bit of money to be considered an “accredited investor.” **Where do Private Placements Come From?** When natural resource firms need to raise money to do things like drill for oil, explore for gold or uranium, or develop a gold mine, they often do it through “private placements”. And they do this to raise money from high net worth investors who understand the opportunity and the risks. A private placement also allows a company to sell shares to investors that are not listed on the stock exchange yet but will be shortly. In a private placement, companies typically offer shares at a discount to the current market value. This discount is often in the 5% – 25% range. The price of shares and the dollar amount raised is negotiated in advance. For large investors, negotiating the price and the amount invested in advance is a huge positive. It means they can acquire large blocks of shares without dealing with the market’s day-to-day fluctuations. It means the share price can’t “run-away” and shoot 25% – 50% higher while a large investor is trying to acquire a position. Being able to acquire a large number of shares in a company at a set discounted price is enough to make private placements a very attractive investment vehicle for large investors. But there’s another aspect of private placements that makes them even better. It’s like icing on the cake. **The Powerful *Kicker* in a Private Placement – Warrants** That icing is called “warrants.” A private placement offering can also include stock options in the deal. These stock options are called “warrants.” Warrants act like stock options in that they allow investors to buy a stock at a predetermined price in the future. They have finite lifespans. Some warrants expire in one year. Some expire in 2, 3, or even 5 years. And just like stock options, warrants can soar hundreds of percent in value when a company does well. Warrants have the ability to supercharge your return. I’ll give you areal life example: A few years back, I put my colleague and friend Brent Cook into a private placement where he got both shares and warrants alongside me and other investors. I’m teasing Brent because this company is also his favorite very large, undeveloped copper-gold-porphyry stock to talk about publicly. In the May 2016 Northern Dynasty Private Placement, investors (or speculators) bought shares in the company at CAD$0.45 per share. The unit also came with a warrant (which Doug Casey and Rick Rule refer to as the *Katusa Warrant*). This was a full five-year warrant which was not only exchangeable for 1 common share at CAD$0.65 per share but also had the benefit of being listed and free trading with its own ticker symbol. Less than 18 months later, in January 2017, Northern Dynasty shares were trading above $4 per share. Now if you had just bought stock in the open market, you would have done very well. Selling at CAD$4 per share would have made you a profit of 789%. But if you had invested in the Private Placement, your returns were supercharged. When the shares of Northern Dynasty were trading at $4 per share, the warrant traded for $3.45 per share. Cashing out up there would have netted you an additional 767%. Making your total return a staggering 1,556%. Not all private placements are lucrative home runs like this one used as an illustrative, yet real-world example. But you can see that if one out of ten hit big, it more than makes up for the bulk of your losers. And you will have losses in speculating in the junior resource sector. The point I’m trying to get across is that you can see that the addition of a warrant made the investment much, much more profitable. That’s the power of a warrant… and it’s why they are such an attractive component of private placements. Because the resource markets are so bad right now, those who are interested in private placements and have available cash have little competition on the best private placements. This means you can cut the best terms on a deal, which means a *Katusa Warrant* in the private placement. As I mentioned, a modest $25,000 private placement investment can grow into $250,000 or more when a resource firm achieves success and you own warrants along with the stock. Because you can buy the private placement at a discount AND get a warrant, the right structured deals in the best companies are in high demand with wealthy individual investors and larger institutional investors. This demand makes private placements a way for companies to raise large amounts of money quickly and easily, with the best investors in the business. But the best Private Placements are never easy to get into. You have to be an extremely wealthy individual with multiple high-profile brokers that have access to the best private placements. Or you have to be buddies with guys like Lukas Lundin, Frank Giustra, Ross Beaty, Pat DiCapo, or Richard Warke. If you’re outside this inner circle, the chances of getting in on the next big Private Placement put together by a guy named Frank, Ross, or Richard is close to zero. **The Katusa Advantage – Level the Playing Field** Investing in private placements isn’t easy. To get into the best deals, you have to know all the major players personally in Vancouver, the heart of global resource finance. You have to know the bankers, brokers, CEOs, and entrepreneurs. You have to visit the projects in person. And you have to constantly take the pulse of the market and the deals being lined up. In short, it’s a full-time job. But why should rich investors have all the advantages? Screw that. I started out with very humble roots. I went to university on an academic scholarship, started out as a high school math teacher and grinded my way up the investment ladder. My goal with Katusa Research has always been to level the playing field between those high-profile deal makers and the everyday investor. And my subscribers see it happening in real time. I am 100% focused on finding the best deals in the resource sector and sharing them with my subscribers. On numerous occasions, I’ve managed to bring private placements to my subscribers (at the same price and terms as key insiders, financiers, and even billionaires). I take zero compensation for this. I don’t get any kickbacks, stock options, or cheap stock gifted to me in offshore accounts. My goal is to make my subscribers wealthy, the only way I know how. Which is by working hard, meeting everyone in the business, and structuring the best Private Placements possible (which I am usually the lead order, i.e. the biggest investor, in). And now you know the incredible power of Private Placements. Regards, Marin Katusa --- # The Explosive Junior Stock Exit Strategy that Prints Money Overnight - URL: https://katusaresearch.com/the-explosive-junior-stock-exit-strategy-that-prints-money-overnight/ - Type: article - Published: 2018-06-22 - Updated: 2019-08-26 - Author: Marin Katusa It’s the system that keeps on spitting out money. And it’s not just limited to the gold and silver sector. It works for all resource companies. But to make money using this system you need to have conviction, patience, and the right investment thesis. Not to mention, the company you hold shares in has to have a management team that’s not comprised of a bunch of useless troglodytes (I.e. they own a rich asset but don’t know what to do with it and will destroy shareholder value). As you build your position in a company, your exit strategy is almost more important than your buying strategy. And one of the main exit strategies for many juniors is the buyout. **The Power of the Stock Buyout** Of all the ways to make money quickly in the resource markets, few can match the power of “*the buyout*.” Own a small stock on Monday… then, suddenly, overnight, you’ve made double or even triple-digit gains by Tuesday. A buyout occurs when a larger company sees an opportunity to grow and buys all the shares of a smaller company – often at a large premium. The result is an overnight windfall for the smaller company’s shareholders. Over the last decade, there has been over $400 billion worth of transactions in the precious metals and base metals sectors. The chart below shows the mergers and acquisitions in the mining sector along with the total number of deals completed since 2008. **This past week, the ****large-cap**** Australian miner, South32, paid CAD$1.8 Billion to acquire the zinc focused company Arizona Mining (AZ.TSX-V).** This sent Arizona shares rocketing higher “overnight” by 49%. Even better, this was a MASSIVE liquidity event for the junior stock. Over 54 million shares traded hands. That represents over CAD$330 million of activity in a single day. And early Thursday morning, I got a news release sent to my phone that another small gold company got bought out. **In an ****all-cash**** offer, Dalradian Resources (DNA.TSX-V) was acquired by Orion Mine Finance in a deal worth $537 million. ** This company was profiled in our Market Intelligence Center as a [gold stock buyout candidate](https://katusaresearch.com/gold-stock-buyout-candidates/). Congratulations to you if you recently picked up shares and are enjoying the nearly 60% “overnight” windfall. So was this a one-off transaction? According to Bloomberg, this might not be the end, but rather the beginning of more blockbuster buyouts in the resource world… South32 CEO Graham Kerr said, “*We are still very much active in searching for deals. People want us to put their cash to work*.” This echoes the sentiment of other big and well-cashed companies like the Lundin Group (and many, many others) that are looking to put cash to work in a takeover. Glencore, BHP, and Rio have all stated they are looking for world-class assets. This is good news for you and me as investors. We could just be in the early stage of a bull market in takeovers. **Cracking the Code of Stock Buyouts** Despite the incredible wealth-building power of the resource buyout, the process behind it is a mystery to many people…even to supposed “experts” that follow the sectors. For decades, people have tried to crack the code behind buyouts…the qualities large companies look for when they shop for smaller companies. Their efforts have largely resulted in failure and frustration. For every stock someone named as a buyout target, there were twenty-five “run of the mill” companies that went out of business. As you probably know, I’ve devoted my professional life to investing in natural resource projects. I’ve flown more than one million air miles to visit over 400 resource projects in over 100 countries. Along the way, I’ve become friends with some of the world’s top gold executives, mining engineers, and geologists. Take the incredibly successful and pure gentleman of the mining industry, my friend Ian Telfer, Chairman of gold mining giant Goldcorp who even went out of his way to write a blurb for my New York Times Bestselling book, *The Colder War*. I’ve published exclusive interviews with gold mining legends like [Pierre Lassonde](https://katusaresearch.com/dinner-billionaire-wine-connoisseur/) (founder of mining royalty firm Franco-Nevada) and [Rob McEwen](https://katusaresearch.com/qa-gold-titan-rob-mcewen-exclusive-qa-marin-katusa-part-2/)(founder of Goldcorp). I’m referencing my experience to show you that I have insight into the world of gold buyouts that most people do not. Through friendships, due diligence, and my status as a top financier, I’ve learned exactly what the guys making buyout decisions are thinking when they pull the trigger. **Why Gold Buyouts Are So Attractive to Gold Majors** Buyouts occur in the resource markets for a simple reason… Take a gold buyout for example… Every time a gold miner pulls an ounce out of the ground and sells it, it depletes their reserves a little. If a gold miner doesn’t direct some of its revenue into the acquisition of new gold reserves, it will mine itself out of existence. It will consume its asset base and cease to exist. And that’s why “buyouts” frequently hand gold investors massive overnight gains. You see, when it comes to increasing gold reserves a big gold miner has two options… **Option #1: The Hard Way** It can spend hundreds of millions of dollars on the risky business of mineral exploration. It can spend a fortune wandering around deserts, jungles, and Arctic regions looking for gold deposits. When you consider that less than 1 in 3,000 mineralized anomalies ever becomes a mine, you realize that exploring for gold is a “long shot” activity. Also consider: If by some fortunate event the miner actually finds gold, it is now looking at 5 to 10 years of development headaches. In its quest to build a gold mine, the miner will wrestle with crooked politicians, red tape, lawyers, environmental activists, and bankers. And then you have… **Option #2: The Easy Way** The gold company can bypass the headaches that come with Option #1 and simply buy another company. That’s it. No long shot drilling programs in the middle of a desert. No swatting mosquitos in South American jungles. No hacking through miles of red tape to get mining permits. Just one simple transaction, executed from the comfort of an office….and the gold miner adds a lot of gold to its balance sheet. Now put yourself in a gold executive’s place… *Is it worth paying a premium to buy proven, productive gold assets…and sidestepping the expenses and risks of Option #1?* You’re darn right it is. In some cases, it’s worth paying double a gold company’s stock market value. That’s why high-quality operating and development stage gold mines are some of the most highly coveted assets in the world. It’s why buyouts can hand you overnight windfall gains… *…And it’s why knowing exactly what kind of gold projects large miners want to buy is an incredible “blueprint” for making money in gold stocks.* But as I mentioned, nobody has been able to unlock the secrets of gold buyouts and know in advance when gold windfalls will likely occur…until now. My team and I recently performed an enormous amount of work in this area. We studied 35 years of data and 340 individual gold buyouts of at least $50 million since the early 1990’s. We’ve determined exactly what large gold miners are looking for. **We compiled the 6 most important qualities a gold producer must have in order to attract a premium buyout offer. Below, I describe each “key” for a buyout.** I’ve prepared a large report that goes into these qualities, but in the interest of keeping this piece relatively short, I’ll name the qualities and go over them quickly… **Key #1 Big Enough to Move the Needle:** Big miners are only interested in significant deposits that can make it worth their time to acquire and develop. **Key #2: Ability to Grow: ** Big miners aren’t just looking for mines with sizable current production. It’s expensive and time consuming to move people and equipment around the world. That’s why a big miner wants to acquire properties it can mine that also have the potential to yield new gold discoveries. **Key #3: Low Costs, High Margins:** Big miners want to buy deposits with good economics. Enough said. **Key #4: Short Payback Period:** Big miners want to see their investment get paid back in a relatively short amount of time, like less than four years. **Key #5: Simple Recovery:** In the mining world, as in life, simple is always better. The more complicated a project’s geology is, the, the more difficult it will be to extract the metal from the ore, the more it will cost to mine it, and the lower your profits will be. **Key #6: Excellent Mine Safety Record**: An underrated and rarely discussed – but very important – quality a mine needs to have to be a buyout candidate is a good mine safety record. **A Gold Formula Worth Millions** I know reviewing our criteria is a lot to take in. But really, it’s all just common sense. Major companies want to acquire assets and mines with substantial current gold production or the likelihood of future production. They want assets that can grow in the future, have good economics, and in the case of an operating mine, are operated with the safety of workers in mind. Based on our extensive study of 340 mining deals over the past 35 years that have generated overnight windfalls like 150%, 108, and 96%, we’ve developed the specific criteria above based on those simple principles. Do we miss some? Yes, you can’t dance with all the girls at the prom. But using just the six keys listed above will put you ahead of 99.9% of your fellow resource investors. I believe monetary and political instability will drive the price of gold much higher over the coming years. And I’m positioning my personal portfolio to capture big gains at the current gold price, and especially if the price rises in the future (like I think it will). By using our Stock Buyout System, I plan to make a series of large capital gains with my readers during that time. Just like the one my subscribers and I recently had [investing in Nevsun Resources](https://katusaresearch.com/this-story-has-never-been-told-in-print-speculating-on-the-first-family-in-mining/) and Alterra Power just a few months prior. We’re not going to be buying the flavor of the day stocks, or the ones that get all the promotion. We’re going to be buying truly elite assets that the biggest miners in the world want to buy. Regards, Marin P.S. My team and I recently put together a special report called, **“*Blockbuster Buyouts: 300% Gains from the Best Gold and Oil Juniors of 2018”***. In it, we break down the analysis that makes these two junior stocks excellent candidates to be taken over by a major. Last year, I outlined my investment thesis for Nevsun, and we made a big score. I’m putting my money where my mouth is with these picks – and I believe they will get bought out sometime this year. To get immediate access to my report and a year of my research with *Katusa’s Resource Opportunities*, [click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail). --- # How I Built my Fortune and got a Meeting with the Queen of England - URL: https://katusaresearch.com/how-i-built-my-fortune-and-got-a-meeting-with-the-queen-of-england/ - Type: article - Published: 2018-06-15 - Updated: 2019-05-09 - Author: Marin Katusa Dear Katusa Research Reader, On April 15, 2014, the English version of an obscure French book hit the U.S. market. In just over a month, the book soared to the top of the *New York Times* Best Seller list. Hailed as “monumental” and a “landmark,” the book went on to sell more than 1 million copies. Dozens of articles about it were featured in major media outlets. It became a phenomenon talked about at the highest levels of society and government. The book, *Capital in the **Twenty First** Century*, is a book about economics. Specifically, it is about “wealth inequality” around the world. The book’s author, Thomas Piketty, makes the case that the world’s rich have amassed far too much wealth. In other words, the book is about how “the rich get richer and the poor get poorer.” I believe there’s one simple reason the book became such a huge hit: Many people believe – down in their toes – the rich have “rigged” the economy and markets. Most people believe the rich use their wealth, power, and influence to pay less in taxes, receive unfair government protection, and skirt the law. I’ve been poor and I’ve been rich, so I know both viewpoints. I’m the son of hardworking immigrants and worked my ass off to make my mark in this world and to get where I am. I think worrying about what how much money other people have is a waste of time. However, I do have one thought on this subject that you might find very, very interesting… and very, very profitable. There is one sector of the investment market where I can wholeheartedly say the rich definitely have a HUGE advantage over the little guy. This sector of the market regularly produces investment gains of 300%… 500%… even 1,000%+, and often in less than a year. This investment I’m talking about is the royalty business. These two words are seldom mentioned in investment how-to guides. You never hear them mentioned often on financial television. And few investors know how lucrative this business can be. The royalty business is one of the best ways to make a fortune. Take the entertainment industry, for example. Songwriting brothers George and Ira Gershwin wrote an entire catalog of hits between 1920 and 1937. Today, their heirs make around *$8 million per year* in royalties from songs written nearly a hundred years ago. You can also buy shares in royalty stocks, like Royal Gold. One of the most famous examples, Royal Gold doesn’t explore, mine, or produce a single ounce of gold. Instead, it collects royalties on 39 different mining projects around the world. If you were an early shareholder in Royal Gold, you’d be sitting on extraordinary long-term gains of over **39,000%**. But here’s the thing… You’d have to be related to someone in show business, like the Gershwins… or have the good fortune to have bought Royal Gold back in 1981, to make anywhere near that kind of money. But today, I’m investing in on the ground floor of a revolutionary and entirely new kind of royalty. This brand new opportunity has been ten years in the making. When an opportunity becomes so big, so massive, I have no choice but to move from the sidelines and into the batters’ box. Performing due diligence on this incredible development was incredibly hard. It took me away from my family on our Christmas vacation in Mexico. It’s ruined many weekends where I was supposed to catch up with friends. It kept me in the office many, many late nights, long after the cleaning crews came through. In total, I spent at least 1000 man-hours of due diligence, and 7 figures in total on consultants before deciding something huge: **This one company is going to be the biggest single investment I’ve ever made in my entire life.** If you’re a long time reader of mine, you know I have a love and aptitude for numbers. I love figuring out the odds. For some reason, I’ve always been able to “run the numbers” a little better than those around me. It’s allowed me to recognize opportunities for asymmetric returns, where the potential for great rewards far outsizes the risk. It all comes down to the math, and I’m not ashamed to admit that I’m damn good at it. When I was nine years old, I was recognized for my math skills and asked to represent Vancouver and meet the Queen of England at the opening of the EXPO Science Center. When I was in college, I made money on the side by teaching advanced calculus to other students. After I graduated, I took my aptitude with numbers to the financial markets where I’ve made tens of millions of dollars for myself and my clients. I then ran one of the world’s most successful junior mining funds, including managing money for many names you would recognize. I was able to do all this through understanding the odds a little better than the next guy. ***For example in March 2010, my analysis of the numbers behind a small gold company called Midas Gold indicated that it was extremely undervalued… and had the potential to rise 10 fold. I took a position in the stock and even told the company managers that the stock was a 10-bagger in a year. My estimate was too low. The stock ended up soaring more than 1,901% above my purchase price. Midas is popular today because it’s a favorite of the newsletter writer industry, but I was there years before as one of the largest investors-skin in the game! ***During November 2008, my analysis of the numbers indicated a small uranium company called Uranium Energy Corp was undervalued and had enormous potential. I urged my readers to take a position. Two years later, the stock had climbed 1,852%. ***In early 2009, my analysis of the numbers told me a small company named Africa Oil had the potential to be one of the year’s biggest stock market winners. I personally invested in the company and urged my contacts to do the same. Two years later, the stock shot up 1,100%. I don’t say any of this to brag… simply to show you that I have a unique ability to understand asymmetric risk/rewards and the odds… to understand when and where to bet my hard earned money. I know – as well as anyone in the world – when to bet BIG. That’s why I’m writing to you today. **I just bet over $5,000,000 and will increase it to over $10,000,000 following my matrix on what I believe is the biggest, surest bet I’ll ever see in my life. ** Out of the hundreds of stocks I’ve analyzed… out of the dozens of major deals I’ve put together… out of the hundreds of projects I’ve visited… I’m convinced that what’s coming is the biggest, surest bet of my life. While my knowledge of when to bet big has made me and my clients good money so far, the opportunity in front of us is far larger than anything I’ve ever seen… and the odds in this asymmetric bet are incredible. You can get all these details here in my new presentation. Regards, Marin Katusa --- # The Uranium Bull Market Just Reached an Inflection Point and Has Officially Started - URL: https://katusaresearch.com/the-uranium-bull-market-just-reached-an-inflection-point-and-has-officially-started/ - Type: article - Published: 2018-06-08 - Updated: 2019-08-26 - Author: Marin Katusa Long-time readers and subscribers know I like to keep a sharp eye on one very important indicator. This indicator has the “pay attention to me” alarm bells that include both its psychological and analytical merits. In mathematics, the *inflection point* is where the curve goes from concave down to concave up (also goes vice-versa). The uranium market has just reached its inflection point and is moving up. Let me explain why. First off, fortunes can be made and lost at inflection points. The inflection point represents the change in the balance of power between buyers and sellers in a given market. By recognizing an inflection point early, you can position yourself before the stampede of unsophisticated generalist investors. Uranium has been one of the most hated investment classes for the past few years, and for good reason. Surplus inventories caused uranium prices to crash 35% over the past 3 years. This kind of bad news made uranium good for the last place in the [Katusa Commodity Monitor](https://katusaresearch.com/katusa-market-intelligence-center/) as shown below. Since mid-April, uranium has picked up significant momentum and is up 18%. A chart showing the metal’s recent performance over the past 2 months is below (yes, uranium is a metal). I find it interesting that uranium focused companies are still playing catch up to the commodity price. Over the same two-month period, uranium companies are up on average less than 10%. Below is a chart which shows the performance of physical uranium against the Katusa Uranium Index, which is a basket of uranium focused companies at development and production stages. **Is Uranium Back En Vogue? ** Earlier this week, The World Nuclear Fuel Market (WNFM) Annual Meeting just finished. It’s one of the most important uranium conferences in the world and every major utility and uranium producer is there. I was invited to give the keynote address at the WNFM in Paris in 2015. One of the big talking points of this year’s conference was the spot market. In less than two weeks, the spot price for uranium moved from $22 a pound up to $23.50 per pound. That’s a rise of 6.8%. This may not sound like a lot, but it certainly is when you understand the context of the rise in price. What drove the price increase? A single buyer came in and bought 600,000 pounds of uranium (which represents less than $14 million worth of buying). This purchaser bought less than 0.5% of annual demand and pushed the price up almost 7%. That’s a big deal. Here’s why… The average nuclear reactor consumes about 375,500 pounds of uranium every year. Think about what would happen if a utility company like Exelon in the United States tried to lock in a year’s worth of production for its 23 nuclear reactors. The price of uranium would go through the roof. It’s not surprising the market is tightening. The world’s largest producer is Kazakhstan’s state-owned producer, KazAtomProm. It makes up 40% of global primary uranium production. KazAtomProm has just agreed to a deal with a Special Purpose Vehicle (SPV) where the latter will buy up to 25% of their annual uranium production. The concept is to sell uranium to the holding company (i.e. the SPV) which removes any overhang from the spot market the Kazakh uranium production would normally have. We believe the SPV that struck a deal with KazAtomProm will have much more demand than the market expects. So that large purchase could be the tip of the iceberg – the inflection point if you will. If you think about it, the deal with KazAtomProm is a self-fulling prophecy, meaning the spot price of uranium will go up. Why? The world’s largest uranium producer does not want to go into the spot market to buy uranium and risk having the “traders” mess with the bid/ask spreads. With this deal, KazAtomProm is taking 25% of their annual production offline (which is 10% of global production). This means that specific allocation of produced uranium is not available for sale in the spot market. This move caused two things to happen: One, it caught the utilities off guard. And two, it’s freaking them out. Over the past 7 years, the uranium buyers have become complacent, and for good reason. There was a lot more uranium available than demand, hence the 35% drop over the last 3 years. If we are at the inflection point, rather than a dead cat bounce, we will need to see more uranium buying coming into the market. I believe we will see just that. Not just from newly built reactors, but by SPVs. (Remember, SPVs = Special Purpose Vehicles). One benefit of being a public figure in the resource sector is that I get pitched a lot of deals. Interestingly enough, I have come across quite a few SPVs looking for funding to get into the uranium sector. These SPVs aren’t run by the old guard of the resource sector. These SPVs are backed by some of the largest titans from Wall Street and the tech sector in Silicon Valley. Yes, you read that correctly. There is interest in the uranium sector from Silicon Valley venture capitalists. Uranium is about to go prime time. These SPVs have the ability to make deals to buy large quantities of uranium, finance companies looking to produce, and develop and explore for uranium. I am told by bankers that the SPV that cut the deal with KazAtomProm will have no problem raising their desired amount of capital. And I believe it. **So, what does this all mean for the uranium sector? ** There will be less uranium available on the spot market because of the deal to remove 10% of the global uranium supply by the Kazakhs. Prudent investors need to think about the relevance of such a move. For example, imagine if all of Russia or Saudi Arabia’s oil production went offline and wasn’t available for sale in the spot market. We all agree the price of oil would surge. That is exactly what just happened in the uranium market. Numerous SPVs are being created to take advantage of the historic lows in uranium and the associated companies. All companies with uranium in their name have bounced off their lows. Rising tides lift all boats. But only the strong ships can navigate the choppy waters ahead. After all inflection points, the good, the bad, and the ugly all rise and catch a bid. Just like in all cycles, a lot of money will be wasted on bad projects run by bad management teams. Please do your diligence and don’t get caught on the wrong side of these projects and companies. You want to focus on companies with solid management teams that have skin in the game. These are the proven warriors and survivors who have remained in the uranium sector through the long bear market. Also, avoid any uranium projects in [AK47 nations](https://katusaresearch.com/use-ak-47-indicator/). **Trump is ****Pro-Nuclear** For better or worse, the U.S. President has made national security and trade deficits as the focal point of his presidency. It is ironic that, to date, he hasn’t made a step towards securing the U.S. electricity market. Nuclear power makes up 20% of United States energy generation. Yet the United States imports 89% of its uranium from outside sources. Below is a chart which shows United States imports by source. You’ll see the Former Soviet Union supplies 42% of American uranium imports. If I were an American President hell-bent on national security, this is not what I would consider an ideal situation for the preservation of the baseload power grid. The simple solution is one that Trump has used quite often lately. Put a tariff on imported uranium equal to the price of uranium so that the U.S. domestic producers will produce enough to meet domestic demand. In the 1960’s, domestic U.S. production was touching 38 million pounds and met all domestic requirements. That was achieved with conventional uranium mining and before ISR (In Situ Recovery – a modern method of uranium extraction) was invented and implemented. ISR is significantly quicker to build and much cheaper to produce than conventional mining methods. But could domestic U.S. uranium production meet domestic demand today? The short answer is, not right away. And that is a big opportunity for those facilities that are permitted and ready for production. My calculations show that at a uranium price of $80/pound, it would take the U.S. 15 years to ramp production up to meet domestic uranium demand. And this is subject to all projects getting permitted—which is a big if. In Trump speak, he would create “Great American Jobs for Great American People”. He would secure the American energy grid from “the bad guys” and he would decrease the trade deficit. It’s a public relations win-win-win for Trump and his supporters. Is this a blip, or the beginning of a new bull market? Time will tell, but I believe we just crossed an inflection point. I have traveled to every major exploration and development uranium operation in the world. I know all the real players in the industry, and truth be told, there aren’t that many you need to pay attention to. Perhaps that’s one benefit of a long bear market – only the true diehards and most viable of projects remain. Right now, I am positioning myself and my subscribers into what I believe are the best speculations in the uranium sector. And even better, I’m working on one speculation that has never had a research report published on it – ever. Do your portfolio a favor and read my research reports and benefit from my hard work and 15 years of direct experience in the sector. Regards, Marin Katusa P.S. I’ve toured many major uranium facilities and early-stage projects. Katusa Research subscribers get the benefit of seeing these projects first hand with my world-class film crew. No other research service brings subscribers to the frontlines of a company’s assets that includes exclusive interviews with company executives. To see the private tour of the world’s largest uranium mill and to find out my two cornerstone uranium investments, [consider becoming a subscriber to Katusa’s Resource Opportunities](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiemail). --- # This Story Has Never Been Told In Print: Speculating on the First Family in Mining - URL: https://katusaresearch.com/this-story-has-never-been-told-in-print-speculating-on-the-first-family-in-mining/ - Type: article - Published: 2018-06-01 - Updated: 2019-08-26 - Author: Marin Katusa This story has never been told in print beyond my paid subscribers. But there is a big reason I am sharing it now. Back in 2006 and 2007, I spent a lot of time in an area of southeastern Europe known as the Balkans. In 2006, I set up a mining company in Kosovo (the second officially registered company of its kind in the young country). I spent a lot of time in Serbia, another Balkan country. The Bor mining district in Serbia is an incredibly famous mining region that dates back centuries. In fact, copper mining in Europe started in the Balkans in pre-Roman times, and the largest copper mine in the world pre-1950 was the Bor Mine in Serbia. I hired a team of geologists that could read the local language (Cyrillic Serbian) and I literally drove the group across the two countries to visit all of the old mining towns to conduct due diligence. There was very little competition. And I believed I would find the next big mine in Europe. A year later, mining entrepreneur Miles Thompson was in Serbia also. Because of our common belief that there was another major deposit hiding within the terrain of Serbia near the giant Bor copper/gold mine, Miles and I met and we quickly became very close friends. Back then, Miles was the Chairman, President, & CEO of a small junior mining company exploring in Serbia called Reservoir Capital. I quickly learned that Miles was much better at running an exploration company than I was. So I decided to back him financially. Ironically, we came close to a deal for me to sell the assets I had accumulated in Kosovo to Reservoir Capital in return for an equity share in Reservoir Capital (this was over a decade ago). But we both agreed that the optics of a Canadian company having assets in both Serbia and Kosovo at the time weren’t ideal. However, Miles and I bonded with time. And we’re still close friends to this day. Along with a few others, I financed Miles’ Reservoir in the early years for two reasons: I liked and believed in Miles, and I believed Serbia had more elephant-sized deposits to be discovered. In the summer of 2008 Miles spent two weeks at my waterfront property in Croatia and when we weren’t drinking, we mostly talked mining. He did so again in 2009 and Doug Casey, Olivier Garrett, David Galland and a few others also joined us and stayed over during the summer, at my place. We had a few investment bankers, brokers, and executives swing through during that time. So, in essence, I took Miles’ money in poker, but he took a lot more from me in his exploration companies. While at my place, Miles received a phone call from his largest shareholder. He was asked to explore selling the exploration of copper/gold assets in Serbia. Some members of his board and largest shareholder wanted the company to focus on the run-of-river energy projects in the Balkans and sell off the mineral exploration projects. Miles and I both thought that there was far more value in the exploration of copper/gold assets than the run of river green energy projects. Nevertheless, we spent a whole week calling everyone I knew in my Rolodex. We pitched the merits of the exploration assets in Serbia until we ran out of breath. Out of hundreds of calls – only one serious meeting resulted. The meeting ended as a complete waste of time. The valuation? CAD$1,000,000 for 100% of the whole mineral package in Reservoir Capital. Miles and I looked at one another and said no way. Miles refused the marching orders from his largest shareholder, and everyone should be thankful he did. In October 2011, Miles spun out the Serbian mineral exploration portfolio into Reservoir Minerals. Every shareholder of Reservoir Capital received shares of Reservoir Minerals as a dividend, including myself. Shortly after, Miles was able to attract Freeport McMoRan, arguably the world’s best copper producer, to farm into the mining assets in Serbia. In the summer of 2012, Reservoir Minerals hit pay dirt in a big way. The following exploration drill programs demonstrated some of the best copper grades I have ever seen in my life. Holes such as 43 meters of copper grading 13.74% and 11.28g/t gold were prolific (and these numbers work out to 20% CuEq). It made the high-grade copper mines in the Congo look like low-grade moose pasture. At the time, I couldn’t have been happier for Miles and his team. I even called my parents (who Miles spent time in Europe those two summers) to let them know our favorite English geologist made a big score! The exploration assets in Serbia were valued at CAD$1 million in 2009, and today the project is valued at CAD$1 billion. **That is a 99,900% gain. It’s one of the greatest case studies I’ve ever seen first-hand of how you can make massive returns in the natural resource sector.** Over the next few years, the company continued to hit incredible drill holes with high-grade copper mineralization. In 2016, the company was the target of a bidding war between Nevsun and Lundin Mining. This sent the stock of the spinout company, Reservoir Minerals, soaring… It was one of the few times that the legendary Lundin family has lost a takeover attempt. **Nevsun Resources** emerged as the buyer of Reservoir Minerals. **In Play – The Battle for Nevsun is Heating Up** In my June 2017 issue of *Katusa’s Resource Opportunities*, I published a detailed analysis and a breakdown of a great way to play the electric vehicle revolution and soaring demand in copper. And that was through Nevsun (NSU.TO). Here was my investment thesis on Nevsun and why I became a big buyer of shares. In that June 2017 letter I wrote: I believe Nevsun is the target of a buyer. I believe Lundin Mining will buy out Nevsun. Let me tell you why. First off, Lundin Mining is flush with cash, with over USD$1 billion in cash from its recent sale of its interests in the Tenke Fungurume copper mine. Secondly, few people know that the Lundin family actually owns a mill from a previous mining operation in Spain, which would be ideal for the Timok project in Serbia that Nevsun owns (more on this asset in a moment). The Lundins have a long successful track record of working with Freeport, which also sold its interest in Tenke Fungurume at the same time as the Lundins, and is Nevsun’s partner in Serbia. The Balkans are different than the rest of Europe. I’ve done business in every region of the Balkans. It’s a different mindset. It’s a frustrating place to do business if you don’t know how to navigate the Balkan way. The government of Serbia is very well aware of what this project means to the region with respect to jobs and putting Serbia in a positive light internationally. That said, the lawyers the government has representing the Serbian interests are smart, and tedious and will outsmart any consultant who has no previous experience in the Balkans. This is where I think Nevsun has done a poor job thus far. I know the Lundin family very well personally. They would thrive in Serbia. And the Serbs wouldn’t mess around with someone like Lukas Lundin. Another little-known fact: Lukas Lundin was a major investor in Serbia in the early- to mid-2000s with a longtime family business associate and advisor. I know this because in 2004, the advisor asked me to visit their assets and report back on my findings (I speak Serbian). The Lundins know how to do business in Serbia. But there is a big “but” to this thesis. I do not believe the Lundins will go into Eritrea, which is the country where Nevsun’s producing mine (called Bisha) is in. Therefore, I believe we have some time on this speculation. Why? Because the banker that puts this deal together will need to do a three-way deal. The Lundins will buyout Nevsun while instantly selling off the Eritrean mine. Why would the Lundins not want the Eritrean mine? Two reasons. First, the mine is just too small for Lundin Mining. The second reason is political. The Bisha mine is the largest foreign mining operation in Eritrea, and I don’t think the Lundins would want to bother with all the political backlash that would come from their shareholders for going into Eritrea. But I know of many Chinese mining companies that have zero issues going into Eritrea. In fact, I know of many that would love to have an operation like the Bisha mine. **What do I Think Will Happen With Nevsun Going Forward** Nevsun stock has been on a tear in the past 3 months. At one time it was up nearly 100%… Nevsun’s CEO, Peter Kukielski, wants to develop the Timok Property in Serbia into a mine. And I do believe he can do it. However, I disagree with him on this. And I met with Peter in late 2017 and stated to him that I believed Nevsun would be acquired by a larger company. Simply because the world-class assets in Serbia were very cheap because of Nevsun’s stocks price at the time. When I met with Peter personally, I asked him to sell Bisha and use the cash to advance Timok, so that the company would go into play delivering shareholders significant gains. Peter didn’t like my strategy. He wants to build Timok in order to create significant cash flow. Is Peter wrong? NO. But rarely does this plan get executed to benefit shareholders. I’ve seen it fail for one reason or another many times before. Peter wants to build a world-class mining company. I respect that. However, my interest is only to make money while limiting my downside risk. And with Nevsun now in play – it’s a catalyst that any large shareholder would want to take advantage of. That said, I owned more shares than any of the insiders of the company, and I believe my invested amount of capital is greater than all of the insiders combined. Peter doesn’t own enough shares (even combined with the rest of the insiders) to fight off any hostile bids if one comes. Based on the number of shares that management owns (skin in the game), they’re more geared toward Nevsun succeeding in the long term than a buyout windfall. Several years of high six and seven figure salaries that could amount to millions of dollars over the years are lucrative to management teams. It’s more lucrative than a one-time six-figure payout based on management’s shareholdings and a two-year golden parachute clause buy out. This is why skin in the game is an important factor to consider. **So, what do I see happening?** First off, me and all my subscribers have already locked in a Katusa Free Ride. I have taken all my risk capital and more off the table alongside my subscribers. It was a nice gain, not a 10 bagger, but a respectable win in a tough resource market. I believe Peter and the Nevsun team will try to bring a large investor in at the Timok asset level in addition to an offtake agreement. To make matters more complex, the Serbian government is looking to sell the Bor Mining and Smelting business this summer. Given the proximity to Timok, Bor would be the likely smelter. It’s feasible to think that a company like Zijin, Glencore or Rio Tinto could buy into both Nevsun while simultaneously acquiring the smelting complex. Peter will probably get his way and will build the mine. Time will tell if it was the right choice—either way, Katusa Research subscribers have a risk-free way to play Nevsun—which is by far the prudent way to play the current situation. Nevsun was a core copper holding in my portfolio. Me and my subscribers did very well on that pick. Two days ago, I published my thoughts on two more takeout candidates that I believe will see Nevsun type returns (or better). And I have my money where my mouth is. Regards, Marin P.S. We’ve had thousands of responses to our [challenge from last week](https://katusaresearch.com/the-resource-market-challenge-an-open-call-to-pitch-your-best-deal/). As expected, about 10% of the responses (of which came from junior mining IR employees) were of companies that didn’t even qualify. Those IR guys are now put in the moron list forever. However, there was one individual who presented a company (one I knew), but with a thesis, I did not think of myself. Our team is already working on deep due diligence on this company and working hard to see if it’s worthy of our subscriber’s attention. If it is, my subscribers will be the first to find out. Note: I just published my June report nearly a week earlier than scheduled. I want subscribers to know the details behind my next two take out candidates that could deliver 100-200% in short order. It’s all featured in the June edition of *Katusa’s Resource Opportunities* – which is one of my most in-depth to date – [click here to learn how to get access to the report](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail). --- # The Resource Market Challenge – An Open Call to Pitch Your Best Deal - URL: https://katusaresearch.com/the-resource-market-challenge-an-open-call-to-pitch-your-best-deal/ - Type: article - Published: 2018-05-25 - Updated: 2019-08-26 - Author: Marin Katusa I’m calling out all Stock Brokers, Investment Fund Managers, Sophisticated Investors, and Executive Management teams of publicly traded resource companies. I pride myself on having boots on the ground, ears to the street, and eyes on all the screens. But sometimes my team and I might miss an opportunity that could be the next big score in the market. And it’s physically impossible for me to be at every site visit, cocktail reception, and backroom poker game (my wife would kill me). **WIIFM?** You’re probably asking yourself—I *don’t even like Marin, why should I help him make more money*? If you’re smart, you should be thinking: What’s In It For Me (WIIFM)? Lots. I have access to over $100 Million of capital to allocate into any one deal through Private Placements, open market buying, or a combination thereof. Even though I have strong deal flow and a very deep understanding of the industry—I’m not perfect. I am always looking for more great deal flow. I am searching for the best deals in the market that I may not know about to not only buy personally, but also to bring exposure to my newsletter subscribers. Katusa Research subscribers are the top 0.01% of global newsletter subscribers. They don’t respond to bullshit. They see right through illusions and the cheap copy other firms put out. Copywriters don’t direct the research at Katusa Research like many of the big newsletter outfits. My hunger for the next big score keeps me and my strong technical team always on the prowl for the next needle moving returns. My subscribers are looking for the next Alterra Power (167% gain) and Nevsun (64% win), which we all made a lot of money on. Another Northern Dynasty would be great, as ten baggers are always nice. Many of my subscribers are accredited investors. Some operate high net worth family offices. Most are professionals. Some are even retail traders hungry to learn and are equally as stringent with their money as I am (a good thing). And I’ll only show my subscribers deals that I am personally willing to write a large cheque for. To that end, we have created a special email address for your submissions – Now, if you have the next big play in the resource markets, naturally you’ll be asking *What’s In It For Me* (WIIFM)? My answer is this: Brokers, if you bring me the deal – you get the commission. For example, in the last 18 months, my subscribers and I took down over $150 Million in Private Placements. For those that care, that amount is larger than any one of the domestic brokerage houses did for junior resources deals. I can only imagine what the brokers are now thinking they would do with a nice 7 figure commission check. This is serious buying power looking to invest alongside me in only the best deals. For the management teams: If we pick up your story, you will get my money and many of my subscriber’s money and an incredible amount of liquidity and market awareness. For the fund managers and investors who want me to take a look at their deal, I’ll work out a finder fee with you if your story is one I did not know of and participate in because of your introduction. If all you have is moose pasture, a dream, and a half-ass PowerPoint slide deck: don’t reply. You will forever be put in the moron junk folder. Nor am I looking for a sleek presentation or to be wined and dined. I’m vegan, and most vegan restaurants suck. I want to back only the best people with the next major undiscovered project. So without further ado… **The Criteria** Here’s my criteria, and it’s pretty simple: - A written thesis in the email body on why the company is either a takeout candidate or a fundamentally undervalued story and a double from the current share price; - Market Cap must be greater than CAD$100 million; - The asset must at least have a PFS; - Management must own at least 5% of the company combined. If you cannot follow these simple rules – you will forever be put in the “moron” file and your company emails will be rejected from me forever. And don’t forget to include your direct contact information. We are trying this experiment to see what we end up with and what’s out there, that may not be on my radar. And if it’s successful we’ll do another Market Challenge for deals under a $100M MCap. But for this first test, we’re only considering deals above a $100M MCap. Again, send an email to… …with only the info that I need to know. If it passes the Katusa test, you’ll get an immediate call back with the next steps. Regards, Marin Katusa P.S. If you want to see the best deals that I end up publishing to my subscribers, don’t miss the upcoming June edition of *Katusa’s Resource Opportunities* to see where I’m putting my own money on a brand new recommendation. [Click here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiwebsite) to learn more. --- # Outsider: The Journey of a Speculator and My Next Big Score - URL: https://katusaresearch.com/the-outsider-the-journey-of-a-speculator-and-my-next-big-score/ - Type: article - Published: 2018-05-18 - Updated: 2019-08-26 - Author: Marin Katusa ***Special Note:****** On June 6th, 2018 at 1:30pm PDT (4:30pm EDT) Marin Katusa will publish the specification on his “The Next Pebble” bet in the June issue of Katusa’s Resource Opportunities.*** Are you a Speculator or Investor? If you relate with the Greasers in the book The Outsiders by S.E. Hilton you are a speculator. If you relate with the Soc, you’re an investor. Just kidding. I’ll get back to the novel Outsiders in a minute… I’m known as one of the largest financiers in the junior resource sector. If there is a Private Placement being pitched, I’ve most likely seen it. Because of this, I am regarded as a speculator. These juniors are speculations because most don’t have any cash flow or profits. In fact, most people who don’t subscribe to my newsletter would call me a speculator. But those who follow my work know better. Here’s a little about me… Other than an amazing family that would support me on any venture during my formative years (the greatest blessing one can have) – I had nothing tangible to my name. No money. No connections in the stock market. I didn’t even know anyone who worked for a publicly traded company (now you could see why I related with the greasers). But I wanted to learn. So, I started where every nerd would start – the library. I read pretty much every book on investing I could get my hands on. I read hundreds of books on subjects ranging from value investing to speculating. From the CFA program to get rich guru nonsense, I absorbed it all. My background is mathematics, and the reality of my predicament was that the mathematics proved I needed to “work it” with the little capital I had access to. I also knew the teacher’s salary I was on (I started out as a High School Math teacher) wasn’t going to provide me with the float to become a mini Warren Buffett. Not to get distracted, but I believe the whole educational system fails our students on many fronts. But none more so than the lack of education on finance and, specifically, how to make money. Let me explain… Teachers at the school where I taught were encouraged to get involved in extracurricular activities for the students. Rather than being a basketball or volleyball coach (which I had zero interest in doing), I made a proposal to the principal: I asked to create a finance club for any and all students. It was frowned upon by the administration and most of the faculty. Yes, many of the teachers looked at me like I was an alien, and that wanting money was inherently bad. Crazy! Good thing a consistent trait throughout my life has been not giving two ****s about what others think (maybe it’s the East Side in me, or the fighting Slavic spirit, I don’t know). I personally found it ridiculous that teachers were lauded for leading walking clubs, poetry clubs, and knitting clubs. And yet I was looked down upon for creating the finance club and encouraging students to want to be financially well off. Rather than taking the kids to a basketball tournament on the school bus, I took my “team” on the school bus to a private tour of a public company’s facility. We also had a president pitch his company to us. And we attended an AGM. I tried to be a role model to these kids because I taught math differently than most teachers. By making math about money, I tried to make math cool. To some degree, I believe I succeeded. Today, the students who were members of my finance club are doing fantastic. One is a mining engineer executive at one of the world’s largest mining companies. Another is a fund manager. Another is a bank manager. Two run their own businesses. And every one of these students had a learning disability. Is it a coincidence that of the 6 students who were in my finance club for two years, 5 are directly working in business and finance? There is no doubt I started as a speculator. And almost 20 years in, I can say that a successful speculator evolves into a hybrid between a speculator and an investor. But you can’t be both a Greaser and Soc… can you? Let me explain the **Journey of a Speculator**. Financial literacy is a must. As is technical understanding of the industry you are analyzing. If you do not have both, you are a gambler. But how do you reconcile the two – how do you become both a Greaser and a Soc? Cherry Valance (the female lead character) had it all figured out in The Outsiders – can’t the two sides just get along? Stick around, because you are going to learn something valuable in this missive. **Remember These Four Letters** F-C-F-P. No, FCFP is not F***OFF in Russian. In 2014 when I bought my first large block in Ross Beatty’s Alterra Power, I bought it not because I liked Ross (I do, but not that much!), but because I liked the potential upside and what I believed was hidden financial value in the company. The financials were complicated, hence the financial literacy portion of my comment above. I wasn’t a wind power expert, nor was I a run of river expert. But I learned what I could, visited as many sites as I could and I used the best consultants in the industry for questions I couldn’t answer myself. I walked many of the well-known analysts through financial details on Alterra. And I even corrected a major financial data source that the industry uses for their inaccuracy on how the debt was being reported (you’re welcome). But what really stood out for me was that my calculations showed me Alterra was going to be generating more cash than it was burning. And I believed the company would start spitting out a dividend. Over the next 36 months, I bought millions of shares to become one of the largest shareholders. Again, not because I wanted to support Ross or because I liked him, but rather because this was a compelling investment opportunity. The fact that Ross was the largest shareholder and Chairman of the company made the experience that much more enjoyable because there is nothing better than working with people you like. And that’s a key statement. I really do like Ross and have an incredible amount of respect for him. And if the exact financial proposition was present but the management team wasn’t one I respected, or liked, I would not have bothered. Stay away from bad people. Was my big bet on Alterra a speculation or an investment? The answer: It was a hybrid of both. The costs of green energy had dropped significantly over the last decade. And I believed they would continue to do so (speculation). I believed that the day would come when green energy would be economic without government subsidies (speculation, and one that got the most pushback from gold bugs). I also believed that cost of capital would remain low during the investment horizon (speculation). The complex financial models I created to determine the NPV of the producing assets weren’t speculation but rather based on financial investment models. Though some of the key inputs, such as future power rates, were speculation. After following Ross’ own evolution in the green energy space (he got into geothermal in 2008—and I visited their first operation in 2008), it wasn’t until late 2014 that Ross and I met privately at his favorite coffee shop in Vancouver where I laid out my thesis for Alterra. It was a delicate combination of both speculative assumptions and investment fundamentals. We went through my 20 plus pages of math and Ross replied, “You’re a nerd”. I responded with, “A cool nerd”. My evolution to a hybrid of speculator meets investor began. Kind of like a perfect mix of Greaser and Soc. Cherry would be so proud. I believe that in order to obtain success in the current cyclical resource markets, any investor must be a sound speculator and any speculator must be a sound investor. Elements of both are required in every investment decision in the equities market. For example, whether you are a Soc or a Greaser running the FCFP on Alterra, you have to make multiple assumptions for the inputs in your financial models. And this goes for any complex investment model for any company in any sector. For all the Soc (investors) out there who look down on the Greasers (speculators), sorry to pop your bubble. When you create your own FCFP model, you may take a consensus of analysts’ assumptions to get your numbers, but all you are really doing is taking the consensus of a bunch of Greasers. You might as well understand what it takes to be a Greaser in order to be able to come up with your own sound speculative inputs. It is shocking to me how many complex financial models I come across from the “big bank analysts” that use absurd input values based on a consensus of 12 analysts. Really? How about you come up with your own inputs and take responsibility and not blame the “consensus”? Anyways, I think you get my point. **Dividends May Not Sound Sexy, but Making Money Is** Alterra was an excellent example of using a hybrid approach of being a speculator and an investor. Because part of my investment thesis was this: What is the true NAV (Net Asset Value) of the company such that a larger company would buy out Alterra? Again, I published my data for over 12 months, and it was a mix of speculation and investment prowess. Was it easy? Hell no. Did I doubt myself at times? Yes. When I was underwater on my first and second and third tranches, did I re-assess my models and inputs—yes! That’s the point of having skin in the game—I care. Would an analyst who has no skin in the game care as much? No. It’s not possible. I had millions into the deal and you better believe I kept a keen eye on the company at all times. How could an analyst who isn’t allowed to own the stock care as much? It’s just not likely. A global recession can drop the price of coal from over $300/t to $100/t and cause the dividend paying coal stock you bought at $40 to cut its dividend, resulting in the stock dropping to $10 overnight. Similar situations have played out countless times. In your investment model, what assumptions (speculation) did you make on the price of the commodity? I often get asked about dividends in my models… And I’ll share some analysis with you today, for both the Greasers and Socs out there—because as they will find out, both have it tough in these markets… There are many factors that can impact the performance of a company’s dividend. Not all dividend yields are equal. I’ll break down some of these factors in more depth below. Very few mining and energy companies have the Warren Buffett “moat” around their businesses. But when you come across one (and they are out there), it takes both speculation and investing techniques to succeed. **Step 1 – Understand Debt and Debt Free** One of the most important indicators I look at for dividend stocks is the amount of outstanding debt on the balance sheet. Debt in a cyclical resource market is very dangerous. If two companies offer the same dividend yield – but one has no debt load and the other a debt facility that they need to service – how do you proceed with your analysis? Start with the payout ratio. A company’s debt can impact many things. But one key indicator we look for at Katusa Research is how closely a company’s debt is tied to its payout ratio. A payout ratio is the ratio of the amount of money the company paid out in dividends, divided by the company’s net earnings. **Step 2 – Payout Ratios** **A payout ratio below 30%** generally means that the company is reinvesting profit back into the company and continuing to grow its operations more so than it is paying back shareholders. It also demonstrates strong economics if the dividend is above industry peers. Following up on the ROI of those management decisions is critical in assessing if management is doing the right thing with this payout ratio. Knowing the company’s margin compared to its peers within the same industry is crucial. Understanding the history of the dividend is also critical. Is the dividend relatively new, or is it increasing year over year, or decreasing? ** A payout ratio between 30-55%** is generally considered healthy, as the company is splitting its focus between giving back to its shareholders, while still retaining some of its cash to grow the company with. **A payout ratio between 55-100%** may look good for the investors on paper. But when the ratio is this high it could mean that either the company has no growth plans or that their dividends are unsustainable. Make sure you understand the company’s debt servicing requirements if the commodity price drops. ** Payout ratios higher than 100% or lower than 0%** can exist as well. These tend to be short-term occurrences due to special dividends and extraordinary circumstances. A company that is paying out more in dividends than it makes, or is paying out dividends when it isn’t making any money, is not going to stay in business for very long. I’ve seen it in the oil patch. **Casey Study: Exxon Mobil** Let’s take a look at the longest dividend paying oil company in the world, Exxon Mobil (XOM:NYSE) over the last five years: At the beginning of this period, Exxon had low debt, strong income, and a very healthy dividend payout ratio of 28% for what is historically a low margin business that requires significant reinvestment to maintain production or grow conservatively. However, as oil prices started their downturn towards the end of 2014, Exxon’s profits followed shortly (hitting their lows in 2016). During this time, Exxon was committed to maintaining its dividend. But to do so, it was sacrificing its balance sheet. What followed is that its debt load skyrocketed, along with its payout ratio. Of course, 2016 was a very difficult time for all oil companies, let alone Exxon Mobil. But if you were only looking at Exxon’s dividend yield during the period it would have been hard to tell. Why? Because Exxon maintained a steady dividend through the entire length of the downturn. Without looking at the dividend payout ratio as well, investors would only have seen one side of the story – a steady dividend. On the other side, Exxon’s debt load more than tripled while its market value shrank by nearly one-third. **Limitations of the Payout Ratio** With that said, the straight payout ratio is not the be-all-end-all either. This is due to the way some industries operate. For example, in the oil and gas industry, many companies have cash flow positive operations. This means that they can sell their oil for more than the amount of money they spend on actually producing it (including paying employee salaries, and other general operational costs). This is called having a positive Operating Cash Flow (OCF). Some companies choose to pay out a dividend from this positive surplus of cash. Other companies reinvest this surplus cash back into growing the company. Oil and gas companies generally favor the latter, which includes drilling new wells and developing the rest of their projects in order to grow their production and revenue. And these capital investments are not considered part of the Operating Cash Flow because they are not part of the company’s current operations. Because of this, many oil and gas companies have a positive OCF, but negative earnings. ** How does a company have +OCF but have negative earnings?** For many businesses, an appropriate amount of leverage (debt) can help the company grow faster than it would otherwise. For this reason, the standard payout ratio calculated from a company’s net earnings is sometimes not the best indicator to use if the company is paying a regular dividend (but still prioritizing growth). In these cases, we can instead calculate a payout ratio based on the company’s OCF by comparing its dividend payout with its OCF, rather than its earnings. In the chart below we once again use Exxon’s past performance as an example. Note that the dividend to OCF ratio looks much healthier than the standard divided to earnings payout ratio. And you’ll notice there was still a spike around 2016 when global oil markets were depressed and revenues were down. Looking at this chart, it’s not hard to conclude that Exxon is not in the same position of financial strength it was in before the oil price collapse of 2015-2016, and it still hasn’t recovered fully. I do not own Exxon. **Current State of the North American Dividend Market** As Raymond DeVoe Jr. once wisely stated… *“More money has been lost reaching for yield than at the point of a gun.”* Understanding resource cyclicality is absolutely critical to success in the resource sector. And that statement couldn’t be truer when it comes to resource stocks. So what’s going on with the dividends of North American public companies? Below is a chart that shows the percentage of companies which pay a dividend in each sector. There are over 2,000 companies that pay a dividend on the Canadian and U.S. stock exchanges today. Banks, lenders, and other financial institutions such as investment trusts account for the largest portion as over 40% of these companies pay some form of dividend. They are followed by the industrial and consumer discretionary sectors. Less than 10% of the energy and mining companies pay a dividend. Of all these companies, only 231 (or just over 10%) are debt free companies. Below is a chart of the sector breakdown for the debt-free dividend-paying companies. The mix here is quite similar to the overall dividend chart. However, certain sectors are better represented here than in the overall mix, such as the energy and tech industries. So it’s a much more exclusive club, sure. But how exactly are these debt-free dividend companies better than the regular ones, you ask? Below is a chart which shows the dividend yield, insider ownership, and payout ratio for debt-free companies versus the average in the S&P 500. The chart above is a great chart that really confirms the whole **“skin in the game”** concept. The blue bars show that the better companies have a larger ownership by insiders. (Long-time readers know I love investing alongside management teams with lots of skin in the game). Unsurprisingly, not only does management own more stock in the companies with less debt, but they also pay a better yield. Additionally, the payout ratio is higher because there are no looming interest payments. **Drilling Deep for Dividends** Dividends in the resource sector are few and far between. It is more common for a mining company to reinvest its cash flow back into exploration or advancing other projects rather than paying out capital. But when the mining companies do go the dividend route, the payouts can be better than the industry norm. Below is a chart which shows the average dividend yield and payout ratios for mining companies versus the S&P 500. As you can see, right now the dividends from the mining industry, on average, yield slightly better than the S&P 500. All this despite the fact that we’re currently in one of the weakest resource markets in recent memory. And, as one would expect, the payout ratio for mining companies is slightly higher as well. As a whole, the North American mining industry paid out USD $2.0 billion in dividends last year, while taking in some $13.7 billion in public funding through IPOs and private placements (from juniors to majors). This resulted in a “yield” of 15% for the industry in 2017. **W here am I Putting my Money?** There’s nothing like getting paid handsomely while waiting for your investment thesis to play out. If you’re putting money into a company, a healthy (and big) dividend makes a company all the more attractive to have in your portfolio. Where most investors fail is that they only chase yield. Just because a company is paying a 10% dividend, doesn’t mean it’s sustainable. If you see a sky-high dividend, you should immediately question the inputs. Is this sustainable? But if you can find a company that can pay you a solid dividend and also has a colossal upside – then you’ve found a recipe for a major investment score. And I’ve found one such company and have big confidence in this dream team of management (I’m building a big position in this company). Now going back to my intro… On June 6th, 2018 I am going to publish, a new company recommendation that owns a project as impressive as Northern Dynasty’s Pebble, with the same massive upside potential as Pebble. If you have followed my work, you know that those who followed my early recommendation on Pebble made over 1000% gains. I am not saying this company will go up 1000% the way Northern Dynasty did for us. What I’m saying is this company has a Pebble-like upside that has the potential to deliver significant returns to shareholders – even in a notoriously stagnant resource equity market. I’ll be finishing the due diligence by sometime next week. More details on this in my June issue. Regards, Marin P.S. I believe I’m on to the best dividend stories in North America. And the dividend is just the tip of the iceberg… This company is going to be a game changer in the Western Hemisphere and disrupt an industry that very few people understand. I’m personally going to be betting very big on this company. To get all my research and analysis (and most importantly the name of this company and my buy-in tranche guidelines), consider becoming a subscriber to my research service, *Katusa’s Resource Opportunities* by [clicking here](https://subscribers.katusaresearch.com/subscribe-now-checkout-010/ref/katusablog/?campaign=kiiemail). --- # This Event Could Cause the Big Blowup of 2018 - URL: https://katusaresearch.com/this-event-could-cause-the-big-blowup-of-2018/ - Type: article - Published: 2018-05-11 - Updated: 2019-08-26 - Author: Marin Katusa There is a unique set of predators that wait motionless and lie in stealth for that single, opportune instant. There’s no rush of heartbeats. And no increase in tension. Often times they are hidden and wait long periods of time for just the right moment to seize their prey. But for many animals in this group, their success rate is phenomenal. This type of animal is called the Ambush Predator and includes one animal that I’ve talked about frequently, especially when it comes to my style of investing – the alligator. Stealth and a precise strategy separate an ambush predator from the rest of the animal kingdom. On the other hand, you have Pursuit Predators, who use speed and strength to carry out a kill and plate their feast. Instinctively, humans are pursuit predators. Although, over the course of history, we’ve used technology and tools to our advantage to start incorporating strategies natural to ambush predators. Using our size, speed and intelligence, we have an uncanny ability to chase down our prey in short distances, all the while looking for a quick return. Ambush predators are cunning and scan their environment from a hidden position. They can outwait and outlast, looking for the perfect moment to pounce. And when that moment comes, they rapidly execute a surprise attack. The prey will think, “*I didn’t see that coming*.” But the ambush predator was preparing for just the right exit strategy all along. Until then, the ambush predator waits… often in solitude… for long periods of time. And it can get very lonely… Until that crucial moment to make its move arrives. **The Lonely Trade** Now, I’ve written several times in the past about the “lonely trade”. The lonely trade is one that strays from the investing norm. It’s one that people criticize you for, and make fun of you for investing in. However, the lonely trades are usually the ones that pay off the most for you, because you’re in at rock bottom prices. You see the opportunity before anyone else. Alterra Power was a lonely trade. It’s an understatement when I say Alterra had no interest from the street. I took it upon myself to organize institutional investor days for the largest shareholder and Chairman, Ross Beaty and I (one of the largest shareholders) to present the investment opportunity. Some of these brokers, analysts, and fund managers had made millions personally with Ross Beaty in the past. Yet, they were completely uninterested in the fundamental metrics of the real value generating business that Alterra was. Then it all changed on October 30, 2017. Alterra was bought out for over $1 Billion, delivering me and long-time readers a big win (167% since I first published my research on the company). Northern Dynasty was another lonely trade. I had numerous investment bankers and “savvy” investors tell me I was crazy, and that I might as well just light my money on fire rather than invest in Northern Dynasty. As with Alterra, there was a specific date when everything changed. On November 8, 2016, Trump won the election. Within three months, Northern Dynasty ran to over $4 per share. If you believe you are an ambush predator investor, pay attention. We will have some amazing investment opportunities over the next 6-18 months. Let me explain… **The Fund Manager’s Dilemma** Recently, I was at an invite-only conference where the largest funds in the world met one-on-one with the top mining companies in the world. At this conference, I nailed down some great watch list ideas from companies for my fund and for subscribers to *Katusa’s Resource Opportunities*. But my biggest takeaway from the conference was what I call the *Fund Manager’s Dilemma*. ***The Fund Manager’s Dilemma***: *“I have to sell my winners with liquidity to meet redemptions, and I’m left with my illiquid losers.”* *– *A quote from one of the biggest fund managers in the mining world. The fund managers that invested in the resource sector have never been under more pressure. One of the world’s largest fund managers openly stated to me that it’s just a matter of time before he gets fired. Why? The sector has underperformed the overall market, and the largest gold producers are down an average of 20% over the last 52 weeks. In fact, 16% of precious and base metal mining companies are trading near their 52-week lows. The last time this happened was March 2009, the low in the equity markets. Below is a chart of publicly listed mining companies trading within 10% of their 52-week lows. Active fund management has significantly underperformed the “generalist funds”. Generalist funds are the funds that have been playing the overall U.S. markets with stocks such as Tesla, Amazon, Apple, and companies on the S&P 500. On average, the S&P 500 is up 13% over the same 12-month period. The chart below compares the different segments of the gold sector (bullion, senior producers, junior producers) versus the S&P 500. Because of the poor performance of mining stocks over the last 12 months, fund managers’ performance in mining has been awful across the board. Resource fund managers experienced significant fund redemptions (people pulling their money out of the funds). And even more important is that no new money is coming into the sector. That means fund managers have to sell whatever is liquid to meet current redemptions. Otherwise, their fund would perform even worse if they were to sell illiquid mining positions (the share price will go down even more to absorb the volume). In the past, liquidity was only an issue with junior mining stocks. But it’s becoming an issue with all mining stocks right now as new sources of capital have dried up. It’s not just the juniors and mid-tier companies. The majors are feeling the pain as well. Below is a chart of Goldcorp, Barrick, and AngloGold. These are three of the largest gold producers in the world. As you can see, all three have significantly underperformed gold in the last 12 months. Because there is no new money entering the large funds, these same fund managers have to sell an existing position to meet the demand for redemption. Or, they have to come up with the cash to buy a new position in something they like better. In essence, the industry is cannibalizing itself. And if you are cashed up, there will be incredible bargains to be had. One of my close contacts is a very, very wealthy and well-connected individual. He just came back from Europe and met with every major fund for a one on one. To put this into perspective, his speculative resource portfolio is larger than the largest gold fund in the world. Successful, smart, and rich, the large funds were hoping to get a major investment from my good friend. We got together last week for a catch up as we hadn’t hung out for a couple of months. He asked me, “Marin – what do you think is the biggest fund out there for gold?” I responded with, “Two billion?” “No” he said, “It’s $600 million. And Marin, how much available cash do you think they have?” “Very little?” “Zero. They’re fully invested.” My eyes opened wide. “*Wow,*” I thought, “*My tranche matrix approach of buying… and raising my cash position… will give me **incredible** flexibility to get amazing deals*.” And that’s where the lonely trade can pay off for the ambush predator style of speculating. Do you know what the Tranche Matrix is? The Tranche Matrix is the single best way an Ambush Predator Investor can play the resource markets. The Tranche Matrix is what has delivered my current 65% gain on my favorite copper developer. I personally use the Tranche Matrix in my research and analysis and so should you. **What to Watch Out For ** I see some serious macroeconomic headwinds coming for the U.S. stock markets. And I also think the U.S. dollar will strengthen considerably over the next few months, especially with the strong likelihood of several Fed rate hikes on the horizon. If these events happen as I expect (I don’t have a crystal ball, but I will prepare my cash position accordingly), a broader market correction will take gold and other resource stocks (the equities) down with it. This will put additional pressure on fund managers who are continually forced to sell winners to fund losing positions. World class development stage assets, along with mid-tier and junior gold producers, will trade at significant discounts to current share prices and trading multiples. I do foresee a situation where many large caps start trading at prices that are normally attached to mid-tiers. And if this happens, it’s an ideal setup for Katusa Alligators using the Tranche Matrix. Why? You never know when the bottom will hit, and you want to build your position over a period of time. Timing the market and buying your whole allocation in one shot is for market prey, not predators. I’m getting ready for the opportunities coming. Are you? Regards, Marin P.S. One of my core portfolio holdings – Alterra – was bought out last fall, delivering 167% gains since I first wrote about it to my subscribers. Recently, one of my core copper holdings received a buyout offer and the stock is up 84% in the last 3 months. If you missed out on these returns, don’t fret. There are 2 other core holdings in our portfolio I see as takeout targets with the potential of 100-300% returns in 12 months. To learn the tickers of those companies and more about my *Katusa’s Resource Opportunities* service – [click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiemail). --- # Making and Losing Fortunes on Machine Gun Roulette - URL: https://katusaresearch.com/making-and-losing-fortunes-on-machine-gun-roulette/ - Type: article - Published: 2018-05-04 - Updated: 2019-08-26 - Author: Marin Katusa “*Marin, you’re crazy. This is where the money is*.” If I had a Bitcoin for every time I heard someone tell me this across a boardroom table, on the phone, or from an email… I’d have a $20 million crypto wallet. At least. And for the record, I actually quite like my wallet I’ve had for 10 years. Originally I wanted to write the subject line as “Making and Losing Fortunes on African Roulette”. But using those words might get me in trouble with the Politically Correct Police. I’ve done many deals and made many investments in Africa. And I’ve had many pitches from entrepreneurs, investment bankers, and blatant crooks that the next big gold, copper, cobalt, oil, etc… project is in this remote part of Africa just ripe for a big return. Here’s why investing in parts of Africa is a game of Russian Roulette – with machine guns… One of my favorite indicators when putting my own money on the line is one I call the “AK-47 Indicator”. In fact, I wrote a whole essay about it that you can find [right here](https://katusaresearch.com/use-ak-47-indicator/). Here’s what I wrote … *I’ve learned the hard way that if you’re interested in making money, you need to trade excitement for boring old rule of law and a simple respect for **the business.* *The places where people with **AK-47s** walk the streets tend to be the places that have very few of the roads, bridges, power lines, railroads, and ports needed to transport raw materials. That kind of infrastructure is critical for turning resource deposits into free cash flow. * *The places where people walk around with AK-47s also often lack contract laws, property rights, and worst of all, respect for human life.* Now I want to show you how a fortune is made and lost in an AK-47 nation. Strap yourself in and let’s take a flight to the Democratic Republic of the Congo. (Except for the 14 of my readers that already live there – just stay where you are. Yes,believe it or not, I have 14 subscribers in the Democratic Republic of the Congo)… Back in late June 2017, my top analyst dug deep into the financials of the giant mining company Glencore. Deep in those company documents on a Saturday afternoon in the office, he fired me an email that said he found another tiny company that’s going to produce about 25% of current global cobalt production. I believe his exact words in his email to me were “*It’s f***** monstrous*”. And he was right. Shares of this newly discovered company were trading at 50 cents at the time. It was trading severely undervalued for the asset this tiny company owned. I was almost tempted to send out an alert to my subscribers to let them know about this find before word got out in the investment banking and newsletter world. But I didn’t. My AK-47 Indicator came to mind immediately. We spent the next couple of weeks digging deeper and deeper in due diligence. All the while the shares of the company started to creep higher, and higher. The fear of missing out (FOMO) was tiptoeing in. And this is where the story (and stock price) started to kick into overdrive. On August 2nd, 2017 I released my monthly issue of *Katusa’s Resource Opportunities*, titled “Becoming a Key Supplier in the Booming Electric Car Industry”. In this issue, I published analysis on this tiny company in question – **Katanga Mining**. Katanga counted Glencore as a substantial shareholder and held some incredible cobalt reserves. As I’ve said many times before, cobalt is an important metal in the electric vehicle revolution. But before I revealed the ticker to subscribers, I made a big, bold disclaimer NOT to purchase anything because of a couple of red flags I saw with the company. One of the big ones (other than being in an AK-47 nation) was an accounting problem. Here’s what I wrote to subscribers… *In the press release put out On July **31**st, 2017, Katanga stated it was working with management and outside council on a financial review. A financial review examines the historical accounting of the company. I pride myself on my ability to look at a company or a project and determine its economic feasibility. I use countless advisors to make sure I understand the geology and engineering requirements of a deposit. However, the one thing I cannot control is if the books are cooked. Accounting fraud is a very serious offense**.* *I know things are done differently in the DRC and I think Glencore will sort this mess out. Regardless, there is no reason to jump into the stock until the investigators get to the bottom of it. The risk is far greater than the reward at this point.* *My team and I work tirelessly to make sure you have actionable advice. However, if I am not **willing** to buy the stock given the current issues, why should I recommend that you invest your hard-earned money into the company? I am very cautious and you should be as well.* At the time I published that, the stock rebounded strongly from a big correction and was trading around 70 cents… The reward in terms of much higher stock prices were very high, along with the risks too. In the chart below, I detailed how Katanga’s Kamoto project was one of the highest-grade cobalt projects at any stage of development. And the cobalt grades were very high compared to others in the peer group. Here is a company that ticked all the boxes… - Experienced management team; - Glencore was a major shareholder and backer; - Incredible assets; - Part of a sector (cobalt) where demand was going to drastically outpace supply in the very near future. But the location on the map was very important. So what happened? The share price took off like a rocket up from 70 cents to $2.70 in 5 months. That’s a 286% gain. I didn’t make a single dollar on the sharp rise in the stock price. Why? Because I didn’t feel comfortable investing in a company with potential that had an accounting noose hanging over its head in an AK-47 Nation. And something just didn’t feel right about all the money and interest in cobalt and the Congo all of a sudden. My gut is usually right about these things. After the company financials were finally released several months later, investors took the stock to the heights shown above. Cobalt had all the momentum in the world. Money was pouring into early-stage companies. Financings were through the roof. And all that came to a grinding halt on January 25th, 2018. Congo raised taxes and royalties on metals including cobalt and copper. This didn’t go over well in the mining industry. And it especially didn’t go over well with investors. Katanga stock started to go stagnant. The red flags I saw with the company only started increasing. But I still LOVED the assets the company had – the Kamoto cobalt project was truly world class. If Katanga could figure out the political situation, shares could appreciate further. But then another bomb dropped last week. The DRC’s state mining company – Gecamines – was filing legal proceedings against Katanga, with the aim to dissolve the company. Gecamines alleged that Katanga had failed to adequately address its $5 billion in debt. The stock dropped like a grand piano from a fourth story window. A few days later, the company was hit with another suit from a former business partner. The former business partner is none other than Dan Gertler, the man who assisted in the start-up of Katanga a decade ago. Dan’s holding company, Africa Horizons Investments Ltd, is entitled to $2.28 billion in future royalty payments. Shares are extremely volatile and a gambling trader’s dream – up and down 20-30% in a day. But that’s not how I invest. Did I miss out on massive gains with Katanga? Sure. And it won’t be the last time I miss out on a frantic and uncertain play. But when I put my hard earned money into a company, I want to ensure I’m backing a winning management team, with world-class assets, in a politically stable environment. Right now, the Congo is not that kind of environment. So the next time someone pitches you the next big investment, and it’s in an AK-47 country – really take a long, hard look before you commit your capital. Regards, Marin P.S. I’m not looking for an unrealistic quick score with my money, but I have had my share of exciting overnight winners. When I invest, I put a large amount of money into a company with the prospect of 100-500% returns in 1-3 years. To see what I’m doing with my own money, consider a subscription to *Katusa’s Resource Opportunities*. To learn more, [click here](https://subscribers.katusaresearch.com/subscribe-17/ref/katusablog/?campaign=kiiwebsite). --- # Russia Kickstarts the Next Uranium Bull Market - URL: https://katusaresearch.com/russia-kickstarts-the-next-uranium-bull-market/ - Type: article - Published: 2018-04-20 - Updated: 2019-05-01 - Author: Marin Katusa This week a nuclear bomb went off in the global energy market. The Russian Parliament is discussing banning all uranium trade with U.S. nuclear utilities. I have written a lot about the American and Russian uranium dynamic in my *NY Times* Bestseller The Colder War. And as I stated in my book, the consequences from Russian actions to the U.S. utilities is catastrophic. One in every five homes in the U.S. is powered by nuclear energy. Because of the low cost of uranium, the U.S. utilities have been buying the majority of their nuclear fuel in the spot market, not the long-term contract which was the historical norm. The U.S. utilities are now caught in a position of being undersupplied in terms of long term contracts. The only result will be higher spot uranium prices. And if this ban does go through, uranium investors that have their money with the right companies are positioned to profit from the situation. So here’s what you need to know… The U.S. imports 6.3 million pounds of uranium per year from Russia. This makes up 14% of U.S. demand. Kazakhstan (a former Soviet State and whose uranium is enriched by the Russians) provides 24% of U.S. uranium imports, to the tune of 10.8 million pounds. Canada provides 11.3 million pounds (25%) to the U.S. and Australia provides 9 million pounds which is 20% of U.S. demand. In the chart below, you’ll see the breakdown showing what countries the United States gets its uranium from. **Get Enriched ** Another major issue the utilities will face is the source of enriched uranium (which the nuclear power plants can consume). Uranium is “enriched” by converting uranium oxide from the mine site to uranium hexafluoride via a conversion plant. Unfortunately for the U.S., local utilities are left exposed in a negative way. All U.S. domestic enrichment facilities have been closed due to poor economic conditions. In other words, they were losing money. The only non-Russian source of enriched uranium to the U.S. currently comes from URENCO (an operator of uranium enrichment facilities). URENCO is a complicated joint venture (JV) between the British and Dutch governments and a consortium of German utilities. The French do have capacity but have a policy of enriching their own material. Russia has positioned itself in the center of the chessboard, and controls 45% of the global enrichment capacity. The U.S. domestic enrichment capacity cannot just turn on production overnight. Remember, these are radioactive facilities and long-term contracts will have to come into place for the capital to be invested to restart the U.S. domestic facilities and to put them back online. If the domestic U.S. nuclear utilities had any common sense, they would go to existing permitted U.S. production companies and sign long term offtakes to provide for the feed for the U.S. domestic enrichment facilities. These utilities do have common sense, and a doubling of the spot price from the current USD$20/lb to $40/lb would increase the electricity generation cost by less than 10%. The absolute critical factor for nuclear reactors is to stay online. I believe the spot price of uranium will have to increase to meet the demand of the nuclear reactors. Combine the Russian geopolitical issue with the Japanese reactors slowly coming online, and you will see the spot price of uranium start its uptrend. The nuclear utilities don’t really care whether uranium is $20 or $40 per pound because once a reactor is up and running, the price of uranium makes up less than 3% of the operating costs. Unlike natural gas or coal which make up over 35% of the final cost. The only thing that matters for the nuclear facilities is to lock in a stable source of long term supplies. I know this because I was asked to give the 2015 Keynote address at the 2015 World Nuclear Fuels Market conference in Paris. This was not an investors conference. It was where the producers, traders and utilities all met to cut deals to buy and sell uranium. **The Russians are Coming…** Don’t underestimate the Russians ability to fight back at the U.S. sanctions. From my sources, I am told the Russians are already locking in long term contracts with the Chinese and other emerging markets that have increased their nuclear power generation. But at the same time, expect trigger responses via Twitter by President Trump. This will only fuel the volatility in the uranium sector. In the *Katusa’s Resource Opportunities* portfolio, we are exposed to what I believe is the best way to benefit from the coming geopolitical risk in the uranium sector. **In the Room, In the Know** At the World Nuclear Fuel Cycle Conference in Spain this week (like the one I gave the keynote address in Paris in 2015), the following was the talk of the conference. My contacts there have stated to me personally that the buyers have already been locking in uranium purchase contracts at higher prices than the reported spot price. *****Note to regulators *— This is not material non-public information. Everyone at the nuclear fuel conference knows about this—and I am relaying this information to my readers before the media gets to the info. That is what my readers expect — bring the best information in a timely manner**** In the coming weeks, all of this information will make its rounds through Wall Street and I expect select uranium companies to be the beneficiaries of the flow of capital into the uranium sector. To find out where your speculation dollars should be, you will need to subscribe. But my subscribers are already sitting on nice gains from this play, and I expect them to go a lot higher. **The Cure for Low Prices…** Seasoned resource investors know that one of the ultimate signs of a market bottom is when the current market price of a commodity is lower than an industry’s lowest quartile cost of production. When this situation occurs, either the price of the commodity goes up or the producers go out of business. And the world goes on without the commodity. In the case of the energy markets, the world will always choose to keep the lights on. That’s why the saying goes, “*The cure for low prices is low prices*.” In the case of uranium, the average all-in production cost of existing, permitted, U.S. conventional uranium mining is about $50-60 per pound. This is an “all-in” cost that takes into account the cost of capital, labor, equipment, fuel, and insurance. The highest grade uranium project in the world, the McArthur River project in Canada, needs about $30-35 uranium to break even. Kazakhstan’s ISR projects needs $30 uranium to be economic. If you’re following closely, you should be asking. “*Why is the spot price about $10 lower than the cost of production for the best uranium mines on the planet? Are these miners losing money on each pound of uranium*?” Here’s what you need to know… Uranium is sold in two ways. One is through the spot market. This is where an end user can buy uranium now. The second is through the long-term contract market. This is where end users enter into agreements with producers to buy set amounts of uranium over set periods of time. In mid-2017, the spot price of uranium traded below $20 per pound. At the same time, the long-term contract price was about $32.50 per pound. Historically, the majority of sales have been in the long-term market, but that has changed since Fukushima. Because of the flood of Japanese stockpiles, the spot market became more active. But that is now starting to change. This anomaly appears to have started to reverse, which is good news for the price of uranium. Both prices are well below the industry’s average cost of production. Eventually, the laws of capitalism will exert themselves. If the Russians bring in a law not to sell uranium to the U.S., neither Canada nor Australia can make up the difference at current prices. As a result, the price of uranium must rise or the lights will go off. The cost of 1 out of 5 homes losing power is far greater than the uranium price doubling or even tripling. The lights will stay on. How else will trump be able to Tweet? But, a transition from bear market to bull market won’t happen overnight. Nor will all uranium companies benefit. There are over 50 uranium companies listed on North American exchanges, so please don’t go throwing darts at the board. You must know where to make your bets. I will also put up my uranium track record over the last 15 years with any analyst or newsletter writer in the business. I don’t know of any other writer or analyst that was asked to give the keynote to the nuclear fuel market conferences. Not to sound brash, but it’s the truth. Uranium bulls, pay attention: There is still supply overhang that will get worked through. But demand is surging. Supplies are just starting to curtail. We’re seeing this happen already in Kazakhstan. And the industry’s production costs are much higher than current spot prices. **Uranium Stocks Rocket Higher in a Uranium Bull Market** I’ve mentioned a couple of factors that could send uranium prices 100%-500% higher this year. Since natural resource stocks are leveraged to commodity prices, deeply depressed uranium stocks could climb five-fold during that time. You might think these projections sound outlandish, but they are actually very conservative. Just over 12 years ago, the price of uranium started on a climb that took it from $12 per pound to $137 per pound (a 1,041% rise) in just three years. Many uranium stocks climbed more than 3,000% during the rally. The world’s largest publicly traded uranium miner, Cameco, increased in value 20-fold. **Some smaller, more speculative uranium stocks climbed more than 100-fold**. Uranium enjoyed that remarkable bull market for several reasons. Supply was constrained, demand was healthy, and fund managers were speculating that the end of the HEU agreement (*Russian Highly Enriched Uranium ‘Megatons to Megawatts’ program where Russia sold its uranium from old nuclear warheads to the U.S*) would further constrain supply. That’s the situation we have now as well. Best, Marin Katusa **P.S. **My subscribers have enjoyed two quick swing trades on a low-risk uranium producer that netted double-digit returns on two separate trades. One of those trades took less than 10 days to come to fruition. We are currently long two of the best uranium stocks, run by the right people, with the right projects and balance sheets. To find out which uranium companies I’m investing in, consider becoming a member to *Katusa’s Resource Opportunities* [right here.](http://www.on2url.com/app/adtrack.asp?MerchantID=443217&AdID=886439) --- # The Solution to Canada’s “Closed for Business” Sign - URL: https://katusaresearch.com/the-solution-to-canadas-closed-for-business-sign/ - Type: article - Published: 2018-04-13 - Updated: 2019-07-31 - Author: Marin Katusa The Canadian energy sector suffered yet another black eye this week. Facing major regional political headwinds, Kinder Morgan Canada (KML.TO) put a stop to work to the permitted expansion of the Trans Mountain pipeline. It’s another example of a major Canadian energy project blocked by short sighted politicians garnering for individual attention of their own party, rather than the benefit of all. Other cancelled mega projects include the Energy East pipeline and the Keystone XL pipeline (thanks in large part to President Obama). The Canadian energy sector is a big piece of Canada’s economy. Currently the Canadian energy sector accounts for 10% of Canada’s GDP and employs over 800,000 Canadians. Most of these jobs are skilled, high paying roles. And oil and gas royalties brought in $19 billion per year over the last five years. This is another failure on the part of the Canadian Federal Government to act in the nation’s best economic interest. Over the last 5 years, international oil companies like Chevron, ConocoPhillips, and Petronas have all abandoned Canada as a place to invest. Why? Because Canada is not a competitive place to do business anymore. Companies like Chevron invest in a region with the expectation to be there for decades at a time. This requires billions worth of infrastructure investments. Right now, Chevron is expanding oil production in areas like Nigeria rather than Canada. Nigeria is place where thieves drill holes in oil pipelines, fill canoes with stolen crude oil and float the canoes down river to illegal refineries. It sounds crazy but it’s true and happens regularly. Yet to Chevron, this is a better place to do business than Canada. Canada wake up! And investors recognize this. While major crude oil benchmark prices are trading at 3-year highs, most Canadian oil companies are trading lower. Money is attracted to places that offer high levels of return. Canada keeps making headlines to scare away energy investors (and companies). Canada is blessed with one of the largest hydrocarbon resources in the world. But the political landscape needs to change significantly if Canada wants to attract big investments in the oil and gas sector. On April 4th, 2018 the Canadian federal government put out a tender notice for a study on the competitiveness of Canada’s upstream oil and gas industry. The government indicates it will pay $280,000 for this study. The government could save a bundle and sign up to *Katusa’s Resource Opportunities* to see my detailed research on the Canadian oil and gas industry. The government should save the $280,000 in tax payer money and simply ask Kinder Morgan why it backed out of the Trans Mountain expansion project. I’ll save the feds the embarrassment of asking Kinder Morgan. Kinder Morgan’s answer would be “*there is too much red tape, hoopla and bureaucrats on power trips to economically build a pipeline. Not to mention the uninformed NGO’s who are swaying the uninformed citizen with propaganda. Does Canada even bother to see who the NGO’s are funded by? Its no secret they are US groups who prefer to not have to deal with the competition of Canadian oil. ”.* The Trans Mountain pipeline project is an expansion of an existing pipeline. It runs from Edmonton, Alberta to Burnaby, British Columbia. The pipeline was first built in 1953. It carried 150,000 barrels of oil per day. Current pipeline capacity is 300,000 barrels per day. The expansion project focuses on “twinning” the original line to achieve total capacity of 890,000 barrels per day. Currently, Trans Mountain is the only pipeline which transports oil from Alberta to the west coast. And every month there is more demand than space available on the pipeline. This month (April 2018) the pipeline could only take 56% of the total volume nominated for the pipeline. Since the beginning of this year, the pipeline has seen demand exceed supply by over 30%. According to a Canadian National Energy Board 2016 study, demand for pipeline capacity on Trans Mountain has far exceeded supply. Before building the Trans Mountain Expansion, Kinder Morgan hosted (what’s known in the industry as an) “Open Season”. *Open Season* allows crude oil producers to bid for space on the pipeline. These bids represent a 15 to 20-year contract between the producer and the pipeline company. These bids represent the “anchor” tenants. The Trans Mountain Expansion had 13 anchor tenants which represented 80% of the pipelines total capacity. The maximum allowed by the Canadian National Energy Board. ### **The Trans Mountain Pipeline is not just required, it’s mission critical to the Canadian energy industry. ** The Canadian National Energy board estimates that by 2030, Canadian oil production will exceed 5.4 million barrels per day. This is an increase of nearly 40% from 2016 production levels. Most new production will come from Western Canada. This means billions in additional tax and royalty revenue for provincial and federal governments. (Note that B.C., Alberta and the Canadian Government all run budget deficits!). However, these tax and royalty windfalls cannot be realized if there is not suitable pipeline capacity to move the crude oil to the global markets. Existing pipelines used for exporting crude oil from Western Canada are currently at or near capacity. The nameplate design capacity is 4.0 million barrels per day. However, the estimated available capacity for Canadian crude oil exiting Western Canada is only 3.3 million barrels per day. This accounts for maintenance, downstream constraints, and capacity allocated to refined petroleum products. The second option to move oil is by rail. More rail loadings mean higher environmental risk. Based on the 2017 Fraser Institute study on Intermodal Safety for Oil and Gas Transportation, pipelines were 2.5 times less likely than rail to result in a release of product when transporting a million barrels of oil. Not only that, only 15.9% of pipeline incidents take place in the actual line pipe. Over 84% of incidents occur in a facility, such as a compressor station or storage facility. All of these facilities are required by law to have secondary mechanisms or catchment basins to make sure crude oil does not cause any damage. In fact, only 1% of all pipeline incidents cause environmental damage. Let’s not forget the Quebec Lac-Megantic rail disaster, which killed 47 people and damaged 30 buildings in the town center. Regardless, crude oil producers have been forced into using the rail alternative. Crude by rail increased from below 100,000 barrels per day to 150,000 barrels per day last year. Below is a chart which shows the current and proposed pipeline capacity out of Western Canada, versus estimated production. As shown in the chart above, current production from Western Canada is and will continue to exceed current pipeline capacity. But take a look at all the failed and delayed pipelines. This means that Western Canadian crude oil will be trapped. Trapped oil leads to more oil on rail cars. Below is a chart which shows the monthly rail car loadings of crude oil. Rail car loadings for crude oil have more than doubled since 2010. Rail car loadings are expected to remain high, since there is no more pipeline capacity for oil producers. Below is a chart which historical prices for the Canadian heavy oil benchmark, Western Canadian Select (WCS) and the U.S. light oil benchmark West Texas Intermediate (WTI). Western Canadian Select has always traded at a discount to its US cousin. This discount is composed of 2 parts. First, WTI is a lighter, sweeter crude that requires less energy to refine. So part of the discount is attributed to quality. The second and larger component of the discount is caused by the lack of pipeline capacity. Once pipelines hit maximum capacity, crude producers are forced to undercut each other for any available space on the pipeline. Basic economics tells us that when supply exceeds demand, prices go lower. This is what is happening for crude oil producers in Canada. To further show the difference in crude pricing, a chart showing the WCS differential is below. This differential is the pricing difference between WCS and WTI. The differential has bombed out considerably this year. This is due to increased production and limited pipeline capacity. ### **How can Canada make itself more competitive on a global scale?** First: Make yourself open for business. I’m not sure that will happen under our federal government whose leader is a trust fund baby. Yes, its true. Canada’s Prime Minister, for all he is trying to make himself a social justice warrior is a TFB (Trust Fund baby) who is worth hundreds of millions of dollars because his grandfather was a very savvy Quebec business man. Hmm, maybe that’s why Canada’s Prime Minister likes his costumes (yes, he is known as Mr. Dressup now globally), because he is probably uncomfortable in his own skin knowing his followers despise TFB’s yet, he is one Canada’s blueblood TFB’s. But I digress. Back to the basics. It’s crazy that a regional government and a town mayor can crush a $7 billion project that has been in the works for years. The Canadian federal government should have stepped in a long time ago but it has not. The lack of understanding has cost the nation one of the most important infrastructure projects of the decade. These recent government actions are a huge disincentive to any major resource company who wishes to pursue a project in Canada. It shows the government is not willing to act accordingly, even if project is in the national best interest. Second: Improve current pipelines and fast track construction on 2 pipelines. The two pipelines are: The Enbridge Line 3 replacement, and the Trans Mountain Pipeline. Trans Mountain will provide the pipeline necessary to increase crude oil exports to the rest of the world, while reducing dependency on the United States. The Line 3 replacement will increase pipeline capacity to the east coast. What many people forget, including our government officials, is that a significant portion of our existing pipeline infrastructure is ancient. The Enbridge Mainline has been in service since 1950 and Trans Mountain since 1953. Sure, there have been updates and quick fixes, but the current system needs a serious overhaul. ### **Safety by Design: New Technology and New Materials** Pipeline corrosion is the cause of 52% of pipeline leaks. With today’s technology, leaks can be detected faster and more affordably than ever before. Now there are Pipeline Inspection Gauges ‘PIGs’ which are used to push stagnant fluids, slush and buildup out of pipelines to prevent internal corrosion. Pipeline incidents in Alberta are down 44% in the past decade because of new detection technology and pipeline coatings. I find it ironic that the B.C. provincial government would rather keep the current antique pipeline going, than a new build with the latest technologies. This is what I meant by the uninformed protesters. You are actually increasing the risk to the environment. Think about that for a minute the next time you hear about an oil spill. The third way for Canada to improve business: Improve and subsidize upgrades for Eastern Canadian refineries. Canada’s refining complex is 10% of what the U.S. has. Canada can process about 2 million barrels of crude oil per day, while U.S. refineries are over 18 million barrels per day. And U.S. refineries are far more technologically advanced. American refineries can process the Canadian heavy crude with ease. In fact, many have built expansions designed specifically for refining heavier crude. On the other hand, Canadians have old, antique refineries which cannot efficiently process Canadian heavy crude. Yes, you read that correctly. A country with a problem getting its oil out of the country, can’t even process their own heavy oil that they produce. These refiners are forced to import 600,000 barrels a day of light crude oil from the United States. How does that make sense!? ### **The Katusa Solution** I debated the founder of Green Peace many years about exactly this situation. And if you [watch the clip right here](https://youtu.be/OZJeW14fzZY), you will notice my solution hasn’t changed and would prevent the big disasters that are at risk, yet all of the regulators have missed. Replace old, antique pipelines Canada relies on today with modern, state of the art pipelines that will not just improve the safety of all citizens, but also the environment. Basically, as I stated in the debate, get the oil companies to put up bonds, remove the old pipelines, but in return they get to build their pipelines. Build all three options, which means Canadian crude has access East, South and west, rather than depending solely on the US markets. Upgrade refiners with bolt-on expansions which can process heavy crude oil. Once upgraded, the refiners can process heavy crude from Alberta. This solves Canada’s 600,000 barrel per day import problem on the east coast. This increases revenues for Canadian oil and gas companies, which in turn increases royalties and taxes for the government. Prime Minister Justin Trudeau has the ability to put Canada’s energy sector back on the map. He’s got the ability to increase government revenue, create jobs and foster new foreign investment in Canada. Do the right thing Justin. And by the way, you can send the $280,000 cheque to [Greater Vancouver Food Bank](https://www.foodbank.bc.ca/) in lieu of paying Katusa Research for giving you the answers to the current conundrum. In 2014, I was asked to be part of Justin Trudeau’s pre-election think tank regarding energy policy by one of his senior advisors. I was pitched hard at a lunch in downtown Vancouver by this former high ranking Liberal MP. I didn’t accept because I openly thought Justin Trudeau was unqualified to be Prime Minister. If his last name was Furman or Smith or Chang he wouldn’t have the support of the Liberal party with his track record or credentials. I was wrong, Justin won. It’s now time for Justin Trudeau to step up and prove that he deserves the Prime Ministers office, because right now sir, your current legacy can be defined in one word “Mr. Dressup”. And to all politicians of Canada, a friendly reminder that the resource sector has given back greatly to the community (far more than any other private industry in Canada), from building hospitals to social programs in communities across Canada—it’s time Canada remembers its source of wealth. Regards, Marin --- # Is Old Energy Heading Towards Life Support? Bring on the Bankruptices - URL: https://katusaresearch.com/is-old-energy-heading-towards-life-support-bring-on-the-bankruptices/ - Type: article - Published: 2018-04-06 - Updated: 2019-05-01 - Author: Marin Katusa The energy industry absolutely dwarfs the mining industry. In fact, a company like Exxon dwarfs all of the mining companies combined. Every week, I get pitched by the last flock of people through the door trying to start a new junior company. It ranges from blockchain, marijuana and resource companies planning on going public… to companies looking to fund the next drill program that will change the game. If it’s funded and public, the bankers, financiers or entrepreneurs have come through our office with their best pitch. Yet, the junior energy sector barely gets a whisper within the financing circles. One sector that we here at Katusa Research are paying MAJOR attention to right now is the **oil industry**. And you should too. It’s a contrarians dream. It’s unloved, bleeding and left for dead. And soon, I believe there will be once-in-a-generation bargains in bellwether companies. One day, we’ll look back and see them as amazing scores. Even though crude oil prices are bouncing around, stock prices of some very solid companies are falling. Companies that were once industry behemoths are now bombing out. Even great companies have seen their share prices lose over 50% of their market value over the past 12 months. These companies have solid people at the helm, cash in the bank and large proven resources in politically stable areas. And I’m not talking about junior stocks going from 30 cents to 15 cents. There are multi-billion dollar market cap oil producers going from $60 to below $20. These companies employ thousands and thousands of people. For example, I have my eye on one Canadian company that had its stock price shaved by nearly 60%. And I certainly see it going lower. But at some point, it will hit the floor and find a base. This company is appetizing because it has many factors I look at. Among them, it has a solid portfolio of assets and it has excellent free cash flow. And in the near future, I know [I’ll be able to pick up shares at predatory prices](https://katusaresearch.com/the-way-of-the-alligator/). It will pay me a healthy (and tax efficient) dividend to hold it until the next, big, stealth bull market phase in energy equities. And a company like this can deliver fast 100%-300% returns in 12 months. Let me emphasize this again. You get paid a dividend while a multi-billion dollar market cap company triples like a junior. The point I am making is that major oil companies will be trading like juniors. Except you also get the asset base of a major oil company. Here’s what many people fail to realize: A massive decline like the 2008 oil crash introduces a lot of emotion in the market. It catches most people off-guard. It produces big swings in their account values (usually to the downside). People begin to panic. Algo trading triggers stop losses. Frustrating emotions create markets that swing up and down with very little concern for fundamentals. You’ll see fund redemptions, lower prices, stop losses triggering more stop losses. Rinse and repeat. During these times, it doesn’t matter if an asset is significantly undervalued. People go crazy. Trying to time market movements – like trying to catch a falling safe – can be very risky. There’s a much lower-risk way to play markets in crisis. Knowing how to do it will give you a huge edge over others. It can be summed up simply as: Don’t try to catch a falling safe. Wait for it to hit the sidewalk, bounce around and break open. Then walk over and pick up the money that is waiting for you. **Marin, can we make money in the oil markets over the next 12 months?** The washout in oil equities is happening. There will be consolidation and bankruptcies. Soon, we will buy shares in incredible companies, with excellent assets, at valuations not seen in decades. So if oil prices are up, why aren’t the stock prices of most oil companies following suit? Let’s get into it… One of the main drivers for the rise in WTI oil prices since November comes from the decline in onshore U.S. oil inventories. The chart below shows the quantity of oil held in U.S. inventories. The decline in U.S. crude oil inventories pushed the price of crude higher. News outlets and “industry experts” say that this is because demand is outpacing supply. I see it differently, let me explain… **First off, the largest driver of U.S. crude oil demand is the refinery sector.** U.S. crude inventories fell by nearly 100 million barrels since June of 2017. Oil bulls are citing increased oil consumption as the reason. If that was the case, it would make sense that refiners would have increased crude consumption on a proportional basis. However, this is not what the chart below indicates. In fact, it indicates that the U.S. refinery demand for crude has hardly budged over the past year. Historically, oil was held in inventory for security purposes. Back in 1975, the U.S. government enacted the Strategic Petroleum Reserve. This made Americans safe from a repeat of the harsh effects of the 1973-1974 Middle East oil crisis. From the 1970s through to 2011, Americans were reliant upon Middle Eastern crude oil. But thanks to shale oil production, Americans are no longer at the mercy of OPEC. Russia and Saudi Arabia just announced a new super-cartel to combat the U.S. But this will not dethrone the huge technological advances available to U.S. production. The U.S. government and American refiners do not feel the need to keep large volumes of crude on hand. Why? Because there are large quantities of crude oil produced domestically. The U.S. government openly said that it will be reducing its strategic holdings. It is expected that American companies like **Continental Resources**, **EOG Resources,** and **Pioneer Energy** will continue to thrive and produce large quantities of crude on home soil. (Note: I don’t own any of these companies). So if American refinery consumption has not increased, and inventories are being depleted, where is all this crude going? The simple answer is it is being exported to China. At the start of 2017, the Chinese imported 65,000 barrels of oil per day from the United States. By October 2017, U.S. exports to China skyrocketed 600% to 448,000 barrels of oil per day. The chart below shows the growth in U.S. crude oil exports, you’ll see total exports has doubled in under a year. United States crude oil exports reached 2.1 million barrels per day in the final week of March 2018. The exports by destination data lags by several months. I’ll bet that when this export data is released, we’ll continue to see a large volume of crude oil being exported to China and to Taiwan. China has been very public about building up its Strategic Petroleum Reserve. And it’s ironic to think that the U.S. is reducing its strategic petroleum reserves while boosting China’s. **The amount of oil held in floating storage is another *under the radar* indicator that I like to look at. ** During periods of strong oil demand and rising crude prices, it is common that oil is stored in large container ships offshore. This is called floating storage. Companies or oil trading funds will play an arbitrage on this. And here’s how they do it: They purchase oil in the spot market at current prices. Then they store the crude on container ships for 6 to 12 months and then resell the crude with the expectation of higher prices down the road. Depending on how long the crude is stored for, you need prices that are $4 to $6 per barrel higher in the future to cover the costs of storing the crude oil. The chart below shows the quantity of oil held in floating storage. The significant declines in floating storage over the past six months indicates the lack of willingness to bet on higher prices 6 to 12 months from now. The market isn’t paying attention to the fact that we are in *backwardation**. *This means the market rate is higher than the expected price in the future. So the “smart” money is selling as much crude as they can now at spot prices because they believe the future price of oil will be lower than it is today. **Do we know where the price of oil is going? Yes – there are some clues ****with**** the *Futures Curve*…** The chart below shows the futures curve for oil prices. The futures curve is a set of expected future prices for crude oil. These are prices that companies or trading institutions are willing to buy and sell from each other. These prices change every day. Below, is a chart of the current price expectations in red and the price expectations 6 months ago appear in green. The change in the medium-term mindset is striking. Let’s take a look at the WTI futures curve from 6 months ago. Crude oil for June 2018 delivery traded for $51 per barrel. Using the April 3, 2018 futures curve, that same barrel is now trading for $63. However, the long-term forecast for crude oil prices is similar, near $53 per barrel. This means that the market expects crude prices to drop 15% between now and January 2021. The correction may happen sooner. Or not at all. But our strategy is this: Find positions in the most undervalued oil equities that can survive $40 oil and profit at $50 oil. **Oil Market Investment Guidance** These charts are telling me that we are in a new oil environment. I believe Oil prices will remain range bound between $50 and $65 per barrel. Unless chaos erupts in the Middle East or in Russia. I also expect U.S. oil inventories to continue to decline. And I see the inventory decline coming from refiners reducing mandated storage levels and not due to massive new demand. Again, there’s no shortage of oil, refiners know it and producers know it. **Best in breed oil companies will do well in this price environment.** There’s one thing I won’t do in this oil environment. I have no interest in going into exotic frontier oil fields with no infrastructure. These locations need intense capex. I am also staying away from dry gas producers because high production costs and transportation issues don’t interest me. These are some of the factors I consider as I build my hit list of oil companies to buy like an alligator in the near future. Technology continues to improve in the oil patch, and costs are continuing to decrease. The biggest profit opportunities in the sector right now come from liquid-rich plays that are in the lowest cost range with significant upside. That’s where I’m putting a lot of my own money right now. The balance sheet matters now more than ever before in the oil patch. Make sure you aren’t caught on the wrong side of the ledger! To kick-start your research in this sector, I’ve made it easy for you… **Check out my [Market Intelligence Center](https://katusaresearch.com/katusa-market-intelligence-center/) and the [Oil Stock Value Monitor](https://katusaresearch.com/oil-stock-value-monitor/)**. I spend $100,000+ per year to access the best data in the world. My team then sifts through multiple data sets, screens and monitors to highlight select companies. Best of all, you don’t have to pay a thing for this service. Regards, Marin P.S. Now if you want to know exactly what I’m buying… My top speculative oil stock is up nearly 100% since my initial recommendation to subscribers. I see another 100% upside in the next 12 months. And I would not be surprised if a major oil company bought it out sooner than that. I just published my exact thesis for this speculation in this week’s April issue of *Katusa’s Resource Opportunities*. To become a subscriber [click here](https://katusaresearch.com/subscribe-now-checkout-010/). --- # Late Nights From the Inbox of Marin Katusa - URL: https://katusaresearch.com/late-nights-from-the-inbox-of-marin-katusa/ - Type: article - Published: 2018-03-30 - Updated: 2020-11-25 - Author: Marin Katusa I’m sure he was a bit surprised when I responded to his email at 11:15pm from my office late last Thursday night. I’ve been on the road, and I had a lot of items to catch up on. So, late nights are nothing new. But because I run my own shop and make my own rules, I make sure there is no barrier between subscribers and me. I read nearly every email that comes through the inbox. And if I can’t respond to you personally (traveling to a site visit), a member of my team at Katusa Research is always happy to oblige. This includes my partners, the analysts, and the excellent customer service team. What can I say? I’m a mobile phone degenerate. I’m always checking it and looking for and dissecting information. It’s how my brain is wired, due to my DNA pushing me forward non-stop. And when someone comes out with feedback about my service, integrity, and dedication to my life’s work, I don’t dismiss it. First, I seek to understand and then I respond. I received one such piece of feedback from a frustrated subscriber’s email last Friday and, of course, I responded. But, more on that in a moment… The resource markets can shake out a lot of people for many different reasons. And the psychological toll of sideways or down markets plays a large part in an investor’s frustration (I have over 120 pages – and counting – of glowing testimonial emails and from time to time, I get my share of non-glowing emails too). Take a look at the junior rich Toronto Venture Exchange (TSX-V) over the past 8 months. And how now, especially after the exhaustion from marijuana and blockchain stocks, there’s little energy in the overall junior markets. Frustration abounds… The amazing thing is that it only takes a small influx of capital to send junior stocks soaring 500%-1000%. Marijuana and blockchain juniors recently proved just that, and lithium and cobalt stocks proved that a little earlier in 2017. Below is a chart that shows the soaring returns in the cannabis and cryptocurrency sectors compared to the TSX-Venture in the same time period. However, even in sideways or unloved markets, I believe that if you give a speculation (that you’ve performed enough deep due diligence on) enough time, your investment thesis for that speculation will play out. I’ve done this successfully many times. And if the speculation I present doesn’t work out, I will feel the pain more than my subscribers, as I’m almost 100% positive no one else puts either a bigger percentage of their net worth into any of the positions in their portfolio or a larger dollar sum. That may be of little consolation, but my interests are aligned with my subscribers’ – as opposed to other newsletter writers that are paid to pump a stock or don’t even own the positions they recommend. **The latter simply baffles me**. More importantly, I believe the companies in the *Katusa’s Resource Opportunities* portfolio are top rate companies. Time will tell if I am right – but I have bet big, and we will find out if I have picked right. Now, I feel I need to cover a few items that I keep getting questions about from both old and new readers. So below, I’ll address some of the common questions I get that will help you keep your frustration in check and to stay the course en route to successful investment scores in what are turbulent markets. Here are some of the main points you need to print and staple to a wall: **Being overweight in any one portfolio position is a recipe for disaster.** Never put more than 10% of your speculative portfolio into any one stock. In the past, I know I haven’t entirely followed that rule myself, but you can only get real success in speculations with risk mitigation and by letting your winners ride (think Northern Dynasty and Alterra as recent examples). Putting all your eggs in one basket could pay off in a big way (if you’re absolutely correct), but you’re exposing yourself to greater risk. I didn’t always follow this rule. It’s no secret that in the past I put as much as 35% of my net worth into one stock. But the global financial crisis and heart surgery knocked sense into even the thickest of skulls. If your speculative portfolio is worth $50,000, don’t put more than $5,000 into any one company. Especially if this is a junior company. But just as important as position sizing is, so is the next rule… **Never buy your intended position in a stock all at once. Buy in tranches.** I’ve met many, many successful traders and fund managers all over the world. I’ve yet to meet anyone (or any software algorithm) that has mastered timing a stock perfectly, on a consistent basis. So take the risk out of timing by buying your desired position in tranches. If you have $5,000 to invest (from your 10% allocation to 1 company), then split that up into tranches. A good rule of thumb is 4 equal 25% positions (so in this case, 4 positions of $1,250). If you are really excited about the stock, buy your first two tranches. Then sit back and wait for Mr. Market to give you a sale and buy more of the stock at cheaper prices. This way, if the stock rises, you’re along for the ride. If it goes down, you can scoop up shares for a discount. Again, I learned this rule by actually improving my purchase techniques with time. It took years to build up my Alterra position. I also plan on doing the same with my number one conviction story right now. I have to buy in tranches to accumulate a position and I have to sell in tranches too. Start to buy your position in tranches and the issue of timing your entry and exit perfectly will not weigh so heavy on your mind. **If an investment causes you stress to the point you can’t sleep –****sell****.** If you are overly distracted by any of your positions and it causes stress, discomfort or you’re losing sleep… sell enough stock to alleviate the situation. Life is too short to worry about a stock position. Enjoy the present and have fun. If your stress level is high on a continual basis and is becoming intolerable, then you have to reflect on one of two things: 1) you’re over-invested, or 2) speculating just isn’t for you. If it’s the latter, that’s OK. Life is short, do things you love and you will not just have fun but be successful. You’ve now come to the point of self-awareness and what works for you. If you’re mortgaging the house, playing with vacation money, or your kids’ tuition, then you’re playing with fire. Only speculate with money that won’t change your lifestyle if you lose 100% of it. **Give your speculation some time to play out.** Being patient and investing like an alligator is extremely difficult. Over my nearly 20 year career, I’ve seen many people (including myself) become impatient and make irrational moves. I have made many mistakes. But I have learned from each mistake. These are all lessons I share with my readers, and there are many. Over a 15-year career as one of the largest financiers in the junior resource market, I’ve learned a lot from the many mistakes I have made. One such mistake I’d like to share is actually betting right, but the lack of patience can cannibalize a successful speculation. Being impatient has cost me a lot of money. Here’s an example from personal experience: I met an analyst on site in early 2006 and we bonded. Site visits do that at times, especially when the plane is stranded in an unexpected 4-day snowstorm that no one was prepared for. We stayed in touch over the years. He moved on from the firm he was an analyst within 2008 and joined Verde Potash. I believed in this individual and without doing a site visit I purchased 4 million shares at CAD$0.25. I trusted him, knew of his strong technical background and the company was trading at a discount to cash, so I was getting the management and the project for free. The company had C$0.29 cents cash per share, so I felt good about my $1 Million bet. I had many meetings with management and then I planned to do a site visit of my own to the main asset in Brazil. (2009 was crazy for me as I spent over 300 days on the road and gained 40 pounds as a result of bad habits such as drinking beer with geologists at night on the road, and not working out regularly. But you would be amazed how much market intel you get from drunk geologists at midnight). Anyways, Verde Potash management laid out a specific time frame and business plan that they assured me would hit if I stuck it through with them. Well, the first milestone was delayed. Then the second. Remember, early 2009 was a very rough market for junior resource stocks. I didn’t have the time to go out to the project and see for myself. But a close and trusted friend of mine (thanks Miles!) stated he knew the project and that it wouldn’t work. I was skeptical after that and frustrated with management for missing the milestones. I lost sight of the main reasons I’d taken the position in the first place. Then the third milestone was missed and I sold. I netted just under a 100% gain. You would think a near double isn’t bad in a very tough market. But I screwed that one up. As it turned out, I missed an enormously greater score. Within 14 months, the stock was trading north of C$10 a share. Was the delays management’s fault? No. I was impatient. Even though nothing changed, and I trusted management, I let one friend’s perception of the project change my view. I continue to learn from my own mistakes (and try to learn from others I respect in the industry). I continually remind myself that, if the specific reasons for investing in a company are still valid, and I trust management, I shouldn’t let non-management time delays sway me to abandon my position. Shit happens. We try to learn and better ourselves and become better investors. **Crystallize a profit using the Katusa Free Ride Formula.** When you have a profit, risk mitigation is key to protecting your downside and leaving the opportunity of huge upside available to you. Remember, you don’t just buy in tranches, but you must also sell in tranches. The most efficient strategy (and one I use all the time), is to use the Katusa Free Ride Formula. So to **D.T.** who sent in that email on Thursday that made me reflect, thank you. And after I replied to you, your response email a day later was one I want you to know that I truly appreciated: *“You were right, I wanted to know whether or not you were the real deal and your email would suggest you are.”* We’re just two alligators on the same side of the fight and on this journey together. And I’m not backing down on my quest for my next score as I believe we will do incredibly well over the long haul, even in these turbulent markets. Regards, Marin P.S. I really believe in my research, process and the framework I have created before I build a position in a stock. And 5 stocks in my portfolio are flashing green light buy signals right now, including one stock that I will be making one of – if not my largest – position I’ve ever had. To find out the name of the stock, [click here](https://katusaresearch.com/subscribe-now-checkout-010/). And to get $500 off the purchase price, give our customer service team a call at 778-737-7381 Monday to Friday from8am – 4pm PST and tell them Marin sent you. --- # Increase your returns 10-fold or more with these Gold Stocks - URL: https://katusaresearch.com/increase-your-returns-10-fold-or-more-with-these-gold-stocks/ - Type: article - Published: 2018-03-21 - Updated: 2019-05-01 - Author: Marin Katusa I want you to imagine Niagara Falls – the most powerful waterfall in North America. Niagara sees approximately 3,160 tons of water go over its edge it every second. Now, think if all that water tried to go over the falls through a single fire hose. If you had a miracle hose that wouldn’t bust, the pressure would create a water jet that goes for miles. Yes, this is a silly scenario. But that’s how the gold mining stocks react when the world’s largest investment funds move in. Even just a small investment from big bankers and hedge funds moves gold mining stocks a mile. That’s why in 2008, gold companies like **Detour Gold Corp** rose eight-fold in four years. **Osisko Gold**, founded by a friend of mine Sean Roosen, went from 80 cents a share to over $15 in less than four years – that’s a gain of 1,775%. And **Kaminak Gold Corp**, another company founded by someone I know quite well and have done business with… soared over 6,571% in just three years. This is why it’s so important that you join my emergency market briefing tomorrow. Because those same types of opportunities in gold stocks are back. You see, when a group of large investment funds decides to buy into a market, they can put well over $100 billion to work. Typically, they stick to very large, very liquid markets like large-cap U.S. stocks and corporate bonds. However, when the concerns over the safety of the global monetary system increase… as they did in 2008 and are back now… More than a few big-time financial funds will want to buy gold and gold stocks for both protection and profit potential. Which gives you a huge advantage over other investors if you act now. Because the current market value of all major publicly-traded gold companies is around $330 billion. This might sound large, but it’s actually a tiny piece of the whole market. The entire gold mining industry is smaller than just Facebook ($500 billion market cap) or Google ($750 billion market cap). Consider the $20 billion market cap of the world’s largest gold mining company, Newmont. Newmont is a giant that shapes the industry and produced over 5 million ounces of gold in 2017. That’s a tremendous amount of gold. Yet, a $20 billion market cap won’t even get you a spot on the top 20 North American oil and gas companies. Newmont is smaller than 272 companies in the benchmark S&P 500. If just 10 out of the hundreds of money managers around the world with more than $50 billion to invest were to each place just 1% of their portfolios into Newmont, they would buy 25% of Newmont. That very small ripple in the ocean of large fund management would produce a buying tsunami that lands on the shores of the gold mining industry. You might be thinking, “*Sounds good in theory, Marin, but this wouldn’t happen in real life.”* But, I’ve turned out massive profits many times before in scenarios like this. For example, in the mid-2000s I was convinced the uranium industry was facing a supply/demand crunch and Wall Street would soon back up the dump trucks full of cash. At the time, the uranium market was tiny. The world’s largest miner, Cameco, had a market cap of just $2 billion. Using my **“*Katusa’s Keys” ****gold and resource investing strategy*, I identified a company with promising uranium projects named Pitchstone Exploration. That was 2005, and the stock was trading at 55 cents per share. Within three years, it soared to $4.50 per share—a 718% win… Then in November 2008, I invested in Uranium Energy Corp at 25 cents a share. **Within two months, the stock doubled.** **After that, it soared to $3.75 a share for a 1,400% return!** There’s an old saying: “A rising tide lifts all boats.” Well, when the tide flows into a small market sector, the boats can rise 10, 50, even 100 times higher. They go from sitting quietly in the harbor to riding tsunamis of investor money. Right now, less than 1% of the world’s financial assets are allocated to gold and gold stocks. This laughably small percentage shows the world hasn’t caught on to the [**new gold bull market that’s already started**.](https://katusaresearch.com/gold-is-a-sleeping-giant-you-cant-afford-to-miss/) What do you think will happen when 0.5% of the world’s financial assets flow towards gold for protection? The sector will be in a once in a lifetime bull market. Even a small increase in this allocation would have a massive effect on the price of gold and gold stocks. Famous legendary investors such as Ray Dalio recommend 5% in gold. You will need a telescope to see the share price of the top run gold companies if 5% of the world’s financial assets are allocated to gold and gold stocks. This new gold bull market is going to be front page news soon. It’s going to come up at investment committee meetings. And it’s going to spread across social media like a wildfire. Big money managers will feel pressure to allocate to gold. People will begin to see buying gold and gold stocks as a prudent way to ensure portfolios against a crisis. Tomorrow, during my *Emergency Market Briefing: The Bitcoin-Gold Connection* you’re going to learn everything you need to profit as this unfolds. Including, how to use my ***“Katusa’s Keys”* to start going for 10-fold or more profits!** Just take a look at some of the gains this gold investing strategy has turn out before, like… **1,480% **on Primary Metals… **1,450%** on Ryan Gold… **1,250% **on Ventana Gold Corp… **903% **on Rare Earth Metals… **452% **on Hathor Exploration**…** **1,901% **in Midas Gold… **420% **on Reservoir Minerals… **862% **on Energulf Resources… **1,200%** on Laramide Resources… **185%** on Newmarket Gold… And many more…without using options, futures, or even buying on margin! Let me be clear: this is not some back-tested trading system based on hypothetical numbers… These are 100% verifiable recommendations made in real-time. Don’t just take my word for it… listen to what investors already using my *Katusa’s Keys* strategy have written in to tell me. One fellow named Frank F. wrote to say about my ideas: *“Marin always finds investments I have never heard of, but I’ve learned to pay attention. He suggested buying Brazil Resources… I made exactly half a million dollars after getting back my original $90,000. I made over 500% in less than a year.”* Nick F, a dentist, said: “*My portfolio has taken off completely. Marin has made a fantastic difference with my success in the resource sector.”* Dave Z. wrote in to thank me… “*Just wanted to tell you I appreciate what you are doing for me; for the first time in my life my trading account is in the 7 figures, and you have a lot to do with that.”* And Ron T., a former pilot, said: *“Nobody out there understands what’s going on in the resource sector more than Marin does. Aside from his absolute knowledge of what’s going on, and his overall business acumen, his value to people like me as an investor cannot be overstated.”* I want to help you become the next Frank, Nick, Dave, or Ron. These aren’t just names to me. I have met every single one of these gentlemen and got to know them at my conferences over the years. This is another bonus you will get when you subscribe to my services. Which is why during tomorrow’s emergency market briefing you’re going to get all the details on the *Katusa’s Keys gold and resource investing strategy…* …how to use it successfully in your own portfolio… And the three unknown gold stocks you can buy TODAY to go for gains like 250%, 500%, and even 1000%+ in the coming months. Simply put, the information you will discover during this briefing is priceless. And as a loyal reader of mine, you’ll receive access for free. So, I look forward to seeing you tomorrow at 12PM Eastern Time. Please be sure to allot one hour for the briefing. Remove all distractions. Best Wishes, Marin Katusa Founder Katusa Research --- # Gold is a Sleeping Giant You Can’t Afford to Miss - URL: https://katusaresearch.com/gold-is-a-sleeping-giant-you-cant-afford-to-miss/ - Type: article - Published: 2018-03-20 - Updated: 2019-05-09 - Author: Marin Katusa Yesterday, I walked you through **[the Bitcoin bubble](https://katusaresearch.com/the-bitcoin-bubble-popped-whats-next/)**. I showed you why the easy money has already been made and why the technology is still years away from revolutionizing money. I have to be honest though. You could throw your money at one of these new cryptocurrencies like WhopperCoin or ObamaCoin and hope to hit the jackpot. At that point though you might as well head to the casino and risk it all on black. At least 90% or more of cryptocurrencies and ICO’s out there are junk. Personally, I would rather take my chances on the greatest opportunity in gold stocks in the past 50 years. I know that might sound like an exaggeration. But soon, you’ll see gold talked about on every major news network and social media platform in the world. Because the truth is gold is already in a new bull market. That’s right – it’s going on right now. Over two years ago my ***Katusa’s Keys *gold investing strategy** was already identifying blockbuster trades like Northern Dynasty that **could have handed my readers 1,053% gain in just 12 months. ** That means $10,000 invested in Northern Dynasty when I recommended the stock grew to as much as $115,290! Most investors are shocked I made this type of return from gold during a bull market in stocks. The reality is, the U.S has over $20 trillion in debt and a massive trade deficit… The dollar’s power continues to fall… Families’ wages have barely risen, but the cost of living and debt has skyrocketed. And the Fed is going to have to answer for the trillions they handed out after the 2008 crisis. My point is, even though the stock market keeps going higher, our economic problems aren’t going away. Investors still need a safe haven from the greenback… a hedge against the government… and a universally recognized form of wealth they can trust in. That’s why gold silently emerged into a new bull market the last few years. And why I’ve made quadruple-digit returns on gold stocks like Northern Dynasty. You’ll notice gold bull markets all follow a similar pattern where prices start a steady climb and then begin to accelerate faster and faster. Obviously, you want to get in as early as possible. But most investors don’t understand when the switch from bear to bull actually happens. If you don’t know what you’re doing it’s easy for the start of a new rally to look like it’s still part of a downtrend. Combine that with the bitcoin boom capturing the spotlight and that the majority of the market is clueless about what’s really happening in the gold markets. **The truth is, I’ve had three opportunities come through my *Katusa’s Keys *in the past few months that I am personally investing a fortune into.** How? If this system keeps chugging along… Then the $7 trillion that central banks around the globe have pumped into the markets over the last 8 years is almost certainly going to kick-off a massive wave of inflation, sending gold prices soaring… On top of that, emerging countries like China and India are buying up gold bars at unprecedented rates … and the price of mining gold continues to soar higher and higher. Global fears continue to rise with the doomsday clock closer than ever to midnight with the threat of Nuclear War in the Middle East and North Korea. Now, just imagine if the Fed raises interest rates and pops the stock market bubble … investors are going to come fleeing into the one safe haven that’s stood guarding your wealth over the last 4,000 years … gold. The way I see it if there’s one investment that’s almost guaranteed to shoot to the moon over the next 10 years … it’s gold. And during my ***Emergency Market Briefing: The Bitcoin- Gold Connection*** I’m releasing three gold stocks my *“Katusa’s Keys”* are signaling could be the next millionaire making plays. This is the same gold investing strategy that’s help me secure profits like… **1****,480% **on Primary Metals… **1,450%** on Ryan Gold… **1,250% **on Ventana Gold Corp… ***Katusa’s Keys***** Gold Stock #1** is a $1 dynamo sitting on a premier gold deposit in South America… located in a region so rich in gold that local miners dig shallow pits and find gold nuggets the size of footballs. Backed by six of the world’s greatest gold investors, I believe the position we’re taking will produce at least 500% in gains… and possibly 1,000% gains. Best of all we can buy this world-class gold company at more than a 75% discount! Using new age tech, ***Katusa’s Keys* Gold Stock #2** just started drilling a forgotten mining pit that hasn’t been touched in over 25 years…but historically produced 10% of the gold in one of the biggest mines in North America. With this stock trading under 50 cents, capturing even a fraction of the historical output from this mine puts a target of $2-$3 per share in my sights. This would be gain of 600-800%! Finally, ***Katusa’s Keys* Gold Stock** **#3 **is about to erupt after fighting off a legendary mining company in a bidding war. This tiny unknown company just secured rights to what could be the biggest gold mine on the continent! Here’s the thing… All four major gold bull market rallies have turned ordinary investors into millionaires. But none of them were like the opportunity you have today. When compared to the S&P500, commodities are at the cheapest they’ve been in 47 years. Let that sink in. Even the insane valuations leading up to the dot-com bubble didn’t give you this great of a chance to get in at such a discount. Gold stocks have been so undervalued the past 7 years that they are even cheap compared to gold itself! Simply put, this is the best value most of us have ever…and may ever… get to buy gold. **We Are Only a Few Days Away** On **Thursday****, March 22nd, 2018**, at 12PM Eastern Time, I will be diving into exactly how this new gold bull market connects with bitcoin… something NO ONE else is talking about. More importantly… You’re going to get all the details on the *Katusa’s Keys* gold investing strategy… and how to use it successfully in your own portfolio… And you’ll also learn about three unknown gold stocks you can buy TODAY to go for gains like 250%, 500%, and even 1000%+ in the next 12 months. Make sure you set aside ample time to check out the full briefing. All you have to do is go to **[this link](https://katusaresearch.com/the-bitcoin-gold-connection-v2/)** about 5 minutes before the briefing goes live, and at the top of the hour, I will jump into the details! In the meantime, make sure you read my [previous post](https://katusaresearch.com/the-bitcoin-gold-connection-v2/)[s](https://katusaresearch.com/the-bitcoin-gold-connection-v2/) if you have not done so already. Best Wishes, Marin Katusa Founder Katusa Research --- # Did the Bitcoin Bubble Pop? If So, What’s Next? - URL: https://katusaresearch.com/the-bitcoin-bubble-popped-whats-next/ - Type: article - Published: 2018-03-19 - Updated: 2019-08-26 - Author: Marin Katusa I’m glad you’re joining me for one of the most important events of the year … *The Bitcoin-Gold Connection.* **Remember, my emergency market briefing starts at 12PM Eastern Time on Thursday, March 22nd, 2018. ** You’ll receive a few emails the day of the event that contains the links where you can access the briefing. All you need to do is make sure to join a few minutes early and sit back and relax. This event will be closed to the public and only accessible to current Katusa Research readers. Today, I want to answer a very important question in the *Bitcoin-Gold Connection.* How did we get here? Believe it or not, a good place to start is thousands of years ago in ancient Rome. When a Roman general returned from a successful military campaign, the city held a “Triumph” through the streets to celebrate his victory. Interestingly, a slave would ride beside the general in his chariot. The slave’s job was to whisper into the victorious leader’s ear “Remember, thou art mortal.” The Romans did this to keep their leaders grounded and realistic. Something the Bitcoin boom could have used last year when prices soared to near $20,000. But this is how all bubbles form, like Tulipmania that gripped Holland in the 1630s. Tulip prices soared 20-fold in four months, before plunging 99% in just two… And the Tech Wreck of the late 90’s when the NASDAQ crashed 80%. An elaborate sounding domain name was enough to drive your stock price to the moon. Or the last housing bubble when a bank account and a pulse got you a mortgage to flip real estate. Bitcoin is no different. Folks have even run up their credit cards or taken equity out against their homes to try and get a piece of the pie. Uber drivers give their passengers hot “insider” tips on which coins to buy next. Teenagers meet in online Bitcoin trading forums with dreams of Lamborghinis and yachts. Simply put, before the bubble, Bitcoin investors bet on the price of Bitcoin rising, not on the actual value of it. Which is why in the first month of 2018 Bitcoin plummeted over 64%. The warning signs were there. True market experts were screaming into the ears of Bitcoin investors. Yale economics professor Robert Shiller, who won the Nobel prize for his work on bubbles, was asked early last year… *“What are the best examples now of irrational exuberance or speculative bubbles?”* His answer – Bitcoin. Nouriel Roubini, a professor of economics at New York University who famously predicted the 2008 global financial crisis warned Bitcoin was *“the mother of all bubbles.”* Even a Harvard study titled “Bubbles for Fama” mathematically guaranteed a massive crash. The researchers defined a bubble as a sharp price run-up over a two-year period followed by at least a 40% drop over the following two years. When the price run-up is 100% or more, they found the probability of a crash becomes 50%. A run-up of at least 150% and that probability becomes 80%. As price run-ups become even bigger, a crash becomes “nearly certain.” Bitcoin’s runup over the last two years is nearly 2,500%… That’s more than 10 times greater than the threshold the researchers found was associated with a “near certain” subsequent crash. I want to make something clear. I believe in the long-term use of Bitcoin and blockchains. The potential to revolutionize the financial system is inarguable. But, my job is to find the best opportunities… the ones that will make you the most money… right now. The easy money was made in Bitcoin and if you’re looking to hit the jackpot you’re going to be disappointed. You see, most investors aren’t looking at Bitcoin correctly. Bitcoin acts like a currency but needs to be valued like a technology as well. Because whether or not Bitcoin becomes a standard means of exchange isn’t the same as the dollar or the euro. It’s based on how well the hardware and software work. Things like security, network speed, and mining efficiency. When you view Bitcoin as a technology, the recent boom and bust make sense. Because new technologies follow a very predictable curve. Also known as a “Hype Cycle.” Basically, what these cycles show is that a market tends to overestimate the effect of a technology in the short run. But underestimates the effect in the long run. The Bubble Blueprint It works like this. After spending years in bedrooms of Silicon Valley techies and hobbyists, Bitcoin finally broke into the spotlight. Suddenly, you couldn’t read the newspaper, turn on the TV, or go on social media without seeing Bitcoin headlines. Everyone wanted a piece of the pie. Psychologists call this “A Desire for Newness.” **I call it a Fear of Missing Out (FOMO).** Humans want what few people have, as a way to show social status. We want to be able to know what others don’t. So then we can hold court at cocktail parties and feel like the smartest person in the room. Even the actual brightest minds (Sir Isaac Newton, in this case) succumb to the mania of a bubble: It’s very difficult to resist the social pressure to become involved. As Charles Kindleberger, a historian of bubbles, wrote: “There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.” At a certain point, Bitcoin became synonymous with winning the lottery. And… the bubble popped. Bitcoin plummeted over 64% in just weeks. Now that the hysteria has somewhat subsided, Bitcoin will have to prove to the market it can actually work for the reasons it was created: A safe haven from the dollar… a hedge against the government… and a universally recognized form of wealth. But that could be years or even decades when you look at the current state of Bitcoin. **Crypto Exchanges and Wallets are still incredibly vulnerable to hackers…**On January 26th, 2018, Coincheck was hacked and robbed of about ¥58 billion ($532 million) of its holdings… surpassing the previous biggest hack of $480 million from Bitcoin exchange Mt. Gox in 2014. **Governments aren’t trying to lose power over their monetary control anytime soon…** the biggest markets in the world like China, Russia, India, Korea and more are banning crypto or making it extremely difficult to grow. **Banks are Banning Bitcoin Purchases**…including major institutions like JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc, Capital One Financial Corp. and Discover Financial Services. **Markets are Vulnerable to Manipulation****…**The U.S. Commodity Futures Trading Commission just opened an investigation on a popular coin exchange, Bitfinex, for a massive rigging scandal. The Social Science Research Network journal just found that at one point, 600,000 Bitcoins valued at $188 million were fraudulently acquired by just two computer bots. Worthless “alt-coins” can be created and then used to buy Bitcoin…artificially pumping up the price. **The Technology Is Still Extremely Flawed…** Just as gold bars are lost at sea or $100 bills can burn, Bitcoins can disappear from the Internet forever. According to new research from Chainalysis, 3.79 million Bitcoins worth over $33 billion have been lost into digital purgatory. It takes 78 minutes to process the average Bitcoin transaction, but this has recently spiked to as long as 1,188 minutes (almost 20 hours) during peak volume times. Fees are high—the average transaction costs around $28 and can reach $100. Like I said, I believe in Bitcoin in the long term. But right now, if you want to make crypto like profits… there’s a better opportunity in the gold markets. That’s what my ***“Katusa’s Keys***” are telling me. This is the same investing strategy that’s turned out gains like… **1,480% **on Primary Metals… **1,450%** on Ryan Gold… **1,250% **on Ventana Gold Corp… **903% **on Rare Earth Metals… **452% **on Hathor Exploration**…** **1,901% **in Midas Gold… **420% **on Reservoir Minerals… **862% **on Energulf Resources… **1,200%** on Laramide Resources… **185%** on Newmarket Gold… And many more… without using options, futures, or even buying on margin. During my emergency market briefing on **Thursday, March 22nd, 2018**, you’re going to learn why this is actually the best time to buy gold in the last 50 years… The single best way to play this under the radar rally… for potential Bitcoin-like gains. And I’ll reveal the three gold stocks my *Katusa’s Keys are *signaling could be the next millionaire making plays… **Handing early investors 10, 20 even 30-times their money or more over the next 12 months!** But, we have work to do… Tomorrow, I will be revealing crucial details behind why gold stocks have quietly been setting up for a massive run. Please be sure to read ALL of my material to make sure that you are fully informed and ready to profit from the Bitcoin-Gold Connection. Best Wishes, Marin Katusa Founder Katusa Research --- # Urgent: The Bitcoin-Gold Connection - URL: https://katusaresearch.com/urgent-the-bitcoin-gold-connection/ - Type: article - Published: 2018-03-18 - Updated: 2019-05-01 - Author: Marin Katusa I have an important announcement to make. On **Thursday,**** March 22nd, 2018 **I’m releasing an emergency market briefing*, The Bitcoin-Gold Connection.* If you’ve never heard of *The Bitcoin-Gold Connection *before, I wouldn’t be surprised. The mainstream news is nowhere near it. Neither is Wall Street. But the truth is Bitcoin is the best thing to happen to gold in years…and you can make a small fortune as a result. In fact, my research is showing that this is the biggest opportunity for gold investors in the past 50 years! And during this short briefing, I’m going to show you exactly how to start profiting with my “***Katusa’s Keys” gold investing* strategy.** I know all anyone can talk about is finding “the next bitcoin.” But when my *Katusa’s Keys* tells me to buy, I listen. It’s helped me make remarkable returns for my subscribers like: **1,480% **on Primary Metals… **1,450%** on Ryan Gold… **1,250% **on Ventana Gold Corp… **903% **on Rare Earth Metals… **452% **on Hathor Exploration**…** **1,901% **in Midas Gold… **420% **on Reservoir Minerals… **862% **on Energulf Resources… **1,200%** on Laramide Resources… **185%** on Newmarket Gold… To name a few… and without using options, futures, or even buying on margin! The *Katusa’s Keys* are a set of investing principles I use to make every investment. I’ve developed this strategy during my 15+ years of traveling over one million air miles to visit companies in 100+ countries… Bumping elbows with hundreds of hedge fund managers… Wall Street bankers… and the brightest minds in the gold markets. During my emergency briefing on **March 22, ****2018, **you’re going to learn: - Everything behind the *Katusa’s Keys* and how to use this strategy successfully in your own portfolio. - Why it’s actually the best time to buy gold in the last 50 years… - The single best way to play this under the radar rally… for potential bitcoin-like gains. - Plus, the three gold stocks my *“Katusa’s Keys”* are signaling could be the next market millionaire making plays… **Handing early investors 10, 20 even 30-times their money or more over the next 12 months!** Here are all the important details… **The Event: ** ***Emergency Market Briefing: The Bitcoin-Gold Connection*** **Date: ** **Thursday****, March 22nd, 2018** **Time:** ***Noon Eastern*** **Your Cost to Attend:** ***Zero!*** If you missed out on the bitcoin boom, but still want to make bitcoin like profits… then this is one event you don’t want to miss… Especially since my special briefing is only for Katusa Research readers. As a loyal subscriber, your name is already on the invite list. All you need to do is make sure you’re at a computer at the start time. Please be sure to read ALL my material coming through your email in the next few days so that you are fully informed and ready to start make a killing in the gold markets. Regards, Marin Katusa Founder Katusa Research --- # The Economic Rise of the Millennials and How You Can Profit - URL: https://katusaresearch.com/the-economic-rise-of-the-millennials-and-how-you-can-profit/ - Type: article - Published: 2018-03-16 - Updated: 2019-07-31 - Author: Marin Katusa On Saturday, October 22nd, 2016, eager fans packed New York’s legendary Madison Square Garden to watch one of the most anticipated sporting events of the year. The same happened again in 2017 in Beijing to a sold-out arena of 80,000 in attendance with another 58 million viewers watching the live broadcast online. These sold-out shows featured athletes that earned millions of dollars a year performing for their fans. The crowds cheered on their favorite players for hours. Unlike the typical sold-out sporting events at Madison Square Garden, this one had no basketballs, boxing gloves, or hockey pucks. *All those fans packed the iconic arena to watch people play video games*. Specifically, a game called “League of Legends,” in which players fight each other in a virtual arena. And if you are wondering, the rink rats (a.k.a. groupies) showed up too! Not many people over the age of 50 know about League of Legends (abbreviated as LoL), but it is a true global entertainment phenomenon. LoL is the most widely played video game in the world. The game’s creator, Riot Games, reported that the game had around 100 million monthly players near the end of 2016. That amount of people is roughly one-third the population of the United States. In addition to playing the game, LoL enthusiasts love to watch elite players compete against each other at live events like the one held in Madison Square Garden. Think of this as the new world of weekend beer-league softball players going to watch major league baseball games. And while the average 50-year old isn’t going to see live video game competitions**, a gigantic and growing amount of young people are: Mainly, the Millennials**. Furthermore, much like with traditional televised events like the Super Bowl, video game enthusiasts don’t even need to be attending in person for companies to profit off their viewership, thanks to streaming platforms like Twitch. So how many people actually watch these events? A shocking number. Viewer counts for last year’s LoL World Championship Finals matched that of last year’s World Series, NBA Finals, and Stanley Cup Finals *–*** combined**. In comparison, the mega-hit HBO show **Game of Thrones** boasted viewership of *just* 16.5 million people for the finale of its season 7 finale. Note that this was a record for HBO. These numbers may seem bizarre and inexplicable to you, but they all point towards an inescapable conclusion – eSports is rapidly catching up with and even displacing, traditional sports. I’ll show you how this is happening and why you should pay attention. **The Demographic Shift No One Is Talking About** There is a complete bias in the current financial paradigm focusing on the economic impact of the baby boomers. The bias comes from the status quo of the boomers being the driving force for the economy for the last few decades. But that is no longer the case. Millennials (those born between 1982-2004) are the generation that you should be paying attention to. Here’s an interesting fact: Millennials (75 million) have surpassed baby boomers (74 million) in total population for the first time ever in the US this past year. Unlike the boomers who are phasing out their spending (other than medical, travel and funeral costs), there will major changes to the economy because of the Millennials. And there will also be vast social reforms because the Millennials are now coming into their age of prominence. I see it in my own office. I’ve had an interesting *changing of the guard* experience. For the first 10-12 years of my career, I was the “young gun” in the resource sector. Now, I am one of the largest financiers in the industry with very different views on how and where the mining sector should go compared to my senior colleagues in the industry who were my mentors. I’ve always been a proponent of bringing new technology to old sectors, but time moves on and I am no longer the “young gun”. For example, I am the oldest person in my own firm. Everyone else is a Millennial. And the bias that Millennials are not as disciplined or hard working as previous generations is complete nonsense. I would argue that baby boomers have actually prevented growth in many areas of the economy, specifically in the resource sector. But I’ll leave this debate for another day. I am using eSports as one example of introducing you to a vast industry impacted by Millennials that most resource speculators probably don’t even know exists. **Millennials Are Different…** One example of generational differences is the amount of time now spent online and “living” online. When I grew up, all the neighborhood kids would get together and play a pick-up game of street hockey, soccer, basketball or cops, and robbers. Millennials are different. For example, last year, over 40% of the U.S. population reported playing at least 3 hours of video games a week. A majority of this number is made up of Millennials. And while the popular appeal of gaming has reached even the aging baby boomer generation, the majority of gaming’s growth has been generated by the Millennials. Now, consider that 72% of all teenagers count themselves as gamers. In the chart below, you can see the video gamer population broken down into age groups. All this has helped turn video gaming into a $109 billion a year industry. Much of this growth can also be attributed to the evolution of how people play video games. In its infancy (the days of Space Invaders and Pac-Man), arcades were the only place you could find and play video games. You know the type… the large, clunky arcade cabinets the size of refrigerators. Home consoles and desktop computers were the next ports of call for video games as the shrinking size of electronics and the development of the internet led to increased market penetration for video game companies (think Atari, Sega, and Nintendo that all burst into living rooms in the 1980s). And while desktop and console game sales still comprise the bulk of the industry, one of the biggest catalysts for the growth of video gaming’s popularity has been the advent of the smartphone. Today, 95% of Americans own a cellphone of some kind. This is compared to 84% of households with a computer at home or 51% of households with a dedicated gaming console. And this statistic is carried most strongly, once again, by the millennials. Now, a total of 98% of Americans aged 18-24 own a smartphone, as do 97% of those aged 25-34. Gen Xers round out the numbers with 96% ownership among the 35-44 age group. And smartphones play a big factor in the way video games are played today. In the chart below, I’ll break down the video games by platform and you’ll see that mobile gaming is the dominant way that “kids these days” are playing video games. **Reaching Billions at a Time** And if you haven’t heard of League of Legends, then maybe you’ve heard of Angry Birds. Angry Birds was originally released at the end of 2009 as a simple mobile game on Apple’s App Store. It has since evolved into a massive franchise, spanning multiple versions of the game for every platform imaginable. Think toys, merchandise, comics, and even its own movie. But at its core and across its many iterations, Angry Birds is a video game… and one that has seen over **3 billion** downloads since its inception. Let that sink in for a moment. The population of the entire world is 7.6 billion. And that popularity can definitely turn into wins for investors as well. Nearly a decade ago, the online gaming developer Zynga launched Farmville, a game that was integrated with Facebook. The game attracted 1 million users within 4 days of its launch and peaked at over 80 million monthly active users, while generating $235 million in revenue in its first quarter alone, and $1.14 billion the year it IPO’d. Zynga went public at a valuation of $7 billion in 2011. That kind of broad appeal combined with Millennials’ ongoing obsession with their mobile devices, it should come as no surprise that video games have become mainstream in a big way. And yet, you still don’t really hear anyone talking about video games. But you will soon. News stations might talk about the latest hot game or app release, and business shows about earnings at big video game companies like Electronic Arts (EA:NASDAQ) or Nintendo (7974:TYO), but for the most part, video games seem to get glossed over by the mass media, as if they were irrelevant. Millennials are a generation that is now starting to come into their own. They are entering prominent industries and careers, building up their disposable income and even starting to have families. For this generation, video games are a BIG deal. However, not a lot of companies seem to have caught on just yet. There’s a massive investment opportunity sleeping just beneath the surface of the water here – unseen by most, yet undeniably present. And my Special Situations team (all are Millennials) and I are looking deep into several opportunities right now. When the time is right to strike, I’m going to tell you exactly how to play it alongside me. **Very important note**: Please view our research on the eSports industry as a special bonus. By no means are we changing our stripes. We are still focused and will continue to focus on natural resource investments. But the way we see it, you come here to read up on great opportunities to build wealth, no matter where we find them. A good example of this was when I was the first to publish a report on the potential of the Canadian UltraLow Cost Carrier airline industry to all readers of *Katusa’s Investment Insights* and specifically stated I bought a large amount of shares in Canada Jetlines (JET.VN). At the time of publication, the stock was trading around CAD$0.20 per share. It recently hit CAD$1.40 per share. Before I write a cheque into any sector or company, I do very intense, very deep and comprehensive research. I’m sharing an exciting sector with you that I am interested in. Going forward, I believe Millennials will create incredible business and investment opportunities over the next couple of decades, and eSports is just one of them. I also believe the Millennials will make certain (and formerly) taboo industries such as cannabis, blockchain, and cryptocurrencies a norm. My personal goal is to become a leader to the Millennials and expose them to the potential of the resource sector and why gold and other metals such as copper, zinc, uranium, and condensates should make up a portion of their portfolio. But I am also learning from the millennials on how technology can improve the resource industry. It’s going to be a win-win situation and I am very excited about the future of the resource industry (let’s face it, it can’t get much worse than it already is!). Because of the Millennials, certain unknown industries will have the potential to grow 100x from their current size. Regards, Marin P.S. If you know anyone in this picture from a recent pipeline protest, please forward them this report. I used to teach calculus, but it’s not difficult for the uninformed protestors to learn about their misguided beliefs. They really need to know that even though they believe they are helping the environment, they are actually putting everyone, including the environment, themselves and all our children at greater risk. Let me tell you why. These protestors are trying to prevent the construction of the Kinder Morgan Pipeline, which will take Canadian oil to the west coast for export to Asia. I truly do understand and appreciate their efforts, but it’s misguided. These protestors need to understand that the oil from the Canadian oil sands is finding its way to ports on the western U.S. shores and it’s being shipped via rail. Shipping oil by rail increases the risk for oil spills, environmental damage, and more importantly human risk (I stated this years ago when I debated the founder of Greenpeace – you can watch the debate [right here](https://youtu.be/OZJeW14fzZY)– and time has proven I have been spot on). Anyways, the good folks in the picture are misguided. We need new pipelines that have modern technology, more advanced safety protocols, and modern safety mechanisms in place. As I stated in the interview, unless we build new pipelines, we will continue to depend on existing high-risk infrastructure such as rail (the worst choice for shipping oil) and old pipelines that were built when the baby boomers were still in diapers. Millennials, educate yourselves properly and stand up for what is logical and correct. Yes, the above statements are all true, check the facts. You can also check out my previous research on oil transported by rail in the following report, “[Slow Down the Trains, and Speed up the Profits](https://katusaresearch.com/slow-down-the-trains-speed-up-those-profits/)”. For all of you out there that are against the pipelines, you have a choice: You can either educate yourself properly, or continue to put our environment, water, and human lives at risk. Do I need to remind anyone of the absolutely awful and unacceptable **Lac-Mégantic rail disaster** which killed 47 innocent civilians? Hopefully, the Millennials will catch on. I believe they will, with a little help from their friends. --- # Three of the World’s Richest Men are Growing Their Wealth in This Sector. Are You? - URL: https://katusaresearch.com/three-of-the-worlds-richest-men-are-growing-their-wealth-in-this-sector-are-you/ - Type: article - Published: 2018-03-09 - Updated: 2020-02-12 - Author: Marin Katusa **This is how you can keep from missing out on a real “opportunity of the century”: Use the Warren Buffett strategy to make a fortune on this metal** Jason had a plan, and it was a good one. It was simple, really. At the time, only about $20 million in gold was in public circulation in New York City. Jason calculated that with the help of his friend Jubilee Jim, they could buy up enough gold to control the market. This is known as “cornering” the market. If you can control the market, you control the prices and you can reap a king’s ransom in profits. Jim made the initial purchase of $7 million. Over the course of several months, they quietly worked through brokers to continue buying up large quantities of gold. The price crept up… $132… $141… $150. Short sellers started to feel the squeeze. Many called on the Treasury Department to sell its own gold to alleviate the upward pressure. Jim and Jason, meanwhile, were busy accumulating $60 million in gold. But the President was onto them. He resolved to bust their monopoly on the gold market. So on the morning of September 24, 1869, President Grant ordered the Secretary of the Treasury to flood the market with gold. Minutes later, the price plummeted from $160 to $133. The United States economy plunged into chaos. Jason “Jay” Gould, however, emerged unscathed, netting over $12 million. His little scheme put him well on his way to becoming one of the richest men in American history. There’s been several attempts to corner the gold market since then, but no one has managed to capture enough market share. Cornering is a risky venture, and you can get burned big time. For example, in 1990 the late Marc Rich famously tried to corner the zinc market. It back fired big time and he ended up losing over $200 million and the controlling stake in his company. That company eventually evolved into what is known as Glencore today. It’s nearly impossible to corner a market like gold or silver (just ask the Hunt brothers), the government will always intervene. My theory is simple, the government will never allow the collapse of the many for the gain of a few. Marc Rich was close in zinc, but there were too many players to fight against so he eventually lost. The Hunt brothers were close in Silver in the early 1980’s, but the government stepped in and ruined their world class attempt to corner the silver market. Where you can make a fortune is by cornering a market that is still in its infancy. If you can do this, then you’ve got an early mover advantage, the lowest cost of capital, and a stranglehold on the industry. This is happening right now to one of the world’s most important metals. Demand for this metal is poised to grow 10-fold over the coming decade and four companies control global supply. That metal is lithium. Its value has already increased by 290% in the past three years. That’s why Warren Buffett has already made his move into the lithium rush. This is an opportunity that has rarely been seen in the century since President Grant unwittingly made Jay Gould rich. This time, though, the profit will be made with the help of the most powerful governments in the world, including China and the United States. And the demand will not be driven by two rogue investors: It will be driven – literally – by millions of people around the world. To help you understand the intricacies of this market, my team and I just published a brand new special report called “**Everything You Need to Know About Investing in Lithium**”. In it, you will learn the dangers to avoid and the secrets to making money in lithium, including: - How to really make money investing in lithium (most people approach it all wrong) - The reason most investors severely underestimate lithium demand - The exact date when demand will outstrip supply for lithium – and the price will jump higher - One Katusa Metric to instantly tell a winner from a loser in any lithium deal Because you are a member of *Katusa’s Investment Insights*, this detailed report is exclusively free for you. To access your free report and our full analysis on the lithium sector, [click here](https://katusaresearch.com/wp-content/uploads/2018/03/Everything-You-Need-to-Know-About-Investing-in-Lithium-2018.pdf). Regards, Marin --- # Massive Investment Mistakes and Lucrative Opportunities: Q&A with Doug Casey Part 2 - URL: https://katusaresearch.com/massive-investment-mistakes-lucrative-opportunities-qa-doug-casey-part-ii/ - Type: article - Published: 2018-03-03 - Updated: 2019-05-01 - Author: Marin Katusa **Editor’s Note:** Yesterday, you received [Part 1](https://katusaresearch.com/massive-investment-mistakes-lucrative-opportunities-qa-doug-casey/) of the Q&A with legendary speculator Doug Casey, the Chairman of Casey Research. Below is the second part of the interview series where Doug and Marin talk about risk mitigation in junior markets, two cryptocurrency plays that they’re invested in, what markets Doug Casey wants to be completely out of, and a junior silver company they’re investing in. **Marin Katusa:** Okay. How does Doug Casey manage his risk mitigation? **Doug Casey:** Not well. Not well but you want to take some off because some of these deals will blow up for all kinds of reasons so take your money off the table pretty soon after the thing… **Marin Katusa:** So do as you say not do as you do. **Doug Casey:** That’s right. **Marin Katusa:** I’ll share an interesting Doug Casey story that has been repeated… There are patterns to success and patterns to bad habits. Over a year ago, Doug and I went out to the Boeing plant. We invested in [this little junior airline company](https://katusaresearch.com/breaking-canadian-air-cartel-big-win-investors/), Doug and I take equal positions in companies and Doug owned about nine percent of the company. You invested a couple hundred grand a few years back in the company like I did directly. And after the Boeing site tour, Doug and I knew we had a winner. One problem, Doug doesn’t know where his certs are. So we go through the whole process of getting his certs re-issued and it takes months. Problem solved right? **Doug Casey:** No, I couldn’t find them. I actually didn’t know where the damn certs were. **Marin Katusa:** But this is the best part of the story… Fast forward to a few months ago, and the stock is on a tear, brokers are calling looking for stock, it’s good practice to make the broker happy and take his cash and give him your stock. So, it should be an easy process, except I call Doug to tell him a bunch of brokers wants paper and Doug doesn’t know where his certs are. He had over a million dollars sitting there. I’m like, “*Doug make sure you take some money off the table*“. He goes, “I don’t know where my certs are”. And you found them eventually through a gauntlet of emails in a brokerage account that you didn’t even know you had. **Doug Casey:** Not only that. I had something at Haywood that I’d forgotten that I had that was another… **Marin Katusa:** Oh, that was Alterra… Doug and I are at a dinner at the Cambridge/Katusa Summit in San Francisco, and Doug has a million dollars in Alterra that he didn’t remember that he had at Haywood. We’re sitting for dinner and all of us are talking about how Ross Beaty did it again and delivered a nice win for Alterra shareholders. Doug says, “*You didn’t put me in that one Marin*“. I respond in shock, as it’s one of the largest holdings in our fund and our personal accounts, “*What are you talking about. It’s in your Haywood account*“. Must be nice having a Marin around! So please, when you buy stuff, actively manage your portfolio because the stockbroker… as important as you think you are, and unless you’re in that top twenty percent of his assets under management… he’s not going to be phoning you to take your money off the table. You have to be responsible for your own portfolio. And when to buy and sell. **Doug Casey:** Yes, because when a bear market comes you know how ugly it can be and you don’t want to be in a position of looking under the couch’s cushions for nickels and dimes because you can’t find the rest of your money. **Marin Katusa:** Okay. The last few minutes are open floor questions to Doug Casey, and I appreciate Doug for flying around the world for to make this show. The microphone is there. Please don’t be shy. **Doug Casey:** Everybody here knows that there are no cosmic answers that can be given to almost any questions. I respect your wisdom. **Marin Katusa:** Are there any questions here for Doug? **[Audience]** Do you own any cryptocurrencies? **Doug Casey:** I do. I was given a Bitcoin, a physical Bitcoin, which exist incidentally, back in twenty thirteen and it was worth about thirteen to fourteen dollars at the time. I bought the guy lunch and he said here have one of these. I still have that Bitcoin today, incidentally. This last summer, I started buying these things and they’ve treated me very, very well. I’ve also gotten into a couple of Bitcoin mining companies. **Marin Katusa:** So which ones? **Doug Casey:** I’ve got a big position in HIVE that I took also early in last summer and also own a big position in Fortress Blockchain (FORT.V). But it’s late in the day for these things, so please use caution. So yeah. I got involved in those and I got involved in the marijuana space, also. **Marin Katusa:** Can you talk about what you’re doing with John McAfee or is it too early? **Doug Casey:** Yeah. You know who John McAfee is. He’s the founder and the original guy to develop anti-virus software for computers and he’s something of a wild man. If you go on YouTube and you put in John McAfee you’ll find that he’s fun to hang around with. John and I are going off to the Solomon Islands about a month from now on a wild and crazy adventure. **Marin Katusa:** There may be a blockchain deal out of it? **Doug Casey:** Well, there might be. He personally thinks that bitcoin is going to a million dollars but I think he’s smoking something. **Marin Katusa:** The marijuana that you’re selling him? **Doug Casey:** That’s right. I think it’s late in the game for these cryptocurrencies. **Marin Katusa:** Any other questions from the audience. Hey, Terry Solomon is here. He’s a legend in the business from the brokerage side. Terry, why don’t you stand up? He’s the one who brokered the deal between Pan American and New Pacific (NUAG.V) which was one Frank Holmes’ top picks this morning. Terry, what question do you have for Doug Casey? I love putting these veteran industry giants on the spot. This will be the last question of the night for this workshop. **[Terry Solomon]** Thank you, Marin, for your kind words. Doug, what do you feel is the best commodity sector to invest in today? Copper? Gold? **Doug Casey:** Well, you put your finger on it because everything in the whole world today is overpriced and you’d think that that would be metaphysically impossible for everything to be overpriced. I think I don’t want to be in the general stock market. I absolutely don’t want to be in anything like bonds, that’s a hyper bubble or real estate here in Vancouver. Listen, I wish I’d never sold my house in Vancouver. I tripled my money twenty years ago and if I’d held on it today I would have gotten another five to one on the thing. So don’t ask me about Vancouver real estate but I wouldn’t be a buyer at this point. So what can you buy? The only things that are cheap are commodities and the metals, which you mentioned, are one of them. Nobody you know, nobody cares. They all peaked seven years ago in 2011. It’s been a long ugly bear market so the metals and the metal stocks are actually very cheap. The other thing is agricultural commodities, also commodities, are very, very cheap. Now there are other things like the shipping stocks, they’re absolutely in the toilet. The offshore drilling stocks, you look at their charts it looks like an aircraft that’s been hit by flak. Those two industries are both very interesting. They’re not going to go away. **Marin Katusa:** But what’s your favorite commodity in the metal space? **Doug Casey:** In the metal space… Actually, I hate to say this because the guys that promote silver tend to be kind of religious nuts. But actually, silver. I think in real terms silver is once again very, very cheap and the fundamentals are better than gold. It’s different than gold for different reasons. If I had to put my finger on one metallic commodity… well uranium is a metallic commodity, that’s the other one. Silver and uranium. **Marin Katusa:** Interesting in our fund we own a lot of New Pacific which is where Terry brokered the deal, actually, and they’ve got a massive, massive project in Bolivia that I think is gonna attract a lot of attention. Silver Corp is pretty cheap too and one I’m looking to build a big position in. You never bet against Rui. He is a machine. So smart, hardworking and uber successful. **Doug Casey:** And of course there are all of these little weird metals but they’re very hard to invest in. **Marin Katusa:** That’s it for today. We have the next company coming up. Thank you very much. **Note:** The entire video interview can be found [right here](https://www.youtube.com/watch?v=DDyj3mrzE4A). --- # Massive Investment Mistakes and Lucrative Opportunities: Q&A with Doug Casey Part 1 - URL: https://katusaresearch.com/massive-investment-mistakes-lucrative-opportunities-qa-doug-casey/ - Type: article - Published: 2018-03-02 - Updated: 2019-05-01 - Author: Marin Katusa **Editor’s Note****:** Marin Katusa recently had a question and answer workshop with legendary speculator Doug Casey at the 2018 Vancouver Resource Investment Conference. Below, you’ll find the first of their two-part interview series. **Marin Katusa:** So, Doug Casey, you have been there and done that, now you’re writing books about fiction. Is that because you’re going insane or what’s going on? **Doug Casey:** Look, the reason I’m writing these novels… first, Speculator, about the mining business and you guys are basically here about the mining business… you should read that book, Speculator. And of course, now, Drug Lord which came out last year where I show that you could be a good guy and be a drug lord. Of course this year we’re going to complete Assassin which is perhaps topical because there are all kinds of anti-thought people that have actually said they want to kill Trump so we’re looking at the history and the techniques and the morality and the practicality of political assassinations. So get those books. But the reason, Marin, to answer your question, is that there are a lot of things that you cannot say in nonfiction or you probably shouldn’t say that you can say in the form of fiction. So that’s the reason. **Marin Katusa:** For the record, we’re looking at ways to make this into a Netflix or Amazon series which it will be one day, and I’m a partner in that business. I expect it to do well. Doug, give me a couple of novels that you believe people should read to expand their horizons on investing speculation, geopolitics, that would help them become a better, wiser investor. **Doug Casey:** Yeah… novels are easier to read in many cases than nonfiction. **Marin Katusa:** Except for the [Colder War](https://www.amazon.com/Colder-War-Global-Slipped-Americas/dp/1118799941/ref=sr_1_1?ie=UTF8&qid=1519058739&sr=8-1&keywords=colder+war). **Doug Casey:** Well, that is definitely not fiction. It is nonfiction. I’ve been a fan of Ayn Rand ever since I read her first… Well, I started out with her nonfiction, which is excellent, but if you haven’t read *The Fountainhead* and *Atlas Shrugged*, you should actually do it because everybody talks about what they think Ayn Rand said but they don’t know. Of course, she talks about business and all this type of thing. I’d put that there at number one. But I don’t read business type fiction. Frankly, I like science fiction more than anything else because, even though I don’t have a cellphone and I find that I’m becoming a dinosaur when it comes to actually manipulating the devices that people use today, I’m a technophile and most of the reading that I do is either history or science. When I read fiction, it is generally science fiction. **Marin Katusa:** Give me your two-favorite must reads…. **Doug Casey:** Okay. Neal Stephenson is a genius. Anything by Neal Stephenson, you can’t go wrong with. But my favorite by him is Diamond Age and he wrote it years ago. It accurately predicted the way, in many ways, what’s happening with nanotechnology. Nanotechnology is one of five or six technologies that are all advancing at hyper speed, faster than the rate of Moore’s law actually. You should read that book. You should read Diamond Age. You’ll really be doing yourself a favor and introduce yourself to a whole different way of thinking. **Marin Katusa:** Doug, now that you’ve kind of made a bundle of money, and I do a lot of investing for you in the funds and everything we do… looking back at your career what would have been your biggest financial mistake. **Doug Casey:** Not investigating something adequately before putting money in it. Just throwing money at it because this is a big problem. I’ve talked with a lot of other guys about this and you get lucky in a bull market. You make a lot of money, you take the money, and you feel an obligation to reinvest the money. Very stupid. Make the money and keep the money and don’t put it back on the market. The number one mistake I’ve made. Don’t do that. Number two is don’t hold these things too long because most, not all but most, almost all, of the stocks that you will find here, even with good people and so forth, most of them are burning matches. So don’t treat them like heirlooms. When you most want to buy more because it’s gone up a lot, you should probably think about selling instead. So that’s another mistake I’ve made. Not being a disciplined seller. Marin is very good that way. If anything he sells too soon but that’s better than selling too late. I promise you. **Marin Katusa:** Doug, what about picking the right broker? What advice can you give someone in the audience about picking the right stockbroker? **Doug Casey:** Look, I guess everybody is using the Internet to execute their orders and so forth because you can do so very cheaply. The commissions are trivial when you use an electronic broker. I don’t do that actually. The reason why is that most of the investing that I do is with private placements and if you get good brokers that are really wired in this, they’re on the street and they can show you deals that your electronic account is not going to show you… and give you information if the broker is on the street and knows what he’s doing. I’m willing to pay a commission for that extra source of information. **Marin Katusa:** But Doug, they are called brokers, not creators. Right? They’re going to make you broke. Ironically the brokers are probably the least qualified or least educated in the financial chain and they have more influence on investment decisions than anyone else in the financial chain. So I would add the real advantage of having a full-service broker is on the warrant side if you invest in private placements. Can you explain to the crowd about the benefit of warrants and why so much of what I do focuses on warrants? **Doug Casey:** Exactly. Marin has said correctly that the ideal portfolio consists of nothing but cash and warrants. The way it works in Canada, I’m sure you guys all know this I’m not making any cosmic breakthrough in saying this but, all of these companies are constantly raising money because very few of them have any earnings. Very few of them even have any revenues, forget about earnings. So they’re constantly selling more shares to keep the doors open and they do this in the form of private placements. Generally, when they do a private placement it’s at a discount to the market, *A*, and you get a warrant, *B*. The warrant can be good for anywhere from as little as a year, which is not good, to as much as five years which is incidentally something that Marin has pioneered. The best kind of warrant is a five year detachable, separately tradable warrant. **Marin Katusa:** So a listed, tradeable warrant? **Doug Casey:** Exactly. **Marin Katusa:** Doug, switching gears… walk readers through the Northern Dynasty concept. **Doug Casey:** This is an ideal case. Stock is fine… an excellent basic property and the Northern Dynasty property is excellent. It’s gigantic in size and economics and so forth. Marin financed that at what, forty cents? I forget what the exact number was. **Marin Katusa:** We did three financings for a total of slightly more than $42 million all at or under $0.45. **Doug Casey:** Right, and on those, the stock later went to as high as… What did it get to? Five dollars? **Marin Katusa:** Yeah, about 4 and change… The beauty here is every unit you bought at forty-five cents you got a warrant and the warrant traded almost as high as four dollars a share. So if you bought the stock, just the shares, you made let’s say eight or nine times your money when I wrote it up. Three or four times your money if you follow Casey Research but that’s a separate issue (I kid, as I like teasing my old friends at Casey Research about being the second best research outfit in the sector). But with the warrant, you basically double pay yourself. We’re taking all this risk if you’re accredited and this is something I tried to really push in my newsletter, *Katusa’s Resource Opportunities*. Also, we broke a Toronto Stock Exchange record for a number of subscribers to take a stake, where we raised over one hundred and twenty million dollars from our newsletter base at Katusa Research. We’re really changing the whole industry so the big banks don’t like me because they’re not getting their fees. The big brokers don’t like me because they’re not getting their B warrant (broker warrant) or they call it B’s and fees, broker fees and broker warrants. All I care about is bringing us (we being the investors) to have the best advantage. So I really don’t care what the banks and the brokers do because they don’t really add that much value in my opinion. **Doug Casey:** Marin is absolutely correct. When you’re doing these financings look at the terms of the warrant. Some people will offer an eighteen-month half-warrant. It better be a really sweet deal if that’s all they’re gonna give you for risking your money and being tied up for four months. **Marin Katusa:** Also, remember… Many people downloaded the Katusa Research guideline to a conference where you can ask all the questions to a company management team. If you haven’t, I strongly suggest you do it. Like when you ask the questions to management, such as, how much are you invested? Where you take someone like Amir Adnani that Doug and I have put millions behind… He’s invested in two companies and he owns ten percent of it himself at the same cost base as the investors. He’s got hard dollars into his company, not just “options” or what I call “soft-dollars” like most management teams in the resource sector. He is the real deal – so we back the real players like Amir, Ross Beaty, Lukas Lundin, and that elk. Remember, soft dollars are not real money, they’re options, and these options are at five years. Many know me as the pioneer of the five-year listed warrant, but that isn’t true. I’ve just brought it back in good style. Management teams in the resource sector have had it good during the last 15 years. All I ask is that the investors who put up real dollars to finance the management dreams to get treated equally as management. Funny thing about management, their warrants are always exercisable for 5 years. I’m yet to see a 2-year half option issued by the companies to their management. And yet they try to justify that I should buy a two-year half warrant. The exchange used to allow a ten-year warrant back in the day. In fact, there used to be something called “piggyback warrant”. A piggyback warrant came with a unit in a PP and when the first warrant was exercised, a second warrant was issued with the exercise of the first warrant. Murray Pezim was the master of Piggy Back warrants. I’m not that greedy. I just want to be treated the same way management treat themselves. **Doug Casey:** You get the paper and the management gets to fly around in a private jet with the money you give them half the time. Ideally, five-year warrants are the best way to invest in the market but, in order to get into those deals, you’re basically either going to have to be next to a really good broker that beats the bushes for those deals, or get to know these companies. I don’t do this at Casey Research but Marin does so [sign up for his newsletter](https://katusaresearch.com/subscribe-17/) and get into those deals. It’s not cheap but… Well, it is cheap actually. Because Marin is the best at this. **Marin Katusa:** It’s about value. And thanks Doug. **Doug Casey:** No, thank you Marin. **Editor’s Note: **In tomorrow’s second part of the Q&A series, Marin and Doug talk two cryptocurrency plays, a junior silver company and what markets Doug Casey wants to be completely out of. --- # This Critical Metal Has Been Overlooked by Investors… Until Now - URL: https://katusaresearch.com/critical-metal-overlooked-investors-now/ - Type: article - Published: 2018-02-23 - Updated: 2024-10-09 - Author: Marin Katusa The price of cobalt is on fire… It is a popular metal used in items like magnets, steel, and super-alloys. And it is normally produced as a by-product of copper and nickel mines. Until very recently, calling the cobalt market a niche market would be a severe understatement. In 2016, global cobalt production was 116,000 tonnes, while cobalt demand was approximately 94,000 tonnes. To put this in perspective, the global demand for copper in 2016 was 23 million tonnes… almost 250 times bigger than cobalt. However, today there may be no hotter metal market than the cobalt market. Why? Because cobalt is a crucial ingredient in electric vehicle battery chemistry. And to achieve the International Energy Agency’s (IEA) estimate of 12.9 million EVs on the road by 2020, the global supply of cobalt will need to increase by at least 50%. ### **Why Electric Vehicles Will Continue to Spur Cobalt Demand** Battery chemistry is crucial to the electric vehicle revolution. No one will buy an electric vehicle if it only drives for half an hour before needing to recharge. Nor will they buy an electric vehicle if the battery costs tens of thousands of dollars. In short, a small, cheap, efficient battery is key. This means that the metals used in these batteries must be of the highest quality. The key to battery chemistry is maximizing energy density. Energy density, measured in *watt-hours** per kilogram* (Wh/kg), is a measure of how much energy a battery can hold. The higher the energy density, the longer the runtime will be for a battery of the same size. The chart below shows the energy density of many common batteries; the higher the energy density, the better. You’ll notice **NCA** (Lithium-Nickel-Cobalt-Aluminum) and **NMC** (Lithium-Nickel-Manganese-Cobalt) batteries are first and second in energy density, respectively. Cobalt is the main ingredient in both NCA and NMC battery types. It is also used in the LCO battery type, but LCO batteries are too expensive and are not used commercially. Further solidifying the investment thesis in cobalt, companies such as Tesla, Toyota, BMW, Nissan, and Chevrolet all already use a version of the NCA or NMC battery types. In North America, Tesla pioneered the use of the NCA battery. The 95kwh Tesla battery pack contains close to 15kg (31 pounds) of cobalt. On the other hand, NMC batteries come in a variety of compositions, and each one uses cobalt. Depending on the exact battery chemistry, it will use somewhere between 13 and 38 pounds of cobalt. And, as mentioned before, there is a positive relationship between energy density and running time in a battery… In January 2017, the Chinese government revised its electric vehicle credit system to reward longer range models. These tax credits will benefit vehicles outfitted with NMC or NCA battery chemistries. BYD is China’s largest electric vehicle producer. According to BYD, the batteries of all newly-launched plug-in hybrid electric vehicles (PHEV) will be of NMC or NCA battery chemistry. Furthermore, all passenger vehicles will start to use NMC/NCA batteries in 2018. *Pictured above: China’s BYD ‘Song’* Until recently the NMC and NCA battery types were not even allowed to be used in EVs in China. The government called them unsafe and unproven. That thesis has since been rectified, and I believe all major Chinese electric vehicle producers will make the switch to NCA or NMC batteries. Recall that the IEA wants to have 12.9 million electric vehicles on the road by 2020… Let’s say that goal is attainable and those 12.9 million cars are on the road by 2020. Since there are around 2 million EVs currently on the road, that means another 10.9 million EVs need to be produced. This means that 10.9 million cars will require a battery that needs somewhere between 13 to 38 pounds of cobalt a piece. This creates over 150,000 tonnes of new cobalt demand. As I mentioned above, cobalt is a by-product of copper and nickel mines. In the last mining boom, nickel and copper miners built too many mines and oversupplied the global marketplace with copper and nickel. An oversupplied market causes weak prices for the metal. Additionally, low prices are a disincentive to miners to keep producing or to expand current operations. This deterrent directly impacts the supply of cobalt. Supply has barely kept up with demand until this point, and that is entirely without the electric vehicle revolution. By 2019, the cobalt market will be heading into a large deficit, and I believe the price of the metal will have to stay strong to meet demand and then it will go lower, as the industry will solve the shortage issue, as it does for all commodities. ### **The Cobalt Supply Powerhouse** Again, one of the main reasons I like cobalt is that it is a key ingredient in both major battery chemistries: NMC and NCA. It has been scientifically proven that batteries which use cobalt in the cathode have a high energy density. A high energy density means better efficiency and mileage for electric vehicles. The second reason I like cobalt is that the supply of it is very limited. Most production is controlled by Chinese companies and originates out of the [AK-47 nation](https://katusaresearch.com/use-ak-47-indicator/) – the Democratic Republic of the Congo. It is safe to say there is a reason to build a few additional mines outside the DRC. Thirdly, because cobalt is mainly a by-product of copper and nickel mines, there are very few ways to gain pure play exposure to cobalt. Like lithium, cobalt wasn’t used for much before the electric vehicle revolution. Demand and supply for cobalt were a paltry 100,000 metric tonnes per year up until a few years ago. Since then, cobalt has become highly sought after. The price for cobalt tripled, from $10 to $30 per pound in the span of a year. However, unlike lithium, ramping up cobalt production is not quite as easy. Over 90% of current cobalt production comes by way of a by-product. Furthermore, there are very few world-class development-stage assets in stable jurisdictions. Below is a chart which shows the current cobalt supply along with potential new mine production. I have included all projects that have completed a feasibility study. Each colored bar represents a new mine’s contribution to the global cobalt supply. The chart above paints the most aggressive supply case possible. In all likelihood, many of these projects will not come online as quickly as I have labeled in the chart. I have analyzed all of these projects and many of them are extremely marginal. Many of these deposits are low-grade nickel or copper and have cobalt as a by-product. Projects such as Mindoro, which is owned by Intex Resources, require billions in up-front capital – and it is located in the Philippines. **These are good problems to have for cobalt investors. It means that the supply side is not going to blow out like it will for lithium.** I believe that the cobalt market will remain tight over the next few years, and that means high prices for the metal. Below is a chart that shows the most up-to-date supply and demand forecast for cobalt through 2030. Assuming no 180º turn in battery chemistry technology, the demand for cobalt should remain high for a decade. You’ll notice that I have not tried to forecast new cobalt supply past 2021. Like with lithium, I believe there will be an additional supply that comes online after 2021 but the question is how much, and when? If the industry does solve the shortage production problem, the price of cobalt will fall, but we are in no risk of that in the short term, so speculation will remain robust in the cobalt sector. ### **The Cobalt Wildcard in the Congo** The Democratic Republic of the Congo (DRC) is a tricky place to do business. I have mentioned time and time again that doing business in AK-47 nations is extremely risky. The Government of Congo means business when you have the Chairman of their state-owned mining company, Gecamines, says things like… *“We legitimately want to control the cobalt market because it is ours.”* I warned readers and venture capital investors time and time again, Governments will always act in their own self-interest. And Governments, where AK-47’s are found in the streets will take more extreme actions, at unpredictable times. Recently, the DRC went and surprised everyone when they announced a massive increase in mining taxes and royalties. Mines and projects run by Glencore, Ivanhoe, Randgold, and others would instantly be subjected to what the DRC calls a ‘super profits’ tax. And since the DRC is so dominant in world cobalt production, what about that metal as it relates to the taxes and royalties, specifically? The new laws permit the DRC to raise the royalty on cobalt from 2% to 10%. That’s a 500% increase which will have company analysts’ heads spinning back to their excel sheets. My team and I have tracked several dozen nations’ tax and royalty promises and then what they’ve actually instituted. And this simple change in numbers can wreak havoc on a company’s balance sheet and business plan going forward. *Katusa’s Resource Opportunities *subscribers have seen this table of before-and-after tax/royalty structures that governments initially promised and then slapped into place… and it factors into every investment decision I put my money into. If you are not using conservative numbers and a safety buffer for royalty and tax increases in your analysis for any junior venture mining stocks, then you’re living in a fantasy world. Regards, Marin P.S. There are over 20 companies which call themselves cobalt companies listed on the Toronto Stock Exchange (TSX) and the TSX-Venture. About 85% of these companies are not worth paying attention to, but there are 3 on my short list watch list now. [Click here](https://join.katusaresearch.com/kr-products-services/) to subscribe to *Katusa’s Resource Opportunities* and find out which ones they are… --- # Don’t Put All Your Eggs in One Bitcoin Basket - URL: https://katusaresearch.com/dont-put-eggs-one-bitcoin-basket/ - Type: article - Published: 2018-02-16 - Updated: 2019-05-01 - Author: Marin Katusa Do you like this chart? Of course you do, anybody would. After all, who wouldn’t want to make ten times their money in the span of a month? This is what much of the cryptocurrency space looked like last year. You could’ve thrown a dozen darts at a board of digital coin offerings and likely made 10x your money from trough to peak on a handful of them. Though there is undeniably a great amount of hype and mania surrounding the cryptocurrency space, there are also real, tangible ideas and technology behind all of it. And many of these ideas are actionable and investment-worthy vehicles. Unfortunately, a lot of the times you’ll find that choosing the right investment can be like trying to find the needle in the haystack, as the below chart shows: Now, of course, I’m not just trying to play the scaremonger here. I know many who have made fortunes many times over in Bitcoin and other alternative coins (“altcoins”). I’m going to show you data revealing that Bitcoin has become less and less relevant as an investment vehicle. And while there are several reasons for this, one which is becoming clear is that many investors believe the “easy gains” in Bitcoin have already been made. In the chart below, the data is saying that Bitcoin no longer carries the same dominant market weighting it did in the earlier days of cryptocurrencies. Bitcoin’s market share has fallen drastically, and it now commands around a third of the total market capitalization of all cryptocurrencies. For a long time, the performance of altcoins was closely tied to that of Bitcoin itself. Ever since the entire cryptocurrency universe exploded into the limelight last year, savvy investors have started to pay more attention to the things that differentiate each altcoin or token from one another. The result? Many cryptocurrencies have started to de-couple from their Bitcoin “peg”, and are now able to trade at valuations based more on their own merit (though it would be wrong to say that the price of Bitcoin doesn’t still influence the price of all other coins to some extent). Take a look at this decoupling below… With all the money going into the cryptocurrency space, investors are clearly looking beyond Bitcoin, and have been for some time now. And while altcoins have been where a lot of that money has ended up, as you’ve previously seen, not all of the altcoins that glitter are gold. So where else can that money go? ### **The Altcoin Alternative #1 – Bitcoin Mining** There are many different avenues to pursue when looking to invest into cryptocurrencies – the coins themselves are merely the simplest and most visible vehicle. Building off of the coins themselves, one of the best alternative investment options is Bitcoin (or altcoin) mining. Bitcoin mining is how many of the early adopters got their start, as back in the day it could be done from your own computer with nearly negligible capital risk and expenditure. These days, Bitcoin mining has scaled to such a large extent that only commercial Bitcoin mining projects can realize any sort of meaningful gain. This drove all the “artisanal miners” to lesser-known altcoins where the mining networks are not quite as saturated. A number of these commercial Bitcoin mining projects have gone public. This allowed investors a way to cash in on the steady revenue stream that Bitcoin mining generates without having to go through the hassle of setting up a Bitcoin mine in their own basement. Subsets of the Bitcoin mining space include companies who handle *Mining-as-a-Service *(“MaaS”), and companies that run master-nodes. The *MaaS* companies contract a portion or all of their mining hash rate out to customers in order to receive a reduced, but more reliable income stream. The companies that run master-nodes generate revenue from cryptos and operate as a type of super miner and blockchain protector that can perform unique tasks that other nodes can’t. DASH is the most well-known master-node-based cryptocurrency and doesn’t come cheap. The cost for a DASH master-node is around USD$800,000, or the price of a starter apartment, a few blocks away from Central Park in New York City. ### **Altcoin Alternative #2 – Bitcoin Exchanges** Investing in the Bitcoin exchanges that effect the transactions is another indirect way to cash in on cryptocurrencies. Right now, in any given 24-hour window, Bitcoin’s transaction volume amounts to some 600,000 BTC – or, given BTC’s USD $10,000 price point as of time of writing, some $6 billion dollars every day. This volume works out to somewhere north of 150,000 transactions per day. Just how much money are these exchanges making? Transaction fees for Bitcoin currently sit around the $25 mark, not including the margins that exchanges charge for their spreads. With all of the other altcoins to consider too, there’s some pretty serious cash to be made in this space as well. However most companies worth their weight and our consideration are privately held, for now. ### **Altcoin Alternative #3 – Crypto Hardware Companies** Another way to indirectly invest in cryptocurrencies is through the companies that provide the hardware. The ASIC (Application Specific Integrated Circuit – pronounced *ay-sick*) hardware required for Bitcoin mining is highly specialized and doesn’t come cheap. But the companies that are serious about mining go out and buy ASICs by the tens of thousands of units. The Chinese company Bitmain produces the world’s most powerful ASIC specially designed for Bitcoin mining, but it too is a private company. However, there are other avenues to play the space. Taiwan Semiconductor Ltd provides exposure to the space, as does Nvidia Corp. Bitfury, one of the larger players in the space after Bitmain, has a vehicle on the horizon as well. Another major hardware component of the cryptocurrency sector are the hardware wallets people use to securely store their Bitcoins. In particular, the benefits of “cold” storage, or the practice of keeping Bitcoins offline in order to minimize the risk of losing them in a hack, is something that will drive innovation on this front. And as blockchain technology develops further there will certainly be more consumer-level hardware implementations, most pertinently in the digital-identity related sectors – insurance, medical records, real estate transactions and the like. ### **Altcoin Alternative #4 – Blockchain Companies** Blockchain technology companies are yet another way to cash in on the cryptocurrencies. That said, blockchain technology companies differ from the ones previously listed in that their valuations are not quite as straightforward to calculate. Blockchain technologies offer their specific implementations through a *Software-as-a-Service* (“SaaS”) model. One particular focus for blockchain technology companies is on the cybersecurity space, thanks to the anonymous nature of blockchains. Of course, it may not seem that way at first glance, given the numerous high-profile hacks Bitcoin exchanges have suffered in the past. But once fully hashed out, as the blockchain security companies are trying to do, blockchain security promises to be a game changer. On the whole, blockchain companies’ ability to generate value for shareholders depends on their ability to develop, market, and secure contracts for their respective blockchain technologies. ### **Not Just Coins Anymore** The key takeaway here is that cryptocurrencies including the altcoins, at large, are merely the surface of what’s to come. Given how restrictive the actual use of Bitcoin as a currency is, the sentiment is that cryptocurrencies still have quite a ways to go before they can own up to the “currency” part of “cryptocurrency”. Many of the altcoins are trying to solve this issue, among others, as the loss in Bitcoin’s share of the cryptocurrency market capitalization has shown. Still, numerous companies have instead chosen to leave the coin development space and focus on alternative ways of profiting from the Bitcoin revolution. That said, in terms of valuation right now, publicly traded crypto sector companies play David to the Goliaths that are cryptocurrency market caps. In the chart below, you’ll see the massive gap in the market caps of the digital tokens versus the market cap of all publically listed crypto related companies in North America. Part of this is due to the fact that some of the larger players, like Bitmain (valued in the billion U.S. dollar range), have thus far remained private. This chart also reflects the nature of I.C.O’s (Initial Coin Offerings) and tokenization, which allows companies to more easily bypass exchanges and raise money directly from private investors. Still, I’m confident that there is extensive room for growth of cryptocurrency and blockchain companies not directly involved with the coin development side of things. In particular with the long arm of the law coming down hard on cryptocurrency regulations. Needless to say, my Special Situations team and I are closely watching every development in this sector. And as always, you will be the first to know when I find the next spectacular pitch down the middle for those of us with a [home run mindset](https://katusaresearch.com/home-run-mindset-essential-winning-resource-market/). Regards, Marin P.S. My high risk, high reward style of speculating is NOT for everyone… but it has worked out nicely for me and many of my subscribers. To find out how to make big scores alongside me, [click here](https://katusaresearch.com/subscribe-17/). --- # What Does a Broad Stock Market Correction Mean for Gold Stocks? - URL: https://katusaresearch.com/broad-stock-market-correction-mean-gold-stocks/ - Type: article - Published: 2018-02-09 - Updated: 2019-05-01 - Author: Marin Katusa On Monday, February 5th, 2018 we experienced ‘Volmageddon’ (Volume Armageddon) where the low volatility indexes got crushed. During Volmageddon, we experienced the largest one-day point drop ever for the S&P 500 at 113.19 points, but an overall drop of 124.21 points within 24 hours. February 5th was the largest one-day point drop, it was nowhere near the all-time largest decline in percentage for one day. The largest one-day percentage drop still remains Black Monday, which was October 19, 1987. On Black Monday the S&P 500 fell by a stunning 23%. Now, a lot has changed since Black Monday over 30 years ago, but there are similarities. The 1987 crash came during a long a bull run starting in the early 80’s that emerged from a terrible recession. The long bull run had made many people complacent. So, of course people are saying a similar crash could happen again… and even usher in a bear market in stocks. The age of *irrational exuberance* – coupled with the rise of quants (traders and analysts with complex mathematical and programming backgrounds) – makes it difficult to predict the end of any stock market rally. Adding to the issue of capital movement and flight, Bitcoin even knocked on and poked its head thru the $6000 door earlier this week. At the same time, I’ve also seen a blockchain company that makes less than $5 million per year in revenue trade at a market cap of over a half of billion dollars. Some sanity would be good for the markets. And a healthy correction to reduce the froth is never a bad thing. What we now know is that if the bull market in stocks and bonds is to end, the implications will be dire. This is because, historically, the Fed has always intervened to prop the market by lowering interest rates. Today, interest rates around the world are still low. And more importantly, the new Fed Head just sworn in this week, Jerome Powell, has openly stated they plan on raising rates (if this proves not to be the case, he doesn’t have much room to go lower). This means that the Fed would have limited options to stop the bleeding. One viable option that remains is negative interest rates. If any President can pull off negative U.S. interest rates, President Trump is the one. Remember, Trump thought Trump University and Trump Taj Mahal in Atlantic City were also good ideas. But I make my living putting money to work in the natural resource markets. And Fed moves impact the broader market equities and impact resource equities alike. So let’s take a look at the effect of a general market correction on our resource portfolio… **How Does Gold Perform in a Recession?** One way to get bear market insurance is to buy physical gold. In bear markets, gold tends to perform better than stocks. This is because investors see gold as a safe haven. Year to date, the gold price has increased 1.0%. And history shows that gold tends to perform better than stocks in periods of recessions or market corrections. For example, gold peaked in 1980 when its price soared to $850 per ounce. In the table below, you can see how gold tends to perform against the S&P 500 during the most extreme corrections since 1976. Put differently, the chart below shows how gold performs during recessions (shown in red bars). The black line is the price per one ounce of gold. The data shows that gold will perform better than the S&P 500 *if* or *when* there is a recession in the future. There is a misconception that gold cannot do well in an interest rising environment. The fact is that in a rising interest rate environment, gold can – and has – increased in price. In the following chart, we overlay gold price action over the last 50 years and highlight times of rising interest rates in blue. You can see how gold performs in periods of interest rate increases by the U.S. Federal Reserve. The chart below breaks the misconception that rising rates are bad for gold, and gold can perform well in an environment of rising interest rates. The questions you should be asking yourself is this: *“Will the U.S Fed continue on the path of higher interest rates with a recently spooked stock market*, or *will they keep the easy money policy alive*?” I will argue that gold will do well in both scenarios. But that is a very complicated argument that I will explain in a future essay. Now let’s turn the focus on gold equities… **Gold Stocks in a Recession** Another way to hedge your exposure to the overall market is by turning to gold mining stocks. Traditional diversification theory suggests that you invest in a sector by investing in the leading industry ETF. In this case, it suggests that you should invest in the VanEck Vectors Gold Miners ETF, GDX. But be careful with ETF’s and know exactly what you’re buying… just ask the shareholders of the XIV exchange traded fund how they felt losing 100% on February 6th 2018, the day after *Volmageddon*. We think there are better ways to invest in the gold sector for the informed and active investor than putting your capital into gold ETFs. If you are reading this, you have already spent more time on the gold sector than most money managers buying Gold ETFs. So how do gold stocks perform when broader equity markets correct? When a recession hits, gold stocks can get hit hard as shown below in a chart of the GDX vs the S&P 500 during the 2008-09 crash. Gold stocks are extremely cyclical in nature. They can have explosive recoveries unlike their broad market equity counterparts after a steep and sharp correction as seen during the recovery from the 2008 low in the chart below… Going back to the dot-com bubble reveals a similar trend. Between March and October of 2002, the S&P declined by 31%. On the other hand, gold stocks like Goldcorp, Kinross, and Randgold were all up over 20% as you can see in the chart below. Below is a table which shows the performance of individual gold stocks during the past 2 crises. The recovery period is the time taken to approximately regain the pre-crisis levels in the S&P 500. It’s clear from the table above that gold equities are very cyclical. Whatever gold stock you own or plan on owning make sure that the company is run by experienced invested management and that the projects can survive a decline in the gold price. Even though I am very bullish on gold and gold equities, in the long run, we’ve seen that anything and everything will happen in the global markets. U.S. interest rates can rise, stay where they are or even decrease (and even the unthinkable-negative interest rates could happen under President Trump). Each option has incredible ripple effects on the global economy which will affect the gold spot price and even gold equities. **Final Thoughts** When overall stock market corrections happen, they don’t leave any stocks behind. Contrary to popular belief, gold stocks are not spared while physical gold has proven to perform well in corrections. Prudent investors will look for any market drop to add to existing gold stock positions at bargain prices. Greed will always lure frantic buyers for fear of missing out (FOMO), but panic selling presents buyers with excellent opportunities for entry into your favorite gold stock. Depending on whether gold is for your own portfolio or not, you need to ask yourself a few questions on your personal tolerance for risk and style of investing. If you’re reeling from the correction and can’t sleep at night, you probably have too much equity exposure and not enough cash. If you’re finding that’s the case, my article on “[How Many Stocks Should You Own](https://katusaresearch.com/how-many-stocks-should-you-own/)” is always a good refresher. **Where am I putting my own money?** I believe the precious metals sector has massive upside from today’s levels and that gold and gold stocks play a pivotal role in any investor’s portfolio. No company can ever buy its way onto my recommended list and more importantly, I disclose the purchase price of every stock. Also included in our material are the many studio interviews where I ask tough questions to the directors and the management teams of the companies that are in our portfolio. I’ll even go to the site and speak directly to the operations teams and geologists to get my facts. There is no doubt you can do all of this on your own, and spend millions of dollars in due diligence and your own valuable time doing what I’ve learned to do over the last 15 years doing this full time… or you can secure your membership and have a look over my shoulder to see every move I am making in the gold junior space. I hope to see you there. Regards, Marin Katusa P.S. Right now I have three active buy recommendations for junior gold companies. And I’m not buying shares in them for only 50-100% gains. I’m looking at making multiple times my money at the risk of 50% downside. Now, this high risk, high reward style of speculating is NOT for everyone… but it has worked out nicely for me and many of my subscribers. To find out how to make big scores alongside me, [click here](https://katusaresearch.com/subscribe-17/). --- # How to Make $100,000 or More from this Misunderstood Market - URL: https://katusaresearch.com/make-100000-misunderstood-market/ - Type: article - Published: 2018-02-02 - Updated: 2019-05-07 - Author: Marin Katusa Making the best investment conference in the world is no easy feat. I called in favors from friends and so did my conference partner, Jay Martin, to put together the best lineup of speakers the investment community has seen in one show. Case in point, my friend Teeka Tiwari traveled across the continent on his birthday to help me make the VRIC 2018 the best investment conference to date. He did this because he cares about making his subscribers money. And boy has he crushed the crypto markets the last 12 months. “*Marin, I get letters from people every week saying how I’ve made them a million dollars.”* This is one of the first things my friend Teeka said to me on his recent trip to Vancouver. Today, he’s one of the most popular analysts and newsletter writers in the world. His newsletter smashed sales records in 2017 and now has a wait list for subscribers. And he’s one of the world’s foremost experts in blockchain companies and cryptocurrencies. In fact, when I need some expert consultation on one of the dozens of crypto and blockchain pitches I hear every week at my office, Teeka Tiwari is one of the first people that I get in touch with. There are over 1,490 cryptocurrencies actively trading with a current combined market cap of +$550 billion and hundreds of Initial Coin Offerings coming online in the next few months. It’s easy to see that investors are now in crypto overload. The best part of knowing someone when you interview them is having chemistry together to explain relatively unknown facts that are misunderstood in the crypto space. For the first time in public, Teeka shares what he thinks are the catalysts for cryptocurrencies in 2018. Few can explain it in such a simple way to understand. If Teeka is right (and his track record thus far has been stellar in the crypto space), there will be another major leg up for the select, best-of-peer cryptos and blockchain companies. Now, I want to bring you the best information. Teeka was kind enough to sit down with me for an exclusive interview for *Katusa’s Investment Insights* readers, and you’ll find the interview below. In this video, you’ll learn… - Are we just at the beginning of the crypto boom? - Has Bitcoin topped out? - The number of signups that crypto exchanges are getting (and which ones Teeka mentions) - How much pent-up demand there is for cryptocurrency trading - How Teeka tells his subscriber to mitigate risk in this highly volatile world - What percentage of Teeka’s net worth is in cryptocurrencies For a transcript of our conversation – [click here](https://katusaresearch.com/wp-content/uploads/2018/02/Teeka-Tiwari-Marin-Katuas-VRIC18-Transcript.pdf). Regards, Marin --- # Katusa and Jim Rickards Talk Gold, Bitcoin, and the Next Crisis - URL: https://katusaresearch.com/katusa-jim-rickards-talk-gold-bitcoin-next-crisis/ - Type: article - Published: 2018-01-26 - Updated: 2019-05-07 - Author: Marin Katusa Dear Katusa Research reader, Vancouver is still buzzing from the 2018 Vancouver Resource Investment conference. The event was an incredible success, with over 8,000 registered attendees, packed workshops, and lots of great investment ideas. Many presentations weren’t just “standing room only,” but also had people peeking through curtains from the outside. If you didn’t show up early for the speaker you wanted to hear, you weren’t getting in. To me, the attendance and interest is a promising sign for the natural resource and venture capital markets. It tells me that investors have a solid appetite for taking risk. If commodity prices continue moving higher, this interest will act as fuel for the rally… and send gold stocks, copper stocks, oil stocks, and others soaring. At a closing panel with Jim Rickards, Peter Schiff, and Teeka Tiwari, I asked the crowd who was there for gold and natural resources and who was there for cryptocurrencies and marijuana deals. The answer shocked me. My gut initially told me that the 8,000+ attendees wanted to know about early-stage marijuana companies and blockchain deals… and maybe listen to natural resource insights if they had time. But the vast majority of hands went up from people who were there for gold and natural resources. I also saw a lot of millennials in the crowd. In previous years, there was a massive disparity in age, and I’d venture to guess that the median age was somewhere around 60. Not so anymore. A large segment of the crowd was young, hungry, and smart. I was asked many good questions about gold juniors, oil explorers, and even what my favorite cryptocurrencies were. The new generation of resource investors and speculators is arriving. The guard is changing. I know many *Katusa’s Investment Insights* readers were not able to make it to the conference. And I want to deliver the best material to my readers. So, I’d like to share with you what I believe is one of the most valuable discussions from the conference. It’s a video of currency and geopolitical expert Jim Rickards and I talking about what we believe is around the corner for the investment markets. By watching this video, you’ll learn: - Jim Rickards’ favorite cryptocurrencies - What is the biggest intellectual failure that people make between cryptocurrency and blockchain - How much of your portfolio Jim Rickards says you should have in gold - What market-rattling “black swan” Jim thinks we’ll see in 2018 - Why Jim doesn’t think that the next bailout will work - Of Jim’s gold portfolio, find out what % is in physical gold vs. gold equities Just click on the screen below to watch the video. I hope you enjoy it. Regards, Marin **P.S.** If you weren’t one of the 8,000 people that attended the conference, don’t fret. Until **Midnight Sunday, January 28th** you can get my top 3 stock recommendations from the show **right here**. --- # Here’s How to Invest With the Ultimate Insiders This Weekend in Vancouver, Canada - URL: https://katusaresearch.com/heres-invest-ultimate-insiders-weekend-vancouver-canada/ - Type: article - Published: 2018-01-19 - Updated: 2019-05-07 - Author: Marin Katusa I’m starting this week’s letter by congratulating my good friend and colleague Ross Beaty for being inducted into the Canadian Mining Hall of Fame. In case you don’t know Ross, he’s one of the industry’s all-time most successful business builders and investors. He’s also a very good guy. Ross (a billionaire) has built many successful companies (Alterra Power and Pan American Silver to name just two), which have made him and his backers very rich. Over 1,200 people came out to celebrate all the candidates that were inducted to the Hall on January 11th 2018. I made the trek across Canada from Vancouver to Toronto to celebrate with Ross. His speech was one of the best I’ve ever seen. Not only was Ross gracious and humble, he thanked all of those who get no thanks in the natural resource industry, including shareholders, lawyers, accountants, office staff and even the newsletter writers. And that’s something I want to bring to attention here. In investment circles, it’s common to hear that investment newsletter writers are a shady bunch. It used to be that if you couldn’t get a job with a research firm, you wrote a newsletter. That never made sense to me. The individuals I got to know early in my career, like Jim Dines, Bob Bishop and Doug Casey were much more interesting, were more seasoned travelers, and much more intelligent than most of the corporate analysts I’ve met. Not to mention the newsletter writers had way more money than the analysts. I found it very interesting that the industry would talk down to the newsletter writers. But at the same time, the brokerage houses would promote the fact that certain big name newsletter writers were on the story. Not all newsletter writers are equal. And I’ll tell you why… Some newsletter writers are “bought.” They accept money from companies in return for recommending them to subscribers. Here’s my recommendation on those guys: Stay away from them. Also, stay away from the writers who hide behind an alias and are not willing to show up a conference and talk openly about what they are doing. I learned early on to do all business transactions as if the details will be reported on the front page of the NY Times. Because someday, they will. This weekend, Katusa Research and Cambridge House will co-produce the **2018** **Vancouver Resource Investment Conference**. If you haven’t signed up for your complimentary access pass,** [click here](https://cambridgehouse.com/e/vancouver-resource-investment-conference-2018-69/register)** to get it. We have 5,000 more registered attended than we did this time last year, which is astonishing. We’ve taken out maximum square footage of the largest conference facility in Vancouver (the Vancouver Convention Centre) and we expect over 8,000 attendees. You should be asking WIIFM (What’s In It for Me) Marin? Well to start it off this year, I decided to have the investment *Rumble in the Jungle*, with Rick Rule, Frank Homes and myself. We’ll square off to see who will pick the best stocks in front of the live crowd. Each of us have picked our top three stocks—and the companies will do a rapid-fire style (20 slides, 20 seconds each) for a 6 minutes and 40 seconds presentation. You will get almost 100 years of investment experience between the three of us, and you get to be entertained by who has picked what company. Of course, my money is on me. But you will only find out who takes the reign as champ if you show up, and that’s just the start of the show on Sunday morning. Not only do we have the best royalty and streaming companies in the world, we have producers in gold, silver, and copper all present. And you will get to rub shoulders, hear presentations and talk with the best cobalt and lithium companies in the space. They will all be there at the conference. Every newsletter writer present has been personally invited by Jay Martin and me. And I have to give a special kudos to Jay Martin and his team at Cambridge House, who have done an incredible job preparing what will be the best conference to date. I will be moderating an interesting panel with experienced newsletter writers Brent Cook and Frank Curzio where we will call out companies as “the Big Scam or a Big Score.” This is one I’m personally excited about. The audience will find out if companies like Novo, Aurion, Garibaldi, Northern Dynasty, and First Mining Finance are either the *Big Scam* or the *Big Score*. In addition to the biggest movers and shakers in the resource industry, I have called up my friends who are the biggest players in the crypto space. Yes, there will be lots of blockchain and crypto companies at the show. As a personal favor to me, the world’s leading cryptoanalyst, Teeka Tiwari, will not only be doing keynote talks, but he has signed up to take on some heavy hitters in Jim Rickards and Peter Schiff. For those that missed the San Francisco Gold and Silver Summit and the video, they went hard at each other with their respective views on cryptocurrencies, blockchain, the U.S. dollar, governments, and gold. One would think this is a handicap match, with two gold bugs who are openly against crypto take on my friend Teeka Tiwari. Jim Rickards and Peter Schiff are heavyweights in their own right, but Teeka is coming prepared, and it’s going to be the best debate of the year. I will be the moderator, and if you know anything about Peter Schiff you know I will have my hands full trying to tame Peter so others can get a comment in. Peter not only loves the sound of his own voice, but he thinks everyone else is also in love with the sound of his voice. It will be fun and you will not want to miss it. Now let’s put something in your arsenal of investment tools if you’re planning to attend the show… Making it to a natural resource conference can ring up a lot of travel costs. It takes up valuable time. That’s why I’ve written an exclusive “survival guide” to help you maximize the return on the money and time you invest into attending a natural resource conference. We call it “***The Katusa Research Natural Resource Conference Survival Guide****“*: *How to recognize resource BS and find high-quality stocks that can vastly increase your wealth*. In this guide you can receive by [clicking here](https://katusaresearch.com/wp-content/uploads/2018/01/SurvivalGuide.pdf), you’ll learn: - **The single most important factor to consider before buying a junior resource stock (this idea alone can transform a losing investor into a winner)** - **Why most resource investors flock to the absolute worst countries to invest in (and how you can easily avoid their dumb mistake)** - **How to quickly and easily determine if a company is about to dilute shareholders and water down your stake. (This happens far too often, but it’s easy to avoid).** - **And many other critical ideas to your success as a resource investor.** This is all hard-won knowledge written down by a guy who makes his living investing in the resource market… not some desk jockey analyst who has no money of his own on the line. The Vancouver Resource Investment Conference is where you’ll see hundreds of top mining executives and companies presenting their stories, assets, and catalysts. The conference is also where you will be able to meet all the top newsletter writers in the industry and find them all in one place. If you’re planning on attending the conference and haven’t signed up yet, I have good news. As a Katusa Research reader, registration is free by following [this link](https://cambridgehouse.com/e/vancouver-resource-investment-conference-2018-69/register). Last year there was a one hour wait for those who showed up and did not preregister. Avoid this costly mistake. Please don’t stand in line when you can be learning about the most exciting stocks of 2018. Pre-register using this [free link](https://cambridgehouse.com/e/vancouver-resource-investment-conference-2018-69/register) and your admission will be streamlined. See you this Sunday. -Marin --- # The Coming End of the Second Prohibition - URL: https://katusaresearch.com/coming-end-second-prohibition/ - Type: article - Published: 2018-01-12 - Updated: 2022-10-12 - Author: Marin Katusa **Editor’s note**: In this week’s edition of *Katusa’s Investment Insights*, our new Special Situations analyst Mike Chang and Marin look at a very interesting area of the venture capital world – marijuana. It’s a multi-billion-dollar sector enjoying huge amounts of new capital flows. Of course, what is enjoying huge capital flows also offers huge opportunity for speculators. In early 2014, a tiny Canadian company raised money from investors with a wild idea. It planned to be one of the world’s largest growers and sellers of legal marijuana. These days, “weed stocks” are hugely popular with investors. However, this company formed way before the sector became popular… and before many places in North America actually legalized weed. It was a weed stock before weed stocks were cool. My good friend and colleague, the brilliant business mind Pat DiCapo, invited me to a private meeting about the idea he had for this company. I really liked its business plan and the management seemed smart, so I became one of its early very large shareholders. I still laugh about that back then, when, my devout Catholic Italian in-laws asked me what I was working on during a family get together (you know the kind I am talking about, 40 Italians around a big table all eating insane amounts of food) and my answer was, “*Nonna, I am in the marijuana business. I am now a drug dealer, like in the movies.*” The family’s collective reaction was priceless. Their reaction was priceless. Today, this once very small, very speculative company is one of the world’s largest growers and sellers of marijuana. It’s also one of the world’s hottest stocks. This company – now called Canopy Growth Corp. – commands a huge $8 billion market valuation… and its shares have appreciated more than 14-fold in the past two years. I have to confess: Although I saw huge long-term potential in the marijuana industry, I didn’t hold my Canopy Growth shares for the whole run higher. I sold my shares after making almost a ten bagger. At the time, I wanted to direct the capital into some other very large opportunities and my wife and I were building our dream house. And, my Italian in-laws were happy that I got out of the “drug business.” Looking back I had to do what I did. I left a firm where I was at for a decade, took the Vancouver branch as my own and had to personally guarantee their salaries and the offices expenses. Not to mention I had no revenue coming in, I also had to buy out one of my partners in a fund and at the time I was personally the lead order in the Northern Dynasty private placements during the restructuring of the board in late 2015. Not to mention my wife and I were building our dream house and our second child was on the way. It all worked out well as I locked in +1,000 gains on Northern Dynasty and my office has doubled in size since then. And my Italian in-laws are happy I am no longer in the “marijuana and drug business. Lol” However, I believe the marijuana industry has tremendous growth ahead of it. Since this area is very hot with the public, I believe it will offer tremendous speculative opportunities as well. Here’s how I see things in the weed industry right now… **America’s New Cash Crop** By now, you’ve surely heard the big picture case for investing in the marijuana industry. Laws related to marijuana consumption and production are being relaxed… with some U.S. states making recreational weed use legal. Now, the once-cooped up marijuana industry is poised for huge growth… much like the alcohol industry was after Prohibition ended in 1933. This is a story that shady stock promoters, bankers, and brokers can use to get the public excited to invest in overvalued stocks and outright bad deals. However, there’s no denying that there is huge, legitimate growth ahead for weed. Here’s the breakdown of which U.S. states have legalized weed and which are in the process of it. In the dark green states, weed is legal for medical and recreational use. In the light green states, weed is legal for just medical use. In the red states, weed is prohibited or allowed for limited medical use. Like it or hate it, marijuana’s popularity is undeniable. According to a survey conducted jointly by Yahoo News and Marist University in the United States last year, 22% of adults – some 55 million people – reported the use of marijuana at least once in the past 12 months. Of that set, over 60% or people (about 35 million adults) reported using marijuana on at least a monthly basis. This puts marijuana on the same standing as tobacco as far as usage goes – the CDC estimated that there were 36.5 million cigarette smokers in the U.S. population in 2015. Marijuana users are often vilified as poisoning their minds. Compare this with tobacco, which is in contrast considered “cool” and glorified in movies. And while I wouldn’t be caught dead doing either, the argument can also be made that marijuana actually has less harmful long-term effects than nicotine does. And then there’s marijuana’s legitimate medical applications as a pain reliever. Taking that into consideration, it should make sense that 8 of the 50 states plus the District of Columbia have already fully legalized marijuana for recreational use, while another 22 permit its use for medical purposes. In the remaining states, cannabinoid products remain outright illegal in a small number, while the rest allow low-THC content medical extracts. With all that said, it should come as no surprise that the weed industry has enjoyed huge growth over the last few years. Though overshadowed by Bitcoin’s explosive performance in recent times, marijuana has generated significant investor interest, becoming a $6.6 billion dollar industry in 2016. Of this amount, 71% belonged to the medical marijuana market, though this figure has likely already greatly changed since then as four of the eight states with legalized recreational-use marijuana had not yet implemented their new regulation as of 2016. Below is a chart that shows the price performance of a custom weed stock index my team and I have created. As you can see, these stocks have soared. There are still many positive catalysts for future growth in the marijuana market. Between the numerous U.S. states that will be looking to legalize in the coming months like Vermont and New Jersey, and full legalization of marijuana coming to Canada at the federal level later this summer, there is still plenty of room for smart investors and entrepreneurs to make some green from green. Some projections call for the marijuana industry to quadruple in the next decade, and there will be lots of opportunities along the way. The challenge is finding the right vehicle… **A Market as High as Its Consumers** Much like its similarly much-hyped sibling Bitcoin, the marijuana sector has enjoyed tremendous publicity in the stock market. Valuations are through the roof, and even though the outlook for the sector on the whole is very positive, an overpriced stock is an overpriced stock. We look at the Price/Sales Ratio here since all of the marijuana companies are still pursuing aggressive growth and hence have minimal earnings. As you can see, compared to a sample peer group selected from the agricultural sector, the ratios for marijuana companies have gone out of whack. This is similar to the situation with Bitcoin and cryptocurrency companies, though I wouldn’t use the word “mania” to describe the marijuana market like I would the Bitcoin market, given that marijuana companies produce tangible products that are very much in demand. That said, patience and skepticism is called for. **Now Or Never?** The weed sector is just past the stealth phase of a bull market where the fastest triple-digit gains are made. The wall of worry, where rogue regulation and black swans could make investors think twice about the sector, is next. That said, the global weed market is valued at around $7.7 billion, with a projected increase to $22 billion by 2020. You can see in the chart below that sales steadily increased as legislation began to become a bit looser, and now that marijuana is legal in a handful of states, profits are about to skyrocket. *Source: *[*Forbes*](https://www.forbes.com/sites/katiesola/2016/04/19/legal-u-s-marijuana-market-will-grow-to-7-1-billion-in-2016-report/#48a97d427b3f) Despite it’s nearly 60% compound annual growth rate, that doesn’t mean there aren’t significant fluctuations in the market that can dramatically impact your bottom line. Remember, any investment should be considered very carefully and with marijuana stocks, it’s often best to take a long-term approach. **Where’s Marin Putting His Money?** With weed stocks soaring, it can be very tempting to buy anything at any price right now…. And hope the sector’s momentum drives up the value of your shares. However, it’s important to remember that at the end of the day, a company’s fundamentals will be what shines through after momentum capital finds another target. I don’t chase trends and price action. That’s not my style. Be careful of buying **bunk.** Yes, bunk is a marijuana term. I’ve never smoked weed. But growing up on the east side of town, you pick up the street lingo quickly. Bunk was a term for shit weed. Be careful of the bunk publicly traded marijuana companies, and guess what—most of what is listed and free trading is all **bunk.** Though there are a number of companies in the marijuana space that do have their game plan down and are executing well (such as Canopy), many of these same companies are also trading well above their intrinsic value. That’s not to say they won’t go higher, but my caution indicators are flashing. If this sector stages a meaningful correction that wrings a lot of optimism from the sector, I’ll be looking to invest in the best companies with the best management teams at the best prices. The marijuana sector is just one of many that will be under the watchful eye of the new *Special Situations* team that I’ve created as an added bonus to select issues of *Katusa’s Resource Opportunities*. We’ll be leaving no stoners unturned in our search to bring you the best deals available in the markets. I’m not diverting from resources. I’ve built my net worth by investing in the right management teams, at the right stage and at the right time in this lucrative sector. There is no rush quite like a gold rush (although Bitcoin is sure coming close). I work for my subscribers. So, if you’re interested in what we are doing with our *Special Situations* work, please drop me a line at [katusa@katusaresearch.com](mailto:katusa@katusaresearch.com) with the words “Special Situations” included in the subject line… and let me know what you think. And I promise one thing, you won’t get any bunk at Katusa Research. Regards, Marin P.S. On January 21st and 22nd, Katusa Research is co-producing the 2018** Vancouver Resource Investment Conference** with Cambridge House. This year’s event will be a who’s who of industry titans joining me on the stage, including Frank Giustra, Rick Rule, Doug Casey, Frank Holmes, Jim Rickards, Frank Curzio and Teeka Tiwari. It is a chance for novice and seasoned investors alike to join over 7,000 others in search of the best investment opportunities in the junior markets. For complimentary tickets, please [click here](https://www.eventbrite.com/e/vancouver-resource-investment-conference-2018-tickets-32595356589?aff=KR1). --- # Breaking Up the Canadian Air Cartel – A Big Win for Investors - URL: https://katusaresearch.com/breaking-canadian-air-cartel-big-win-investors/ - Type: article - Published: 2018-01-05 - Updated: 2019-05-07 - Author: Marin Katusa Canadians have a long history of being too nice. It’s even become a running joke in Hollywood and the mainstream media. Canadians are too nice, too friendly, and apologize way too much. For a long time, Canadians were too nice to what I call the “Canadian Air Cartel”… the two large airlines that dominate the Canadian air travel market. Together these two large airlines – Air Canada and WestJet – have prevented companies like Ryanair, JetBlue, Spirit, and Southwest Airlines, and other startups from offering low-cost air travel around Canada. Only in Canada do air travelers get steamrolled with exceptionally high airfares. Frequent Vancouver to Toronto travelers see prices reaching $1,000 per return ticket. In comparison, a flight from Vancouver to London, England might only cost $499 on the return. The big airlines point to fuel costs, taxes, levies and airport surcharges for higher fares. But the reality is that the big two Canadian airlines have bloated, high-cost structures. The airline industry uses a term called Cost per Available Seat Mile (CASM) to measure operating costs. For example, Air Canada has a CASM of 14.1 cents while WestJet had 12.96 cents for the first nine months of 2017. The introduction of low-cost carriers in other countries has made air travel possible for hundreds of millions of people around the world. It has given people a huge range of choices. By comparison, the CASM for Ultra-Low-Cost Carriers (ULCCs) is much lower. In Europe, Ryan Air had a CASM of 7.52 cents and WizzAir had a CASM of 7.27 cents in 2017. Despite all this, Canada is one of the only first world countries that does not have ultra-low-cost airline service. In Canada, Air Canada and WestJet together control approximately 80% of the domestic market. Together, these two giants have gouged Canadian travelers for years… and used their political clout to unfairly limit competition. Take a look at how many Ultra-Low-Cost Carriers there are in the world and how many passengers they serve (PAX), with none in Canada… *SOURCE: Canada Jetlines investor presentation* One of Canada’s two dominant airlines, WestJet, recently revealed plans to make big waves in the Canadian airline industry with its new Ultra-Low-Cost Carrier airline, Swoop, next June. But I see this ploy as another vehicle where WestJet wants to continue the status quo and maintain its duopoly. But the time for being too nice to the Canadian Air Cartel has come to an end. The Canadian people have spoken, and they want an ultra-low-cost airline just like every other major Western Country. They want discounted airfare, and they don’t mind flying from smaller airports to get it. **And if you paid attention in *Katusa’s Investment Insights*, you could’ve made almost 3x your money (around 320% profit).** Just over a year ago in this missive, I wrote about a company called Canada Jetlines (JET.V) that was set to go public. Canada Jetlines’ aim was to become Canada’s first and best low-cost airline. For full disclosure, I was an early investor in the company, and back when it was a concept, I believed the business had huge potential. In my original article from December 2016 [right here](https://katusaresearch.com/can-help-break-canadian-air-carteland-start-flying-like-first-world-citizen/), I alerted *Katusa’s Investment Insights* readers about the company and the speculation. I said … *Canada is a huge, geographically diverse country. It’s a leader in banking, resources, and manufacturing. Its citizens are among the most educated in the world.* *We deserve to have affordable air travel that will connect us to each other, enhance our national unity, and benefit our families and businesses alike. There is a clear-cut need waiting to be filled here.* Canada Jetline’s management team, led by Mark Morabito, saw a large market with a huge unmet need. They raised money from investors and began fighting the Canadian Air Cartel. After the company went public in early March, savvy investors could’ve picked up shares for under 25 cents. On Wednesday this week, those same shares traded heavy volume at around $1.05. The company hopes to be flying in the skies as early as summer 2018, serving six Canadian cities. **So What Changed?** My speculation started to come to fruition thanks in part to Katusa Research readers. Under the *Canada Transportation Act*, foreign ownership of an airline is restricted to 25% of voting equity. While the legislation—enacted in order to keep control of Canadian companies firmly in Canadian hands—is well-intentioned, it placed a serious roadblock in the path of those who must cast their fundraising net farther and wider. With help from my open letter to readers to break up the Canadian Air Cartel and allow the market to dictate flights and rates, the Canadian Federal Government relaxed one of the biggest hurdles in getting an ULCC off the ground. The government was finally fully aware of this dilemma and thankfully made a smart decision. Recently, a motion was passed by the Canadian Parliament which allowed for 49% foreign ownership of an airline. That will open up the market to vast new sources of capital while ensuring that the ultimate control of a company remains with Canadians. Two companies have already received this permission, one of which is Canada Jetlines. This near doubling of foreign share ownership is crucial for a start-up airline to raise enough money to compete against the duopoly. Having plenty of working cash and access to capital is critical for taking on two giant companies with almost the entire domestic market in their hands. **What to Expect** With ULCCs on the horizon in Canadian skies, air travelers can expect much more competitive fares. Canada Jetlines says it will launch with $10 flights for the first 1,000 tickets it sells. And it looks to sell base fares for less than the cost of running shoes (about $100). Lower operating costs mean ULCCs have a very profitable model. Being smaller outfits that run tighter ships, they’re able to keep costs under control and keep their key metric – the CASM – low. They fly to smaller airports on the outskirts of major cities, with much lower fees, have only one class of seats, and one type of aircraft. At the end of the day, they’re able to take all this and sell fares for significantly lower prices and turn higher profits than major airlines. **Katusa Readers Strike Again** Again, congratulations to all readers that scored a big win with Canada Jetlines. I saw many, many emails where Katusa Research was cc’d in your letters to government officials. It proves yet again what strong and savvy subscribers we have, who I’m very grateful to have on board. Although not a resource company, Canada Jetlines is a prime example of how being “*In the Room, In the Deal*” is very important in small-cap stocks. Because of the tremendous opportunities I see in many sectors in and outside of natural resources, I’ve recently hired a team of wizard mathematicians and created a new *Special Situations* team. This team has worked under me in the past for five years, creating proprietary data models and trading systems. They went on to work at major brokerage houses and firms, becoming millionaires very early on. Since they are the best of the best, I wanted them back in my inner circle to bring my subscribers incredible investment opportunities they wouldn’t see anywhere else. And we are adding a whole new feature to *[Katusa’s Resource Opportunities](https://katusaresearch.com/subscribe-17/)* – and you won’t want to miss out on it. *Special Situations* is where all aspects of the junior and small-cap market will be covered. Everything from blockchain, cryptocurrencies, airlines and anything in between. Don’t worry, my team is still laser-focused on finding the best and biggest potential returns in natural resources. But we are adding brilliant minds and systems to provide all the best market ideas in one spot. Regards, Marin P.S. Two days ago we released the January issue of ***Katusa’s Resource Opportunities*** with a brand-new investment recommendation. This company has a dominant global reach in the industrial metals market. We also feature a Special Situations segment that details the profitability of bitcoin mining and a breakdown of the companies involved. You don’t want to miss this month’s action-packed issue. **[Click here](https://katusaresearch.com/subscribe-17/)** to learn how to come on board as a subscriber. **Disclosures and Disclaimers** Readers are advised that the material contained above is solely for informational purposes. This article does not give or constitute investment advice or instruction. Readers are encouraged to conduct their own research and due diligence and to obtain professional investment advice. The information featured above is from sources believed to be accurate, news filings and press filings. The writers, owners and editors are not responsible for any errors and omissions. Marin Katusa, Katusa Research Inc. (“Katusa Research”), New Era Publishing Inc. (“New Era”) and/or the other principals, partners, directors and officers of Katusa Research or New Era (the “Katusa Research Team”) own securities positions in the following companies mentioned above: JET. Additionally, members of the Katusa Research Team currently intend to acquire or sell securities in the following companies mentioned above: JET. No members of the Katusa Research Team have received any commission or other compensation to feature any company mentioned in this newsletter nor are they party to any financial arrangement regarding the securities of such companies or any person who has any interest in such securities. The information contained in this publication is not intended and does not constitute individual investment advice and is not designed to meet your personal financial or investment situation or needs. Neither Marin Katusa nor Katusa Research are registered broker-dealers or financial advisors. Never make an investment based solely on what you read in an online newsletter, including this newsletter, especially if the investment involves a small, thinly-traded company that is not well known. Past performance is not indicative of future results. You should independently investigate and fully understand all risks before investing. When investing in speculative stocks, it is possible to lose your entire investment. The information contained in such publications is obtained from public sources believed to be reliable, but its accuracy cannot be guaranteed. Further, the views expressed herein are of Katusa Research as of the date hereof, are subject to change and the Katusa Research Team does not undertake any obligation to update such information or views. None of the members of the Katusa Research Team shall be liable for any damages, losses, or costs of any kind or type arising out of or in any way connected with the use of this newsletter. The information in this publication reflects the current opinion of the publisher, is subject to change, and may become outdated. The publisher undertakes no obligation to update any such information. Unauthorized Disclosure Prohibited. The information provided in this publication is private, privileged, and confidential information, licensed for your sole individual use as a subscriber. Katusa Research reserves all rights to the content of this publication and related materials. Forwarding, copying, disseminating, or distributing this report in whole or in part, including substantial quotation of any portion the publication or any release of specific investment recommendations, is strictly prohibited. Click the link to review the detailed [Terms and Conditions.](https://katusaresearch.com/terms-conditions-use/) --- # Four Big Ideas That Could Make You a Fortune in 2018… and an Exclusive VIP Invitation - URL: https://katusaresearch.com/four-big-ideas-make-fortune-2018-exclusive-vip-invitation/ - Type: article - Published: 2017-12-29 - Updated: 2019-05-07 - Author: Marin Katusa **Editor’s note**: In today’s end-of-year issue, you’ll find four big investment ideas we wrote about in 2017. But this is no bland “retrospective” list. These ideas could make you a fortune next year and the year after that. We hope you and your family have a great holiday season. **Idea #1: How to Invest in the Next Great Shale Field** Of all the ways to make money, few can match the power of owning a stake in a giant oil field, before it becomes front page news. For example, in 2009, Kodiak Oil & Gas was a virtually-unknown small-cap oil producer. But what investors didn’t know was that Kodiak was a very early player in the now-legendary Bakken Shale. As Kodiak struck rich deposits there, shares soared 8,400% before it was bought out. We know what the next great shale field will be. Nobody has done more homework on it than us. We know all the players and companies involved. We believe one company is poised to soar in value as this field is developed. Read [our full write up here](https://katusaresearch.com/open-letter-ceos-shareholders-north-american-oil-gas-companies/). **Idea #2: Gold Miners Are Running Out of Gold. Here’s Why That’s Good for You** What’s bad for large gold miners could be very good for gold stock investors for the next few years. The catch is, you must be a certain type of gold stock investor. Put simply, large gold miners are running out of gold. Rather than look for more in jungles or frozen tundra, gold miners will do the smart thing. They’ll search for gold in the stock market… and go on a buyout binge of small and mid-cap companies with proven gold reserves. Gold investors are smart to become familiar with what kind of assets the majors want to buy… along with the world’s 10 or 20 best, most attractive projects that large miners will see as critical to their survival and growth. [Learn the full story here](https://katusaresearch.com/gold-miners-running-gold-heres-thats-good/). **Idea #3: This Commodity is About to Enter a Very Large, Very Long Bull Market** We believe the widespread adoption of Electric Vehicles (EVs) will create a very long and very large bull market in copper and copper stocks. As you may know, EVs require 3 – 4 times more copper than conventional vehicles. Driven by surging demand from EVs, annual copper demand could grow at 4.5% per year for the next 25 years. While that may not sound like much, it’s nearly a tripling of demand. However, the world won’t get all the copper it wants at current prices around $3.15 per pound. The world’s largest, most important copper mines – the ones that set the global copper price – are in decline. They have been in operation for decades, and their richest parts have been tapped. To use an analogy, most of the world’s big copper mines are like former all-star ballplayers in their late 30s and early 40s. They were great in their prime, but their ability to produce is steadily decreasing. Surging demand. Limited supply. It’s a recipe for much higher prices. Since mining stocks are highly leveraged to the price of metals, their share prices could soar at least 500% from current levels. You can find all the details in our four-part essay series. Here’s [Part I](https://katusaresearch.com/biggest-change-car-industry-century/), [Part II,](https://katusaresearch.com/make-fortune-electric-vehicle-boom-without-selling-single-car/) [Part III](https://katusaresearch.com/world-needs-lot-copper-wont-get-3-per-pound/), and [Part IV](https://katusaresearch.com/copper-stocks-easily-rise-10-fold-current-levels/). **Idea #4: My 2018 Uranium Outlook: Two Major Catalysts Mean Higher Prices Ahead** Over the past few years, many people have said “*Can it get any worse?*” while discussing the deeply depressed uranium market. Conditions have been so bad that people who know it the best have given up on the sector and now love it the least. That is a good sign for a speculator. We believe those words indicate we have passed the worst in the uranium downturn. When all give up hope and only expect more pain, it’s a sign we have reached the bottom. Which gives us limited investment downside and huge upside. But as any seasoned speculator would tell you, we needed to see some particular catalysts to turn fully bullish on the sector. And just recently, we got two major catalysts that sparked an interest in uranium. [Read the full story here](https://katusaresearch.com/2018-uranium-outlook-two-major-catalysts-change-game/). **Bonus Idea:** **How to Acquire the Most Powerful, Most Valuable Commodity of All – The Exclusive Invite** In early 2016, Marin Katusa urged a huge crowd at the Vancouver Resource Investment Conference to buy shares in a small company that controlled the world’s largest undeveloped gold and copper deposit. At the time, this small company traded for around 34 cents per share. Less than a year after Marin pounded the podium on this tiny company, its stock traded for $4.40 per share… a 1,194% gain. You probably know this company’s name: Northern Dynasty. If you’ve invested in resources for some time, you know we can’t overstate the importance of getting the best information before others. Information is the most powerful, most valuable commodity in the world. Knowing the right people and getting the right information is how Marin made a 1,450% gain in Ryan Gold…. 4,160% gains in Prophecy Resources… 2,440% gains in Lithium One… and 1,852% gains in Uranium Energy Corp. And of course, it’s how he made a 1,000%+ gain in Northern Dynasty. We bring all this up because one of the ULTIMATE ways to gather the best investment information in the world – the 2018 Vancouver Resource Investment Conference – is just around the corner. It’s being held on January 21st and 22nd at the Vancouver Convention Centre West. As you may know, Marin finds this conference so valuable that he partnered with Cambridge House International to co-produce it. He personally makes sure this conference has great speakers and thinkers like Frank Holmes, Rick Rule, and Jim Rickards. Plus, many of the world’s top resource CEOs will be at the conference. And don’t think this conference is strictly resources. All major investment areas, including cryptocurrencies, marijuana, gold, oil, stocks, real estate, bonds, and currencies will be discussed and analyzed. **As a reader of Katusa Research, you can get complimentary tickets to the event if you [click here](https://cambridgehouse.com/e/vancouver-resource-investment-conference-2018-69/register).** To all subscribers, here’s to a healthy and prosperous 2018! --- # Northern Dynasty Short Sellers Just Lost a Major Battle… Let the Retreat Begin - URL: https://katusaresearch.com/northern-dynasty-short-sellers-just-lost-major-battle-let-retreat-begin/ - Type: article - Published: 2017-12-22 - Updated: 2019-05-07 - Author: Marin Katusa The world’s largest undeveloped gold and copper deposit just got a lot closer to becoming a mine. And short sellers are about to get trampled. On Monday, Northern Dynasty Minerals announced that giant mining firm First Quantum Minerals had agreed to acquire an option to buy a 50% stake in its Pebble project for $1.5 billion. The Pebble project, located in Alaska, is an asset I’m very familiar with. It is a world-class deposit in every sense of the term. I’ll never visit a bigger one in my lifetime. Over one million feet of drilling has proven over 100 million ounces of gold, over 70 billion pounds of copper, and over 500 million ounces of silver. It simply does not get bigger than Pebble. Pebble is also a controversial project. Environmentalists have fought tooth and nail against its development because of the misunderstanding of the impact of the project to the area’s salmon hatcheries. After analyzing the project’s potential upside and risks, I recommended Northern Dynasty to readers of my research service in July 2016 (Full disclosure: I am still a large shareholder as well). Just after I issued a “buy” on the company, shares soared more than 700% and traded hundreds of millions of dollars’ worth of stock. Of course, any controversial stock that soars more than 700% in months will draw its shares of detractors. In early 2017, some very vocal short selling groups shorted Northern Dynasty while issuing what I believed were very misleading and misinformed “research reports.” The short sellers ignorantly claimed Pebble wouldn’t be economic or permittable, and therefore would not attract a major miner with deep pockets to come in as a partner. Every step of the way, I publicly stated the short sellers were wrong … and I put my money where my mouth was. You see, unlike most everyone who bet against Northern Dynasty, I’ve visited the deposit and met with management many, many times. I’ve read through all the geological and environmental reports. I know the company’s founders and executives. I visited the site with legendary geologist David Lowell (read his [positive thoughts on Pebble right here](https://katusaresearch.com/one-worlds-greatest-geologists-talks-northern-dynastys-pebble-deposit/)). Like David, I believe Pebble is a world-class deposit, is economically viable, will be put into production, and will be an incredible multi-generational asset. *Photo from the August issue of Katusa’s Resource Opportunities and taken on July 24th, 2016. From left to right: Doug Casey, David Lowell, Marin Katusa and Bob Dickinson standing over top of Northern Dynasty’s Pebble deposit. * **It seems First Quantum, one of the world’s best mine builders and mining companies, agrees with me, and not the short sellers.** In First Quantum, Northern Dynasty has attracted a powerful joint venture partner who will ultimately spend $1.5 billion to earn into 50% of the Pebble Mine, and then the two are 50-50 on a moving forward cost basis. First Quantum will pay $37.5 million as the first step. Then, over the next four years, First Quantum will pay $112.5 million to fully earn into the option which gives First Quantum the right to spend another $1.35 billion to earn into 50% of the project. If First Quantum only spends a total of $1.49 billion and walks away for whatever reason, 100% of the project stays with Northern Dynasty and First Quantum gets nothing. First Quantum must advance another $1.35 billion over years five and six to earn the 50% of the Pebble project and to build the mine. The remaining cost of building the mine is based on a 50-50 basis between Northern Dynasty and First Quantum. Basically, the framework is structured such that if the Pebble Mine does not get the permit to build the mine over the next four years, First Quantum loses its $150 million and has no right to the project and Northern Dynasty will retain 100% ownership of the project. It’s very important to emphasize that First Quantum is one of the top mine building companies in the world. It’s managed by very smart people who do their homework and have built much more challenging mines than the Pebble Mine in much more difficult places than where Pebble is located. I pride myself on going the extra mile for my subscribers and doing the due diligence others won’t do or are capable of doing. That’s why immediately after seeing the press release at 5am PDT time on Monday, I asked Northern Dynasty CEO Ron Thiessen to come into my studio for the first interview after the deal was announced. The first public interview Ron Thiessen has done regarding the deal is with Katusa Research. After watching this video, you’ll have a good idea of the lengths that I’ll go to when I perform due diligence on one of my core holdings. I hope you enjoy the video we put together. If you’d like to understand more details behind the deal, then make sure to watch the whole thing. Northern Dynasty has delivered a joint venture deal that exceeded my own expectations. **This is a great deal for Northern Dynasty shareholders and the project is now significantly de-risked.** **What’s Next?** The only argument left for the short thesis is that a permit will not be issued to the Pebble Mine. The permit decision will not happen for a couple of years at the earliest and many of the shorters will be looking to cover. Looking to cover means the shorters will want to exit their short positions. To do so, they will have to buy back the shares they shorted (adding fuel to any rally). As of Monday, over 30 million shares of Northern Dynasty are held in a short position. This is around 10% of the company’s outstanding shares. It’s a large amount of “buy tickets” that will have to be filled as Northern Dynasty’s share price rises. I believe this First Quantum deal is a major step forward for the Pebble project. I believe the Trump administration will approve this project, which will create huge value for the citizens of region close to the mine, the whole of Alaska, and all of America. I believe it’s absolutely possible to develop this deposit while being mindful of the surrounding environment. Short sellers just lost a major battle. However, no mainstream media wants to talk about it because its sexier to talk about bitcoin and the latest cryptocurrency darlings. Call me long and stubborn, but ask yourself what Warren Buffett would do? Even Warren Buffett would be intrigued with the inherent deep value proposition of Northern Dynasty now that First Quantum plans on becoming a joint venture partner. It’s not just me who thinks Northern Dynasty will have a strong 2018. Major conservative mining banks such as BMO have recently come out and initiated Northern Dynasty as a market outperformer while increasing their Net Asset Value estimates by over 30% on the company post First Quantum news. I’ll enjoy watching Northern Dynasty’s shares climb higher and higher as the shorts turn tail and run. For their own sake, I hope they run towards a mining college and hit the books. Regards, Marin **P.S. You might want to read this carefully…** In early 2018, I will publish a research report that will be dwarf the potential of Northern Dynasty. I expect this to be the largest ever investment I have directly ever made into one company. And, as usual, I am the first to this story. Before the big banks. Before any other newsletter. Before any brokerage house. You will have the opportunity to be first in line in what I believe has the greatest investment potential of any deal I have ever participated in. You’ll get all the details as a member of *Katusa’s Resource Opportunities*. [Click here](https://katusaresearch.com/subscribe-17/) to learn more about becoming a member. --- # What Type of Fuel Will Really Supply the Electric Vehicle Revolution? - URL: https://katusaresearch.com/type-fuel-will-really-supply-electric-vehicle-revolution/ - Type: article - Published: 2017-12-15 - Updated: 2019-05-07 - Author: Marin Katusa Dear Katusa Research reader, I just sat down for an interview with Erik Townson of the popular podcast Macro Voices. If you’re not familiar with the podcast, Erik is a hedge fund manager that gets some very solid guests on his show, like bond expert Lacy Hunt, fund manager Hugh Hendry, author and fund manager Jim Rogers, and my friend Rick Rule. I’m proud to have my name on Erik’s roster of guests. Several friends and colleagues listened to the interview or read its transcript and really enjoyed it. Erik and I covered a variety of important topic, like oil, uranium, Vladimir Putin, and electric vehicles. You can catch the entire interview (link is below), but in this email, I’ve included a “quick hit” series of comments that my team thought were the interview’s key points. You’ll find them below. *****On the topic of electric vehicle adoption and what type of fuel will supply the electricity they’ll require:** **Marin:** The West, the developed world – America (let’s focus on that) has about, I don’t know, I think it’s around somewhere between 750 to 800 cars per every thousand people on the road. Let’s step away from talking about the West right now and let’s go to China, where they have less than 100 cars per every thousand. And let’s now go to somewhere like India. I spent a lot of time with the energy minister in India and we spent a lot of time talking about this. They have less than 20 cars per thousand on the roads. But let’s look at their infrastructure. It is very poor infrastructure as is, and the government now is realizing that they can bypass the whole combustion engine the way a lot of India, Africa, and China has bypassed wired communications. For example, they didn’t have to do the telephones the traditional way. They just adopted the cell phone, the rapid adoption of the cell phone. If you take a look at what is going on in China, they are investing hundreds of billions of dollars into exactly this. And, more importantly, they are mandating these changes. So if you want to be an SEO or fund it and loan to take debt money from the government – if you’re a car company you have to have so many focus. So now everyone’s focusing on these batteries and how they’re going to make them better. And whether it can be salts, lithium, cobalt – there’ll be problems with that because there’s just not enough cobalt to meet the demand. But who says that the winner of all this has to be a battery? I’ve written about this. What if it’s like a propane gas tank where you own the car but whichever, Tesla, or the future cars – if you go to India let’s say it’s Tata Motors, and China, any of the vehicles – and you pull up to the electric station and it’s like, just replace the battery? And it’s about as long as the time to fill up your gas, let’s say less than three or four minutes, and you’re off with a new battery that’s charged. Why do we need to figure out a grid that’s going to be a very different grid than what everyone’s applying to today? That type of scenario is going to be much easier to adopt in India, in China, in the developing parts of the world than it would be in, let’s say, downtown New York, or downtown Toronto, or LA, where you already have an infrastructure complex. Now let’s go back to what will happen in the West. To take this massive adoption, it’s going to be almost going back to the original battle between Tesla and Edison – alternating current versus direct current – and everyone knows that Tesla was proven right. But now it’s almost going to go back to that “wait a second.” For the success of the electric vehicles in many parts of the world, we’re going to go back to Edison’s strategy of the source of the power, where it gets charged up. Power stations within the city where, for example, you’re going to have driverless vehicles, things are going to be optimized so that when you park your car or get dropped off at your work, who says that it can’t go and get the batteries at some station that’s in the city? We don’t know what the exact solution is going to be, and I don’t try to pretend. I’ve written about all the different possible battery combinations that everyone’s working on. And I say it’s kind of like we’re still at the Palm Pilot. The Blackberry is just coming in. And the iPhone wasn’t even invented yet. We’re like in 2004 in the phone revolution here. Let’s give it another 10 years, and it’s going to be an adoption that’s going to be much faster on a percentage adoption in the developing world, in India and – and remember it’s going to be a different type of vehicle. In India you’re not going to have the SUV type of vehicle. When you go to New Delhi for example, all of the cars are mandated to be CNG, which is compressed natural gas. They don’t burn gasoline in the cities and they still have huge pollution issues. And over 45% of the power is coal, as you mentioned. The governments there have a lot more power to mandate change than they do in the West, because the infrastructure is completely government-dependent. So, like in Mumbai, and all of the infrastructure that is required, it’s going to be set up. India is putting over $50 billion just into their airports. And it’s a gong show. When I was down in Mumbai, there was a brand new airport, but it’s still not big enough to handle all of the chaos in India. Everyone’s tripping over one another. You go to China, same thing. This is a very real term evolution, but it’s going to happen. And that’s where the cars are moving forward. And, more importantly, if you’re a Volkswagen in the West, say, you look at what are some of the biggest costs for these vehicles. A combustion engine vehicle has over 2,000 moving parts, where an electric vehicle has less than 200. That’s a lot simpler to replace. And you look at an electric vehicle – if you compare a gas-powered engine to a diesel, a diesel is about twice as long lifespan. Electric vehicle is about three to four times what a diesel is. There’s a lot more efficiencies for someone like Volkswagen, who’s broken the law and they’re going to be fined significantly, where they can now get rid of the unions, or reduce the dependence on the unions for labor and all these different aspects. I really do believe that the electric vehicle revolution is real. The adoption rates are going to be much faster in the developing world because there’s so much more low-hanging fruit. And they can develop their infrastructure in line with the adoption of the electric vehicle, whereas they didn’t predesign it to the combustion engine. I think that makes sense. *****On the state and future of uranium and the nuclear energy market:** **Marin**: [In the U.S., nuclear is] still 18–20% percent of baseload power, post-Fukushima. The Achilles’ heel of the nuclear sector, of the uranium renaissance, is the fact that the current designs of these reactors are just too expensive. It’s too big of an upfront cost for anyone to put on their balance sheet. The price of uranium is irrelevant to the cost of nuclear electricity. It really is. By the time you permit these things – an $8 billion reactor complex ends up becoming twice as long and somewhere between $15–$18 billion. Companies like Westinghouse have gone down because of these cost overruns. Toshiba had to get government help because of these cost overruns. These are big, big cost overruns. I guess the answer to your question is I also believe the future of nuclear will have to change where the upfront costs are smaller, whether it’s pebble-bed reactors or smaller modules, I think, rather than 2,000–3,000 megawatt projects. Will we ever see a scenario where it’s a 250 megawatt nuclear reactor and the costs aren’t just one-tenth of that, they’re one-fiftieth of that? I think that’s where it will go. That’s where it will have to go. In China, it’s a bit of a different story than the cost overruns in the West. Because, again, it’s the government backing it. So, you look at a place like India that has less than 2% of their baseload power from nuclear, they want to get to where America is, at 20%. Same as China. They’re less than 5% today. They want to get to 25% and they’ve planned and financed 70 reactors to come online. So, uranium and nuclear energy, it’s not going to disappear. But, you know, you have a lot of stockpiles built up. There’s about four or five years of above-ground stockpile. For the price of uranium to get going you’re probably going to have to see 20 to 25 – to get the price of uranium to double you’ll have to see 25 reactors come online globally. And the key question here is what will the Americans do with their nuclear warheads? What the USSR – in 1992 and the collapse of the Soviet Union, they down-blended their nuclear warheads to make nuclear energy. That was an agreement signed here in Vancouver, Canada between the Americans and the Russians. Now, there’s not a chance Putin – in my book I said there’s not a chance he’s going to ever redo that type of contract because it made no sense for the Russians. At the time, under Boris Yeltsin, they were bankrupt and they needed what they could get. But, I ask you, will the Americans down-blend their nuclear warheads to create nuclear power? I say no. Secondly, the infrastructure is not in place in America. It would take about $20 billion of infrastructure to be able to create a complex to do so. But if the Americans did say, hey, let’s down-blend 10% of our nuclear warheads to create some HEU to LEU, they would have to send their nuclear reactors to Russia to get that done. I just don’t see that scenario. -Marin To listen to the entire podcast at Macro Voices – [click here.](https://macrovoices.com/331-marin-katusa-mohamed-bin-salman-is-reshaping-saudi-arabia) Or read the whole pdf transcript of Marin and Erik’s Q&A – [right here](https://katusaresearch.com/wp-content/uploads/2017/12/Marin-Katusa-Transcript-December-7.pdf). --- # My 2018 Uranium Outlook: Two Major Catalysts Change the Game - URL: https://katusaresearch.com/2018-uranium-outlook-two-major-catalysts-change-game/ - Type: article - Published: 2017-12-08 - Updated: 2020-02-19 - Author: Marin Katusa Of all the things people can say about a stock market, a country, or a commodity, few indicate huge potential profits ahead as much as the five magic words of despair. They are as follows… *“Can it get any worse?”* If you read my work for some time, you know why those words should interest you as a speculator. That’s because a great speculator never lets a crisis go to waste. A crisis is when you can sow the seeds of winning investments that climb not just 100% or 200% in value… but 1,000% or 2,000% in value. Speculating during a crisis can put your wealth creation plans on steroids (read my full educational piece on the subject [here](https://katusaresearch.com/investment-secret-might-not-want-share-friends/)). The reality is that nuclear energy has provided – and continues to provide – the world with stupendous amounts of clean, safe, emission-free electric power that is base load, meaning its reliable all the time. Coal, which is also used to generate electricity, has killed far, far more people than uranium. The average citizen also doesn’t know the vital role that nuclear power plays in the American economy. America gets 20% of its electricity from nuclear power. Nuclear power provides electricity for over 20 million homes, almost twice the number of homes as there are in California. Without nuclear power, the lights would go off for one in five American homes. Below is a chart that shows where the U.S. gets its electricity from. ![United States YTD Electricity Generation by Source] Over the past few years, many people have said those five magic words – “*Can it get any worse?*” while discussing the deeply depressed uranium market. Conditions have been so bad that people who know it the best have given up on the sector and now love it the least. That is a good sign for a speculator. I believe those words indicate we have passed the worst in the uranium downturn. When all give up all hope, and only expect more pain, it’s a sign we have reached the bottom. Which gives you – the *would be* speculator – limited investment downside and huge upside. But as any seasoned speculator would tell you, we needed to see some particular catalysts to turn fully bullish on the sector. And just recently, we got two major catalysts. In November, Cameco (the world’s largest public uranium miner) announced it was shutting down production at its massive McArthur River mine in Canada. The McArthur River mine was responsible for approximately 10% of global uranium mine production. To put this into perspective, shutting down McArthur River, which is a high-grade uranium mine in the Athabasca basin in northern Canada, would be the equivalent of shutting down all of Saudi Arabia’s or Russia’s oil production (each contributes around 10% of the global supply). McArthur River is a tier-one world-class asset that is a low-cost producer. Shutting down the mine is a bullish development for the uranium speculators. You probably know the uranium sector has been a terrible place for investors since March 11, 2011. On that day, one of the biggest earthquakes in recorded history struck the east coast of Japan. The quake and the resulting tsunami killed more than 15,000 people and caused over $200 billion in damage. In the weeks that followed, events at Japan’s Fukushima I Nuclear Power Plant dominated global headlines. The earthquake and tsunami caused structural damage to the power plant, which knocked out vital cooling systems. This caused reactor meltdowns and released radioactivity into the air. The disaster turned entire nations against nuclear power and its fuel source, uranium. Before the earthquake, uranium traded for over $70 per pound. After the quake, Japan dumped its substantial above-ground uranium supplies onto the market. This dumping, paired with reduced demand, sent uranium into a bear market that took prices below $20 per pound. ![Uranium Price, Spot Price and Long Term Price] However, as [I detailed in January](https://katusaresearch.com/prepare-profit-series-part-2-clear-path-much-greater-uranium-demand/), the world still needs a lot of nuclear energy. Nuclear energy is responsible for about 10% of global electricity production and about 20% of U.S. electricity production. If people want to keep their lights on, they need nuclear energy. Growing Asian demand and steady demand from massive current consumers (United States and France) means that global uranium demand will grow to 190 million pounds per year by 2020 and to 220 million pounds per year by 2030, a growth of 20% in 15 years. That demand will not be satisfied with spot uranium prices under $20 per pound. It costs the mining industry more than that to get it out of the ground. That’s why Cameco and other producers are shutting down production. Seasoned resource investors know one of the ultimate signs of a market bottom is when an industry’s lowest cost of production is below the current market price. When this situation occurs, either the price of the resource goes up or the producers go out of business and the world goes without the resource. In the case of energy resources, the world **always** chooses to keep the cars running and the lights on. That’s why the saying goes, “*The cure for low prices is low prices.”* In 2015 and 2016, I didn’t turn very bullish on the uranium sector because I wanted to see low prices cause major production shutdowns like the one at McArthur lake and one we’ve seen this year in Kazakhstan (the world’s largest uranium producer). I believe the McArthur shutdown is a major step forward towards restricting uranium supply and even moving towards a global supply deficit soon. The second major catalyst was the world’s largest producer of uranium, Kazatomprom, which produces 40% of the global primary uranium production, that just announced a 20% reduction of production over the next three years. Can we trust the Kazatomprom reductions? The sound answer to that is no more and no less than we can trust the oil markets given the announced OPEC cuts. Below is a chart that shows how the cuts affect the overall uranium supply. ![2018 Uranium Supply Cuts] Some market participants are of the same mind. Since Cameco’s announcement, uranium stocks have rallied strongly. However, they are still deeply depressed, very cheap, and far, far below their 2011 levels. As of this writing, uranium is trading at $25 per pound. I think it’s very realistic to expect spot prices to increase 20% to reach $30 per pound in 2018. It will take over 25 nuclear reactors (whether new and/or restarts in Japan) combined to get the spot price of uranium above $40 per pound unless a major cut in production happens in Kazakhstan. Why? There will be no shortage of uranium at $40 per pound. The Kazakhs and Cameco (60% of the global primary uranium production combined) can make decent returns at $40 per pound uranium. At the same time, the utilities don’t really care whether uranium is $20 or $40 per pound because once a reactor is up and running, the price of uranium makes up less than 3% of the operating costs. Unlike natural gas or coal which make up over 35% of the final cost. ## **Where I Put My Money in the Uranium Sector** The key factor for a utility is securing stable secure supply to keep its reactors operating. We have seen the low for uranium prices. I will continue with my prudent approach towards the uranium sector, which is only speculating inworld class assets and getting exposure to the lowest-cost producers in politically-stable jurisdictions. Regards, Marin Katusa Ps. Subscribers have enjoyed quick swing trades on a low-risk uranium producer that netted 15% and 36% gains on two separate trades. One of those trades took less than 10 days to come to fruition and we locked in our gains. To find out my two favorite uranium companies that are ripe to double with any rise in the uranium price, consider becoming a member to *Katusa’s Resource Opportunities* [right here](https://katusaresearch.com/subscribe-17/). --- # The Greatest Bubble of All Time Will Get Bigger: Prepare Yourself and Your Money for the Coming Currency Wars - URL: https://katusaresearch.com/greatest-bubble-time-will-get-bigger-prepare-money-coming-currency-wars/ - Type: article - Published: 2017-12-01 - Updated: 2019-05-07 - Author: Marin Katusa The next world war will not be fought by tanks, remote-controlled drones or even standing armies. The war has started. It is erupting on graphic cards and mobile networks around the globe. A single negative tweet will create a firestorm of attention from both sides. We are about to enter the melt-up phase of the global war on currencies. For years, people speculated that China and Russia take on the U.S. dollar. The Currency War is not one country’s central banker against another in a race for interest rate bottoms or tops. This is going to be a long, drawn-out battle of the citizens of the world using digital and modern means of exchanges (cryptocurrencies) against governments equipped with hard and fiat currencies. Who will win? That depends on who you ask. The cryptocurrency side has had a strong 2017. But don’t count out the governments just yet. They have many weapons at their disposal, such as the tax collector, in the U.S. case, the IRS. One of the most important factors in building your personal fortune is being ahead of the capital flow. You want to buy assets cheap and be situated where the capital will flow into. Right now, cryptocurrencies are becoming the most disruptive forces in the global markets. Bitcoin has long surpassed the Nasdaq index returns during the dot-com bubble and has surpassed the heights of Tulip-Mania. As you can see in the chart below, the market capitalization of Bitcoin continues to explode higher as capital pours into the sector. Bitcoin’s total value has now surpassed all but the top 30 of the largest companies in the S&P 500. As you can see below, the total value of Bitcoin is greater than GE, Goldman Sachs, IBM and General Motors. As you know, we just wrapped up the San Francisco Silver and Gold Summit. Put on by Katusa Research and Cambridge House International, it’s one of the world’s premier gatherings of resource financiers and companies. Cryptocurrencies were a hot topic at the event. Every year, I bring in the most coveted speakers in the resource space and invite a few special guests in other trending sectors. These are the people worth listening carefully to including fund managers, company CEOs, key publishers, investment bankers and many others behind the scenes. And this year’s speaker list was no exception. The “cryptocurrency vs. gold” debate was the highlight of the show. On the panel with me were… - *New York Times* bestselling author of “Currency Wars”, **Jim Rickards** - **Doug Casey**, legendary speculator and Chairman of Casey Research - **Teeka Tiwari**, cryptocurrency expert and financial editor - Chairman of Curzio Research, Frank Curzio• And CEO and founder of Einstein cryptocurrency exchange, **Michael Gokturk** It was a clear consensus that Bitcoin and other cryptocurrencies are a great way of moving large sums of money through international borders in an efficient manner. And everyone on the panel agreed that Bitcoin is going a lot higher in the short term (next 12 months). But even the biggest digital money enthusiasts agreed that the system is not even close to becoming commonplace for daily transactions. Cryptocurrency expert Teeka Tiwari explained that… *“Bitcoin doesn’t really do a very good *job for* going down to the local Starbucks and buying a $2 cup of coffee. It might cost you $10 to spend two bucks. That’s a pretty lousy proxy for a daily utility.”* No stranger to engaging in debates, currency expert Jim Rickards went full bore on the Bitcoin and digital currency assault. Granted I’ve gone to hundreds of conferences in my career and this was by far, one of the most exciting topics and debates I’ve been a moderator of. In this eye-opening debate, you’ll learn… - Where bank payment expert Einstein CEO **Michael Gokturk** is investing his money in the digital coin space. - Where technology expert **Frank Curzio** sees the price of Bitcoin going. - When **Jim Rickards** believes the U.S. Government will freeze Bitcoin accounts. - How **Teeka Tiwari** believes any hedge fund that shorts Bitcoin will be destroyed. - And much, much more… I hope you enjoy the video. Regards, Marin --- # The Most Important Quality You Must Have to Achieve Investment Success - URL: https://katusaresearch.com/important-quality-must-achieve-investment-success/ - Type: article - Published: 2017-11-24 - Updated: 2019-05-24 - Author: Marin Katusa You never see it on the front page of the *Wall Street Journal*… and it’s not covered in MBA courses… But I believe “balance” is one of the most important business and investment concepts anyone can possibly learn. In fact, I can make a good case that balance is ***the most*** important personal quality you must have to achieve long-term investment success. If you don’t have balance, you have no business running your own money… or anyone else’s. When I say “balance,” I’m not talking about the ability to stand on one foot and juggle. *I’m talking about balance of the mind*. The ability to walk the tightropes that run between opposing sides of the human brain. For example, we know humility and objectivity are characteristics of truly smart people. The man who thinks he knows everything knows nothing. However, to succeed in business and the stock market, you must have the courage to act… the courage that comes from self-confidence. If you don’t have self-confidence, it’s very hard to succeed in the market. But taken too far, healthy and productive self-confidence can become dangerous and destructive hubris. Balance is also an issue when it comes to the strategies and tactics we use. One of the surest paths to success is to do more of what’s working and less of what’s not working. Say you own a dress shop. If blue dresses are selling well and red dresses are not selling well, order more blue dresses and less red dresses. Doing more of what’s working is something that has created great wealth for centuries. Yet, taken too far, “doing more of what’s working” can easily get you stuck and make you vulnerable. It can prevent you from looking around, staying intellectually curious, growing, and taking calculated risks on new ideas. In the 1990s, the iconic photography company Kodak insisted on doing more of what’s working – selling old fashioned camera film – and dismissed digital photography. Kodak’s decision to stick with the tried and true led it straight to bankruptcy. I strive for balance in my analysis process as well. When I analyze an industry or a company, I’m fanatical about studying every detail I can get my hands on. However, I also believe mastering any subject or skill almost always comes down to understanding just three or four critical ideas. The rest is usually unimportant noise. If you spend too much time on small details, you can overthink yourself right into failure or inaction. And how about patience vs. demanding results? Patience is a great virtue. Men like super-investor Warren Buffett have shown us how patience can help us compound wealth for decades. Businesses are like children. It takes them time to grow and succeed. On the other hand, some investments flat out don’t work. Patience can turn into denial and cost you a lot of money. If you stay in a loser for too long, it costs you both financial capital and mental capital. *We must be patient and impatient at the same time.* **Humility Vs. Supreme self-confidence… Using proven formulas for success Vs. Being open to new ideas… Thorough analysis Vs. Focusing on the few, critically-important ideas… Patience Vs. Tossing dead weight overboard.** It’s tough to stay on top of these tightropes every single day. I certainly can’t manage to do it all. I’ve never met anyone that can. But I try very hard to do it. I hope you do as well. If this all sounds like I’m lying on a couch in a psychiatrist’s office, don’t worry. I haven’t lost my mind. But I have been thinking *an enormous amount* about balance over the past year. I’ve certainly had some positions that have tested my balance more so than any time in my entire career. But as you may know, my patience with one position paid off massively recently… and I believe we will see more massive payoffs soon. **Confession Time: My Biggest Test and Biggest Investment** Of the hundreds of investments I’ve made over the past 15 years, none of them have tested my balance and caused me stress like Alterra Power. As regular readers know, I’m very bullish on green energy. It’s one of the biggest investment opportunities of our lifetimes. And Alterra has been my number one way to invest in green energy for a long time. The company was one of the cornerstones of the launch of Katusa Research. However, Alterra wasn’t always my top idea. In September 2009, I moderated a green energy panel at a large investment conference. Barack Obama was in his first year, subsidies were flying to green companies, and the green companies were much like the crypto companies or marijuana stocks of today. Joining me on stage were top investment minds Rick Rule, Ross Beaty, Doug Casey, Bob Bishop, and Lukas Lundin. The panel was very bullish on geothermal energy. I was the only bear on the sector. I believed it had potential but was overpriced. I said the companies being discussed on stage were “priced to perfection.” Avoiding geothermal was the right call. Over the next 36 months, the share prices of geothermal companies such as Ram Power, Magma Energy, and many others went down as much as 80%. Many went bankrupt. In late 2014, I got very interested in Alterra Power because the company was in great shape, had very high-quality assets, and its share price had plummeted from CAD$15 on IPO day to a low of CAD$2.65 per share. You can see Alterra’s bear market in the chart below. I began buying large amounts of Alterra stock. I believed I’d make multiples on my money within three to five years. I put my neck on the line and told people Alterra was an extraordinary opportunity. In the summer of 2015, I was quoted in Canada’s largest newspaper about my largest energy position, Alterra Power, and how it was so undervalued. And then, my patience, my strategy, my ego, my confidence, my determination, and my testicular fortitude – everything I use in my investment career – were called into question. I wanted the world to see what I saw in Alterra. But it doesn’t always go like that. Two and a half years later, Alterra stock hadn’t done much. During this time, family members, business associates, and subscribers have started thinking and asking, “*Marin, did you get this one wrong buy you’re too stubborn to admit it*?” But, here is where the confidence, testicular fortitude, and psychology comes in. Whether you like my style or not, few will argue with my analytical ability. But, after you sing the same song for so long, people start questioning your skills. They say you’re the boy who cried wolf, or in this case “Alterra.” After all the frustration and questions, I started questioning myself… “Did I get this one wrong?” I checked and rechecked my numbers. I went through large Excel files cell by cell, looking for mistakes. I rebuilt my financial models over and over again. I kept coming to the same conclusion: Alterra is the world’s cheapest high-quality green power producer. I have found myself explaining my [GBOE theory (Green Barrel of Oil Equivalent)](https://katusaresearch.com/your-edge-in-the-energy-sector-how-katusas-green-barrels-of-energy-gboe-metric-works/) that I invented to executives and directors of large oil producers trying to get their firms interested in buying the best low-cost green power producers (Alterra Power). The goal would be for them to become carbon net neutral, which I believe will be the trend in the years ahead for large carbon producing oil and gas companies, such as those in the Canadian Oil sands or LNG companies. Every time Alterra shares broke out to new highs and seemed like they would prove me right, they pulled back. I kept buying on those pullbacks. And I’ll be frank with you: My position size in Alterra exceeded the normal limits I place on myself. That’s because I believed in this position so strongly. Recently, the large green power producer Innergex Renewable Energy announced it was buying Alterra for CAD$8.25, roughly a 63% premium over the share price at the time of announcement… And a 50% premium over this publication’s entry price in mid-2016. It is ironic that the November issue of *Katusa’s Resource Opportunities* was going to be about the culmination of effort in Alterra Power. I had put together a highly detailed 7-page report outlining both my psychological and investment thought process for Alterra Power. I outlined my frustration with the investment, how I believed I was right but no one else believed me, how I spent thousands of hours researching every company in the sector over the years to make sure I had the right one. I had 5 pages of peer comparisons showing how Alterra was ridiculously undervalued. And then on a Monday afternoon, my analyst interrupted my meeting in my Vancouver office to tell me Alterra was being acquired by Innergex Renewable Energy for CAD$8.25 per share. I immediately blew off the rest of my meetings to analyze the transaction and listen to the joint-company conference call and alert subscribers of my next move with the acquisition. I will continue to closely monitor the Alterra/Innergex transaction as it unfolds. Once again, congratulations to all readers who purchased stock in Alterra Power. I referenced *balance* and *patience* in this missive because it is a key skill to hone as you navigate the investment markets. The next time you’re dejected about your investments, check and re-check your numbers and your investment thesis. And stay true to your gut instincts and the reason you made the bet in the first place. Because you never know when you’ll make the next huge “overnight windfall.” And when it does, you’ll be hungry for more. Regards, Marin Ps. I just wrapped up two days at the sold-out San Francisco Gold and Silver Summit. I met with every management team and market mover on my list. If you want to learn my top 3 investment opportunities from the show poised for triple-digit gains, you’ll want to view this presentation right here. Keep in mind, this offer will close on Sunday, Nov 26th at midnight. --- # The Broad Market is Expensive… Here’s Where You Can Still Find Very Cheap Stocks - URL: https://katusaresearch.com/broad-market-expensive-heres-can-still-find-cheap-stocks/ - Type: article - Published: 2017-11-17 - Updated: 2020-02-14 - Author: Marin Katusa November. For some folks, it means time to hang up the Thanksgiving decorations. For others, it means heading south to a warm place like Florida. But for me – and every good natural resource investor I know – November means bargain season. It means Christmas comes early… and the presents can lead to hundreds of thousands – even millions – of dollars in extra profit. *That’s because November is the start of tax loss season.* Around this time – with the year’s end in view – investors and speculators start looking at their portfolios and create plans reduce their tax bills. Often, this planning means holding positions a bit longer so they qualify for lower, long-term gain tax treatments. But for a large number of people, it means deciding to sell stocks based on their tax implications… and not based on their underlying values or abilities to produce cash flows. If you’ve read my work for a while, those words should interest you. You know that most of the time, the market correctly values most assets. But not all the time. As investors, we find our edge during those rare times when buying and selling decisions are made not based on values, dividends, or cash flows, but on external factors like fund redemptions, tax considerations, or fears the world is about to end. *These periods are when **prices** decouple from **values*****.** In other words, when selling decisions are based on factors that have little to do with underlying values, we – the [alligators](https://katusaresearch.com/the-way-of-the-alligator/) lying patiently in the water – can strike and pick up assets for bargain prices. This is exactly what happens at the end of the year in the natural resource market. Investors dump stocks simply to lock in losses or gains because their upcoming tax bill is first and foremost in their minds. That’s why November through December is known as “tax loss season” in the resource market. This is also the time of the year when fund managers like to push the *reset* button by selling positions that didn’t work out for them during the year. Taken together, tax loss selling and large fund selling can produce enormous selling pressure on stocks that haven’t done well in a given year. This selling pushes stock prices lower… which can trigger stop losses and create more selling… which can create a self-reinforcing liquidation cycle that climaxes in a final “puke out.” This can be an incredible time to buy high-quality assets for dimes on the dollar. Below is a table which shows the annual returns of 15 commodities for each year going back to 2012. After looking at the table for a few seconds, one of my major takeaways is that the commodity sector has experienced massive volatility over the past five years. But as I have stated many times in the past, a wise speculator makes volatility his ally. Read my full educational piece on this subject [right here](https://katusaresearch.com/great-investor-must-treasure-one-thing-people-hate/). Volatility combined with tax loss selling attracts experienced and wise speculators to the commodity sector, and they buy the best stocks within each sector that are on “sale”. To truly take advantage of tax loss selling, you need to know what you are looking for. Do not buy a basket of stocks within a sector just because the commodity is down. Only buy the best stocks in the sector, and make sure you know how to differentiate between average and the best. Let me explain what I do… **The Katusa Tax Loss Strategy** I am going to use the coal sector as an example, but you’ll find potential tax loss selling candidates in every corner of the commodities sector. In 2015, coal and copper stocks experienced their biggest losses in decades. Shares in Teck Resources, Canada’s largest diversified miner, lost 72% of their value in 2015, and then in 2016, the share price popped 615%. This is not a junior, this is the world’s second-largest producer of metallurgical coal and Canada’s largest diversified miner. The chart below shows the share price volatility of Teck over the last seven years. Why the big pop in 2016? Metallurgical coal prices rebounded 125%, and as a major producer of coal, Teck had an incredible run from a low of $2.66 per share to a high of $25.96 per share. Yes, smaller coal stocks also rebounded, but Teck Resources is one of the world’s biggest producers. That means its stock is very liquid, which is critical to the success of this strategy. Most juniors in the resource sector are very illiquid, meaning they do not trade millions of dollars of stock per day. Very little buying can take an illiquid stock significantly higher. But the inverse is also true. Very little selling can slaughter its share price. But, if you are looking for a tax loss victim, why not buy one that is very liquid so you will be able to sell very quickly without hurting the share price? Teck is a perfect candidate for this example. Not only did the stock perform as well or better than any other junior coal stock, its liquidity was 10-100 times greater than the juniors. Remember, tax loss selling happens in all corners of the market, juniors, mid-tiers and the big producers. So, if you are buying for a specific reason, make sure you plan on how you will sell your shares in advance of your buying. Not only do you need a buying strategy in advance, but you also need a selling strategy in advance of your buying. It won’t always work out as you plan, but it helps. Going back to the Teck example… If you wanted to participate in the selloff in coal and play the rebound in metallurgical coal prices if you bought a junior thinking it was cheap (which it probably was), the illiquidity of the junior most likely reduced the exit price you would have received. Whereas owning a liquid stock, you would have sold your shares without putting any pressure on the stock. Here’s how to build your own tax loss season fire sale watch list. 1. Identify the complete list of exploration, development and production stories within the sector. 2. Meticulously comb through financial and production data for every company to identify your targets and the market liquidity of each stock. 3. Meet and discuss the company’s 2018 outlook with the management team. Are there positive catalysts on the horizon to drive the share price higher? 4. Execute your ideas during tax loss. Does this sound like a lot of work? It should, because it is. You can spend thousands of hours of your time, or you can piggyback on my hard work. Not to sound cocky, but ask anyone who knows me well in the sector and ask them if I am one of the hardest workers and sharpest in the sector. I have already calculated my own propriety metrics and ratios to identify the best tax loss candidates at the exploration, development, and production stages. I have a shopping list of companies with very high-quality assets that have not done well in 2017 for various reasons. They are prime targets for tax loss selling and selling from impatient shareholders. I’m looking for the market values of these companies to become decoupled from my estimate of their intrinsic values… the values knowledgeable industry players would happily pay for the companies. On Dec 6th, 2017 I will publish my Tax Loss Hit List in *Katusa’s Resource Opportunities*. Or, you can spend a thousand hours doing homework and compete against me. I know who I am betting on. Regards, Marin --- # Why Copper Stocks Could Easily Rise 10-Fold From Current Levels - URL: https://katusaresearch.com/copper-stocks-easily-rise-10-fold-current-levels/ - Type: article - Published: 2017-11-16 - Updated: 2020-02-14 - Author: Marin Katusa In [yesterday’s essay](https://katusaresearch.com/world-needs-lot-copper-wont-get-3-per-pound/), I stated that I believe copper prices will remain elevated for a very long time. Below, I explain why this could be a huge wealth creation event for you… Like all natural resources, copper goes through huge booms and busts. That’s why we say resources are “cyclical.” If you get in early before the booms and avoid the busts, you can make a lot of money in natural resources. As you can see from the chart below, copper experienced a huge bust during the 2008 financial crisis. Investors were terrified, the next depression was around the corner… which would mean a lot less copper consumption. But as we know, there was no depression. Central banks stepped in and created enormous amounts of credit…so much that asset prices soared off their 2009 bottoms. Copper was no exception. Because they are leveraged plays on the copper price, copper miners soared. Some copper miners, such as Copper Mountain, Taseko Resources, First Quantum, and Hudbay Minerals increased in value by over 1,000% in the years following the crisis. From 2011 to 2016, however, it was all downhill for the copper market. Global economic growth has been sluggish… and copper plummeted from $4.50 per pound to $2 per pound, a decline of more than 50%. You can see this bear market in the long-term chart below: Given the big decline in prices from 2011 to 2015, you might think copper producers would have curtailed production. That’s not the case. As you can see in this chart of global copper production, miners have increased production. But those same producers will soon hit a wall, as I will explain shortly. The producers did whatever they could to keep their operations alive, including “high grading” their mines. High grading occurs when a miner extracts the highest-grade ore in a mine in response to low prices. It’s a near-term solution with a negative long-term effect on the ore body. Nothing is worse in mining than high grading your deposit during a period of low commodity prices. This is because when the market turns around and prices are higher, you are left with a high strip ratio and low-grade ore. Basically, you’re left with the warm beer at the bottom of the bottle. This means that mines which have high graded their productions will get smacked in the face with higher production costs. These factors are additional reasons the copper industry won’t be able to supply the world with the copper it will demand with prices under $4 per pound. **Summing Up the Supply/Demand Situation** Katusa Research believes the EV boom will create a very strong demand “tailwind” for copper. Again, we believe annual copper demand growth could be 4.5% for the next 25 years. For reference, the world’s largest copper mine, Escondida, produces 2.18 billion pounds annually. ***We need to add the equivalent of Escondida’s annual production every 2 to 3 years.*** Even if we assume zero growth in global copper demand, the world will run out of copper in 22 years by only mining the known reserves of all the mines in production today. Yes, that math is correct. I double-checked it myself. It’s clear just on that basis alone, new mines will have to come into production to replace the depleted mines. But thanks to ore grades falling at major mines and a lack of large new discoveries, the copper industry cannot meet that demand with copper at $3 per pound. The price must increase to at least $4 – and probably to $5 to spur new production. Get ready for a long, strong bull market in copper and copper stocks. In tomorrow’s essay, I’ll tell you why this means that if you act very soon, you could enjoy the very rare, life-changing investment anomaly that I call the “triple play.” Regards, Marin Katusa --- # The World Needs a Lot of Copper, but It Won’t Get It for $3 Per Pound - URL: https://katusaresearch.com/world-needs-lot-copper-wont-get-3-per-pound/ - Type: article - Published: 2017-11-15 - Updated: 2019-08-26 - Author: Marin Katusa In yesterday’s essay, I stated that I expect Electric Vehicles to be the driving force behind global copper demand increasing at 4.5% per year for the next 25 years. **While this might not seem like much, it’s actually enormous demand growth for a mature market. It translates into a nearly three-fold increase in global demand over the next 25 years.** If we believe annual copper demand is set to soar over the next 25 years, the next question we have to ask is, “Can the copper mining industry supply that much?” The answer is “Yes, but not with copper at $3 per pound.” We’ll get into the data below, but in preview, the world’s largest, most important copper mines – the ones that set the global copper price – **are in decline.** They have been in operation for decades, and their richest parts have been tapped. To use an analogy, most of the world’s big copper mines are like former all-star ballplayers in their late 30s and early 40s. They were great in their prime, but their ability to produce is steadily decreasing. Existing mines still have plenty of copper ore, but it is less plentiful and it’s of lower quality (lower grade). In other words, it will cost more to mine each pound of copper mined in the future. There are also some large undeveloped copper deposits in the world that can and will be put into production, but the shovels won’t start digging unless copper is substantially higher than current levels. Surging demand. Limited supply. It’s a recipe for higher prices. Here are the details. **Ore Grades Are Declining** Currently, 178 producing copper mines supply 83% of the world’s copper. The remaining 17% of mined copper comes from secondary production where the main metal produced is not copper. More than half of this mine production – 68% – occurs in mining-friendly or relatively mining-friendly countries. I often call these countries “non AK-47 countries.” In these places, you normally don’t see random people walking around cities with AK-47 machine guns. I count the U.S., Canada, Australia, all of Europe, Chile, Peru, and Brazil in this group. About 32% of copper mine production occurs in AK-47 countries. These are places where it isn’t uncommon to see people walking around with AK-47s. The countries are known for not having great respect for contracts and property rights (and often human rights). They are not the kinds of places I’d take my family for a vacation. In my book, copper-producing AK-47 parts of the world are Russia, Congo, Iran, Mongolia, Saudi Arabia, and Kazakhstan. One of the best measures of a mine’s quality and potential profitability is a metric called “ore grade.” It measures how much metal a miner gets for every tonne of rock and dirt it digs up. The lower a mine’s grade, the more digging, and processing its operator must do to produce copper. This results in higher costs. The chart below shows the average annual reserve grade of the world’s global copper producers. This group is made up of large miners you’ve likely heard of. Companies like BHP Billiton, Freeport-McMoRan, Antofagasta and First Quantum. As you can see, the average grade has declined 60% over the last 14 years. It’s an irreversible trend. **Increasing Production Costs** Declining grades are pushing production costs higher and higher. Below is a chart that shows the cash costs of production for the same group of global copper producers. **A Lack of Big Discoveries** In addition to falling grades and rising costs, the copper industry simply isn’t finding as many large new deposits as it used to. Mankind has been digging into the earth in search of copper for thousands of years. We’ve found most of the really good stuff. Over the last 10 years, over $300 billion dollars has been invested globally in the exploration, development, and production of copper. And only a handful of new mines have been put into production. The chart below shows how large copper discoveries have declined over the past 25 years. **Governments and Poor Infrastructure Constrict Supply Growth** In addition to the challenges above, the copper industry faces huge challenges from governments and poor infrastructure. These two factors often work hand in glove to increase production costs and slow down or stop new projects. Operating a big open pit copper mine requires enormous amounts of electricity. It powers electric shovels and trucks. It powers the mills that crush the rock. It powers lights. Depending on the operation, electricity can be anywhere from 15-30% of the cost per pound of copper produced. During the downturn of the last few years, electrical grids in many parts of the world that have advanced promising copper deposits (that should be soon in production) have not increased electrical capacity that can meet the demand from the copper mines. A general rule of thumb is for 100 million pounds of open-pit copper, a mine needs 65 MW of electrical capacity (an enormous amount of electricity). This is enough electricity to power 65,000 homes. As the project gets bigger, the ratio improves by 15% for every additional 100 million pounds. Many of the expected large copper projects that the market expects will come online shortly in Africa cannot tap into the existing electricity grid because there is simply no excess electrical capacity. As a result, the potential copper mine will have to make up for the lack of electricity from the grid with their own, higher-cost sources of electricity, whether by installing diesel generators or by building their own power plants. In other words, the price of copper under $4 per pound doesn’t justify the infrastructure capex. Also, expect certain countries in the third world to use access to the existing electrical grid as additional leverage for a piece of the profits at higher copper prices. For example, in 2017, large copper producer First Quantum Metals was told by the Zambian government that the amount of electricity supplied to its copper operations would be reduced. The Zambian government used electricity as leverage for a bigger piece of the project’s profits. But at the end of the day, this will result in a higher cost of production, because the company will either have to pay higher prices for electricity or install supplemental power sources at a much higher cost. Another example of a government making life difficult for miners is the Freeport McMoRan/Indonesia story. Freeport is one of the world’s largest, most powerful miners. Its Grasberg operation in Indonesia is one of the world’s most productive mines. In 2017, Freeport was forced by the Indonesian government to reduce its stake in the operation from 91% to 49%. This was a huge setback for one of the world’s biggest miners. Freeport invested $12 billion into Grasberg to own 91% of it. Now it only owns 49%. To make things worse, Indonesia stated that if Freeport doesn’t invest another $10 billion within 10 years, it will lose its remaining 49% interest. You can argue all you want about what is right and wrong when it comes to governments appropriating assets, but the result is still the same. When governments seize assets, it drives up costs. **Where Recycling Comes In** Copper is recyclable. Generally, it is not burned up like oil or natural gas. When analyzing the copper market, you must always factor in recycling. I believe recycling will meet some of copper’s future demand, but even at $4.50 per pound, recycling met less than 20% of the demand. Recycling copper is a high-cost solution. Also, there are new restrictions on recycling copper in China that will increase the cost of recycling. There will be no flood of recycled copper to halt a sustained rise from the current price around $3 per pound to over $4 per pound. **What the Copper Market Will Look Like in the Future** Historically, global copper production has increased at an average rate of 3.42% per year. To model what the supply/demand situation will look like in the future, I have run the numbers using annual demand growth of just 3.75% and annual supply growth of 3.5% (a little higher than its long-term average rate of growth). The chart below shows those projections out to 2040. You can see that production will barely keep up with demand until 2030, and then fall behind. Again, the chart above was produced using conservative numbers. I believe in that conservative scenario, copper will reach $5 per pound over the next decade. But it’s the next scenario that could make copper the world’s hottest commodity over the next decade. As I mentioned earlier, I believe global demand growth could average 4.5% per year over the next 25 years. If this happens, copper will be treated as a precious metal. There just is not enough copper in the world that can be economically mined under $5 per pound to meet global demand. The major takeaway is that the tight copper market is going to become very tight over the next 60 months, after which copper demand growth will significantly outpace available production. I believe this will result in an incredible bull market for copper. Just how big and profitable could this bull market be? I’ll tell you in tomorrow’s essay. Regards, Marin --- # How to Make a Fortune in the Electric Vehicle Boom Without Selling a Single Car - URL: https://katusaresearch.com/make-fortune-electric-vehicle-boom-without-selling-single-car/ - Type: article - Published: 2017-11-14 - Updated: 2019-05-07 - Author: Marin Katusa In yesterday’s essay, I stated that copper is a metal all Electric Vehicle makers must consume in huge quantities in the future. Below, I explain why… Copper is a vital element used in nearly everything around you. It’s used for plumbing in houses and factories. Since copper is also a wonderful conductor of electricity, it is used in power lines, electric motors, wiring, cars, and appliances. This aspect – copper’s excellent electrical conductivity – makes it a critical part of the EV revolution. **Electric vehicles require three times more copper than conventional international combustion engine vehicles.** On average, a car with an internal combustion engine uses 55 pounds of copper. A hybrid uses about 110 pounds, and an EV uses 165 pounds of copper. Some basic math shows that the coming electric car boom will create a super boom in copper demand. In 2016, the world consumed 50 billion pounds of copper. Keep this number – 50 billion – in mind. We’ll come back to it later. In 2016, 158,614 EVs were sold in the U.S. EVs made up 1.6% of the total U.S. car market. It is expected that by 2021, EVs will make up 4% of total U.S. vehicle sales. The consensus from independent analysts, including the brain trust at Bloomberg, is that by 2030, the adoption of EVs in the U.S. will be 34%. What does that mean for copper demand? First, we have to make some assumptions to calculate the net effect on copper demand. Let’s assume a conservative adoption rate by 2030 is just 20%, not the accepted 34%. An EV adoption rate of 20% means there would be 3.6 million EVs sold in the U.S. in 2030. Let’s assume EV technology becomes much more efficient and the amount of copper needed per car decreases from 165 pounds to 100 pounds by 2030. Using these assumptions, we find that the U.S. automobile sector alone will conservatively consume 1.1 billion pounds of copper in 2030. The EV sector will consume 360 million pounds of that total (33%). That is a lot of copper. Using my conservative metric, new EVs alone will increase U.S. annual copper consumption by just under 9%. Now let’s look at China. China is the world’s largest vehicle market. In 2016, 282,000 EVs were sold in China, 77% more than the number sold in the U.S. This is where the numbers get mind-boggling. In 2016, 28 million vehicles were sold in China. EVs were just 1% of the Chinese market. The Chinese government is planning for 4% EV adoption by 2021, which would mean 1.12 million EVs will be sold in China in less than five years. Again, using our conservative estimate of 100 pounds of copper per EV, in 2021 China’s EV market will consume 112 million pounds of copper, on top of the 1.35 billion the rest of the Chinese vehicle market will consume. The Chinese government plans on mandating specific quotas of EVs its automakers must follow. China has stated it wants 7 million EVs (or 20% of its 35 million vehicle market) sold by 2025. This is very aggressive; a more conservative number would be 7 million by 2030. That means the total consumption of copper in the Chinese vehicle market will be 2.1 billion pounds, of which 700 million pounds will be just EVs. With EVs in the U.S. consuming an additional 360 million pounds of copper over current demand and EVs in China consuming an additional 700 million pounds of copper over current demand, we get 1.06 billion pounds per year in extra demand. In a 50-billion-pound annual market, that’s a 2.1% increase in demand. While 2.1% may not sound like a lot, let’s put it into perspective. An annual demand increase of 1.06 billion pounds is more copper than Rio Tinto produced in 2016. Rio Tinto is the 9th largest copper producer in the world. To put it another way, there are only four copper mines in the world that annually produce more than 1.06 billion pounds of copper. I think you get the picture with just the U.S. and China. The rest of the world will follow. Several pages ago, we showed you our EV sales forecast through 2025. You’ll recall that we project incredible growth from today to 2025. Looking further into the future, some are even more bullish on EV growth. The chart below published by Bloomberg New Energy Finance shows that by 2040, the global EV market could get to over 60 million vehicles sold that year alone. I underestimated the use of copper in EVs on purpose. The fact is, scientifically speaking, for the EVs to become even more efficient, they would use more copper per vehicle, not less. That’s an interesting topic for another day, but it comes down to efficiency. I also haven’t mentioned the amount of “plug in” infrastructure that will be required to meet EV demand. All those EVs need special charging stations. China is heavily investing in new electricity grids; the U.S., under President Trump, plans major infrastructure projects that will all create new demand for copper. And green energy uses multiple times the amount of copper per unit of energy compared to that of coal and natural gas. Another major new source of demand for copper will be the smart home. Smart homes use over twice as much copper as traditional homes. Installing solar roofs and all the other features that include the electrification of a smart home will double the use of copper in a house. I expect EVs will be the driving force behind global copper demand increasing at 4.5% per year for the next 25 years.** While this might not seem like much, it’s actually enormous demand growth for a mature market. It translates into a nearly three-fold increase in global demand over the next 25 years.** **The World Needs a Lot of Copper, but It Won’t Get It for $3 Per Pound** If we believe annual copper demand is set to double over the next 25 years, the next question we have to ask is, “Can the copper mining industry supply that much?” The answer is “Yes, but not with copper at $3 per pound.” In tomorrow’s essay, I’ll explain why. Regards, Marin --- # The Biggest Change to the Car Industry in a Century - URL: https://katusaresearch.com/biggest-change-car-industry-century/ - Type: article - Published: 2017-11-13 - Updated: 2019-05-07 - Author: Marin Katusa **Editor’s note**: As mentioned in yesterday’s note, below is the first in our “prepare to profit” series that covers what Marin Katusa believes will be one of the biggest, longest commodity bull markets in history. In December 2016, General Motors began selling one of the most important cars in its 108-year history, the Chevy Bolt. In addition to being significant for the iconic American automaker, the introduction of the Bolt was a landmark event in the history of electric cars. The Bolt was the world’s first low-priced, mass-market car with a range of more than 200 miles. For a long time, electric carmakers have seen this feature – the ability to run 200 miles before requiring a recharge – as critical to the “revolution”: the widespread adoption of clean, emission-free electric cars. A driving range greater than 200 miles is critical because of something called “range anxiety.” Range anxiety is the fear drivers get from knowing the battery in their electric car could run out of charge… and leave them stranded far away from a charging station. As electric vehicles have grown in popularity over the past decade, the term has become an obsession in the auto industry. In fact, you could say the race among electric carmakers like GM, Tesla, and Nissan is the race to become the world champion of overcoming range anxiety. A big breakthrough in treating this “disorder” would be worth hundreds of billions of dollars. It would set the winner up to dominate the future of cars. Although electric cars have come a long way over the past decade, they are still light years behind internal combustion engines when it comes to fueling infrastructure. Batteries drain quickly and they must be recharged. Most gasoline-powered cars enjoy ranges of over 300 miles, while for years, affordable electric cars had limited ranges of less than 100 miles. (Tesla’s famous Model 3 has a range greater than 200 miles, but it’s also out of the average buyer’s price range.) A limited number of miles per battery charge is a big deal because regular gas stations are much, much more common in most places than charging stations. In most areas, the guy leaving his driveway in an electric car has a lot less options for refueling than the guy driving a Chevy Suburban. You might want to do your part to save the Earth, but if doing that means constantly worrying about getting stranded with a low battery, you’ll probably choose the gas guzzler. This aspect of owning electric cars is the biggest obstacle to their widespread adoption. Most folks choose not to deal with “range anxiety,” so electric cars command only a tiny percentage of the U.S. auto market. However, some of the world’s smartest people are working on overcoming this obstacle. They have access to billions of dollars in capital to further research and development. After all, they know that a big breakthrough in EV technology will put them in a position to dominate the future of the car industry… while enjoying all the power and profit that will come with that position. While many companies are battling to become the king of electric vehicles, the face of the EV revolution is the brilliant innovator Elon Musk. Musk has achieved fame and fortune through a career of disrupting established industries. He disrupted payment processing with his company Pay Pal. He has disrupted commercial space travel with his company Space X. He has disrupted the car industry with Tesla’s electric cars. Now, Musk and his fellow electric automakers are set to disrupt the copper industry. With the Bolt, GM won an early battle over Musk. But this war – which will go down as one of history’s greatest business wars – is far from over. **Electric Vehicles: On the Cusp of a Super Boom** In addition to earning a spot in automotive history, the Chevy Bolt is getting great press. It was named the 2017 Motor Trend Car of the Year. The popular car reviewer said, “The groundbreaking Chevrolet Bolt EV is the car of tomorrow. Today.” Another electric car to win a recent Motor Trend Car of the Year award is the Tesla Model S. Motor Trend said the Model S was a “truly remarkable automobile.” Because of favorable press and climate change concerns, sales of electric cars are starting to boom… and they’ll continue to boom in the future. Just 10 years ago, there were virtually no electric cars on the road. In 2017, an estimated 1 million new electric vehicles will be sold. This science experiment is now the real deal, and it is changing the car consumer mindset. Below is a chart that shows the enormous increase in global EV sales since 2010. A driving factor in building affordable electric vehicles is a decrease in the cost of car batteries. Since 2008, the cost of an electric car battery has declined by 80%. Below is a chart that shows this dramatic decline: The International Energy Agency has set a target of 12.9 million electric vehicles on the road in major markets by 2020 and 100 million by 2040. According to Bloomberg’s New Energy Finance group, by 2025, over 5 million electric vehicles will be sold each year. This is a giant 887% increase over 2016’s level. Below is a chart that shows the Katusa Research electric vehicle annual sales forecast. The seismic shift from gasoline-powered cars to electric vehicles is a generational change. Despite GM’s early win with the Bolt, Elon Musk and Tesla remain the poster children of EVs. In fact, Tesla is now comparable by market capitalization to GM and Ford… while selling a fraction of the number of cars of GM or Ford. **The Safe, Sure Route to EV Profits** Over the coming years, many people will make bets on who will win the great EV race. Will it be Elon Musk and Tesla? Will it be GM? BMW? Audi? Nissan? Toyota? Will it be an upstart we haven’t heard of yet? Picking technology winners is a very tough game. It’s a constantly changing landscape. Technological innovation is accelerating at an incredible pace. Today’s dominant force is tomorrow’s loser. I know Electric Vehicles are on the cusp of a super boom… and therefore a huge investment opportunity. But instead of trying to pick which car companies satisfy the tastes of the fickle public, I’d rather take the smarter, surer route for profiting during this boom… **I’m going to sell every EV maker copper, *a metal they must consume in huge quantities for decades in the future.*** Demand for this critical EV ingredient is set to boom. Regards, Marin P.S. In tomorrow’s essay, I’ll explain why copper is the single best bet on the coming super boom in Electric Vehicles. More to come… --- # The Untold Story of the Clintons, Uranium, and Corruption - URL: https://katusaresearch.com/untold-story-clintons-uranium-corruption/ - Type: article - Published: 2017-11-03 - Updated: 2019-05-07 - Author: Marin Katusa In early 2015, I received a telephone call from Pulitzer Prize-winning journalist Jo Becker. She was working on a front-page article for the *New York Times*. Jo was researching the uranium market and the Clinton family. Specifically, she was looking into how one Russian-controlled company came to own some U.S.-based uranium mines… and what role, if any, Bill and Hillary Clinton had played in the story. I spent over an hour walking Jo through the uranium market. I explained how the U.S. got 20% of its electricity at the time from uranium-fueled nuclear power, yet produced less than 10% of its annual needs domestically. It made up its vast supply shortfall mostly by importing uranium from Russia or Russian-influenced countries. This made the U.S. energy supply vulnerable to the dangerous geopolitical chess master Vladimir Putin. Becker’s article blew the lid off a scandal that has plagued the Clintons for years now. The mainstream media’s general story goes like this: Uranium is a strategic resource the U.S. should safeguard at all costs. Yet, in 2010, the Russian company in question, Rosatom, was able to purchase and control strategic U.S. uranium mines (through a company called Uranium One). Bill and Hillary Clinton helped Rosatom’s backers pull off the deal because they made massive donations to the Clinton Foundation. The press called it “pay to play.” The idea that Bill and Hillary Clinton sold out America’s strategic interests harmed Hillary Clinton’s 2016 presidential campaign. I’m sure the Clintons hoped that the damage stopped right there. Yet over the past few weeks, the story has been given new life. In today’s rabid U.S. political climate, Clinton enemies want to see corruption charges filed. Yet again, the Clinton/Uranium deal has become a huge front-page story. It’s all over the big talk shows. And that’s why once again, I have reporters from big-name media companies calling and emailing me to talk about uranium and the Clintons. I have quite a bit of experience with reporters. While there are some very good journalists out there (Jo Becker being one of them), I’ve never been satisfied with their efforts to accurately quote me or explain the full stories as I see them. Many other folks I know who have given interviews feel the same. So, rather than talk to a reporter who will filter it through their own mind and write their own version of how I see things, I’m going to personally share with you the “inside story” as I see it. Here are some big things the mainstream media has wrong about Clintons, uranium, and corruption. **One: The uranium project the Russians acquired – Willow Creek – isn’t anything special. ** It’s not a critical part of the U.S. uranium supply. It’s absolutely not key to U.S. “strategic interests.” In 2016, Willow Creek produced 100,000 pounds of uranium. This represented just 3.64%% of total U.S. production of 2.7 million pounds. Willow Creek currently has 16.9 million pounds of uranium reserves and resources. This is just 1.14% of total U.S. uranium reserves and resources. At current uranium prices, Willow Creek isn’t even economical. The uranium price is down 55% since the Uranium One deal. In fact, since the deal was done for Willow Creek, the Russians have cut production at the mine by over 50%. In 2011, Willow Creek produced 214,000 pounds of uranium. The Russians ramped production to over 900,000 pounds in 2013, only to cut back production every year for the next three years. The massive price decline makes Willow Creek a losing investment. The Russians would love to sell the project and focus on their bigger, better assets. However, by selling now in the currently depressed uranium market, they’d take a huge loss. My hunch is that the Russians are holding the asset in hopes the uranium market will get stronger. Then, they will sell it. I’m not making a political statement by pointing out this fact. It’s just something anyone with any knowledge about the uranium market knows. Nobody sold out a key part of the U.S. uranium supply to the Russians at a discount. They just sold a small, unimportant, relatively high-cost uranium mine at a huge premium to its current value. **Two: The real reason the Russians bought Uranium One was for its exceptional assets in Kazakhstan.** Most citizens only know the central Asian nation of Kazakhstan by the hit 2006 movie Borat. The title character is a caricature of a Kazakh television reporter. What most people don’t know is that Kazakhstan has become a huge player in one of the world’s most important energy markets. In 2016, the world got 40% of its uranium from Kazakhstan. Put another way, Kazakhstan is four times more important to the global nuclear market than Saudi Arabia is to the global oil market. Kazakhstan is more important to the uranium sector than the world’s five largest oil producers (Russia, Saudi Arabia, U.S., China, and Canada) are to the oil sector combined. Twenty years ago, Kazakhstan produced virtually no uranium. Fast forward to today and it’s now the world’s largest producer. It’s one of the fastest ascents to the top of a resource market’s food chain in modern history. Kazakhstan took the uranium heavyweight title of the world thanks to a production method called “in situ recovery,” or ISR, which by the way was invented and perfect in the 1960’s in the U.S. All of Kazakhstan’s uranium production comes from ISR. It’s the cheapest way to produce uranium. This is because ISR involves no blasting, digging, hauling, or crushing of rock. It involves no conventional open pit mine or underground mines. ISR pumps the equivalent of soda water into porous rock that hosts elevated uranium concentrates. The water becomes “impregnated” with uranium and is then pumped out of the rock. An ISR operation is more like a water processing facility than a mine. Kazakhstan has the lowest uranium production costs in the world. **That is why Rosatom purchased Uranium One**, not to get control of a small, relatively-high cost mine in the U.S. I love a good conspiracy theory. Some theories actually turn out to be true. However, any claim that the Russians bought Willow Creek in a sneaky attempt to control the U.S. power supply is just nuts. Russia’s decision to buy Uranium One was simply a matter of money. It was a matter of owning some of the world’s best uranium assets. **Three: Russia didn’t need to buy Willow Creek to get the U.S. over a barrel. It already had that.** To most people, Russian President Vladimir Putin is a movie-quality villain. He’s a former KGB officer. He meddles in presidential elections. People that speak out against him tend to disappear. That’s why most Americans would be astonished and angry to learn how U.S political leaders have put America in a vulnerable situation… and dependent on Russian uranium to keep its lights on. Remember, as I noted, the U.S. generates 20% of its electricity from nuclear power. It consumes about 50 million pounds of uranium each year. Yet, it gets less than 7% of its supply from domestic U.S. uranium mine production. The U.S. gets almost twice as much uranium from strategic Department of Energy stockpiles as its gets from total U.S. uranium mine production. It also gets a little uranium from Canada and a little from Australia. But the U.S. gets the bulk of its uranium (more than 50%) from unfriendly Russia and former USSR states that are heavily influenced by Russia. This puts the U.S. in a dangerous situation. Over the past decade, Russia and the United States have gotten into a variety of low-level disagreements. If a disagreement were to escalate, Vladimir Putin could easily “play the uranium card” and cut off Russian uranium supplies to the United States. Putin could also exert influence over Kazakhstan and block uranium shipments to the U.S. This would cause an American power crisis. The U.S. cannot rely on big producers like Canada and Australia for uranium imports. Neither country can supply enough uranium to fulfill American demand. More importantly, both Canada and Australia have signed long-term agreements with India and China. This means there is even less uranium available for U.S. imports. Also, raw, physical uranium is of no use to nuclear power producers. It must be refined or “enriched” to a specific grade to be of use. This refinement process is extremely expensive, extremely difficult, and extremely time-consuming. In the uranium market, enrichment capacity is even more important than raw, physical uranium supply. **Russia controls over 50% of the world’s uranium enrichment capacity**. The enrichment facilities in the U.S. and in countries friendly to the U.S. *are running virtually flat out*. A trillion pounds of uranium could magically appear in the U.S., and couldn’t be used to produce power because the U.S. doesn’t possess or have access to the needed enrichment capacity. *Building this capacity would take more than 10 years and tens of billions of dollars**.* The U.S. cannot simply “flip a switch” and get its electricity from other power sources like dirty coal, solar, wind, or natural gas. It does not have the infrastructure to do so. Building it would take a decade. **The U.S. has painted itself into a corner. It must have nuclear energy or the lights will go out.** This mishandling of America’s energy supply has given Russian President Vladimir Putin an incredible amount of leverage over America. Just imagine if the U.S. depended on Russia for more than 50% of its crude oil needs. People would be protesting in Washington D.C.  The U.S. has just one possible path forward in the short term if it wants to keep the lights on for the equivalent of two Californias. It will have to pay tens of billions of dollars to secure enriched uranium from Russian-controlled sources… at prices much higher than the current spot price or long-term price. As for the long-term, the U.S. must encourage a massive expansion in domestic mine supply and enrichment capacity. This includes “fast-tracking” the permitting process for new mines and enrichment facilities. Over the past ten years, the U.S. made amazing advancements in domestic oil production by encouraging shale oil projects. It needs to do the same with uranium. It’s literally in the interest of U.S. national security to take these steps. (If you happen to know anyone with any say in the U.S. government, please forward them this piece.) Again, American citizens would be protesting in the streets if they were heavily dependent on Russian-controlled oil to power their cars. They should be equally concerned about being so dependent on Russian-controlled uranium for much of their electricity needs. There is a perfect setup here for a well-funded, intelligent U.S. uranium management team to consolidate the broken U.S. uranium sector. The nuclear sector, including the uranium exploration, development, and production segment of the sector has been crushed. But the fact is, nuclear power is here to stay. The U.S. will continue to demand 50 million pounds of uranium for decades to come. More importantly, there will be a U.S. uranium first agenda playing out in the sector. Meaning that there will be political and economic support to create jobs in the U.S. uranium sector. Three decades ago, over 25,000 direct jobs were in the uranium sector in the U.S. Today, there are less than 500. Not even the coal sector, which has seen its market share of electricity generation drop by 50% in the U.S over the last decade, has seen such a large percentage drop in employment. If you are a value-focused contrarian investor and you have the testicular fortitude and patience to make an “unpopular” trade that has the potential to make incredible gains in the future, you should look into the uranium sector. I can’t speak to what the Clintons did or did not do in the Uranium One deal. We all know politics is a dirty business. I don’t have a political dog in the fight. But to me, the real scandal is how over the past years, U.S. government officials allowed themselves to be played like a fiddle by Vladimir Putin. They’ve handed him more control over the U.S. power supply than he ever should have had. They tossed him a free trump card. It’s just a matter of time before he plays it. Regards, Marin PS. A small, elite group of Katusa readers just made a 63% capital gain OVERNIGHT. Two more huge potential wins are shaping up right now. Don’t miss out on tomorrow’s next huge resource score. Learn how to get in [right here](https://katusaresearch.com/subscribe-17/). --- # Bitcoin Vs. Gold? Why You’re Probably Wrong About This Battle - URL: https://katusaresearch.com/bitcoin-vs-gold-youre-probably-wrong-battle/ - Type: article - Published: 2017-10-27 - Updated: 2019-05-07 - Author: Marin Katusa It’s been said that if you want to have an enjoyable dinner party, don’t talk about politics or religion. Conversations about these topics are almost sure to get heated and irrational. They often turn calm, well-mannered people into raving lunatics. I believe we should add another item to the banned topic list… Bitcoin vs. Gold In all my years in the market, I’ve seen few subjects get people riled up like Bitcoin vs. gold does. Some people hate Bitcoin and love gold. Some people love Bitcoin and hate gold. If you want to stir up a storm at an investment conference or on social media, just pick one, say it’s great, and then say the other is stupid. Then sit back and watch the insults and attacks pile up. But what if zealots on both sides are being stupid? What if everybody is looking at Bitcoin vs. Gold the wrong way? I’m about to suggest that is exactly the case. Regular Katusa Research readers are familiar with the allure of owning gold and its long history as money. People have used gold for thousands of years because it is portable, durable, anonymous, divisible, convenient, and consistent around the world. And most importantly to many people, governments cannot debase gold as they debase paper currencies. To fans of cryptocurrencies like Bitcoin, those are familiar words. They own cryptos for many of the same reasons. They love the idea of owning money that isn’t controlled by a government. Because of the similarities between Bitcoin and gold, you’d think their fans would see eye to eye. But that’s not the case at all. Maybe it should be. **How Smart People Think About the World** One of the hallmarks of a truly bright person is the ability to objectively think about two totally opposing sides of an argument. For example, a great investor who believes strongly that an investment will do well can also objectively think about its risks. A great business leader is able to objectively analyze the pros and cons of two different business plans. With this fact of life in mind, here’s an idea that can offend both Bitcoin zealots and gold zealots, but might make a lot of sense to you… ***Why not own both cryptocurrencies AND gold? *** You can bet on both horses… so why not do it? Most people want their investment gurus to be dead certain of things. People want certainty in their lives. They love to follow someone who seems to know exactly where they are going. They want to hear “buy this” and “sell that!” And most of the time, people surrender to their own internal confirmation bias, which leads them to the crystal ball guru they *want* to hear from. That behavior reminds me of this comic… The truth is, nobody really knows what is going to happen in the market next week or next year. They don’t know if stocks will boom or bust. Of course, we can analyze industries… balance sheets… and valuations… and make smart bets based on our estimates of probabilities, but in the end, nobody knows for sure what is going to happen in the world. Nobody knows for sure if a Bitcoin will be worth $1 million or $1 in five years. Nobody knows if an ounce of gold will be worth $8,000 or $800 in five years. Anyone who claims they know for sure is full of it. That’s why, if you’re worried about the stability of the global monetary system – or simply want to own assets that aren’t correlated to stocks and bonds – it can make a lot of sense to own some gold and some cryptocurrencies. Again, you can bet on both horses. There are no rules that say you have to make all or nothing bets with your investments. In fact, most people should never make all or nothing bets with their investments. They are far better off staying diversified among stocks, bonds, real estate, gold, and other assets. When people ask me if they should buy Bitcoin or other cryptocurrencies, I tell them to go for it… but only if they truly understand them… and only if they truly understand intelligent position sizing. I think you’re crazy to own Bitcoin if you don’t understand it. I think you’re crazy to own gold if you don’t understand it. I think you’re crazy if you make any investment without knowing that the key to intelligent position sizing is to not bet the farm on a single trade or investment. (Read our educational piece on this critical subject [right here](https://katusaresearch.com/biggest-key-safely-speculating-natural-resource-stocks/). It could save you a fortune) And when you don’t bet the farm on single ideas, you have capital available to put into different asset classes… like Bitcoin AND gold. You don’t have to get into name calling arguments on the Internet. You don’t have to freak out when someone says gold is better than Bitcoin or vice versa. You can own two different assets that could both do well if central banks fail to create monetary stability. As for my own portfolio? I own some physical gold as wealth insurance. I own real estate. I own some conventional businesses, both publicly traded and privately traded. I have allocated some speculative capital to a cryptocurrency and blockchain fund that’s done very well and I’ve also invested in a private start-up company called Einstein Exchange. I continue to look at profitable ways to invest in the cryptocurrency megatrend. However, I’m not betting the farm on any of those things. I diversify. Just as importantly, I don’t get emotionally attached to gold… or stocks… or Bitcoin. I believe people who get emotionally attached to gold or Bitcoin or any other investment are making a huge mistake. Getting emotional about your investments is sure to cloud your judgement. Save the emotional attachment for your kids. They will love you back. Your investments won’t. ***If you want to make great decisions about gold, Bitcoin, and all your other investments, you need the best information. About one month from now, you can get that information at the San Francisco Gold & Silver Summit, which Katusa Research is co-producing with our partners at Cambridge House International. The show has a long history of success, as it has been running for many decades. This year, it is being held at The Hilton Union Square in San Francisco, California on November 20-21, 2017. Actually, “gold and silver summit” is a misnomer. This annual conference started out with a focus on precious metals, but it’s grown massively beyond that subject… and become one of the few conferences I make a point to attend. This year’s speaker lineup is exceptional. Bestselling author Jim Rickards will be there. Jim is an expert on gold, geopolitics, central banking, currencies, and many other things. He’ll provide an insider’s take on what’s happening in Washington D.C… and how it will affect your investments. My friend Rick Rule will be speaking as well. Rick is one of the natural resource industry’s smartest minds and one of its most skilled financiers. Rick is a walking encyclopedia of resource and business knowledge. He’ll discuss in detail the sectors he sees the greatest opportunities in. My friend Frank Holmes will be there. Frank is the CEO and Chief Investment Officer of U.S. Global Investors. Frank has had a rockstar-like last 12 months. He is the Chairman of one of the biggest business success stories of 2017, HIVE Blockchain Technologies (TSX: HIVE). HIVE’s status as a pure play on cryptocurrency mining has propelled its stock from 75 cents to $3.50 in less than a month, for a gain of 376%. (Frank is one of the rare guys who can do what I described earlier… think very intelligently about gold and Bitcoin.) Frank also created the world’s the first airline ETF, symbol JETS, and one of the best gold stock ETFs, symbol GOAU. Frank is one of the most connected people in the markets, and someone you will want to pay attention to very closely. He’ll share his best investment ideas. I’m also happy to say my good friend and conference favorite Doug Casey will be there. Doug is a legendary speculator and thinker. He’ll share his top ideas at the conference. Doug’s presentations are part history class, part comedy show, part investment analysis, and always entertaining. I’ll be speaking at the conference as well… along with some of the world’s best business executives and newsletter writers. During panel discussions, I’ll ask investors and executives the hard questions… with a focus on getting the most useful, most actionable information for myself and the audience. I’ll also moderate the debate on Bitcoin vs. gold. *** One of my goals in founding Katusa Research is to level the playing field in the natural resource sector… to provide individual investors with the insight, resources, and tools they need to compete with large funds and connected players. Today, I want to provide you with another resource. Because you are a Katusa Research reader, I have arranged for VIP entry into the conference for you. Tickets to the conference are normally up to $80, but by entering the promo code **KRCLUB17**, you will get tickets for free. If you’re interested in attending, you can register [right here.](http://cambridgehouse.com/e/silver-and-gold-summit-2017-66) Make no mistake, this conference is about making money. The speakers were chosen with that goal in mind. Which company will be the next 10 bagger like Northern Dynasty, or be taken out by a gold major in a 47% overnight win like what happened to Integra Gold. Attending the conference will be a tremendous way to arm yourself with the knowledge and connections you need to make the biggest possible returns. Chances are high that you will hear about the next crop of 10-baggers over the next 12 months at this conference. I hope to see you there. Regards, Marin Katusa --- # Possibly the Most Important Thing About Gold You’ll Read All Year - URL: https://katusaresearch.com/man-gold-royalty-blood-receals-whats-store-1300-gold/ - Type: article - Published: 2017-10-20 - Updated: 2019-05-07 - Author: Marin Katusa Dear Katusa Research reader, A Swiss newspaper just published one of the most important things on gold you’ll read all year. It’s an interview with Pierre Lassonde, one of the smartest guys in mining. One of the smartest guys in the world. Pierre is the billionaire founder of top mining royalty firm Franco-Nevada. In an industry with plenty of pretenders and shady salesmen, Pierre stands very tall. He’s a brilliant deal maker, he has an incredible long-term track record, and he’s an all-around good guy. When Pierre talks about making money in natural resources, I listen. I hope you do too. (You can read my story about having dinner with him [right here](https://katusaresearch.com/dinner-billionaire-wine-connoisseur/)) Recently, the Swiss newspaper Finanz and Wirtschaft (translated to Finance and Economy) interviewed Pierre to get his take on gold and gold mining. I thought it was an excellent interview. Below, you‘ll find what I believe are the biggest, most useful ideas he shared, along with some comments from yours truly. I hope you find this “one two” punch combination from Pierre and myself useful. **Q: So where do you think gold will go from here?** **Pierre Lassonde**: My view has been between $1250 to $1350 per ounce for this year and then slightly ramping up next year to around $1300 to $1400. But for gold to get into the next real bull market we need signs of inflation. So far we haven’t seen them. The Federal Reserve and other central banks have piled up huge reserves. But there is no inflation because the money is sitting within the banks and they are not lending it. Therefore, you don’t get a multiplier effect. But what happened recently in the US – the one-two punch with respect to the hurricanes »Irma» and »Harvey» – is going to require an enormous amount of reconstruction. This could finally move the needle on inflation. Also, Europe is doing much better. So at some point I suspect we are going to see inflation start to pick up a little bit. **Marin comment**: I couldn’t agree more. I believe gold has great potential to rise from current levels, but it won’t budge until the extraordinary central bank stimulus of the past 10 years produces meaningful inflation. Until inflation shows up across the economy, I believe gold doesn’t break $1,400. That could take several years. Gold bugs don’t like to hear that, but it really could take that long. One of my favorite ways to track inflation through **Q: What does this mean for the mining industry?** **Pierre Lassonde**: First of all, at a gold price of $1300 the industry by and large is doing well. I tell my peers: If you are not making money at $1300 you should not be in this business. So it’s a good price and you should be making good money. But the industry has had to shrink a lot. When the gold price dropped to $1000 at the end of 2015 everybody in the business was too fat. So the industry laid people off, consolidated, shrunk and many junior companies have been wiped out. **Marin Katusa comment**: I agree again. If you own shares of a gold company that can’t make money at $1,300 gold, sell it. It has poor assets or poor management or both. I actually prefer to see a company making money at $1,100 gold before considering it as an investment. **Q: What are the consequences of [the industry shrinking]?** **Pierre Lassonde**: Production is declining and this is going to put an enormous amount of pressure on prices down the road. If you look back to the 70s, 80s and 90s, in every of those decades the industry found at least one 50+ million ounce gold deposit, at least ten 30+ million ounce deposits and countless 5 to 10 million ounce deposits. But if you look at the last 15 years, we found no 50 million ounce deposit, no 30 million ounce deposit and only very few 15 million ounce deposits. So where are those great big deposits we found in the past? How are they going to be replaced? We don’t know. We do not have those ore bodies in sight. **Q: Why aren’t there any large discoveries anymore? ****Pierre Lassonde**: What the industry has not done anywhere near enough is to put money back into exploration. They have not put anywhere near enough money into research and development, particularly for new technologies with respect to exploration and processing. The way our industry works is it takes around seven years for a new mine to ramp up and then come to production. So it doesn’t really matter what the gold price will do in the next few years: Production is coming off and that means the upward pressure on the gold price could be very intense. **Marin comment**: This is a big, big idea all gold investors should be following. Back in July, I wrote an entire research piece on this topic ([read it here](https://katusaresearch.com/gold-miners-running-gold-heres-thats-good/)). To summarize the piece, gold discoveries have plunged over the past 10 years…. the reserves at major gold mining companies have plunged to 2004 levels… and gold industry capex has plunged. This means that even if the price of gold were to rise to $2,000 next week, the gold industry couldn’t quickly ramp up production to capitalize on the high price. It would take at least five years to get production going. The supply constraints also mean large gold companies must replenish their reserves by buying small and mid-tier gold producers with proven low-cost ounces in the ground. Get to those companies before the majors do, and you could make a fortune during the coming takeout wave. **Q: How does that impact the funding of mining?** ** ****Pierre Lassonde**: The thing with this industry is that you have to have an incredible amount of patience and you have to have money. And right now, it’s hard to get money. The risk appetite of investors has been gone for many, many years. If you are not one of the chosen few you can’t get money. You sit on the sideline and wait. In the past, more than half of the new discoveries have been made by junior companies. But they haven’t had any money now for like 10 years. So how are you going to find anything if you don’t fund the junior companies? **Marin comment:** When sentiment is rosy towards a sector, public companies have the advantage over you, the investor. They can sell stocks and bonds at very advantageous terms for themselves. But when sentiment towards a sector is terrible and it is starved for capital, that gives you, the investor, a great advantage. He who has cash when others do not dictates the terms and rules the market. He buys for pennies on the dollar. This is a key part of the Katusa [crisis investing approach](https://katusaresearch.com/investment-secret-might-not-want-share-friends/)and [our trademark alligator approach](https://katusaresearch.com/the-way-of-the-alligator/). *** If you’d like more information and insight on the gold industry’s declining reserves, make sure to check out our analysis of the situation. It’s one of our most popular pieces of 2017. [Click here](https://katusaresearch.com/gold-miners-running-gold-heres-thats-good/) to read it. Regards, Marin --- # Donald Trump Wants an IQ Test. A Big One is Coming Up - URL: https://katusaresearch.com/donald-trump-wants-iq-test-big-one-coming/ - Type: article - Published: 2017-10-13 - Updated: 2019-05-07 - Author: Marin Katusa ***Rex Tillerson, the ex-CEO of ExxonMobil and the now U.S. Secretary of State, has reportedly called Donald Trump a “moron” behind closed doors. In response, Trump has suggested they take an IQ test and see who is smarter. In the next four months, Donald Trump will get what he asked for. He will take one of the biggest economic IQ tests of his young presidential career. Will he fail or succeed? The outcome has major implications for solar power in the United States. In preview, I hope Trump passes this IQ test. I hope he doesn’t cater to a small group of weak, uncompetitive U.S. solar panel manufacturers and slap tariffs and trade restrictions on foreign solar panels sold in the U.S. Over the past 10 years, solar energy use has boomed in the United States. A big driver of this boom is the plummeting cost of solar panels, most of which come from foreign manufacturers. However, a small group of uncompetitive U.S. manufacturers are lobbying the Trump administration very hard to get tariffs and trade restrictions place on the imports. They just might get what they want. And that most definitely would be bad for U.S. jobs and the use of solar energy. Two companies, Suniva and SolarWorld Americas are leading the trade protection charge. Suniva is bankrupt. SolarWorld Americas’ parent company is bankrupt as well. The two firms have brought a case to the U.S. International Trade Commission, asking the Trump administration to make foreign solar panels more expensive to buy in the U.S. The tariffs could double the price of imported cells. The largest U.S. solar panel manufacturer, First Solar, just came out publicly in support of the proposed legislation. Of course. Trump has to rule on the proposed tariffs by January at the latest. ***Slapping on these tariffs will create a few more U.S. solar panel manufacturing jobs, but they will hurt the much larger job market in installing solar panels. That’s because higher panel costs will make solar energy less attractive to residential and commercial buyers. Higher panel prices mean higher solar power rates. Profit margins for solar installers are already razor thin. These companies will pass along the cost increases to the consumer. This means the consumer is on the hook. It means more money going to bills and less to discretionary income. It would be essentially a transfer of wealth from regular Americans to the pockets of U.S. solar executives. It’s completely ridiculous to think the U.S. will side with some small crappy solar companies that went bankrupt because they couldn’t compete on the world stage. Ironically, the big winner of this debate is neither the US solar manufacturers nor consumers. The big winners are coal powered plants. This tariff makes solar less competitive, which effectively makes coal more competitive. It would be a complete 180-degree turn in US energy policy. Donald Trump: I hope you pass this IQ test and don’t pass foolish solar legislation that enriches the uncompetitive few at the expense of the many… and at the expense of progress. **This is What a Great Oil Well Looks Like** ***On Friday, October 6, 2017, Kelt Exploration, a $1.1 billion Canadian oil and gas producer, drilled a great well right beside Blackbird Energy’s land position in Western Canada’s Montney Shale. Regular readers know I’m a huge fan of Montney investment and that I believe Blackbird Energy [is the cheapest high-quality junior oil company in North America](https://katusaresearch.com/open-letter-ceos-shareholders-north-american-oil-gas-companies/). The well Kelt drilled produced 1,567 boe per day and 84% liquids. More impressive was that 71% of the production was oil or condensates. This well has a 100% payback of less than 12 months at current market prices and has a total cost of just under $5.7 million. Kelt will be drilling three more in the region adjacent to Blackbird’s land by the end of the year. Blackbird’s 6-33 well, which is just a few sections to the right of Kelt’s well (map is below) in the red circle will be reworked by the end of the year. Below is Kelt Exploration well circled in red. Kelt Exploration’s land is light green and Blackbird’s is yellow. You can see that just to the right of Kelt’s land are two yellow blocks (sections), which Blackbird owns. Kelt’s success is important to Blackbird for two main reasons. The successful well that Kelt drilled (that I circled in red above) is very close to the yellow blocks (each block is a section of land) which Blackbird owns. This successful well will help delineate further land adjacent which will benefit the re-reserve report Blackbird will have to do next year. ***Secondly, in addition to the successful Kelt well just drilled, we will learn the results of three more wells in the area by Kelt and one by Blackbird by year end that will help increase confidence in the area, not including the other wells being drilled by other operators within the region. If successful (and if the four wells coming by year-end are anything like the first well by Kelt, they will be), these results will most likely lead to further increases in the delineation of the resource valuation of the land. Why? Sproule Associates Limited (“Sproule”) are the engineers that Kelt Exploration’s used for their third-party independent Reserve Report. Blackbird uses McDaniel & Associates. Both firms use very similar techniques to evaluate their clients’ land holdings. But what both firms will agree upon is more drilling will help to delineate more land with a higher a confidence. I believe the successful well Kelt just announced will be the first of many for this specific region of the Pipestone Montney and I expect positive results from Blackbird in the coming months, which should increase the share price of Blackbird. Pareto Securities, a large European institution just published a very bullish report on Blackbird with a target price of CAD$1.10 per share. This is the first major European institutional report published on Blackbird that we are aware of. **Conclusion:** Kelt’s news is very bullish for Blackbird. Hold your shares, as I think we are going on one hell of a ride over the next 90 days with Blackbird stock. Regards, Marin --- # This Single Idea is Worth At Least $100,000 - URL: https://katusaresearch.com/single-idea-worth-least-100000/ - Type: article - Published: 2017-10-06 - Updated: 2019-05-07 - Author: Marin Katusa When an object begins falling from high up in the sky, it accelerates downward – falling faster and faster and faster – until a fascinating thing happens. As the object falls, it collides with air molecules. These tiny collisions exert upward force on the object. This is called “air resistance.” The faster an object falls, the greater the impact of the collisions with air molecules, and the greater the air resistance. Eventually, the air resistance becomes so great that it balances out the force of Earth’s gravitational pull, and the object can fall no faster. This maximum speed is called “terminal velocity.” Although stock and commodity prices aren’t physical objects, during a bear market, it can seem like they’re falling at terminal velocity. **Your position in the market has a huge influence on how it feels to you**. If your position is an owner instead of an observer, it can feel much faster. As crisis-hunting [alligator investors](https://katusaresearch.com/the-way-of-the-alligator/) lying in ambush along the world’s financial river, we like to see asset prices falling at terminal velocity. When an asset plummets in value or suffers a bear market, it immediately goes on our watch list. As I often state, markets are rational most of the time. They price most assets correctly most of the time. But when emotion levels go off the charts – like they do in a crash or a bear market – emotion overwhelms reason. During a crash, terrified investors sell assets with no regard for their underlying values or ability to produce cash flow. During a crash, the price of assets becomes “decoupled” from the value of assets. If you can keep a level head while others are losing theirs, you can buy at fire-sale prices. For example, during the 2008-2009 financial crisis, the share price of Canada’s largest diversified miner, Teck Resources, plummeted from over $50 per share to under $4. It then soared back to $50 per share and beyond within 18 months (a gain of more than 1,100%). Or look at what happened to Copper Mountain Mining. It’s one of the largest copper producers in Canada (I have been on its board for over a decade). The company had a successful IPO in May 2007, but fell from over $2 a share to below $0.40 per share during the financial crisis. By 2011, the crisis was over, and the stock climbed over $7 per share. I personally made over 1,800% on that move. I’m very excited about Copper Mountain’s future. Long-time readers know “crisis hunting” is one of the pillars of our market approach. We run towards crisis and against panicking crowds. It’s a lonely job, but the rewards for doing so are simply incredible. There’s a good reason legendary billionaire investor Warren Buffett says one of the secrets of investing success is to “*be greedy when others are fearful*.” There’s a good reason a quote attributed to the legendary financier Nathaniel Rothschild is “*buy when there is blood in the streets*.” **The Lesson of the Falling Safe** Markets in freefall are often called “falling knives” or “falling safes.” In other words, trying to catch them can be extremely dangerous. For example, below is a chart of crude oil prices from early 2007 through late 2008. See that sharp decline on the right-hand side? That’s a market in freefall. It’s a falling safe. A market in that state is nearly impossible to “time” successfully. It’s nearly impossible to buy at the bottom. But that doesn’t stop many people from trying to do so. Many people see a decline like this and think, “It’s due for a big rebound… so I’m buying.” Some people get a thrill from trying to pick the exact bottom of a market in freefall. They go for the glory and start buying… and often suffer huge losses as the market keeps falling. Here’s what many people fail to realize: A massive decline like the 2008 oil crash introduces a lot of emotion in the marketplace. It catches most people off-guard. It produces big swings in their account values (usually to the downside). They begin to panic. The very high levels of emotion create markets that wildly move up and down with very little concern for fundamentals. During these times, it doesn’t matter if an asset is overvalued or undervalued. People go crazy. Trying to time market movements – trying to catch a falling safe – can be very risky. There’s a much lower-risk way to play markets in crisis. Knowing how to do it will give you a huge edge over others. It can be summed up simply as: *Don’t try to catch a falling safe; wait for it to hit the sidewalk, then walk over and pick up the money.* The legendary trader and market analyst Marty Zweig (who once owned one of New York City’s most expensive penthouses) is one of history’s biggest advocates of this strategy. Zweig said trying to buy an asset in freefall is like trying to catch a falling safe. You’re likely to get crushed by it. It’s a much better idea to wait for the safe to hit bottom and for its contents to explode onto the sidewalk. Look at the 2008 crude oil market again. Instead of trying to catch the falling safe by going long when the chart looked like this… … the smart speculator waits for the safe to hit the ground. He waits for the chart to look like this… Look at the price action during late 2008. People who bought oil at $70 in October 2008 got a 50% “discount” from July’s high of $140. They also lost half their money as the safe kept falling. It eventually hit the ground at $35 in December. The safest, best time to buy oil and oil stocks came in early/mid-2009. The falling safe had hit the sidewalk. After hitting a low of $35 a barrel in December, oil rebounded into the upper $40 range. The oil bears countered this rally and tried to drive prices back down to the low several times. Each time, oil refused to decline. Oil “tested” its bottom. There was no one left to sell. It was much safer to buy oil and oil stocks in early-to-mid 2009 than it was in 2008. People who waited for the safe to hit the ground made huge returns as oil went on to rally into the $70s and $80s in 2009. They waited for the high levels of emotion (and risk) to get wrung out of the market. This strategy of not buying markets in freefall – and instead, waiting for the falling safe to hit the ground – will put you miles ahead of your fellow investors. It will allow you to consistently make huge returns in the stock and commodity markets. Keeping our “alligator” approach in mind is crucial right now because I believe we could yet see a crisis in gold companies with development-stage assets. The sector is starting to experience serious stress and serious selling pressure. **Development-Stage Gold Assets Are Getting Very Cheap** If you follow the gold market at all, you know gold stocks performed horribly from 2011 to 2016. It was a bear market that crushed retail and institutional investors alike. Most gold company shareholders felt like they spent years riding on falling safes. I believe this bear market has made mid-tier gold companies with development-stage projects very cheap. “Development-stage” gold companies have proven assets in the ground and are in the process of building mines. They aren’t drill hole plays and they aren’t yet producing gold. In addition to suffering from the overall bear market, the gold ETF rebalancing we wrote about [here](https://katusaresearch.com/junior-gold-stock-etf-poised-create-fire-sale-opportunity-gold-stocks/), gold development firms have performed poorly because of investor fatigue. Over the last decade, a large majority of the development stage companies have disappointed their investors with cost overruns, production delays, production problems (higher cost of production and lower production levels), and too much debt. Their business performance has been pathetic. A critical step in getting a gold project into production is something called a Bankable Feasibility Study (BFS). A BFS should be a comprehensive study of a project’s potential economics. It takes into account aspects like geology, metallurgy, infrastructure, and environmental impact. Bankable Feasibility Studies are required for miners to get financing from banks. In many cases, the Bankable Feasibility Studies (BFS) gold developers touted over the past decade turned out to be nothing more than Bankable-Fiction Stories used to finance the projects that ultimately disappointed shareholders and destroyed shareholder value. To track this sector, I’ve built a custom stock index, the Katusa Gold Developer Index. It is made up of 15 publicly-listed companies that have completed a BFS on their gold projects and are currently working towards gold production. As you can see from the chart below, this “falling safe” slammed the pavement in late 2016… but has traded in a sideway range since then. I believe this situation has created some large potential opportunities. Let me explain. The management teams who have survived the gold bear market have not forgotten which engineering firms, engineers, and geologists produced the bad Bankable Feasibility Studies. Engineering firms are hired as independent third-party consultants. The engineering firm’s professionals (the geologists, engineers, etc) sign off on the studies. In theory, they should not be “managed or controlled” by the companies that hire them. Also, in every BFS, the individuals who have signed off must publish their professional credentials. Before I jump into the details of a BFS, I first investigate the track record and credentials of the geologists and engineers who signed off on the BFS. I look at their last dozen studies. I won’t get into specific names, but there are individuals who have signed off on multiple studies that were absolute disasters. Why bother giving that individual or firm another chance? Not with my money. Gold development companies have paid very close attention to these failures as well. Because there are so few mines currently being built, the management teams for the first time in many years can select the best engineering firms using the best geologists and engineers available at reasonable prices, because we are not in a gold bull market. The engineering firms need work and are pitching their best professionals to potential clients. But the market hasn’t figured this out yet. We have. Another drawback for the development-stage companies is their lack of news flow. There are no sexy drill hole results or near-term catalysts other than completing construction, which in most cases is at least 12 months away. The combination of previous disappointments from the sector, investor fatigue, lack of news flow, and selling by large gold ETFs has created a sector that is fundamentally cheap and trading at valuations much lower than exploration companies with no 43-101 resource reports, BFS or funding to build mines. So why should you care? The larger companies are taking note and paying attention. Consolidation in the mid-tier gold sector is going to happen. The odds of an exploration target ever becoming a mine is lower than 1 in 3,000. Ironically, many of the near-term gold producers are trading today at market capitalizations lower than many exploration companies with nothing more than “potential” and a lot of risk. In some cases, the exploration companies are trading in the $200 million to $1 billion valuation without a single drill hole result! And with consolidation comes takeouts at premium prices. Once a few takeouts happen, the other gold developers will start trading higher because the market will realize what the new trend in the gold space is, and you will make a fortune. Why take on the 1 to 3,000 odds, when the companies that have already defeated those odds are trading at valuations lower than their high-risk peers? This is a unique opportunity I’m personally betting big on. The gold development sector It is the absolute best place in the gold sector for value investors to place their bets. All the above will happen whether gold prices go higher or not. I believe gold prices are going higher, and that will greatly benefit the gold developers in getting even higher takeout prices. Safes have been raining in the gold sector. But they’ve hit bottom and are now very cheap. It’s one of the biggest resource opportunities of the next 24 months. Regards, Marin --- # Is Bitcoin Killing Gold? - URL: https://katusaresearch.com/bitcoin-killing-gold/ - Type: article - Published: 2017-09-29 - Updated: 2019-05-07 - Author: Marin Katusa On January 1st of this year, the price of one Bitcoin was $997. By August, Bitcoin had more than quadrupled in value to reach over $4,000. Another popular cryptocurrency, Ethereum, has made Bitcoin’s big gain appear relatively small. Ethereum’s year-to-date performance has reached over 37-fold at times. Many other cryptos have gained at least 100% this year… and made people huge sums of money. With cryptocurrencies generating huge gains and attracting a large, rabid following, it’s time to ask… *Are cryptocurrencies killing gold?* We’ve been asked this question many times from both subscribers and gold industry insiders. Regular Katusa Research readers are familiar with the allure of owning gold and its long history as money. People have used gold for thousands of years because it is portable, durable, anonymous, divisible, convenient, and consistent around the world. And most importantly to many people, gold cannot be debased by governments like paper money can be. To fans of cryptocurrencies, those are familiar words. They own cryptos for many of the same reasons. They love the idea of owning money that isn’t controlled by a government. But is there enough of these people now – and will there be enough of these people in the future – to deal a serious blow to gold demand? Will Bitcoin supplant gold in the hearts and minds of those who value privacy, sound money, and liberty? Let’s start answering that question by seeing what’s happening now. First off, let’s look at how much total dollar value has been traded in gold compared to the cryptocurrency sector. Below is a chart which shows the last 30 days total value traded in U.S. dollars, the big gold ETF (symbol, GLD), the combined cryptocurrency market, and the total gold futures market. We can infer a few things from this chart. First off, the gold futures market is primarily traded by large gold companies, professional traders, and institutional money managers. The group traded over $1.3 trillion worth of gold over the past 30 days. This means that the largest funds and traders still favor gold over cryptocurrencies. But that makes sense because mandates at most major funds don’t allow them to buy cryptos. This will start to change. Many funds that aren’t buying and selling cryptos will do so in the future. The average retail investor doesn’t have access to or the capital for the gold futures market. This guy will often buy the gold ETF to gain exposure to gold. However, a good portion of those potential gold ETF buyers are buying cryptocurrencies now. The cryptocurrency market has traded **over 350% more** on a total dollars traded basis than the largest gold ETF, GLD. The cryptocurrencies trade 24 hours a day, 7 days a week. Money never sleeps in the crypto world. Their exchanges are never closed. The gold futures market trades 24 hours a day for 5.5 days a week. The gold ETF has the fewest trading hours. The market for the ETF is only open 6.5 hours a day, 5 days a week. Or, take another indicator of interest, Google searches. Below is a chart that shows a comparison of how much people are searching the Bitcoin price versus the gold price in the past 12 months. Bitcoin is gaining steam at a rapid pace… [![bitcoin price vs gold price]](https://katusaresearch.com/wp-content/uploads/2017/09/bitcoin-price-vs-gold-price.png) And if we rewind the trend search even further back to 2011, we can see in the chart below that interest in the gold price remained steady (with some wild exceptions). Interest in the Bitcoin price came from nowhere and is accelerating fast.[![bitcoin price vs gold price since 2011]](https://katusaresearch.com/wp-content/uploads/2017/09/bitcoin-price-vs-gold-price-since-2011.png) I also believe cryptocurrencies and blockchain technologies have eaten into the cash available for speculating in junior resource stocks. For example, a cryptocurrency-mining company called HIVE Technologies recently went public and attracted huge amounts of interest and money from investors. It was backed and publicized by two guys known for their work in the natural resource sector, Frank Giustra and Frank Holmes. Every dollar of speculative investor capital going into HIVE is a dollar that isn’t going into junior resource stocks. Because of the success of HIVE, I expect to see similar offerings in the future. The typical buyer of these offerings will be someone who wants high-risk, high-reward speculations. That’s also the typical buyer of junior resource stocks. So, I expect future crypto-related currencies and securities will draw even more money that would otherwise be destined for junior resource stocks. ***With the data and anecdotal evidence provided above, I think it’s safe to say that Bitcoin and other cryptocurrencies are drawing money away from gold-related securities like ETFs and junior gold stocks. I believe interest in cryptos will only grow in the future. However, if cryptocurrencies want to go truly “big time” and draw some of the trillions of dollars of institutional money that typically invests in stocks, bonds, real estate, and commodities, they will need to take a big step. Currently, there are over 1,100 different cryptocurrencies which can be traded on over 100 different exchanges. Many of the fly by night cryptocurrencies and exchanges will turn out to be scams, just like many fly by night Internet stocks in the early days, or mining stocks of the past. Regulations will come into the cryptocurrency sector — like it or not. Sorry libertarians. I know it’s not what you want to hear, but it will happen. We are in the early days of the blockchain and cryptocurrency revolution. But for the cryptocurrencies to go mainstream, I believe the large investment funds will have to be able to access the platforms to speculate in the sector. That is not the case today for various reasons, including their own fund mandates and the lack of being able to wire funds from bank accounts to digital platforms (exchanges) to buy and sell cryptocurrencies, among others. More importantly, there is a lack of being able to wire back the funds directly back to bank accounts. When I personally sell a stock on a stock exchange and then transfer the funds out of my brokerage account to my bank, I do so directly from my brokerage account to my bank account. That is not the case for many of the platforms to trade cryptocurrencies. An intermediary (a “wallet”) is required, and that introduces an unnecessary step in the transaction chain. There are so many wonderful elements to the blockchain potential, but for the big funds to be able to play the sector, the industry will have to evolve. But a solution will come that will meet the needs of large fund managers. And the exchange that achieves that will get massive adoption rates from the big money on the sidelines waiting to be able to get exposure to the sector. When this comes, it will be a huge step forward for cryptocurrencies. **Conclusion:** Bitcoin and all the other cryptocurrencies are gaining traction, that is clearly shown by trading volumes and Google search data.But the traction the cryptocurrencies have gained is **NOT **killing the physical gold market. However, I do believe the junior mining executives will have to do a better job of retaining and attracting the speculative dollars available to buy their stock. Now, more so than ever, speculators have access to new or previously forbidden sectors like cryptocurrencies and the 400+ marijuana companies in North America. Weak and struggling junior resource stocks will wither and die at faster rates. Like it or not, gold executives and gold investors, you have a major new competitor in the form of cryptocurrencies. Regards, Marin Katusa P.S. One last interesting fact related to gold, Bitcoin, and dollars: Recently Puerto Rico was devastated by a hurricane. Gas stations and convenience stores were accepting U.S. dollar cash only. Gold, silver, and Bitcoin were not accepted forms of payment. The U.S. dollar still has plenty of life left in it. --- # This Small Move Could Send a Tidal Wave of Money into Gold Stocks - URL: https://katusaresearch.com/small-move-send-tidal-wave-money-gold-stocks/ - Type: article - Published: 2017-09-22 - Updated: 2019-05-07 - Author: Marin Katusa At 3,950 feet wide and 176 feet tall, the legendary Niagara Falls is the most powerful waterfall in North America. Straddling the border between the U.S. and Canada, Niagara sees approximately 3,160 tons of water go over its edge it every second. It’s said The Great Lakes contain 20% of the world’s freshwater. Most of it passes over Niagara Falls as it drains into the Atlantic Ocean via the St. Lawrence River. Many of us can remember a trip to Niagara Falls and recall hearing the water’s power as it roared from below. Now, think if all that water tried to go over the falls through a single fire hose. If you had a miracle hose that wouldn’t bust, the pressure would create a water jet that goes for miles. Yes, it’s a ridiculous scenario. But it’s a useful analogy for explaining how the gold mining sector would be affected if some of the world’s largest investment funds decided to make even a small increase in their allocation to physical gold and gold stocks. It would be like trying to drain Niagara Falls with a fire hose. Just a small percentage increase in allocation towards gold and gold stocks among global fund managers would make gold stocks double… and then double again… and double again. Below, we’ll look at the numbers. But first, let’s review who really moves stock and bond prices… When it comes to the investment markets, a small investor has no effect on asset prices. Even the buying and selling of a wealthy individual with $200 million has no effect on stock and bond markets. The guy with $200 million is a mouse when it comes to the elephants. By elephants, I mean large pension funds, large hedge funds, large insurance funds, and large sovereign wealth funds. These funds invest the money for tens of thousands of people. They control not just hundreds of millions… but often hundreds of billions. For example, oil-rich Norway’s $1 trillion sovereign wealth fund controls 5,000 times more money than the rich guy with $200 million. Elephants like Norway’s fund managers are the people that move markets and create long-term price trends. Now realize that the managers of these mega funds are just regular people. They are as likely to fall victim to groupthink as anyone. They don’t like to stray far from the herd. They tend to make the same decisions at the same time. When a group of large investment funds decides to buy into a market, they can put well over $100 billion to work. So, elephants typically stick to very large, very liquid markets like large-cap U.S. stocks and corporate bonds. However, some elephants occasionally stray from the herd. They buy into less liquid markets. For example, some of them will buy gold stocks and physical gold. If concerns over the safety of the global monetary system increase (as they did in 2008), more than a few elephants will want to buy gold and gold stocks for both protection and profit potential. That elephant money will flow into a relatively tiny sector. The current market value of all major publicly-traded gold companies is around $330 billion. This might sound large, but it’s actually tiny in global finance terms. The entire gold mining industry is smaller than just Facebook ($500 billion market cap) or Google ($650 billion market cap). The chart below shows this comparison, along with Apple and U.S. oil and gas industry for good measure. To look at it from another angle, consider the $20 billion market cap of the world’s largest gold mining company, Newmont. Newmont is a giant that shapes the industry. It does some of the biggest deals. It has the resources to hire the industry’s best people. It produced over 5 million ounces of gold in 2016. That’s a tremendous amount of gold. Yet, a $20 billion market cap won’t even get you a spot on the top 20 North American oil and gas companies. Newmont is smaller than 266 companies in the benchmark S&P 500. If just 10 out of the hundreds of money managers around the world with more than $50 billion to invest were to each place just 1% of their portfolios into Newmont, they would buy 25% of Newmont. That very small ripple in the ocean of large fund management would produce a buying tsunami that lands on the shores of the gold mining industry. You might be thinking, “*Sounds good in theory, Marin, but this wouldn’t happen in real life*.” If you’re thinking that, you’re dead wrong. This line of thinking isn’t theoretical. Two situations in recent history show how small sectors can stage extraordinary moves when even a small percentage of the world’s capital flows into it. ***In 2003, I spent a lot of time and energy researching the uranium market. I became convinced the industry would face a supply/demand crunch which would send uranium into a major bull market I took a huge position in uranium stocks. At the time, the uranium market was much smaller than the gold market is today. The world’s largest miner, Cameco, had a market cap of just $2 billion. My thinking turned out to be right. Uranium entered a bull market and attracted a lot of investor interest. But because the industry was so small, investment capital could only flow into a handful of legitimate uranium miners. During the uranium bull market of 2003 – 2007, Cameco climbed 1,300%. Pitchstone Energy climbed 700%. Paladin Uranium climbed over 1,000%. ***More recently, the cryptocurrency market has shown us how extraordinary price moves can happen when money flows into a small sector. In 2016, the cryptocurrency market began drawing a large amount of investor interest. But at the time, the market cap of all cryptocurrencies amounted to $7 billion (less than 1.5% of Facebook). As money flowed into this small market, cryptocurrencies like Bitcoin soared more than 10-fold. Some soared more than 100-fold. There’s an old saying “A rising tide lifts all boats.” Well, when the tide flows into a small market sector, the boats can rise 10, 50, even 100 times higher. They go from sitting quietly in the harbor to riding tsunamis of investor money. Right now, it’s estimated that 1.4% of the world’s financial assets are allocated to gold and gold stocks. This laughably small percentage shows the world doesn’t care much about gold right now. But just a modest increase in this allocation percentage would hugely influence gold stock prices (some money would go into physical gold and gold ETFs, but a lot would flow into gold stocks as well). To be clear, I’m not saying the world’s biggest money managers will wake up one day, decide to allocate 10% of their portfolios to gold and gold stocks and make gold and gold stocks double in a single trading session. I am saying that if gold enters a bull market, it’s going to be front page news. It’s going to come up at investment committee meetings. Big money managers will feel pressure to allocate to gold. People will begin to see buying gold and gold stocks as a prudent way to ensure portfolios against a global monetary accident. Moving substantial amounts of money into gold and gold stocks would be a gradual, multi-year process. If you’re a younger investor, you might think this scenario sounds crazy, but it’s been a standard money management practice before. I believe a gold price breakout above $1,400 per ounce is coming soon. This would represent a multi-year high in the gold price. It would be a nice round number the media can quote and hype. It would ignite more and more interest in gold. But investor money will flow into a tiny area. My advice is to get into gold stocks before the elephants arrive. Regards, Marin --- # The Rules of the Electric Car Game Just Changed in a Massive Way - URL: https://katusaresearch.com/rules-electric-car-game-just-changed-massive-way/ - Type: article - Published: 2017-09-15 - Updated: 2020-02-19 - Author: Marin Katusa Last weekend, as the media focused on hurricanes and Donald Trump’s immigration policies, two massive stories flew under the market’s radar. These stories were about one of the biggest economic revolutions of our time… and they have major investment implications. First, China announced it plans to ban the sale of fossil-fuel powered cars and trucks. No date was given, but China is making it clear that Electric Vehicles (EVs) are the future of the world’s largest car market (which is 35% larger than the U.S. market). China is desperate to clean up its infamous air pollution. Emission-free electric vehicles will play a huge role in the efforts. Secondly, Volkswagen, the world’s largest car company, announced it plans to design electric versions of all 300 of its models. To achieve this, Volkswagen plans to invest over $70 billion into new infrastructure. It’s going to be a huge shift undertaken by one of the world’s largest, most powerful manufacturing companies. Regular Katusa Research readers know that I believe the Electric Vehicle revolution is one of the biggest investment themes of our time. For a long time, mass adoption of EVs were an environmentalist’s fantasy. Zero emission vehicles that run on electricity just couldn’t compete with conventional cars on price, quality, and fueling infrastructure. But thanks to incredible advances in technology, massive investments by large car makers, and huge government support, electric vehicles (EVs) are poised to go mainstream. The news from China (the world’s largest car market) and Volkswagen (the world’s largest car maker) tell me that mass EV adoption will occur faster than most people believe it will… even faster than I believed it would just six months ago. I believe a big reason the rate of EV adoption will take so many people by surprise because they don’t understand how technological progress is now occurring at an exponential rate. This rate of change is far faster than the kind of “linear change” most people are used to. Exponential progress is happening now because of the stunning increases in the power and speed of computers. Computing power is the foundation on which our world of technological progress rests on. It’s what makes the Internet, your iPhone, your Facebook account, Tesla cars, Wi-Fi, and thousands of other things possible. After decades of refining and improving computer technology, progress in the field is accelerating. Our computers are getting much faster, much more powerful, much smaller, and much cheaper. The kind of economic shifts that used to take 20 years to play out are now taking just five years to play out… and catching many people off guard. This trend is affecting all industries, no matter how “old school” they are. Back to China and Volkswagen… Of course, China’s new policy will have measurable and direct affects in China. Of course, Volkswagen’s new policy will have measurable and direct affects in the company. But just as importantly, these policies will have massive indirect affects across the entire world. These decisions mean more and more money will be invested into EV research and development. I’m talking about tens of billions of dollars over the short-term and hundreds of billions of dollars over the long-term (over 10 years). More money and more minds will go to work on making EVs better, cheaper, and more reliable. More new ideas will be developed and tested. Many will fail, but some will be world-changing breakthroughs. These breakthroughs will be developed at a faster rate than before. The world’s largest car market and the world’s largest car maker want it that way. The enormous amount of money and energy devoted to EVs will drive production costs lower. Lower EV production costs will mean cheaper EV sticker prices and increased competitiveness with fossil fuel powered vehicles. Increased competitiveness means more people buying electric vehicles sooner. More EV sales will signal to automakers that they should invest even more money into research and development. Even better technology will be developed and production costs will go even lower. It will become a virtuous, self-reinforcing cycle. Perhaps the best way to showcase how increased investment has cut costs in the EV sector is by looking at the cost of lithium-ion batteries used in EVs. The chart below shows the dramatic cost reduction from 2010 to 2017. Personally, I believe the best way to profit from the electric vehicle revolution is not by investing in EV makers, but by selling EV makers the materials they must all consume in huge quantities for decades in the future. The average electric vehicle with a 65 kwh battery pack will require over 100 pounds of copper, 20 pounds of cobalt and 100 pounds of lithium carbonate. Remember how I mentioned Volkswagen wants to make electric versions of all 300 of its models. Below is a chart which shows the quantity of metals demanded by Volkswagen to go 100% electric, relative to the current annual production. These numbers are not exact. There is going to be variance depending on battery type, however the numbers are staggering enough as is. The supply chain for electric vehicle inputs is already strained. China’s policy change is only going to strain it further. This is a good thing for paid members of Katusa Research, who are acting as EV material suppliers. Under supplied markets mean high prices and big profits for companies that can supply product to the market. The price of cobalt, a crucial material in the Lithium-Ion battery has soared from $12 per pound to over $25 per pound in 18 months. Below is a chart of this EV-driven bull market. The world’s largest lithium producer, Albemarle, said on a recent conference call that it is sold out of lithium for the next five years. The spot price for battery grade lithium has rocketed from $3.60 per pound to over $10 per pound since April 2015. And of course, you probably know my thoughts on copper. The EV boom is very bullish for copper demand. Years from now, the world is going to want a lot more copper… but the industry simply can’t supply it at $3 per pound. Copper prices will need to be much higher than they are now. You can read by research on this situation [here](https://katusaresearch.com/im-finally-buying-copper-stocks/) and [here](https://katusaresearch.com/believe-im-right-hope-robert-friedland-right/). It’s estimated that nearly 1 million new EVs will be sold globally in 2017. Early this year, the respected Bloomberg New Energy Finance team estimated that there will be 8 million electric vehicles sold annually by 2030, and 65 million sold annually by 2040. I believe the huge news from China and Volkswagen could lead to these targets being hit sooner than expected. The virtuous self-reinforcing cycle is coming… and it’s very good for EV market suppliers. Invest accordingly. Regards, Marin --- # I Believe I’m Right, But I Hope Robert Friedland is Right - URL: https://katusaresearch.com/believe-im-right-hope-robert-friedland-right/ - Type: article - Published: 2017-09-08 - Updated: 2019-05-07 - Author: Marin Katusa Robert Friedland says the price of copper will be so high in the future that you’ll need a telescope to see it. If he’s right, shareholders in the right copper stocks stand to make a fortune. But is Robert right with his forecast? Or… is mining giant Glencore right? Or am I right? If you’re not familiar with Robert Friedland, you should be. He’s one of the world’s richest, most successful mining entrepreneurs. His first mega mining score was Diamond Fields. Friedland’s team discovered Voisey’s Bay, a world-class nickel deposit. The discovery made Diamond Fields’ shares go from $0.25 per share to over $160 per share, a more than 63,000% gain. This single deal made Friedland a billionaire at a young age. Friedland made another huge score with Ivanhoe Mines, which discovered and developed the giant Oyu Tolgoi copper-gold deposit in Mongolia. The share price of Ivanhoe Mines went to a high of $28 per share in January 2011 from a price under $1 just a decade earlier. These days, Friedland is looking to make his next big score with “Ivanhoe Mines 2.0”, his company that owns three world-class projects, with a heavy emphasis on copper. Friedland is an incredible salesman and presenter. Recently, he has wowed audiences with claims that the price of copper will skyrocket over the next decade. A big driver of this copper bull market, says Friedland, will be electric vehicles (EVs). Regular Katusa Research readers know that I believe EVs are very bullish for long-term copper consumption. They know electric vehicles require three times more copper than conventional vehicles with international combustion engines. On average, an internal combustion engine uses 55 pounds of copper. A hybrid uses about 110 pounds and an EV uses 165 pounds. For a long time, mass adoption of EVs was an environmentalist’s fantasy. Zero emission vehicles that run on electricity just couldn’t compete with conventional cars on price, quality, and fueling infrastructure. But thanks to incredible advances in technology, massive investments by large car makers, and huge government support, electric vehicles (EVs) are poised to go mainstream. But just how mainstream will EVs go? And how much copper will EVs consume? Below, I’ll go over EV copper consumption forecasts from Friedland… commodity giants BHP and Glencore… and your independent source of investment research and ideas, Katusa Research. To compile data on these forecasts, I’ve combed through public data and public statements… and modelled their assumptions to 2040. To make such a forecast, you need two inputs. The first one is how much copper, on average, each EV will consume in the future. The second input is how many EV cars will be on the road in the future. Robert Friedland has stated that EVs will require 330 pounds per vehicle. BHP, the world’s largest mining company claims future EVs will require 176 pounds per EV. Glencore claims 110 pounds, and Katusa Research is pegging 100 pounds per EV. For the second input – how many EVs will be on the road – I’m using Bloomberg New Energy Finance’s EV outlook, which is the industry’s accepted forecast. The Bloomberg folks forecast EVs will have a 2% share of the global vehicle market by 2020, a 24% share by 2030, and a 54% share by 2040. A market share of 54% by 2040 may sound high, but I believe that adoption rate is very realistic. Using the inputs described above, I created the chart below. It shows how much copper the EV market will need each year based on the assumptions made by Friedland, BHP, Glencore, and yours truly. You’ll note that my forecast is very similar to Glencore’s. I’m glad to see this. Glencore is one of the smartest natural resource companies in the world. Its managers are smart and tough and they have a lot of skin in the game. I say that with great respect. You’ll note that BHP’s annual EV copper demand forecast by 2040 is 76% higher than mine. Robert Friedland’s forecast is an incredible 230% higher than mine. If Robert Friedland is correct, over 20 billion pounds of copper will be required in 2040 to meet just the copper demand for EVs. That is equivalent to about 40% of today’s total copper production and demand. Before I ran the numbers, I would have guessed Friedland would be the highest. Friedland is a world-class promoter. He wants to drum up interest in his copper company. Naturally, he’s going to create and promote an extremely bullish scenario. I’m not here to sell you a copper company. I’m just showing you what the numbers tell me. And granted, I always like to be conservative in my forecasts to give me and my readers a margin of safety. But here is the point: Even if my conservative forecast is right, copper is going much higher over the long term. I’m forecasting that in just 12 years, EVs will consume 1.3 billion pounds per year. This demand is greater than half the annual production of Escondida, the world’s largest and most productive copper mine. But as I’ll share in the near future, the world can’t supply that much copper at prices below $3.50 per pound. It will require at least $4 copper. Now, if we use BHP’s projections, copper will probably go north of $5/pound. And if Friedland is right, we will see copper north of $8/pound. Friedland is a force of nature. He is smart, rich, aggressive, and abrasive. I have seen him go into Mongolia and make billions, while having everyone doubt him the whole time. He has done the same in the Congo. You don’t want to bet against Robert Friedland. Although I’m openly doubting Friedland’s copper demand projections, I’m not betting against him. ***I believe I’m right, but I hope Robert is right****.* The good news is, no matter who is right, copper is going a lot higher, and those who own large, high-quality copper deposits in mining-friendly jurisdictions will make a fortune in the Electric Vehicle boom… without selling a single car. Regards, Marin --- # Freeport McMoRan Shareholders Learn a Key Resource Lesson the Hard Way - URL: https://katusaresearch.com/freeport-mcmoran-shareholders-learn-key-resource-lesson-hard-way/ - Type: article - Published: 2017-09-01 - Updated: 2019-05-24 - Author: Marin Katusa As I write, copper for September 2017 delivery is trading for $3.07 per pound. The red metal is at 2-year highs. It’s up over 20% over the past year. In other words, **it’s a bull market in copper**. And that’s why the following statement is so crazy: *One of the world’s largest copper producers just lost one of the world’s greatest copper mines*. This week, the Indonesian government and major miner Freeport McMoRan reached a “settlement” where Freeport’s ownership stake in the colossal Grasberg mine (located in Indonesia) will be reduced from 90.64% to 49%. The reduction in ownership will go in favor of the Indonesian government, which feels it deserves a larger share of the mine. ***Image: Freeport’s Grasberg Mine*** Grasberg is one of the world’s largest, most productive gold and copper mines. Building it required $12 billion in investment. And the Indonesian government essentially just stole about 42% of it. Freeport tried to fight the move, but ultimately Indonesia said *take a partial reduction or we’ll shut down the mine and move towards a 100% reduction*. To be fair to Indonesia, it says it will pay Freeport shareholders for its stake. But it will surely be at a ridiculously low price… and Freeport will no longer be a majority shareholder (which is worth a huge amount of money). However you paint it, it’s a major loss for Freeport shareholders over the long-term. They’re learning the hard way that it’s essential to base your resource investments in resource-development friendly countries like the U.S., Canada, and Australia… while being very wary of selected countries in Asia, the former Soviet Union, and Africa. In other words, they’re learning why they should put my AK-47 Indicator to use. Over the past decade, I’ve written a lot about how nationalization is one of the biggest – yet most underrated – dangers for resource investors. While nationalization comes in many forms, it is essentially a government breaking legal contracts and stealing from a business and its shareholders. As cash-strapped governments look for emergency sources of revenue, they often turn to confiscating physical assets like oil fields, gold mines, and copper mines. Doing so is typically an easy sell to the public. Much easier than stealing a beer or some candy. The government can say the oil or gold is part of the country’s natural heritage. The politicians get the added bonus of sticking it to Whitey. Early in my investment career, I really enjoyed the excitement of risking capital in exotic lands like Indonesia. The site visits were exciting. But as I wrote in an educational piece that could save you a fortune called ***How To Use The AK-47 Indicator***:.. Over the past 17 years, I’ve been all over the world—often to places that many people would never dare to go. Besides Iraq, I’ve traveled to Kosovo, Venezuela, Russia, China, Argentina, Colombia, Mexico, Turkey, Nigeria, Kenya, Ethiopia, and dozens of other countries. Yet if you read my work and look at my portfolio these days, you’re sure to notice a lack of “third world” excitement that many resource investors crave. As a new resource investor, it’s hard not to get interested in the excitement and drama that comes with investing in far-off lands. After all, many countries in Africa, Asia, and South America are less picked over by exploration geologists. You get to visit new places and meet interesting people. And the prospect of finding the next giant gold deposit in some jungle is just plain exciting. All these things got me on many plane trips. Yet, now…after many successes and many mistakes**, **I tend to avoid places where people hold AK-47s in the streets. All the travel I’ve done…all that time spent on planes…has shaped my portfolio and the research I write today… which *overwhelmingly features companies that I can take my friends and family to visit the operations, safely.* In other words, after flying millions of miles on planes and visiting more than 100 countries, I’m right back home. But the reason I invest so heavily in Canada and other English-speaking countries isn’t nostalgia for where I’m from…it’s strictly a matter of making money. I’ve learned the hard way that if you’re interested in making money, you need to trade excitement for boring old rule of law and a simple respect for business. The places where people with AK-47s walk the streets tend to be the places that have very few of the roads, bridges, power lines, railroads, and ports needed to transport raw materials. That kind of infrastructure is critical for turning resource deposits into free cash flow. The places where people walk around with AK-47s also often lack contract laws, property rights, and worst of all, respect for human life. If you’re reading this, there’s a good chance you live in the U.S. or Canada. As much of a SOB as you think the politician in your state or province is, trust me, he has nothing on the average lunatic running a third-world country. Or think of it this way: if Donald Trump doesn’t like you, he sends out a nasty tweet. If your average third world dictator doesn’t like you, he sends out a hit squad. After doing business all over the world – and in more than a few war zones – I now much, much rather put my capital to work in countries with long histories of respecting contracts and property rights, and which have the roads, power lines, bridges, and ports that are critical to extracting and transporting natural resources. I say let the novice investors have all the third-world excitement they want. I’ll take the money. As Freeport shareholders are learning, where your resource investments are located is critical to your success. It’s important enough that I’ll state it again: Investing in the U.S., Canada, Australia, and the small handful of countries with similar respect for property rights, contracts, and rule of law may not be exciting, but if you’re looking to preserve and grow your capital, those places are like American Express, everywhere you want to be. Regards, Marin Ps. I am working on the final stages of due diligence on an exciting new junior gold company. We went to visit the property and we were the only newsletter that was on the trip. I will reveal the name of this company in 5 days when the next issue of *Katusa’s Resource Opportunities* is published to subscribers. For details on how to sign up and get the full details on this stock that could return a quick 50% in 3 months on favorable drill results, [click here](https://katusaresearch.com/subscribe/). **Disclosures and Disclaimers** Marin Katusa, Katusa Research Inc. (“Katusa Research”), and/or the other principals, partners, directors, and officers of Katusa Research (the “Katusa Research Team”) own securities positions in, and are long on, the following companies mentioned above: none Additionally, members of the Katusa Research Team currently intend to acquire securities in the following companies mentioned above: none No members of the Katusa Research Team have received any commission or other compensation to feature any company mentioned in this newsletter nor are they party to any financial arrangement regarding the securities of such companies or any person who has any interest in such securities. The information contained in this publication is not intended and does not constitute individual investment advice and is not designed to meet your personal financial or investment situation or needs. Neither Marin Katusa nor Katusa Research is registered broker-dealers or financial advisors. Never make an investment based solely on what you read in an online newsletter, including this newsletter, especially if the investment involves a small, thinly-traded company that is not well known. Past performance is not indicative of future results. You should independently investigate and fully understand all risks before investing. When investing in speculative stocks, it is possible to lose your entire investment. Information contained in such publications is obtained from public sources believed to be reliable, but its accuracy cannot be guaranteed. Further, the views expressed herein are of Katusa Research as of the date hereof, are subject to change and the Katusa Research Team does not undertake any obligation to update such information or views. None of the members of the Katusa Research Team shall be liable for any damages, losses, or costs of any kind or type arising out of or in any way connected with the use of this newsletter. The information in this publication reflects the current opinion of the publisher, is subject to change, and may become outdated. The publisher undertakes no obligation to update any such information. Unauthorized Disclosure Prohibited. The information provided in this publication is private, privileged, and confidential information, licensed for your sole individual use as a subscriber. Katusa Research reserves all rights to the content of this publication and related materials. Forwarding, copying, disseminating, or distributing this report in whole or in part, including substantial quotation of any portion the publication or any release of specific investment recommendations, is strictly prohibited. Click the link to review the detailed [Terms and Conditions.](https://katusaresearch.com/terms-conditions-use/) --- # Asymmetry: The Financial Secret That Can Earn You 10,000% Returns (No Joke) - URL: https://katusaresearch.com/asymmetry-financial-secret-can-earn-10000-returns-no-joke/ - Type: article - Published: 2017-08-31 - Updated: 2020-02-12 - Author: Marin Katusa **Asymmetry: The Financial Secret That Can Earn You 10,000% Returns (No Joke)** Did you see The Big Short yet? A movie based on Michael Lewis’ hit book of the same name, The Big Short was released in late 2015. It’s the story of how a small, clever group of people saw the 2008 mortgage crisis coming. Initially, these people and their warnings were mocked. Eventually, they were vindicated… and made billions of dollars by betting correctly on the outcome. People loved The Big Short. It was nominated for five Academy Awards, including Best Picture. Critics praised the movie for explaining complicated financial concepts in such a way that layman moviegoers could understand them. If you haven’t seen the movie, it’s worth watching. It’s both educational and entertaining. But as good as The Big Short is, it failed to teach the story’s greatest, most useful lesson. It failed to share one of the world’s most powerful financial strategies. I’d guess maybe one investor in a 1,000 knows this strategy… and less than one in 100,000 knows how to use it properly. But it’s how the traders who inspired The Big Short turned relatively small amounts of money into millions – even billions – of dollars during the housing collapse. They made returns in excess of 10,000% (a gain that turns $10,000 into more than $1 million). One trader, John Paulson, used this strategy to make over $10 billion for himself and his clients, one of the biggest scores in market history. As powerful as this strategy is, you almost never see it discussed in the mainstream press. You almost never see it mentioned on financial television. But those who understand its power use it to generate incredible wealth. This secret is known as “the asymmetric bet.” In this letter, I’ll explain how it works… and how you can use it for your personal benefit. **The Power of Asymmetry** You probably learned about symmetry in school. It’s when the parts of something have equal form and size. For example, cut a circle in half, and the two parts are symmetrical.[![circle]](https://katusaresearch.com/wp-content/uploads/2017/08/circle.png) In many cases, symmetry is attractive. Generally speaking, the more symmetrical someone’s face is, the more attractive they are considered to be. Symmetry can be attractive in architecture, art, and landscaping. But when it comes to the financial markets, expert operators avoid symmetry. Symmetry is for chumps. **Expert investors and speculators hunt for asymmetry**. An asymmetric bet, trade, or investment is when the potential upside of a position is much greater than its potential downside. If you risk $1,000 for the chance of making $10,000, you make an asymmetrical bet. If you risk $1,000 for the chance of making $1,000, you make a symmetrical bet. Which one is more attractive to you? You’re probably thinking the chance to make $10,000 is better than the chance to make $1,000. That’s good. That’s the right answer. [![Asymetric bets]](https://katusaresearch.com/wp-content/uploads/2017/08/Asymetric-bets.png) Even though this idea is simple common sense, most people fall into the trap of making symmetrical bets in the stock market. Many investors commonly risk 100% of their money in the pursuit of a 100% return. Or even worse, they risk 100% of their money in the pursuit of a 50% return. For example, an investor will buy a stock that some expert touts as having “100% upside,” and he’ll be willing to ride the stock to zero (a 100% loss) if things don’t work out. 100% upside. 100% downside. Symmetry. This kind of symmetry offers you horrible odds… the odds you’ll find in casinos and most sports betting. Most people don’t understand this concept, and it kills them in the financial markets. Again, symmetry is for chumps. I won’t touch an investment with a symmetrical risk/reward profile. When I put my money to work, I look for opportunities where I can risk $1 in the pursuit of $20 or even $100 in returns. Risk a little. Make a lot. That’s the idea behind asymmetric bets. **Where to Find Asymmetric Bets** As I mentioned, the guy who risks 100% of his capital to make a 100% return is making a bad, symmetric bet. So who is making asymmetric bets? And how do you find those bets? Asymmetric bets come in a variety of forms… If you buy a stock with 500% upside potential and you’re prepared to cut your losses at 50% of your investment, that’s an asymmetric bet. Upside of 500%. Downside of 50%. 10 to 1 odds. Stocks with the potential to massively appreciate in value offer asymmetric risk/reward profiles. This is a big reason I devote my time and energy to natural resource investing. The natural resource sector is one of the financial market’s most volatile sectors. More so than other assets, commodity prices move up and down in huge boom and bust cycles. They exhibit what’s called “extreme cyclicality.” One year, the price of a commodity like oil, silver, or copper can skyrocket 75%. The next year, it can fall 50%. (Read [this essay](https://katusaresearch.com/biggest-key-far-making-huge-money-resource-stocks/) for the full explanation.) This volatility gives life to many 500%+ stock market winners every year. The key is to buy assets after busts and before booms, not the other way around. As I’ve written before, most investors think “volatility” is bad word. You don’t want to see it in your prudent, conservative investment mix. The talking heads on financial television bemoan volatility. Mainstream headlines make it sound like a terrible thing. As s a professional investor, I love volatility. I owe much of my success to this “dirty word” of the financial world. I believe it’s a landmark moment in an investor’s career when he or she realizes that volatility can be harnessed, directed, and used like a tool to create wealth quickly. If you know how to harness volatility, the natural resource sector can be a constant source of high-quality, asymmetric bets that build wealth for you. You can make returns in 10 months that take most people 10 years to make. If you focus on making the kinds of asymmetric bets that are common in the resource market, I can’t guarantee you’ll make billions like the guys who inspired The Big Short. But I can guarantee you will dramatically improve your investment results. Regards, Marin --- # An Open Letter to CEOs and shareholders of North American oil and gas companies - URL: https://katusaresearch.com/open-letter-ceos-shareholders-north-american-oil-gas-companies/ - Type: article - Published: 2017-08-25 - Updated: 2019-05-07 - Author: Marin Katusa **From:** Marin Katusa, CEO of Katusa Research **To:** CEOs and shareholders of North American oil and gas companies **Subject:** Don’t let this huge opportunity to create shareholder value pass you by **Date: ** August 25, 2017 ______________________________________________________________________________________________________________________________________ When a CEO takes the reigns of a company, he/she becomes bound by something called “fiduciary duty.” The vows of fiduciary duty are like marriage vows. They can mean different things to different people, but they come down to the broad concepts of “doing right” and acting honorably. In the business world, CEOs are married to shareholders. CEOs are trusted and expected to look after their partners’ best interests. CEOs are expected to stay loyal to shareholders and act as stewards of their capital. To most folks, this means focusing on two things… One, don’t lose shareholder money (“don’t do dumb things’). And two, do your best to capitalize on opportunities that will increase shareholder wealth (“do smart things and grow the company”). I believe surging North American shale production will keep the price of oil lower for longer than most analysts expect. This means oil and gas executives will have a very small margin of error when making capital allocation decisions. They will not have soaring oil prices to bail them out of bad moves. Smart executives will focus on areas with liquid rich production. These areas offer the highest returns on investment in the oil patch. A mergers and acquisitions (M&A) rush has started for premier liquid rich assets. Much of this M&A activity has been focused on the liquid rich Permian Basin in the U.S. Unfortunately, all this interest has made the Permian very expensive. The majors are now consolidating land within the Permian, and the majors always pay a premium. On the other hand, the Montney Shale in Western Canada has metrics equal to or better than the Permian. Yet, projects in the Montney trade at a fraction of what similar projects in the Permian are currently trading at. This value disconnect will change. The main reason the Montney is trading at such a large discount to the Permian is because of the lack of takeaway capacity. However, that is changing. Currently, there are proposals for five major processing facilities to handle the liquid rich production of the Montney. Smart buyers are getting in now. M&A in the Montney is starting to heat up. But what premier liquid rich assets in the Montney are available? With all this in mind, I’m writing this letter to all North American oil & gas CEOs, specifically ones with a focus on Canada. To get right to my message for CEOs: If you’re not seriously considering purchasing the phenomenal assets of premier small cap oil & gas operator Blackbird Energy and adding them to your company’s asset base, you are in danger of violating your fiduciary duty to shareholders. You are in danger of letting an incredible opportunity to intelligently allocate capital and create shareholder value pass you by. Since CEOs should be judged by those they have a duty to, this letter is also for shareholders – big and small – of those companies. If you are such a shareholder and you want to see your wealth grow safely and substantially, please make sure your “partners” – the executives in charge of your holdings – receive a copy of this letter. Below, I detail why Blackbird Energy (ticker BBI in Canada) is among the highest-quality oil and gas operators in North America. I’ll detail its phenomenal assets and show how a conservative appraisal of its value shows it is worth well over 300% of its current market value. If you’re familiar with the enormous potential of the Montney Shale, please skip ahead to the section “Blackbird Energy’s Incredible Position and Potential.” If you’d like a quick overview of the Montney, please read the following section. ## **The Next Great Shale Field** Over the past seven years, the U.S. shale oil boom has lifted U.S. oil and gas production levels to their highest in decades. During this time, the names “Bakken,” “Eagle Ford,” and “Permian” have become synonymous with oil wealth creation, and fixtures in the mainstream press. These are the names of the three biggest, richest U.S. shale oil fields. Untapped by oilmen for decades, they are now staggering in size and richness. Together, the Bakken (in North Dakota), the Permian (in Texas), and the Eagle Ford (also in Texas) produced 4.7 million barrels of oil per day today. This total would make them the world’s 4th largest oil producer… bigger than Iran or Canada. These three fields revolutionized United States oil production in a short amount of time. And of course, they’ve made some people very rich. At the Katusa Research office, we monitor over three dozen shale formations that could eventually be labeled “bigger than the Bakken” or “better than the Permian.” We keep a proprietary database on these formations, most of which are unknown to even most professional investors. Very little modern exploration work has been performed on them. You could say that all of our tracking and site visits amount to “hunting elephants.” All the time and money we’ve spent hunting elephants has paid off. We now know exactly where the next shale boom will occur: The Montney Shale in Western Canada. ## **The Best Place to Find Large Shale Fields** The best place to look for a giant shale field is near a giant conventional oil field. For example, the Permian and Eagle Ford shales are both in Texas, where many large conventional oil fields have been discovered over the years. That’s why it’s no surprise the next great shale field is located Western Canada, an area that has yielded massive quantities of oil in the past. Specifically, this field is located in the oil-rich province of Alberta… in a huge geological formation called the Western Canadian Sedimentary Basin (WCSB). The WCSB is home to rich oil and gas reserves that have created many fortunes, such as the one for T. Boone Pickens. But despite the success people have had in the WCSB, large swaths (think layers) of it remain relatively unknown. Of the parts that are known, very little has been drilled with the latest technology, which is light years ahead of where it was just five years ago. The next giant shale field, called the Liquid-rich Montney formation (more on this name in a moment) is a part of the WCSB. While U.S. shale fields like the Eagle Ford or Permian get most of the press, the Montney will be like the Permian… but on steroids. And although you might have heard about the Montney before, it’s not a prolific field right now. Thanks to its unique geology, it has taken drillers a long time to “unlock’ the Montney’s potential. It has required different drilling techniques than other shale fields. And the infrastructure needed to transport its production is just now being financed and built. But very recently, drilling teams discovered the “key” to unlocking the Montney’s potential… and now we know it is capable of incredible production. As someone who makes his living investing in natural resources, I can say that I love the Montney. I believe future drilling will show that it’s a formation just as good or better than legendary fields like the Eagle Ford or the Permian. Why? Because the best part of the Montney formation contains natural gas that can be split apart to unlock an extremely valuable substance called “condensates.” You see, hydrocarbons “chain” together. The more carbon atoms in the chain, the heavier the compound is, and the more “liquid rich” the gas is. The more “liquids rich” it is, the more valuable it is. These heavier hydrocarbons are called condensates. You know some of these condensates. Condensates are the building blocks used to produce plastics, kerosene, and even jet fuel. Without condensates to act as a diluent, the heavy oil from Canada’s tar sands couldn’t be transported via pipeline. Condensates are also used in the ethanol blends you may use at your local gas station. Condensates are so useful and valuable to society that a barrel of condensates is worth more than the best oil coming out of the Bakken or Eagle Ford shales. Condensates sell for a premium over the benchmark price you always see for crude oil. You could say condensates are the “King of Hydrocarbons.” The Montney contains a huge stretch of condensate-rich shale that I call the “Super Liquid Rich Condensate Corridor.” Tapping the Super Liquid Rich Condensate Corridor is going to create tremendous wealth for shareholders. According to estimates from the United States Geological Survey, the Bakken field contains 3 billion barrels of recoverable oil… and the Eagle Ford contains just under 3 billion barrels of recoverable oil. I believe the Montney could contain more than 10 billion barrels of the King of Hydrocarbons, condensates. I believe this field will become as productive as the legendary Permian Basin, which if it was a country, would be the world’s 10th largest oil producer after Kuwait. The companies that find and produce from its richest areas stand to see their revenues soar 2,000%… 5,000%… even 10,000%+… just like companies in the U.S. shale fields did. And thanks to a “glitch” at the world’s largest and most expensive oil complex, companies that produce condensate in the Montney have an extraordinary market for their products. ## **There’s a Glitch in the World’s Biggest Oil Complex** A civil war in Syria. ISIS running amuck in Iraq. Iran working on a nuclear bomb… These are all major worries in the land we call the “Middle East.” This region is home to the world’s richest oil deposits. But unfortunately, the region is plagued by constant war and terrorism. That’s why the Western world covets large, safe, secure oil deposits… far away from the Middle East. Such deposits are among the most valuable assets on Earth. Our modern economy runs on oil. We don’t want our livelihoods held hostage by the Middle East’s war of the week. One such large, very safe deposit is the legendary Canadian Oil Sands. Located in Western Canada, the Canadian Oil Sands is one of the world’s largest deposits of crude oil. Its reserves are estimated to be 166 billion barrels. Just two other countries, Saudi Arabia and Venezuela, have larger reserves. Thanks to this massive deposit, Canada is the United States’ largest supplier of foreign oil. Canadian oil does not have to be shipped over an ocean. It is not located under 15,000 feet of water or in a war zone. You’re more likely to encounter a roadside moose than a road side bomb in oil sands country. **Because of its enormous size and strategic importance, the Canadian Oil Sands region is the largest, most expensive oil complex on Earth. More than $250 billion has been invested there over the past 40 years.** Nearly every major oil company has had an investment in the oil sands. Some investors there include ExxonMobil, Chevron, Royal Dutch Shell, and BP. Even U.S. oil refiners have invested billions in the oil sands. They all wanted to secure safe Canadian oil for their refineries. The massive oil sands complex is connected to the thirsty U.S. market by a large pipeline system. You could say a large portion of America’s economic lifeblood flows through those pipes. Yet… there’s a “glitch” in this extremely important, extremely expensive system. The oil that comes from the Canadian Oil Sands is “heavy” oil. It doesn’t flow through pipelines very well. That’s a huge problem when it comes to getting oil from point A to point B. If you can’t transport your oil to where it is needed, it’s virtually worthless. The solution to this problem is condensates. As I mentioned, condensates are extremely valuable compounds. Condensates blend perfectly with heavy oil to make a mixture that flows through pipes quickly and smoothly. Canadian oil sand producers need a *stupendous amount* of condensates to keep their oil flowing to the United States. Canadian oil sand producers currently demand over 500,000 barrels of the stuff per day. This is enough to fill 2,858 trucks like you see below every day. Remember, this is the largest, most expensive oil complex on Earth. It’s more expensive than the projects of Saudi Arabia, Iraq, and Kuwait combined. When it needs something, it needs A LOT of it. However, the region around the Canadian Oil Sands only produces about 300,000 barrels of condensate per day. As a result, Canadians end up importing over 175,000 barrels of condensate per day from the United States. Condensate from the Eagle Ford shale in Texas is piped north to Canada, blended with Canadian heavy oil, and then shipped back south to refineries on the Gulf Coast… some of which are located in Texas! I know it sounds crazy… but it’s absolutely how things are working right now. As you can imagine, this process is expensive. Canadian Oil Sands producers would much rather buy local condensate and save money. This is why companies operating in the Montney Shale have such a fantastic profit outlook. The condensate from the Montney will come from the same province as the oil sands (Alberta). It has to travel less than 1/5 the distance of imported condensate. When you factor in transportation costs and the weak Canadian dollar exchange rate, Canadian oil sand producers can get local condensate for as much as 40% less than imported condensate. It’s a gigantic cost savings. The development of the Montney is exactly what the Canadian Oil Sands – the world’s largest, most expensive oil complex – needs. The Montney Shale is essentially next door to the Canadian Oil Sands. Montney condensate producers will find very large, very willing buyers for their production. You could think of an ownership stake in a Montney condensate producer like you would owning a beef operation that supplies the majority of McDonald’s hamburgers… or owning the company that supplies Apple with phone screens. There’s a giant system that depends on your product. There’s a very large buyer who wants what you are selling. This “glitch” in the Canadian Oil Sands complex is a huge plus for Montney producers. I love the fact that I can own a Montney producer that will play a critical role in the Canadian/U.S. oil partnership. The partnership ensures a large and consistent demand for my condensate… and high prices to boot. ## **Blackbird Energy’s Incredible Position and Potential** Founded in 2009, Blackbird Energy is a small cap oil and gas company based in Grand Prairie, Alberta, a town right on top of the Montney Shale. Current market value is C$235 million. Blackbird Energy is the brainchild of CEO and large shareholder Garth Braun. Garth is a native of the Grand Prairie area. He comes from an entrepreneurial family that has done business in and around Grand Prairie for a century. Garth is extremely familiar with the Grand Prairie area and its people, so he was among the first to recognize the Montney Shale’s liquids-rich condensate potential. The region has been a prolific oil and gas producer for decades. But its layers of shale were never tapped. With no fanfare, Garth bought Blackbird’s land position for pennies on the dollar. He managed to secretly buy up tens of thousands of acres at much, much lower prices than what multi-billion-dollar companies paid for equivalent quality land. Blackbird now has 109 “net sections” (around 69,000 net acres) of land located right in the liquid-rich corridor of the Montney. In other words, the land is in the best part of one of best shale fields on Earth. Blackbird has no debt, so you can be sure that it owns 100% of the land. Banks don’t own it. Creditors don’t own it. Garth and his shareholders (of which I am one of) own it. The company also has C$65 million in cash. It’s a key part of Blackbird’s extremely strong balance sheet. What is all the prime real estate on that balance sheet worth? A recent appraisal acts as a guide… Every year, oil and gas companies must report their oil and gas reserves to government regulators. This information comes in the form of “51-101” reports… or “Reserve Reports.” These reserve reports are not prepared by the companies themselves. They must be completed by independent third-party engineering firms. Reserve Reports can serve to separate the pretenders from the guys with real assets. Bankers, CEOs, and major fund managers make billion-dollar decisions based on reserve reports. In the oil and gas world, reserves are broken down into Proved plus Probable reserves. They are broken down based on the confidence level the third-party engineering firm believes is accurate for determining how much oil and gas is held within the oil and gas formation. “Proved” reserves mean engineers have a very high confidence level that the oil and gas can be extracted. “Probable” reserves are a lower confidence level. But additional drilling or further engineering work can increase the confidence in this resource. Taking the Proved plus Probable reserves a step further, the engineering firm calculates a monetary value for these reserves. The engineering firm uses a cash flow model to determine this monetary value of the reserves. This model is known as a “Net Present Value” or NPV model. Earlier this year, Blackbird released its 2017 reserve report. To produce the report, Blackbird employed a very experienced, highly-regarded engineering firm called McDaniel & Associates Consultants Ltd. This firm does the reserve estimates for big oil and gas firms like Encana, Seven Generations Energy, and many other large energy companies operating in the Montney. In Blackbird’s 2017 Reserve Report, McDaniel & Associates placed a Net Present Value with a 10% discount (NPV10%) of C$455 million on Blackbird’s Proved plus Probable reserves. It’s 10 times more value than was placed on Blackbird’s reserves the year before. Here’s an important fact to understand. The same engineering firm that booked the reserve estimates for Blackbird did the same analysis on the most respected oil and gas producers in the Montney such as Encana and Seven Generations. What’s even more important to the story, is that the engineers only used 11.9% of Blackbird’s total acreage to come up with that value of C$455 million. As I mentioned earlier, Blackbird’s current market value is C$235 million. In other words, just 11.9% of Blackbird is worth more than the whole company is selling for on the market. Buyers at current prices can buy that small slice at a discount and get the rest of the acreage for free. I want to stress how important this report by McDaniel & Associates is to Blackbird shareholders. Blackbird has drilled eight wells to date, with another eight to be drilled over the next 12 months. Eleven wells will have production results announced over the next 12 months. A big reason why I believe Blackbird will be a huge success lies in something called “multi-stack potential.” Think of a shale formation like layers of a cake. Each layer represents oil and gas that the company can target for extraction. The more layers of cake you have, the more potential recoverable oil and gas there is. The liquids-rich section of the Montney that Blackbird calls home fits this analogy to a T. Furthermore, you can target each of these layers from the same spot at surface. This means you can drill six or eight wells instead of just one from the same spot. From the picture below, you can see Blackbird will be able to target four layers of oil and natural gas from one well pad. Moving an oil rig takes days and costs tens of thousands of dollars. If you drill eight wells from the same spot, that is much less often you need to move equipment. This is a huge cost savings and the direction that the future of oil is going. For comparison on how the future focus of companies will be multi-stacked layers, let’s compare Blackbird to Nuvista Energy, which is a Montney-focused oil and gas company with acreage close to Blackbird’s acreage. Nuvista had to drill 100 wells to get to a C$1 billion NPV10 on land that didn’t have the multi-interval potential. **Blackbird is almost at a half a billion-dollar NPV10 with just five wells**. Nuvista has a market capitalization of over USD$1 billion, and is increasing its focus on the acreage close to Blackbird. The time it takes to drill 100 wells and the cost is staggering. The future of the profitable shale business will be focused on multi-interval liquid rich corridors. The entire industry is zoning in on this “multi-stack potential” and Blackbird is right in the middle of it. ## **Blackbird’s Future Looks Very Bright** In the oil patch, it’s rare to find a junior company with exceptional assets, zero debt, and plenty of cash. Blackbird is one such rarity. Any large company that buys Blackbird will be purchasing an asset that is “self-funding.” Again, Blackbird has C$65 million in cash. It has another C$43 million in cash available from warrants that are currently in the money. That’s enough cash to fund the development of Blackbird’s land base. The development of the land base would produce more cash, which could be used to develop even more of the land base. In other words, it would create a “self-funding” program of resource development. Applying the math that the independent engineers applied on the first 10% of the drilled land, there could be well over $5 billion of un-booked upside in delineating the asset. **That means, a major buying this asset could potentially pull off a 20 bagger for its shareholders**. That is the type of value the liquid rich Montney holds. There is no other asset I know of that can produce over 40,000 boepd in five years without any new capital at a growth rate of 40% per annum at the valuation Blackbird is trading at. And this would only represent 10% of the land that Blackbird holds. The only place in the world that can compete with this type of growth is in the Permian, which is the hottest area in the world today. Wall Street analysts and oil executives rave about how great the Permian is. Top-tier acreage in the Permian is currently selling for US$27,500-UD$50,000… while top-tier acreage in the Montney is selling in the range of US$1,850-$13,800. Blackbird is currently valued at US$3,300 per acre. In other words, Blackbird’s acreage is as good as or better than Permian acreage, but you can buy it for more than an 80% discount. **Even better, the company that buys out Blackbird can pay back the total purchase price for Blackbird from the cash flow in less than four years**, and get thousands of drill locations and decades of liquid rich condensate production growth for free. Again, there is no other junior oil and gas company in North America that I know of with that offers such incredible potential for an acquirer. **Who Could/Should Buy Blackbird?** Understating your exit is critical when investing in natural resource stocks. I believe an exit in Blackbird would most likely be the result of a sale to any company looking for the following (which is every player in the Montney): - **Self-funded production to 40,000 boepd by 2022 with no debt on balance sheet. Blackbird would bring $105 million and no debt to the transaction**. This makes Blackbird one of the most cashed-up junior E&Ps in North America. It has the cash to cover all capital requirements to not only delineate the land over four years of drilling but also grow production to 40,000 boepd by 2022. - **Over 300 drill locations (currently, but it will get to over 1,000) that makes up less than 20% of the land using only six wells per section**. (Encana, on land adjacent to Blackbird, uses 28 wells per section – so I am being conservative). - **Annual production growth rate of 40% in Alberta, Canada which is a politically-stable jurisdiction**. And infrastructure and take away are in place (I believe GHA-gas handling agreements will be in place within 12 months to demonstrate the secure future of Blackbird’s production). - **Capital Intensity** – Looking at total well cost divided by EUR (Estimated Ultimate Recovery) and 1yr EUR, Blackbird is as competitive as the best wells in the Montney. Blackbird’s Capital Intensity is under $15/boe whereas the Wapiti is $21/boe and areas run by well-known large oil and companies of the Montney are above $30. By this metric Blackbird is in the lowest quartile. - **Reserve Replacement** – Liquid-rich producers must replace declines in production with equally-focused liquids rich reserves. Remember oil, gas and condensate all decline at different rates and the liquids decline the fastest. That means that the liquid rich condensate producers must work even harder to keep its liquids production at the same levels. Blackbird’s acreage provides the larger liquid rich condensate producers the ability to tap into liquids rich production immediately. - **Significant value to any acquirer on both a NAV and peer comparison basis.** This is called NAV accretion. Using a 10% discount rate, $50 per barrel WTI and a 1.25 USD/CAD exchange rate, Blackbird has a Net Asset Value of C$1.3 billion. In comparison to its Enterprise Value of C$163 million, Blackbird is considerably undervalued. - **Capital Intensity Efficiencies: Paybacks of less than 12 months.** That is a top tier payback period, and wells could be paid back as quick as seven months at $45 oil. A key fact for any acquirer is minimal shareholder dilution to replace liquids-rich reserves with significant upside potential. - I have another 12 metrics that can show the value of Blackbird. Any CEO that would like my in-depth analysis, by all means please email us at **[katusa@katusaresearch.com](mailto:katusa@katusaresearch.com)** and I will personally walk you through my analysis in person or via conference call. ## **In Summary and Full Disclosure** To be completely transparent, I have a big dog in this fight. I’m not a journalist and I’m not a stock promoter. I’m an investor. I have received zero compensation from Blackbird for sharing my thoughts on the company. I will receive zero compensation from Blackbird in the future. I’m simply a large Blackbird shareholder who knows the company inside and out. An increase in Blackbird’s value is the only way I can benefit from this situation. In my role as a positive activist investor, I’ve spoken to Garth Braun about Blackbird’s execution and business plan more than 100 times over the years. In fact, it’s no secret I urged Garth in 2013 to drop all his other assets and solely focus on the liquid rich areas of the Montney. I believed the area had huge potential. To Garth’s credit, he did exactly that. However, I have no interest in encouraging a deal where one side wins and one side loses. I have an interest in playing the very “long game” and encouraging deals where both sides win. Looking at a potential Blackbird acquisition through this lens, I can confidently state that a purchase up to C$0.90 per share would be a great win for both an acquirer’s shareholders and Blackbird’s shareholders. Also, I believe in the liquids-rich Montney so much, that I do not want cash for my shares. I want shares in the larger entity because I believe a buyout will create a “double bump” in shareholder value. One bump would come in the form of a premium price for Blackbird shares. A second bump would come from the development of the phenomenal assets. Blackbird Energy owns tremendous assets in one of the world’s great shale fields. It is trading for 75% less than a conservative appraised value of those assets. It has no debt and can internally fund 100% of the development of its large land base. Any oil and gas CEO with an interest in Canada – and a fiduciary duty to shareholders – should seriously consider purchasing the company. I believe the decision would go down as a brilliant capital allocation move that will create shareholders value for many, many years. Regards, Marin Katusa CEO, Katusa Research Large shareholder of Blackbird Energy **Disclosures and Disclaimers** Marin Katusa, Katusa Research Inc. (“Katusa Research”), and/or the other principals, partners, directors and officers of Katusa Research (the “Katusa Research Team”) own securities positions in, and are long on, the following companies mentioned above: BBI Additionally, members of the Katusa Research Team currently intend to acquire securities in the following companies mentioned above: BBI No members of the Katusa Research Team have received any commission or other compensation to feature any company mentioned in this newsletter nor are they party to any financial arrangement regarding the securities of such companies or any person who has any interest in such securities. The information contained in this publication is not intended and does not constitute individual investment advice and is not designed to meet your personal financial or investment situation or needs. Neither Marin Katusa nor Katusa Research are registered broker-dealers or financial advisors. Never make an investment based solely on what you read in an online newsletter, including this newsletter, especially if the investment involves a small, thinly-traded company that is not well known. Past performance is not indicative of future results. You should independently investigate and fully understand all risks before investing. When investing in speculative stocks, it is possible to lose your entire investment. Information contained in such publications is obtained from public sources believed to be reliable, but its accuracy cannot be guaranteed. Further, the views expressed herein are of Katusa Research as of the date hereof, are subject to change and the Katusa Research Team does not undertake any obligation to update such information or views. None of the members of the Katusa Research Team shall be liable for any damages, losses, or costs of any kind or type arising out of or in any way connected with the use of this newsletter. The information in this publication reflects the current opinion of the publisher, is subject to change, and may become outdated. The publisher undertakes no obligation to update any such information. Unauthorized Disclosure Prohibited. The information provided in this publication is private, privileged, and confidential information, licensed for your sole individual use as a subscriber. Katusa Research reserves all rights to the content of this publication and related materials. Forwarding, copying, disseminating, or distributing this report in whole or in part, including substantial quotation of any portion the publication or any release of specific investment recommendations, is strictly prohibited. Click the link to review the detailed [Terms and Conditions.](https://katusaresearch.com/terms-conditions-use/) --- # Why I’m Finally Buying Copper Stocks - URL: https://katusaresearch.com/im-finally-buying-copper-stocks/ - Type: article - Published: 2017-08-18 - Updated: 2019-05-07 - Author: Marin Katusa Regular Katusa Research readers know that one of the biggest, most important, most lucrative trends of the next 20 years will be the rise of green energy… and the concurrent decline in fossil fuel consumption. Thanks to radical improvements in technology, solar energy and wind energy are now cheaper than energy from fossil fuels in many areas. Also, pollution and climate change are huge worries around the world. To go along with voters’ desires and fight what they see as man-made climate change, governments will spend trillions (with a “t”) of dollars on solar and wind energy. They will pass laws to encourage green energy production and consumption. They plan to revolutionize the way we power our electrical and transportation systems. Huge winners and huge losers will be created. It’s going to be one of strongest financial tailwinds we’ll see in our lifetime. Making money from this trend will be like selling web services during the ’90s Internet gold rush… or selling bullets during World War II. Like any big trend, there are many ways to position yourself to benefit from it. For example, my readers and I own one of the world’s premier small cap green power operators. And over the coming months, I plan to accumulate stakes in some of the world’s best copper deposits. That’s right. Copper has become a great way to invest in the green energy super-trend. I believe it can make us a great deal of money over the next five years. To fully understand the upside potential copper mining stocks have right now, we need to quickly cover where the copper market has been, and how the right copper investments can create great wealth quickly. **Making Huge Returns in Copper 101** Copper is a vital building ingredient in nearly everything around you. It’s used for wiring and plumbing in houses. It’s used in cars, infrastructure projects, and appliances. It’s a major component of power lines and electric motors. And as the 2009 – 2011 period shows us, this vital building material is capable of staging incredible rallies. Like all natural resources, copper goes through huge booms and busts. That’s why we say resources are “cyclical.” If you get in early before the booms and avoid the busts, you can make a lot of money in natural resources. As you can see from the chart below, copper experienced a huge bust during the 2008 financial crisis. Investors were terrified the next depression was around the corner… which would mean a lot less copper consumption. But as we know, there was no depression. Central banks stepped in and created enormous amounts of credit…so much that asset prices soared off their 2009 bottoms. Copper was no exception. Because they are leveraged plays on the copper price, Copper miners soared. Some copper miners, such as Copper Mountain, Taseko Resources, First Quantum, and Hudbay Minerals increased in value by over 1,000% in the years following the crisis. Over the past four years however, it’s been downhill for copper investors. Global economic growth has been sluggish…and copper plummeted from $4.50 per pound to $2 per pound, a decline of more than 50%. You can see this bear market in the long-term chart below: Note the right side of the chart. It shows that copper has rallied off its 2015 lows. I believe this rally will turn into a long period of rising copper prices. To show you why, I’ll cover both supply and demand. **Why Copper Demand Stands to Increase… a Lot** Let’s start with the obvious demand growth catalyst: Electric Vehicles (EVs). I believe this sector will enjoy tremendous growth over the next 20 years. EVs are a major part of reducing carbon emissions around the world. Electric vehicles require three times more copper than conventional vehicles with international combustion engines. On average, an internal combustion engine uses 55 pounds of copper. A hybrid uses about 110 pounds and an EV uses 165 pounds of copper. Over the last five years, EV sales have grown at a compounded growth rate of 32% annually. You can see this uptrend in the chart below.In 2016, 159,139 EVs were sold in the U.S. EVs made up 1.6% of the market. It is expected that by 2021, EVs will make up 4% of the total vehicle sales in the U.S. The consensus from independent analysts, including the brain trust at Bloomberg, is that by 2030 the adoption of EVs in the U.S. will be 34%. What does that mean for copper demand? First, we have to make some assumptions to calculate the net effect on the copper demand. Let’s assume a conservative adoption rate by 2030 is 20%, not the accepted 34%. By using an adoption rate of 20%, that would mean by 2030, there would be 3.6 million EVs sold in the U.S in 2030. But let’s assume EV technology becomes much more efficient and the amount of copper needed per car decreases to 100 pounds by 2030. Conservatively the U.S. automobile sector in 2030 alone will consume 1.1 billion pounds of copper, of which the EV sector will consume 360 million pounds or 33%. That is a lot of copper. Just the new EVs, using my conservative metric, will increase U.S. annual copper consumption by just under 9%. Now let’s look at China. China is the world’s largest vehicle market. In 2016, 282,000 EVs were sold in China, which was 77% more than what was sold in the U.S. This is where the numbers become mind-boggling. In 2016, 28 million vehicles were sold in China. The EV market in China is 1% of total sales. The Chinese government is planning for 4% EV adoption by 2021, which would mean 1.12 million EVs will be sold in China in less than five years. Again, using our conservative estimate of 100 pounds of copper per EV, in 2021 China’s EV market will consume 112 million pounds of copper on top of the 1.35 billion the rest of the Chinese vehicle market will consume. The Chinese government plans on mandating specific quotas of EVs its makers must follow. The government plans on making the automakers responsible to meet the quotas, not the public. Also, China also has similar subsidies as the U.S. for the adoption of EVs. China has stated it wants 7 million EVs (or 20% of the 35 million vehicle market) by 2025. That means the total consumption of copper in the Chinese vehicle market will be 2.1 billion pounds, of which 700 million pounds will be just EVs. I think you get the picture with just the U.S. and China. The rest of the world will follow. The chart below published by Bloomberg New Energy Finance shows that by 2040, the global EV market could get to over 60 million vehicles sold that year alone. On purpose, I underestimated the use of copper in EVs. The fact is, scientifically speaking, for the EVs to become even more efficient, they would use more copper per vehicle, not less. That’s an interesting topic for another day, but it comes down to efficiency. Aluminum cannot replace copper in EVs for many reasons. **Infrastructure projects** What I didn’t mention yet is the amount of “plug in” infrastructure that will be required to meet EV demand. All those EVs need special charging stations. China is heavily investing in new electricity grids and the U.S. under President Trump plans major infrastructure projects that will all create new demand for copper. **All of this means that in just 10 years, the growth for copper demand will compound at 4-5% annually. That’s a lot of growth for an already mature market.** I think this type of increase in demand will provide a conservative baseline for copper to reach $5 per pound by 2020. Sure, recycling of copper will meet some of the demand, but at $4.50 per pound, recycling met less than 20% of the demand. Recycling copper is a high cost solution. Also, there are new restrictions on recycling copper in China that will also increase the cost of recycling. Another major new source of demand for copper will be the Smart Home. Smart homes use over twice as much copper than a traditional home. Installing the solar roofs, and all the other features that include the electrification of a smart home will double the use of copper in a house. Historical global production copper demand growth is 3.34% annually. The reality is, higher copper prices will be required to bring on new production. Historically, global production has increased at 3.42% annually. That includes the hundreds of billions of dollars that went into the sector during the greatest bull market in copper history, driven by the modernization of China, in the 2000s. That said, I have conservatively analyzed copper demand growth using 3.75% growth and I’ve increased the supply to 3.5% annual growth. The chart below uses actual historical production and consumption numbers annually and projected out using the above metrics mentioned above to 2040. [![170817 global mined copper production 3%]](https://katusaresearch.com/wp-content/uploads/2017/08/170817-global-mined-copper-production-3.png) The above chart is the conservative scenario which clearly states there will be a bull market in copper. And I believe the above scenario will take copper to $5 per pound by 2020. But it’s the next scenario that could make copper the hottest commodity over the next decade. It is expected that new EV demand globally will increase copper demand over the next 25 years by 1.25% annually. Combine that the existing 3.34% historical average, and there could be a scenario that the growth rate of copper reaches over 4.5% annually over the next 25 years. The chart below shows the historical supply vs demand chart of copper historically and for the growth of copper globally we used 4.5% annually. We have projected the growth rates of demand and supply to 2040. If this happens, copper will be treated as a precious metal as there just is not enough copper economically available under $5/lb to meet the global demand. [![170817 projected global refined copper emand vs production]](https://katusaresearch.com/wp-content/uploads/2017/08/170817-projected-global-refined-copper-emand-vs-production.png) As a result, copper will have an incredible bull market. The major takeaway is that the tight copper market is going to become very tight over the next 60 months and then copper demand growth will significantly outpace the available production. I believe this will result in an incredible bull market for copper. **The Copper Bear Market is Over** Given big decline in prices from 2010 to 2015, you might think copper producers would have curtailed production. That’s not the case. As you can see in this chart of global copper production, miners have increased production. But those same producers will soon hit a wall, as I will explain shortly. The producers did whatever they could to keep their operations alive, including “high grading” their mines. High grading occurs when a miner extracts the highest-grade ore in a mine in response to low prices. It’s a near term solution, that has a negative long-term effect on the ore body. Nothing is worse in mining than high grading your deposit during a period of low commodity prices. This is because when the market turns around and prices are higher, you are left with a high strip ratio and low-grade ore. Basically, you’re left with the warm beer at the bottom of the bottle. This means that mines who have high graded their productions will get smacked in the face with higher costs of copper production. But the situation is getting even more bullish for copper… The price of copper is set to break $3 per pound, but can the infrastructure in place handle any new production? I believe it will struggle and fail to accommodate meaningful production increases. Let me explain. Operating a big open pit copper mine requires enormous amounts of electricity. It powers electric shovels and trucks. It powers the mills that crush the rock. It powers lights. Depending on the operation, electricity can be anywhere from 15-30% of the cost per pound of copper produced. During the downturn of the last few years, electrical grids in many parts of the world that have advanced promising copper deposits (that should be soon in production) have not increased electrical capacity that can meet the demand from the copper mines. A general rule of thumb is for 100 million pounds of open pit copper, a mine needs 65 MW of electrical capacity (an enormous amount of electricity). This capacity requirement is equivalent to 65,000 homes needing electricity. As the project gets bigger, the ratio improves by 15% for every 100 Million pounds. Many of the expected copper projects that the market expects will come online shortly in Africa cannot tap into in the existing electricity grid because there is simply no excess electrical capacity. As a result, the potential copper mine will have to make up for the lack of electricity from the grid with their own, higher-cost sources of electricity, whether it’s by installing diesel generators or by building their own power plants. In other words, the price of copper under $4 per pound doesn’t justify the infrastructure capex. Also, expect certain countries in the third world to use access to the existing electrical grid as another piece of leverage for a piece of the profits at higher copper prices. For example, large copper producer First Quantum Metals was just told by the Zambian government that the amount of electricity that will be supplied to their copper operations will be reduced. The Zambian government is using electricity as leverage for a bigger piece of the project’s profits. But at the end of the day, this will result in a higher cost of production because now the company will either have to pay higher prices for electricity or install supplemental power sources at a much higher cost. This is just another form of nationalization that I have written about over the years. The point is, copper producers are facing rising costs. Coupled with rising demand, it ensures that copper has found its low point. **The Expert’s Way to Buy Copper Assets** Last year I stated we would wait 12 months for the market supply and demand to find a base, and that is exactly what has happened. Prices have finally moved significantly off their 2015 bottom. The big trend has changed from bearish to bullish. Now is the time to start buying world-class, big, top tier copper assets in politically-stable jurisdictions. The best part of the above statement is that there aren’t many projects that fit the above description. And because of that, they will fetch a premium during the coming copper asset consolidation. Over the next 24 months, I believe we will see some significant consolidation in the copper development and production sector. But before you invest, you need to know about the biggest secrets in the copper sector that nobody wants to talk about. **Your Edge in the Market: What Most People Don’t Know About Copper Projects ** There are some big secrets when it comes to what majors look for in world-class projects. Let’s start with something called “clean concentrate.” Copper concentrate is what a miner sends to a smelter after the rock that hosts the copper is crushed, grinded and the copper is extracted and concentrated. The smelter turns that copper concentrate (usually concentrate is anywhere between 22.5-30% copper) into the copper we use in buildings and manufacturing. When a copper producer sends its concentrate to a smelter, it can contain nasty stuff like mercury, arsenic, and antimony. That’s what we call dirty concentrate. When copper concentrate has high levels of “nasties,” it is “dirty” concentrate. Not only does a producer get “penalized” for dirty concentrate (meaning it gets less per pound of copper than “clean concentrate”), some smelters flat out refuse dirty concentrates when there is an excess supply of it. The global smelters are in high demand for “clean concentrate” You probably didn’t know this… but for years smelters have been dealing with this secret by “blending” the dirty concentrate with clean concentrate. Ironically, mines in Chile (the world’s largest copper producing country) such as the giant Escondida mine are showing higher *nasties* compared to when they first started many years ago. Many of the large copper producing mines will go through the same thing. The Asian smelters who are now dealing with a lot of supply of dirty concentrate can dictate smelting fees, which means the dirty concentrate producers are getting slaughtered. This means that BHP, Rio Tinto, MMG and Freeport all are dealing with this very dirty secret. Nobody is talking about this, but they will be soon. This is a small nuance that can have huge effects on a copper investment. A company can have a lot of copper in the ground, but dirty concentrate production can kill it, and your investment. Another major factor is the logistics to the smelter. Where will the copper company send their copper concentrate too? Access to a port is just one of the many concerning issues to check off the list. Another major factor is the question of whether the smelter that the company believes is the logical choice even want that copper concentrate. To sum up, I am very bullish on top tier, world class copper deposits that have the following: Lowest-cost production, produce clean concentrate and are located in safe jurisdictions right now. These assets will be the first to be bought out over the next 24 months in the copper sector. In the upcoming issue of my premium research service, *Katusa’s Resource Opportunities*, I will explain in detail the copper assets any serious resource investor should consider buying for their portfolio. Regards, Marin Katusa P.S. I expect to make at least 300% in the coming copper rally. To get my top recommendations, along with all my other research, consider becoming a member of *Katusa’s Resource Opportunities *[right here](https://katusaresearch.com/subscribe/). --- # We’re Moving Closer and Closer to a Major Buying Opportunity in Oil - URL: https://katusaresearch.com/moving-closer-closer-major-buying-opportunity-oil/ - Type: article - Published: 2017-08-11 - Updated: 2019-08-06 - Author: Marin Katusa ***As we entered the summer months, many investors wanted to believe a terrible time for oil and gas stocks was nearing an end. Now that we’re six weeks into summer, we see that’s not the case. During the first half of 2017, oil and gas stocks were among the market’s worst performers. The Dow Jones US Oil & Gas Index declined 17%. Some of the more highly levered oil and gas stocks fell twice that much. After such a big fall, value-hunting investors began buying. But last week, we saw that oil and gas stocks are still vulnerable to waves of selling that send them to 52- week lows. Take Pioneer Natural Resources for example. In the mutual fund and hedge fund world, it’s considered one of the premier independent oil and gas companies… a “go to” stock for getting exposure to the oil sector. After reporting second quarter earnings and stating it would delay drilling projects, Pioneer stock was crushed 17% in the following two days and hit its lowest level of the year. A true wipeout… in one of the sector’s best operators.[![Oil stock pioneer natural resources chart]](https://katusaresearch.com/wp-content/uploads/2017/08/100817-Oil-stock-pioneer-natural-resources-chart.png) Pioneer is not an isolated case. Last week, a handful of other oil and gas stocks hit yearly lows, including Apache, Range Resources, Southwestern Energy, Parsley Energy, RSP Permian, Sanchez Energy, Carrizo Oil & Gas, and Noble Energy. An especially notable loser last week was Canadian producer Seven Generations Energy. It’s a major player in one of my favorite areas for investment, Canada’s prolific Montney shale. It has exceptional assets. However, quality was no sanctuary last week. After reporting second quarter earnings, “Seven Gen” dropped as much as 18% and reached a fresh yearly low. [![oil seven generations chart]](https://katusaresearch.com/wp-content/uploads/2017/08/100817-oil-seven-generations-chart.png) ***Regular readers will recall [my writings on the oil patch back in June](https://katusaresearch.com/guided-tour-oil-crash-outlook-next-18-months/). At the time, I stated that although the oil and gas sector had suffered massively in 2017, more pain was on the way. Last week’s declines show that my expectations are being met. They are also moving us closer to a significant bottom in the oil sector. I’m getting closer and closer to pulling the trigger on high-quality names marked down to discount prices. More on this to come. **How Index Funds Are Impacting the Gold Sector** Over the past seven years, index funds and exchange-traded funds (ETFs) have dominant forces in the market. Typically, these funds don’t try to beat the market. They are the market. They own broad indexes (like the S&P 500) or sector groups (like retail or energy). And they’ve become widely popular with investors. Index funds are so popular that many investors are warning about the effects index funds are having on the overall stock market. Since index funds buy stocks based on an index – not good old fashioned fundamental analysis – they have the potential to make popular, overvalued stocks even more overvalued… and warp the market. What you may not have heard however, is how ETFs are influencing returns in the gold stock sector. Since spring, the smaller mid-tiers (sub 400,000 ounces of gold production annually) have experienced significant selling which we will explain later. This significant selling of the smaller mid-tiers has lowered the overall mid-tier index relative to its performance to the senior index in past years. And still true today, as a group, the mid-tiers overall are cheaper than the senior gold producers. The chart below is the Katusa Senior Gold Index which is made up of the 15 global publicly listed primary gold producers that produced over 1 million ounces of gold in 2016. The senior golds have outperformed the Katusa Mid-Tier Gold Producers which is made up of 25 publicly listed primary gold producers that produced between 250,000 and 1 million ounces of gold in 2016. There are 15 primary gold companies that are publicly listed that produce over 1 million ounces annually. There are 25 publicly listed mid-tier gold companies (on all global stock exchanges) that produce between 250,000 to 1 million ounces annually. The 15 senior gold producers combined produce 34.69 million ounces in 2016, whereas the 25 mid-tier produced a combined 12.4 million ounces in 2016. The combined market capitalization of the 15 senior gold companies is $130.9 billion. The 15 senior gold producers combined have $38.5 billion in debt. The 25 mid-tier gold producers have a combined market cap of $52 billion and have $12.4 billion in debt. On average, using a market capitalization value per ounce of gold produced, the senior gold producers index is getting valued $3,773 per ounce of gold produced. On average, the senior gold companies have $1,110 of debt per ounce of gold produced. The Mid-tier gold producers on average are valued at $4,200 per ounce of gold produced and have $997 of debt per ounce of gold produced. The mid-tier gold producers have a more disciplined balance sheet than the seniors, as seen by the data above. But then why are senior gold producers outperforming the mid-tiers? One reason “big gold” is outperforming “mid-tier gold” is the recent restructuring of the VanEck Junior Gold Miner ETF, ticker GDXJ. Created in 2009, GDXJ has become a big hit with gold stock investors. For years, it was a one click way to buy a basket of small and mid-tier gold exploration, development, and production companies. Investors reckoned that by holding GDXJ, they get “juice” on the upside, but not the downside risk associated with owning just one or two gold juniors. At one point this year, the fund had amassed more than $5 billion in assets. This tremendous growth was a problem for VanEck. GDXJ grew too large to own many of the smaller stocks in its universe. GDXJ took in more cash than it could place in small and mid-tier gold stocks. Rather than turn money away, VanEck restructured the fund this year. It sold off some of its smaller holdings and expanded its universe to some larger gold stocks. In a few cases, GDXJ owned up to 19.9% of many of the producing mid-tier companies. When the GDXJ decided to rebalance, it reduced its exposure in mid-tiers and increased exposure in senior gold names. The resulting selling pressure directly affected the share price of the mid-tier companies (in the short term). Lesson: Know who the other shareholders of the company you invest in because their decision to sell can directly affect your portfolio. Regards, -Marin P.S. In the July issue of *Katusa’s Resource Opportunities*, my team and I put together a watch list of oil companies to buy at alligator prices. The correction we foresaw in these companies is happening at a rapid rate which means they’re becoming very attractive. Subscribers will have the chance to buy these great companies at fantastic valuations. To come on board as a subscriber and get the names of these companies on our target list, [click **here.**](https://katusaresearch.com/subscribe/) (***Note values per ounce of gold produced and debt updated as of August 11, 2017***) **Disclosure** Neither Katusa Research nor Marin Katusa own shares in the companies mentioned in this article. No members of the Katusa Research Team have received any commission or other compensation to feature any company mentioned in this newsletter nor are they party to any financial arrangement regarding the securities of such companies or any person who has any interest in such securities. The information contained in this publication is not intended and does not constitute individual investment advice and is not designed to meet your personal financial or investment situation or needs. Neither Marin Katusa nor Katusa Research are registered broker-dealers or financial advisors. Never make an investment based solely on what you read in an online newsletter, including this newsletter, especially if the investment involves a small, thinly-traded company that is not well known. Past performance is not indicative of future results. You should independently investigate and fully understand all risks before investing. When investing in speculative stocks, it is possible to lose your entire investment. Information contained in such publications is obtained from public sources believed to be reliable, but its accuracy cannot be guaranteed. Further, the views expressed herein are of Katusa Research as of the date hereof, are subject to change and the Katusa Research Team does not undertake any obligation to update such information or views. None of the members of the Katusa Research Team shall be liable for any damages, losses, or costs of any kind or type arising out of or in any way connected with the use of this newsletter. The information in this publication reflects the current opinion of the publisher, is subject to change, and may become outdated. The publisher undertakes no obligation to update any such information. Unauthorized Disclosure Prohibited. The information provided in this publication is private, privileged, and confidential information, licensed for your sole individual use as a subscriber. Katusa Research reserves all rights to the content of this publication and related materials. Forwarding, copying, disseminating, or distributing this report in whole or in part, including substantial quotation of any portion the publication or any release of specific investment recommendations, is strictly prohibited. Click the link to review the detailed [Terms and Conditions.](https://katusaresearch.com/terms-conditions-use/) --- # Why Big Oil Will Become Big Green - URL: https://katusaresearch.com/big-oil-will-become-big-green/ - Type: article - Published: 2017-08-04 - Updated: 2019-05-07 - Author: Marin Katusa On June 9, 2017, the shareholders of oil major ExxonMobil enjoyed an incredible milestone. The company paid a quarterly dividend of 77 cents per share. This dividend payment was larger than the one ExxonMobil paid to shareholders at the same time as the year before, and marked the 35th consecutive year ExxonMobil increased its dividend payment. When you consider how the brutal competition of capitalism makes it difficult for most companies to even pay dividends – let alone steadily increase them for years year – you realize *35 consecutive years* of dividend raises is an impressive accomplishment. Because of dividend records like this, many investors view the dividends paid by ExxonMobil and its Big Oil peers such as Chevron, Shell, and BP (British Petroleum) as sacrosanct… income streams you can count on during retirement. Big Oil has paid reliable dividends for so long that many investors see their Big Oil shares like they would grandma’s ring or the family farm. And you read it here first: If Big Oil companies want to be seen as steady dividend payers for years into the future, they are going to need to become Big Green. They are going to have to get into solar, wind, and hydroelectric energy in a big way. I know many will view my suggestion as ludicrous. But after you review the data and facts as I have, I’m confident you’ll agree. **An Unstoppable Trend in the World’s Biggest Business** The business of providing energy to power our cars, trucks, airplanes, factories, and homes is the biggest business in the world. And it’s changing in a big way. In the year 2000, renewable energy (solar, wind, hydro, etc.) provided 1.4% of the world’s power. Since then, renewable energy’s share of the global power market has increased to 7.5%. It’s a stunning share increase of more than 400%. The chart below shows the global market share of renewable power since 1990. Renewables are grabbing more market share because they are getting cheaper. As I’ve written many times in the past few years, the cost of renewable energy sources like solar and wind power have plummeted in the past decade. In many areas, unsubsidized solar and wind power is now cheaper than power generated by burning fossil fuels. Plus, the political pressure to move from fossil fuels to renewables is incredible. It’s not going away. The world isn’t going to stop using oil for a long time. There will money to be made in oil for a long time. However, the best days of fossil fuels are in the past. The world’s largest oil companies know it. But that doesn’t mean Big Oil has to shrivel up and die. Smart oil executives don’t see themselves as just in “the oil business.” They see themselves as being in the “energy business.” If that energy comes from oil, natural gas, solar, or wind, then so be it. Smart oil executives know the transition from dirty energy to clean energy will be the biggest strategic shift in their market in the coming decades. Big Oil has ignored renewable energy for a long time. But we’re starting to see a shift in its thinking. ***For example, in 2016, the French supermajor, Total SA, acquired green energy storage manufacturer Saft for $1.1 billion. ***Statoil, Norway’s National Oil Company, partnered with Alterra Power Corp and the National Energy Authority of Iceland to drill the deepest geothermal well in history. ***And perhaps most significantly, the European oil giant Royal Dutch Shell is looking into buying Equis Energy, Asia’s largest green power producer. Equis Energy has put itself up for sale and Shell and a handful of large pension funds are evaluating it. There is no formal offer from Shell yet, but I believe Shell will make a bid. I think it’s a savvy business move. Buying Equis Energy would provide significant perpetual cash flow and dividend potential. Equis Energy is a private company, so financial details are scarce. At the project level, Equis Energy has assets in Indonesia, Japan, Taiwan, Philippines, Thailand, Australia and India. Total operational green power capacity is 4.4 gigawatts. This is enough electricity to power over a million homes. Furthermore, Equis Energy has a robust pipeline with an additional 6.7 gigawatts of development stage green power production capacity. Using industry average capacity factors and efficiency rates, Equis Energy likely generates between 10 to 12 terawatt hours (TWh) of green power. Its reported that the purchase price being considered for Equis Energy is $5 billion. This yields an implied valuation of approximately $440 per MWh of green power production. Compared to industry averages, this is a high multiple. **Why Green Energy Offers Safety and Stability** Big Oil executives have to make multi-billion dollar capital allocation decisions that have 15 – 30 year time frames. Their projects are among the biggest and most expensive projects on Earth. They have to think very big and very long-term. When it comes to investing $5 billion in an oil and gas project, oil executives face many unknowns. What kind of engineering challenges does the project present? How will electric cars affect future oil demand? How will developing nations like China and India affect future oil demand? How will plunging costs of solar and wind energy affect demand for natural gas (which is also used heavily in power generation). When you’re putting billions of dollars to work, the less unknowns, the better. That’s why Shell is considering a multi-billion-dollar investment in green energy. Shell CEO Ben Van Beurden stated that the company has changed its mindset to a “lower forever” oil price environment. A lower forever mindset means less capital expenditures invested in expensive offshore oil projects or projects in remote areas with little infrastructure and far from refineries. These large conventional oil deposits are what currently move the oil production and cash flow needles for Big Oil. Big Oil’s attraction to green energy is the long project life and cash flow stability which comes with it. The average life span of a wind or solar farm is 25 years. Owners of green energy projects can sell their power through guaranteed, multi-decade contracts called purchase power agreements (PPAs). Backed by a PPA, the cash flow generation from a green energy asset can be easily modeled for its entire life. Then, a wind farm, for example, can be updated with newer and even more efficient wind mills and have another life of 25-30 years. Big Oil doesn’t like taking big risks. Big Oil wants stability and the ability to pay its shareholders solid dividends every quarter. Compared to power generation projects, long life conventional oil projects carry massive price and project execution risk. For example, Shell recently spent $5 billion drilling oil exploration wells off the coast of Alaska. The results yielded no oil and $5 billion vanished from Shell’s bank account, never to return. Not only that, the chances that the project would have been deemed economic at $50 oil are slim. Compared to that experience, buying Equis for $5 billion makes a lot of sense. Historically, Big Oil stayed away from renewables because it cannibalized the fossil fuel business. Big Oil now knows it either must adapt to the new reality or be left behind. There is no risk in cannibalizing the fossil fuel market. We know this because nearly every country in the world has signed agreements to lower carbon emissions. We now have car companies like Tesla and BYD building affordable electric vehicles. Utility companies like Duke Energy and Dominion Energy are building renewable power plants. Companies like Facebook, Microsoft, Google and Amazon are signing offtake agreements for green power generation. Even Saudi Arabia is getting into the green energy business. Saudi Deputy Crown Prince Mohammed bin Salman wants Saudi Arabia to spend over $30 billion on the country’s renewable energy sector. It’s a brilliant plan for his nation. It is exactly what Saudi Arabia should be doing. In fact, Russia should follow Saudi Arabia’s lead. In 50 years, Saudi Deputy Crown Prince Mohammed bin Salman will be seen as the most visionary of all the Kings before him because he diversified the country out of its dependence on oil. With or without Big Oil’s involvement the green energy revolution will happen. The chart below shows the increase in global wind and solar power consumption from 2000 to 2016. The increase in global green power consumption is over 750%. It’s a strong trend that will not reverse. Right now, Big Oil controls about 17% of the world’s oil and gas production and less than 1% of the world’s renewable energy production. If Big Oil companies want to maintain their status as elite dividend payers – and avoid getting swept under the fossil fuel rug – they must begin acquiring renewable power assets. Big Oil needs to become Big Green. Regards, Marin **Disclosure** Neither Katusa Research nor Marin Katusa own shares in the companies mentioned in this article. No members of the Katusa Research Team have received any commission or other compensation to feature any company mentioned in this newsletter nor are they party to any financial arrangement regarding the securities of such companies or any person who has any interest in such securities. The information contained in this publication is not intended and does not constitute individual investment advice and is not designed to meet your personal financial or investment situation or needs. Neither Marin Katusa nor Katusa Research are registered broker-dealers or financial advisors. Never make an investment based solely on what you read in an online newsletter, including this newsletter, especially if the investment involves a small, thinly-traded company that is not well known. Past performance is not indicative of future results. You should independently investigate and fully understand all risks before investing. When investing in speculative stocks, it is possible to lose your entire investment. Information contained in such publications is obtained from public sources believed to be reliable, but its accuracy cannot be guaranteed. Further, the views expressed herein are of Katusa Research as of the date hereof, are subject to change and the Katusa Research Team does not undertake any obligation to update such information or views. None of the members of the Katusa Research Team shall be liable for any damages, losses, or costs of any kind or type arising out of or in any way connected with the use of this newsletter. The information in this publication reflects the current opinion of the publisher, is subject to change, and may become outdated. The publisher undertakes no obligation to update any such information. Unauthorized Disclosure Prohibited. The information provided in this publication is private, privileged, and confidential information, licensed for your sole individual use as a subscriber. Katusa Research reserves all rights to the content of this publication and related materials. Forwarding, copying, disseminating, or distributing this report in whole or in part, including substantial quotation of any portion the publication or any release of specific investment recommendations, is strictly prohibited. Click the link to review the detailed [Terms and Conditions.](https://katusaresearch.com/terms-conditions-use/) --- # Gold Miners Are Running Out of Gold. Here’s Why That’s Good for You - URL: https://katusaresearch.com/gold-miners-running-gold-heres-thats-good/ - Type: article - Published: 2017-07-28 - Updated: 2019-05-07 - Author: Marin Katusa What’s bad for large gold miners could be very good for gold stock investors for the next few years. The catch is, you must be a certain type of gold stock investor. Put simply, large gold miners are running out of gold. Rather than look for more in jungles or frozen tundra, gold miners will do the smart thing. They’ll search for gold in the stock market… and go on a buyout binge of small and mid-cap companies with proven gold reserves. Most mining investors don’t stop to think about it, but when a gold company sells an ounce of gold, it erases a little bit of its balance sheet value. This stands in contrast to companies that make candy, soda, or beer. These businesses don’t deplete their balance sheets in the normal course of producing revenue. Gold companies do. And this is why they must constantly replenish their reserves or they’ll mine themselves out of existence. As you read this, large gold miners are finding it difficult to replace the reserves they dig out of the ground and sell. There are several reasons this is happening. For starters, most of the world is “picked over” when it comes to gold deposits. After centuries of digging and drilling for gold, we’ve found most of the large deposits. The chart below shows how annual gold discoveries have plunged in the past 10 years (2015’s level is 85% below 2006’s level). You also have falling gold prices. In 2011, gold reached a high of $1,900. Since then, investors have preferred stocks and bonds to gold, and gold has dropped to $1,252. This large decline means gold companies can’t mine some of their reserves economically, which means they can’t claim as many ounces in reserves as they could in 2011. The chart below shows how gold major’s reserves have declined dramatically since 2011. They are now below 2004 levels. Gold’s decline also means less revenue for gold companies, which means they have less money to spend on project development and exploration. The chart below shows how gold miners have slashed capital expenditures (called capex) by 58% from 2012 levels. This all means major gold companies need to beef up their reserves by purchasing the best projects owned by smaller gold companies. They have to show their shareholders growth, or the shareholders will begin to jump ship. We’ve seen some big ones take place this year. Gold major Goldcorp took out small cap Exeter Resources earlier this year, at over a 50% premium. Goldcorp’s CEO David Garofalo has openly stated that Goldcorp is aggressively looking to take advantage of the current downturn by picking up assets. Royalty companies such as Sandstorm are even getting into the buyout mix with its recent purchase of Mariana Resources. I think Sandstorm made a smart move. Mariana’s Hot Maden project in Turkey is high grade, simple to put into production, and it will get a lot bigger. I think the sweet spot of buyout targets will be mid-tiers and juniors that have large, district-scale projects that can move the needle for a major. I personally believe that there is going to be consolidation in the mid-tiers (defined as having between 100,000-1,000,000 ounces of annual production). I’m not alone in this view. My friend Rob McEwen, the founder of Goldcorp and a living legend in the gold industry, recently said to me: *“The mid-tiers’ production curve is going up. The seniors’ production curve is going down. So the performance is going to be in the mid-tiers and the juniors. But the mid-tiers need to get size as the market has become increasingly dominated by passive investment through ETFs, rather than active investment managers.”* Rob went on to describe how the proliferation of ETFs will influence the thinking of gold executives: *“The number of the indices that the company is in is going to increasingly determine the volume and market liquidity of a company’s shares. Therefore, some mid-tiers are probably going to be looking for stocks that are ignored by the indices and ETFs. So if you have a good project that’s got room to grow and you’re not in a lot of indices, you might want to be looking over your shoulder or people should look at you to buy before the bigger guy steps in.”* I believe all the data points to a lot of buyout deals taking place over the next 24 months. Gold investors are smart to become familiar with [what kind of assets the majors want to buy](https://katusaresearch.com/introducing-great-new-tool-gold-investors/)… along with the world’s 10 or 20 best, most attractive projects that large miners will see as critical to their survival and growth. Regards, Marin Disclosure: Marin Katusa and/or Members of Katusa Research own shares and are long the following companies listed: None Marin Katusa and/or Members of Katusa Research plan to buy shares in the following companies listed above: None Marin Katusa, KCR Fund and other entities in which he has an interest in via share holdings and investments have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.Marin Katusa/Katusa Research have not received any compensation (stock or cash), fee or commission to feature any company mentioned in this newsletter. Marin Katusa nor Katusa Research are not registered broker-dealers or financial advisors. Never, ever, make an investment based solely on what you read in an online newsletter, including this newsletter, especially if the investment involves a small, thinly-traded company that is not well known. Past performance is not indicative of future results and it should not be used as a reason to purchase any stocks mentioned in any Katusa Research newsletter or on the Katusa Research website. Marin Katusa and Katusa Research shall not be liable for any damages, losses, or costs of any kind or type arising out of or in any way connected with the use of this newsletter. You should independently investigate and fully understand all risks before investing. When investing in speculative stocks, it is possible to lose your entire investment. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. Marin Katusa nor Katusa Research know your financial situation or tolerance for risk. Opinions expressed in such publications are those of the publisher and are subject to change without notice. --- # How to Become One of the Most Valued Suppliers to the Booming Electric Car Industry - URL: https://katusaresearch.com/become-one-valued-suppliers-booming-electric-car-industry/ - Type: article - Published: 2017-07-21 - Updated: 2019-08-05 - Author: Marin Katusa As electric vehicles have grown in popularity over the past decade, the term “range anxiety” has become an obsession in the auto industry. In fact, you could say the race among electric car makers like Nissan, Tesla, BMW, and Chevy is the race to become the world champion of overcoming range anxiety. A big breakthrough in treating this “disorder” would be worth hundreds of billions of dollars. Range anxiety is the fear drivers get from knowing the battery in their electric car could run of out of charge… and leave them stranded far away from a charging station. Although electric cars have come a long way over the past decade, they are still light years behind internal combustion engines when it comes to fueling infrastructure. Batteries drain quickly and they must be recharged. The popular 2016 Nissan Leaf electric car averages 107 miles per charge on its 30kWh battery. Most gasoline-powered cars enjoy ranges over 300 miles. A limited number of miles per battery charge is a big deal because regular gas stations are much, much more common in most places than charging stations. In most areas, the guy leaving his driveway in an electric car has a lot less options for refueling than the guy in a Chevy Suburban. You might want to do your part to save the Earth, but if doing that means constantly worrying about getting stranded with a low battery, you’ll probably choose the gas guzzler. Most folks choose not to deal with “range anxiety.” This aspect of owning electric cars is one of the biggest obstacles to their widespread adoption. Some of the smartest people in the world are working on overcoming this obstacle. They have access to billions of dollars in capital to further research and development. After all, they know long driving ranges and abundant charging stations will create a huge boom in electric car adoption. Again, a big breakthrough in battery technology – something that massively increases the range of EVs – would be worth hundreds of billions of dollars. Advancements in batteries have – and will continue to have – large effects on certain niche resource markets. It’s estimated that that nearly 1 million new electric vehicles will be sold in 2017. Below is a chart that shows the enormous increase in EVs on the road since 2010. Note the explosion in Chinese sales. The world’s most populous country is adopting EVs in a big way. A driving factor in building and selling affordable electric vehicles is bringing down the cost of car batteries. Since 2008, the cost of an electric car battery has declined by 80%. Below is a chart that shows this dramatic decline: For the most part, electric car batteries have one of three different chemical compositions. One is called NCA (short for Lithium-**N**ickel-**C**obalt-**A**luminum and one is called NMC (short for Lithium-**N**ickel-**M**anganese-**C**obalt. Both of these batteries are composed of lithium, cobalt and a few other trace metals such as manganese and iron. The third composition is called **L**ithium-**I**ron-**P**hosphate, this battery is quickly being phased out as it is less efficient than NMC and NCA batteries. Lithium is used in all major electric vehicle batteries. Its properties allow it to store a lot of energy in its atomic bonds. A little bit of lithium can store a lot of energy. Because of those properties, lithium is the preferred ingredient for batteries that need to be as light and as powerful as possible. Due to demand created by the electric vehicle boom, lithium has been an incredibly hot sector. Albemarle, considered by many to be the “ExxonMobil” of the lithium world, is up over 130% since January 2016. I have had more meetings than I can count with companies trying to get me to buy into their lithium projects. While some lithium stocks may produce good returns for shareholders in the future, it’s not an undiscovered sector. There is a lot of money chasing returns in lithium. But that’s not the case with the little-known resource called cobalt. **How the EV Boom Will Create Increased Cobalt Demand** Cobalt is an element with the symbol Co. It’s a metal that is typically produced as a by-product in copper and nickel mines. Cobalt is a main component of both major battery types used by companies like Tesla in the United States and soon BYD in China. You know Tesla. But you might not know BYD, which is the world’s largest EV maker. (in 2016, Tesla sold around 76,000 vehicles while BYD sold over 100,000). It dominates the huge and growing Chinese EV market and even counts Warren Buffett as one of its prominent shareholders. Tesla uses a battery similar to the NCA battery type. An average Tesla Model S battery of this composition will require nearly 30 pounds of cobalt. *Tesla Model S battery pack courtesy of Teslaupdates.co* Until very recently, BYD used only the less efficient and cheap Lithium Iron Phosphate battery. Thanks to a change in how the Chinese government subsidizes its electric vehicles, I believe BYD will be making a big shift towards the NCA and NMC battery chemistries. Well known companies like Nissan and BMW use the NMC battery type. Depending on the exact battery chemistry, these NMC batteries require between 13 and 40 pounds of cobalt. In its 2016 EV Outlook, the International Energy Agency (IEA) has a target of 12.9 million electric vehicles on the road by 2020. It may sound like a lot, but that represents less than 2% of all cars on the road. So, let’s assume the IEA’s goal is attainable and these 12.9 million cars hit the road by 2020. In 2016, there were roughly 2 million EVs on the road. This means that 10.9 million new EVs will require a battery that needs somewhere between 13 to 40 pounds of cobalt a piece. Based on market share for each battery type, this translates to 150,000 tonnes of new demand. Aside from batteries, cobalt is used in items like magnets, steel, and super alloys. To call the cobalt market a niche market would be an understatement. In 2016, global cobalt production was 116,000 tonnes, while cobalt demand was approximately 94,000 tonnes. To put this in perspective, the global demand for copper in 2016 was 23 million tonnes. To achieve the IEA’s 12.9 million EVs on the road by 2020, the supply of cobalt will go into deficit by 2019 and be 50% under supplied by 2020. This surge in demand will be very rewarding for shareholders of the right companies involved in this market. If you’re interested in profiting from the EV boom, consider owning cobalt suppliers. Regards, Marin P.S. My team and I are putting the finishing the touches on a full research report on a company that is by far the world’s best cobalt play. It goes out to members of *Katusa’s Resource Opportunities* very soon. To come on board as a subscriber, [click here.](https://katusaresearch.com/subscribe/) --- # Here’s Why Gold Could Stage a Powerful Rally Soon - URL: https://katusaresearch.com/heres-gold-stage-powerful-rally-soon/ - Type: article - Published: 2017-07-17 - Updated: 2019-08-20 - Author: Marin Katusa ***Every week, the agency that oversees the U.S. futures market (the CFTC) releases a report that shows how companies and hedge funds are positioned in the futures market. This report is called the Commitment of Traders (or COT for short) report. Various participants with various goals come together in the futures market. You have producers (like farmers and oil companies) selling their production. You have users (like big food companies and manufacturers) buying raw materials. And then you have speculators (both large and small) who are simply looking to trade the market for a profit. The regulators categorize these participants, track their positioning, and distribute the data. Right now, the COT report for the gold market indicates we could see a powerful gold rally soon. Here’s why… My team and I like to watch the relationship between large speculators and producers and users of a commodity (often called “commercials”). The commercials deal in their market every day. It’s their business. Farmers know the corn market. Copper miners know the copper market. ExxonMobil knows the oil market. Most of the speculative money in the futures market is managed by computerized trading systems. These systems buy markets that are trending higher and sell short markets that are trending lower. This “trend following” money tends to group together and tips heavily to one side of the boat at market extremes. ***In the futures market, every short position has an offsetting long position. So, when hedge funds are extremely short a market, it means the commercials are extremely long (and vice versa). While I never trade on COT data alone – and no indicator is perfect – I do take note when trend following hedge funds are all betting in one direction. It can indicate an extreme in market sentiment and a potential opportunity. The market loves to punish the speculative crowd. For example, in 2014, hedge funds made near-record amounts of bullish long bets in crude oil. The commercials took the other side of that bet. As increased U.S. shale production flooded the market, oil prices crashed and many hedge funds took a bath. ![WTI Oil vs cot spec longs 2011 to 2015] ***Based on COT data, we may be about to see a rally in the gold market. Below is a chart that displays the short gold positions held by speculators (the hedge funds) since 2015. As you can see, they are high right now. You’ll also note that when speculator bets against gold got this high in the recent past, gold enjoyed strong rallies. ![Gold price vs cot spec longs] Again, I don’t trade based on COT data, but it often signals turning points in the commodity market. I’m not a full-time chartist, but anyone can look at the chart of the big gold stock ETF (GDX), see how it’s been bouncing at the $21 – $21.50 per share level. ![GDX 1 year performance] ***If you want to bet on a gold rally, you can buy gold stocks here and set a very tight stop loss near the $21 – $21.50 level. If gold rallies, GDX could easily go back to its February level in the $25 range (and higher). If gold sinks instead of rallies, you lose a very small amount. This is the sort of risk/reward profile that top short-term traders like to see. This is not a trade recommendation from Marin Katusa. It’s simply something interesting that I’ve noticed… and something some very smart traders are watching right now. Don’t place anything like the trade I’ve described if you’re not comfortable following a trading plan or unable to cut losses quickly. ***Paid up members of *Katusa’s Resource Opportunities* know we are in “stalking mode” right now in the oil market. Oil is down substantially from its yearly high of $55 per barrel. Oil and gas stocks are down big… and many are trading near 52-week lows. Dividends are being slashed. Exploration budgets are being slashed. Executive bonuses are going to be slashed. Blood is starting to run in the streets of the world’s oil capitals like Houston (United States), Calgary (Canada), and Dhahran (Saudi Arabia). Many offshore drilling stocks, which operate in the highest-cost sector, are down more than 70% from their 2017 highs. When I see big losses and negative sentiment like this, my contrarian, bargain-hunting antennae go up. I start paying more and more attention to my spreadsheets and financial models. In the oil patch, I’ve created a short shopping list of premier North American assets I’d love to buy at bargain prices. We haven’t started buying yet. I believe there’s more pain to come in the oil and gas sector. But I wanted to pass along the chart below, which shows how the energy sector’s weighting in the benchmark S&P 500 index is at its lowest point in 13 years. It’s yet another indicator that energy is extremely out of favor with investors… and a big contrarian opportunity is taking shape. ![Energy Index as percentage of SP500] Let other people get in the long line to overpay for Bitcoin and tech stocks. We’ll be shopping in the deserted, bargain-bin oil and gas sector. More to come on this big (but still developing) opportunity. Regards, Marin --- # To Be a Great Investor, You Must Treasure This One Thing Most People Hate - URL: https://katusaresearch.com/great-investor-must-treasure-one-thing-people-hate/ - Type: article - Published: 2017-07-07 - Author: Marin Katusa From its source on the Tibetan plateau, the Yangtze River winds its way 3,900 miles through China and terminates near the mega-city of Shanghai. The Yangtze is one of the world’s longest, most powerful rivers. For more than 2,000 years, it has played a key role in Chinese history as a source of drinking water, a crop irrigator, and as a transportation network. Although the Yangtze has supported lives, it has ended many others. In 1931, torrential rains caused the Yangtze to flood its banks, which wiped out crops and lead to the deaths of an estimated 3.7 million people, making it one of the deadliest natural disasters in history. In 1954, another round of flooding resulted in the deaths of more than 30,000 people. In the early 1990s, the Chinese decided to harness the Yangtze with a huge dam. At over 1 mile long and almost 600 feet tall, the Three Gorges Dam is the largest hydroelectric dam on earth. It cost more than $30 billion to build and produces awesome amounts of electric power. It’s also a key part of the Yangtze flood-prevention system. To this day, the Three Gorges Dam stands as a monument to mankind’s ability to harness powerful forces and direct them towards productive means. We’ve harnessed rivers like the Yangtze. We’ve harnessed powerful animals to pull plows and wagons. We’ve harnessed the power of the atom to produce nuclear energy. So as an investor, why should you sit in fear of volatility… instead of joining in mankind’s legacy and harnessing its extraordinary power to build wealth? **This Could be a Landmark Moment for You…** To most investors, “volatility” is a bad word. It’s like a habanero pepper in your oatmeal. You don’t want to see it in your sensible, conservative investment mix. The talking heads on financial television bemoan volatility. Mainstream headlines make it sound like a terrible thing. And this brings up one of the greatest lessons you can ever learn about the financial markets…. one of the true keys to market mastery. Great investors and speculators treasure volatility. As a professional investor, I love volatility. I owe much of my success to this “dirty word’ of the financial world. In fact, I believe it’s a landmark moment in an investor’s career when he/she realizes that, much like a powerful river, volatility can be harnessed, directed, and used as a tool. *When that realization happens, a world of huge opportunities opens.* **Many of these opportunities will come from the extremely volatile commodities market. ** If you know how to harness this market’s volatility and put it to work, you can make extraordinary returns in stocks. You can make returns in 10 months that most people wait 10 years to make. Why? Because more so than any other asset, commodity prices move up and down in huge boom and bust cycles. They exhibit what’s called “extreme cyclicality.” One year, the price of a commodity like oil, silver, or copper can skyrocket 75%. The next year, it can fall 50%. In other words, it can be very volatile. Take crude oil for example. Below is a chart of crude oil’s price movements over a 20-year period starting in 1997. As you can see, one of the defining traits of this market is extreme volatility… the tendency to boom and bust. Volatility isn’t the exception in this market… *it’s the rule*. Moves of 40%… 50%… and 60% took place in less than 24 months. I’m not “cherry picking” crude oil to show you an unusual example. Here’s copper during the same period:[![060717 Copper Price]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-Copper-Price.png) Here’s natural gas:[![060717 Natural Gas]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-Natural-Gas.png) Here’s coffee:[![060717 Arabica Coffee]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-Arabica-Coffee.png) Here’s sugar:[![060717 Sugar]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-Sugar.png) And here’s corn: [![060717 Corn]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-Corn.png) Given their volatile nature, it’s not uncommon for commodity markets to soar hundreds of percent higher in just a few years. Their massive price moves create massive opportunities. For example, during the 2008-2009 financial crisis, the share price of Canada’s largest diversified miner, Teck Resources, plummeted from CAD$50 per share to under CAD$4. It then soared back to CAD$40 per share and beyond within 12 months (a gain of more than 1,400%). [![060717 Teck Resources]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-Teck.png) Or, consider the story of Copper Mountain Mining. It’s one of the largest copper producers in Canada. The company had a successful IPO in May 2007, but fell from over CAD$2 a share to below CAD$0.40 per share during the financial crisis. By 2011, the crisis was over, and the stock climbed over CAD$7 per share. (I personally made over 1,800% on that move.) [![Copper Mountain Mining Chart]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-CMMC.png) And consider the incredible story of Northern Dynasty, a company I recommended in my premium service, *Katusa Resource Opportunities *in July 2016. Northern Dynasty is a great case study on how to profit from volatility. Northern Dynasty owns one of the world’s largest undeveloped copper and gold deposits. In 2011, the company was a market darling. Copper and gold prices were very strong. Northern Dynasty shares soared to over CAD$20 and major mining companies were bidding to get a piece of its project. Just five years later, copper and gold prices had suffered big declines. Northern Dynasty lost support from major mining companies and its share price fell below CAD$0.40 per share (a 98% decline in five years). Below is a chart that shows the share price from 2007 to 2017. [![060717 NDM]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-NDM.png) After I performed a site visit and hundreds of hours of research, I believed things would get a lot better for Northern Dynasty. In July 2016, I recommended the company as a buy under CAD$0.45 per share. Within nine months, the deeply depressed shares soared to CAD$4.40 (a gain of 880%). It’s an incredible story of using volatility to our advantage. [![060717 Northern Dynasty]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-NDM-a.png) Most financial advisors will urge you to avoid volatile markets like the ones I’ve described. I agree with them. Armchair investors have no business trying to navigate these rapids. These folks are best served by regularly buying shares in low-cost index funds, settling for average returns, and getting on with their lives. But what if you’re willing to do extra work to earn extra returns? What if you’re interested in being better than average… like 10 or 50 or 100 times better than average? Well, then you might consider learning how to harness the commodity market’s volatility and using its extraordinary power to generate wealth for you. I could fill a book on how to harness and volatility and profit from it, but I believe that ultimately, you need just three key mental assets to make volatility a wellspring of capital gains for the rest of your life. **Asset #1: Learn to appreciate a good crisis** Boom. Bust. Repeat. That’s the nature of a volatile market. And while booms can be great, you must learn to appreciate the busts as well. You need to learn to appreciate a good crisis. That’s when you sow the seeds of big bull market gains. As I state in my educational essay [An Investment Secret You Might Not Want to Share With Friends](https://katusaresearch.com/investment-secret-might-not-want-share-friends/): Markets are rational most of the time. They price most assets correctly most of the time. But when emotion levels go off the charts – like they do in a market crash – emotion completely overwhelms reason. During crashes, terrified investors sell assets with no regard for their underlying values or ability to produce cash flow. This creates an environment where the price of assets becomes “unhinged” from the value of assets. This, of course, means you can buy bargains during a crash. If you can keep a level head while others are losing theirs, you can buy at fire sale prices. When most investors hear about a crash in a market, their instinct is to sell or completely avoid that market. But if you’re interested in profiting from volatility, you must develop an instinct to buy into those kinds of markets. You must learn to run towards crisis. A crisis is about the only time you can buy valuable assets at extreme bargain prices. **Asset #2: Ability to ignore the desire to be part of a crowd. ** Eighty thousand years ago, being part of a crowd helped you survive. Since there is “safety in numbers,” members of pre-historic tribes were less likely to get eaten by predators or killed by rival tribes than those who wandered alone. To this day, being part of family and social groups promotes happiness and longevity. However, in the investment market, your herding instincts work against you. Doing what everyone else does is sure to make you a loser. Said another say, don’t wait in line to buy assets. If you do, you are sure to overpay. Think of how the public piled into tech stocks right before the 2000 crash… or how the public piled into real estate right before the 2007 – 2009 crash. To harness volatility and make it a source of profits, you must learn how to ignore your desire to be part of a crowd. After an asset suffers a bust, nobody wants to buy it. The lack of buyers means asset prices get very cheap. You’ll have little competition to buy the assets. The headlines will be terrible. If you tell the average guy what you’re buying, he’ll look at you like you’re crazy. These are all signs you’re doing the right thing. Buying cheap, hated assets is a lonely endeavor… but it’s extremely rewarding. **Asset #3: Ability to sell and ring the cash register** This might be the most difficult mental asset of all to acquire and put into practice. This is because it’s easy to fall in love with a position that has produced big paper profits for you. Once you learn how to buy extreme bargains during times of crisis, you’re bound to have some massive 100%+ winners in your portfolio. It’s easy to fall in love with a stock that doubles or triples in value. Seeing it in your portfolio will make you feel good. The winning stock can become like the family pet. And who wants to sell the family pet? Trust me… you do. Extremely cyclical assets like commodities and natural resource stocks should be approached with a “rent, don’t own” mentality. You must be willing to sell these assets after they appreciate in value. It’s only a matter of time before they bust again. Remember, you don’t make money until you sell. Your “pet” is just a piece of paper. Don’t fall in love with it. It won’t love you back. To get an idea of what life can be like for a natural resource stock – and why you should take a “rent, don’t own” approach to them – have a look at this chart of Range Resources from 2005 – 2017. Range is one of North America’s largest natural gas producers. Range shares boomed 489% from 2005 – 2008… then busted 64%. Range shares boomed again from 2011 to 2014, gaining 185%. After that boom, shares fell 78%. When resource stocks like Range boom, speculators can make big money… but only if they sell. [![Range Resources]](https://katusaresearch.com/wp-content/uploads/2017/07/060717-Range-Resources.png) **In Summary** If you’re new to the markets, it’s easy to get scared of volatility. The media certainly makes it out to be a bad thing. But I’ll state again for emphasis: *I believe it’s a landmark moment in an investor’s career when he/she realizes that, much like a powerful river, volatility can be harnessed, directed, and used as a tool. When that realization happens, a world of huge opportunities opens.* Many of these opportunities will be in the volatile commodity markets. If you learn how to harness this volatility and put it to work, you can make it a source of huge capital gains for years to come. Regards, Marin --- # What is the Most Important Item When Analyzing a Balance Sheet? - URL: https://katusaresearch.com/important-item-analyzing-balance-sheet/ - Type: article - Published: 2017-06-30 - Updated: 2025-07-23 - Author: Marin Katusa When oil is trading at $45 per barrel, the answer for oil producers to the question above is “debt.” Now that oil is down 18% from this year’s high, debt is a large and growing concern in the oil patch. And if you’re a stock investor, this should concern you too. That’s because of where debt and equity lie in a company’s capital structure. The people who own a company’s debt are first in line to get paid back if a company declares bankruptcy. The equity owners are last in line. The people who own a company’s debt are first in line to get paid interest before shareholders see a dime in dividends. Debt is the single most important item on the balance sheet to understand when analyzing a company’s stock. When a company takes on debt, the debt holders are usually first secured by the tangible assets of the company. In the oil patch, the asset would be the projects…. the oil and gas fields. Along with the debt come many debt covenants, which are basically rules the company must follow to stay in the good graces of its creditors. If the company for whatever reason breaches any of those covenants, the company is in default. Default means the company must pay back the debt or renegotiate with the debt holders. Either way, the shareholders get screwed. In the oil and gas sector, the pattern over the years has been almost like clockwork. Management teams take on massive amounts of debt when oil is doing well. Big name brokerages and banks “advise” the management teams how this makes sense, the bankers get their fees, the management teams get their money via the debt package and the debt holders get security on the asset and collect a high interest rate that they couldn’t get elsewhere. The shareholders get shafted. **Not Katusa Research subscribers.** The table below shows the publicly-listed U.S. oil producers that have total debt exceeding their market caps by more than 100%. Debt to Market Cap is a simple ratio that shows how much more debt the company has compared to its market value. As you will notice, the “hot red” color is intended to act as a signal to stay away from these companies. For example, California Resources has $5.268 Billion in debt. Its market capitalization is just over $400 Million. The debt was taken on expecting higher oil prices, not lower. If the company breaches any covenants, the debt holders will be first in line to get paid. The shareholders will be the last. Debt comes before equity. Please remember that when you are looking at speculating in any company. [![Oil Companies Debt to Market Cap]](https://katusaresearch.com/wp-content/uploads/2017/06/DMCAP1.png) **Extend and Pretend** In the oil patch, there is a saying, “Extend & Pretend.” This means oil companies and their bankers know that debt covenants will be breached and the debt will be in violation of the original agreements. But in almost all cases, the debt holders don’t want to take over an asset in a bad oil price environment. Hence, the company will have some room to negotiate, “roll over” the loan, extend the debt, and pretend everything is OK. The corporate managers keep their lofty salaries and bonus packages. The bankers collect more fees. The debt holders keep getting paid. The shareholders lose. **All is not Lost** The below table shows the exact same thing, but of companies with below 100% Debt to Market Cap ratios. Does this mean the companies below are safe? No. But what it does mean is the management teams of the companies below have much better discipline than the managers of the companies in the list above. [![Oil Companies Debt/Market Cap]](https://katusaresearch.com/wp-content/uploads/2017/06/DMCAP2.png) One important key to being a good oil analyst is not to waste your time, especially on companies with bad financials and debt happy management teams. Debt happy is a term that I use for management teams that believe debt is a great way to grow. It usually isn’t in the resource sector, especially when a company takes on too much debt and the price of oil turns negative after the debt is taken on. There is over $200 Billion in debt outstanding right now in the U.S. oil patch. But more importantly, the debt taken on between 2012 and 2015 will start to mature soon (meaning it either needs to be paid—or renegotiated). That means there will be many companies coming up against the oil debt wall.[![North American E&P Total Debt vs Oil Price]](https://katusaresearch.com/wp-content/uploads/2017/06/NA-EP-Total-Debt-vs-Oil-Price-2.png) **The Oil Debt Wall—The End Result** Next year, the oil companies are going to have to start paying back the debts they took on from 2012 to 2015 (a time of high oil prices). Not all the debt lenders are stupid, and they realize that in 2018, the U.S. oil patch has almost $25 billion in principal payments to make (which many will struggle to do so). One year later, another $25 Billion is due. And then by 2022, the principal payments will balloon to almost $60 billion, not including the previous interest payments. It doesn’t take a genius to figure out that the lenders who are due their payments in 2018 & 2019 will probably decline to renegotiate the terms of the debt. They will want cold hard cash paid back to them. Why? Because there is so much debt due to be paid back to the lenders in 2020, many of the companies who took on debt expecting plus $75 oil will not be able to make their payments in 2020 and beyond. The debt holders know this. They do not want to foreclose. They do not want to own assets in a low oil price oil environment, nor do they want to operate the oil fields. So, the debt lenders want to extract as much cash as they can before the big debt year pay backs of 2020 when the big debt wall facing the oil patches come due. And for the first time this cycle, the oil executive’s dependency on the option of relying on the lenders willingness to “Extend and Pretend” will no longer be an option in many cases. That means reality will hit the oil patch. The oil companies will breach their covenants and carnage is coming to the oil patch near you. Shareholders in those debt-heavy companies will lose most if not all of their equity value. **Alligators in the Oil Patch** And this is when the alligators show up. To be a successful oil speculator, one must understand the natural volatility and cyclicality of the oil business. Please read my essential paper: [The Way of the Alligator](https://katusaresearch.com/the-way-of-the-alligator/). There will be major consolidation in the sector. The smart management teams will use the washout as an opportunity to buy the best assets that were mismanaged by previous management teams at discount prices. That is the Way of the Alligator. That is how you make money in the resource sector. Buying the lowest cost quartile, highest quality assets during times of sector-wide distress at discount prices is how fortunes are made. I have my eye on a few of my favorite names in the U.S. oil patch I want to put my money into. But first, I will let the natural cycle and produce a blow up. It’s happening as we speak. Katusa Research subscribers will have all the knowledge and information they need to be the smart buyers instead of the desperate sellers. More on this to come. Regards, Marin --- # A Guided Tour of the Oil Crash… and My Outlook for the next 18 Months - URL: https://katusaresearch.com/guided-tour-oil-crash-outlook-next-18-months/ - Type: article - Published: 2017-06-23 - Updated: 2019-05-07 - Author: Marin Katusa On February 21, 2017, the price of crude oil was $55 per barrel. Crude had been rallying for months, and the outlook for oil stocks was improving. That outlook is drastically different now. Crude oil has dropped 22% to $42.84 per barrel and sits at its lowest point all year. Oil and gas stocks are plummeting. It’s wealth destruction at warp speed. Large pension funds, hedge funds, sovereign wealth funds, and index funds are suffering major losses. For example, Cenovus, one of Canada’s largest oil producers is down 53% from Jan 1, 2017. Well-known Williston Basin producer in North Dakota, Whiting Petroleum, which produces over 100,000 bopd is down 54% year to date. The chart below shows the share price performance of just a few independent oil producers in North America year to date. The wealth destruction has been harsh. Additionally, here is a table showing year-to-date losses in some of biggest and well known oil and gas producers. When the largest independent oil producers in North America deliver the worst returns since the last oil crash in late 2014 it’s time to start paying attention. Regular readers know that when I see dire headlines, dark sentiment, and plunging share prices, my contrarian, bargain-hunting antennae go up. I start paying more and more attention to my spreadsheets and financial models, with the end goal of creating “shopping lists” of premier assets I want to buy. My team and I have spent a lot of time on the oil sector in the past few weeks. Oil’s decline is front pages news. With all that in mind, I’ll take you on a guided tour of the oil patch and we’ll reach some conclusions. In preview, I expect more pain in the oil sector before we gain. **A Quick Word on Global Oil Demand ** Global oil demand growth is inching higher – neither soaring or sinking – because the global economy is in stall speed. I don’t expect to see rip roaring global economic growth soon. A recession (which the world is due for) could cripple the demand picture. In other words, I believe there is greater chance in the short term of an oil demand shock to the downside than an oil demand shock to the upside. But in the here and now, we have tepid demand growth. With this in mind, we turn to the supply side… **DUC Dynasty: The Wave of New Supply That Will Overwhelm Any Oil Rally** The supply side of the oil picture can be summed up in three key points: -OPEC, still a huge force in the oil market, is still cheating on its quotas. Its members badly need oil revenue. It will continue to produce at high rates. I ignore OPEC’s public attempts to make the world think its members will meaningfully curtail production. -Russia, one the world’s top three oil producers, is also producing at high rates. It’s a similar situation to OPEC here. Russia badly needs oil revenue. There will be no meaningful production cuts in Russia. -The U.S. is fracking its way to massive new oil supplies and production. As I pointed out early this month, the fracking revolution made a downward trend in U.S. oil production turn on a dime. The incredible growth of the US domestic oil production can be seen in the US production growth chart below. U.S. oil producers have innovated and invested so much that they’ve built up a huge number of “Drilled and UnCompleted” wells… or “DUCs” for short. DUCs are wells that exploration firms have drilled but haven’t taken the final step of tying them to transportation and distribution networks. Their owners wait for oil price rallies before bringing them online. The difference between getting $45 a barrel and $55 a barrel can make a huge difference to a producer’s bottom line. DUCs represent “supply in waiting.” Think of DUCs as unconventional storage. Rather than above ground storage for oil, or storing oil in massive oil tankers—the owners of the DUCs know exactly how much oil they have in inventory. It’s a cheap way of storing oil—in its natural surrounding—in the ground! As you can see from the chart of U.S. DUCs, something Katusa Research calls the “DUC Dynasty” has been created. DUCs in the U.S. are at an all-time high. Within a month (and I’m being conservative) these DUC wells can be completed and tied into production if the price is right. If oil rallies back above the $50 range, the DUC Dynasty will be completed, which will suppress any oil rally in the next 12 months. In fact, we have extrapolated just-released U.S. government data and incorporated it into our in-house database of licensed wells projects in the US. **We believe that by late summer 2017, the U.S. will be producing 1 million barrels of oil more than it did the same time last year. This is incredible progress. **** ** ** ** **But What About the Statement, “Fracking isn’t economic at current oil prices.”?** That argument is correct if your company is fracking the way it was in 2013. But today, in 2017, incredible innovation has driven costs lower and production higher. Below is a bar chart showing the full cycle average country costs to produce per barrel today around the world. Most large producer costs are below $45 per barrel. Plus, Canada and the U.S. will continue their cost improvements. On average, I expect 5% improvements in cost reductions for both Canada and the US this year and next.** ** **Will Oil Stay Cheap Forever?** No. Even though I believe oil will break $40/barrel (I stated this when oil was above $50 in early 2017), I believe fortunes will be made after the coming carnage hits. Let me explain. Buying unloved, hated sectors when nobody wants them is how you buy world-class assets for bargain basement prices. And prices will come back, they always do. The U.S. fracking revolution has been incredible at unlocking and tapping into known oil formations like the Montney and Permian. But the Reserve Life Index of all the Big Oil companies, including the state-owned companies, are accelerating to the downside. Reserve Life Index, also known as RLI in the industry, is the number of years a company has in reserves at current production levels. Even with the success of the shale revolution in the U.S., the last time total global oil discoveries were lower than they were was in 1940. The bar chart below shows the conventional global oil discoveries since 2000. **Every 25 days the world consumes more oil than was discovered in conventional fields in all of last year.** The shale revolution in North America will continue to unlock oil in the North American shale fields, but that won’t be enough in the long term to keep oil prices low. Eventually, the cure for low oil prices will be low oil prices. With less exploration, we expect the global discoveries in 2017 to be close to or less than the global discoveries in 2016. Global oil consumption will continue at the current rate, and inventories will be depleted. This is great news for the savvy and educated investors who want to position themselves in the best oil companies at bargain basement prices. It is exactly what I plan on doing for my own portfolio. On July 5, 2017 I will be publishing a [comprehensive oil report to all my paid subscribers](https://katusaresearch.com/subscribe/). It covers everything they will need to know about the coming Oil Equity Crisis, and how to best position a portfolio to benefit from the implosions that are starting to happen. Never let a good crisis go waste—fortune favors the bold and informed. I’m on the sidelines with my cash for now, but I plan on allocating a very large amount of capital and my subscribers will know exactly what my strategy will be. Regards, Marin **P.S. NEXT WEEK is Oil Debt Analysis week at Katusa Research** Next week, we will publish an analysis of the current debt situation of the North American oil producers. There will be a lot of bankruptcies in the oil patch, which will create major opportunities. There will be many situations where shareholders (the equity) of many E&P firms get wiped out as the bond holders restructure the debt. There will also be situations where both the equity and debt holders will be wiped out. But just like it always happens in every crash, the companies that emerge will become stronger than before… and produce massive gains for investors. --- # Commodities vs S&P 500 – The Chart 45 Years in the Making - URL: https://katusaresearch.com/commodities-vs-sp-500-the-chart-45-years-in-the-making/ - Type: article - Published: 2017-06-16 - Updated: 2019-05-07 - Author: Marin Katusa Dear Katusa Reader, Commodities vs S&P 500 have NEVER been cheaper. The chart below I created is a ratio of the S&P Commodity index vs the S&P 500 over 47 years. ![S&P-Commodity-Index-vs-S&P-500-Equities-Are-Expensive,-Commodities-are-Cheap] ## **Commodities vs S&P 500 Chart Main Takeaway? ** You can quickly assess that, relatively speaking, commodities are dirt cheap. In fact, they are the cheapest they have ever been to the share prices that make up the S&P 500. So, how can we make money from this chart? First, I would recommend those fund managers and investors who own shares in the companies that make up the S&P 500 not to be margined and start taking profits to lock in their gains. The big board looks ripe for a correction. Secondly, raise your cash position. The bargains in the commodity sector are starting to present themselves, and many of the best resource companies are at incredible valuations. But keep in mind that successful investing is a marathon, not a sprint. I’ll remain patient and wait for great entry prices. As I detail in my book, *[Resource Market Millionaire](https://katusaresearch.com/resource-market-millionairesp/) *“small cap resource stocks are among the most volatile stocks in the world. One-day moves of 10%…15%…and 20% are common in small resource stocks.” One day, the share price of a good company will be $1.50. The next day, it will be down 20% to $1.20. While that volatility turns many people off, we can turn it into a huge edge for us. We can do so by “stalking” our stocks. We need to remain patient…like a lion that waits and waits for **just **the right moment to strike. When I find a great opportunity, I don’t run into the market and buy at any price. Instead, I stay patient and wait for great prices. I “stalk” the stock. I wait for the market to mark down the merchandise I want to buy. And if it takes me weeks to accumulate the amount of shares I want at the price I want, so be it. That’s just how the resource market works. It’s how I’ve operated in the market for years and years. For example, back in the November issue of [Katusa’s Resource Opportunities](https://katusaresearch.com/subscribe/) titled “*Get Ready to Buy: Bargain Season is Coming*”, I recommended a company called [**Kirkland Lake Gold**](https://katusaresearch.com/if-kirkland-lake-gold-is-hunting-juniors-like-an-alligator-who-is-on-its-radar/). One of the reasons I loved the company was because at the time it had an enterprise value per ounce of gold produced much lower than its peer group. The chart below shows the Enterprise Value (Market Cap +Debt – Cash) compared to its peer group. Kirkland Lake on that one metric was the cheapest in its group. ![Mid Tier Gold Producers Enterprise Value per Ounce Produced] This was just one of many comparables I published in the report. Another comparable I used was the company’s cash flow per share compared to its peer group. The chart below shows the Price to cash flow of the intermediate gold producers from 2016. ![Mid-Tier Gold Producers Price to Cash Flow Graph] At the time of publication, the stock was trading at CAD$8.29. But I was not comfortable buying at those prices. I wanted to buy it like an alligator under CAD$7.00. And that’s the guidance I wrote to my subscribers… *There is no need to rush out and buy a full position and wait for the repricing back to the peer group. This will take alligator-like patience. Accumulate stock slowly and always buy on weakness; do not overpay for the stock.* A couple of week’s later, patience prevailed and we were able to purchase the stock under the buy target. My investment thesis was proving correct over the next several months as the market started to wake up to Kirkland’s potential. Take a look…![Kirkland Lake Gold Shares Price] Months after, Kirkland Lake Gold was the top performing gold stock in the first quarter of 2017. We closed our position at a substantial gain. To succeed in resource stocks, you must be willing to stalk assets and wait for exactly the right time to buy. When the stars align and we get a great price on one of our stocks, we strike. We have just published on another stock that I am a big fan of and believe will get cheaper. And while it gets cheaper, I along with my large alligator following plan to buy our stocks like predators. As I often say, you’re the alligator. Your list of assets is your prey. By “stalking,” you’ll get them at the right time, at the right price. I’m confident that by maintaining our discipline and waiting for great deals during a market environment where commodities are the cheapest they have ever been to the S&P 500 that we’ll be rewarded with attractive buy prices and huge returns in the future. Regards, Marin Katusa --- # A Potential Fire Sale in High-Quality Oil and Gas Assets - URL: https://katusaresearch.com/potential-fire-sale-high-quality-oil-gas-assets/ - Type: article - Published: 2017-06-09 - Updated: 2019-08-05 - Author: Marin Katusa **Editor’s note**: In this week’s edition, you‘ll find a collection of Marin’s “market notes” that detail some of the most important things happening in the market right now. **A Potential Fire Sale in High-Quality Oil and Gas Assets ** ***One of my favorite sources of investment ideas is the new lows list… the stocks sitting at their lowest point over the past year. As a deep-value contrarian resource investor, I’m always looking for deeply depressed sectors. I’m looking for financial distress, bankruptcies, crashes, and crisis. As I put it in one of our [most important educational essays](https://katusaresearch.com/investment-secret-might-not-want-share-friends/): *A market crash creates huge opportunities because it introduces extreme amounts of emotion into the market. Market are rational most of the time. They price most assets correctly most of the time. But when emotion levels go off the charts–like they do in a crash–emotion completely overwhelms reason.* *During a crash, terrified investors sell assets with no regard for their underlying values or ability to produce cash flow. During crashes, the price of assets becomes “unhinged” from the value of assets. If you can keep a level head while others are losing theirs, you can buy at fire sale prices.* I bring this up because we might soon see a fire sale in high quality U.S. oil and gas assets. This sector is under a lot of selling pressure right now. One of the top independent oil producers, Continental Resources is down 27% in the past two months. Top natural gas producer Range Resources is down 25% in the past two months (and down 42% in the past six months). Most oil and gas ETFs are at sitting at 2017 lows. Below is a chart that shows a plunging Continental Resources share price: If oil continues the decline it started in February – which I think is likely because supplies are plentiful – oil and gas stocks could suffer a big wipeout in the coming months. This would give us the opportunity to buy top-shelf oil and gas assets at fire sale prices. We’re patiently watching this situation unfold. More on this to come. **How Exponential Progress Crushed Oil Investors** ***One of the big “running themes” in my market analysis is **exponential progress**. Driven by huge increases in computing power, technology is advancing at an exponential rate. This not only means that conventional change is occurring… but the rate at which it is occurring is speeding up. (Read my [full analysis here](https://katusaresearch.com/depending-stand-either-thrilling-terrifying/)). This isn’t just an issue for tech investors. Every great resource investor is paying attention to this development. Rapid advances in technology can help you get rich or help you get poor. The past few months have brought an incredible demonstration of how this works. Advancements in fracking have increased on-shore oil production so much that offshore projects are getting delayed or simply canceled. This technology-created bear market in offshore drilling projects is destroying the profits and share prices of offshore drill rig operators. For example, the chart below shows the past year’s performance of three large offshore drillers, Seadrill, Diamond Offshore, and Transocean. They’re getting killed. Again, resource investors ignore exponential technological progress at their peril. *****One last thing this week if you didn’t catch it on my Twitter account…** In the wake of Donald Trump’s election win, the U.S. dollar soared and gold crashed. Investors believed Trump would “make America great again,” revive the U.S. economy, and boost the attractiveness of the dollar. Not to my surprise, Trump is finding it difficult to get anything done amidst Washington DC’s “swamp creatures” – the lobbyists, the cronies, the unions, the arms makers, the bankers, the mooches, etc. The dollar’s post-election rally has fizzled… and gold’s correction has reversed. Gold – my favorite way to Trump-Proof a portfolio – is outperforming the dollar since the election. Regards, Marin --- # This Investment is Like Google in 2003 - URL: https://katusaresearch.com/investment-like-google-2003/ - Type: article - Published: 2017-06-02 - Updated: 2019-05-07 - Author: Marin Katusa Intellectual Property… “IP” for short. IP is the secret sauce of capitalism. It’s the legal realm protecting things like proprietary recipes, formulas, and computer programs. Think Coca-Cola’s secret recipe for Coke… Google’s proprietary search algorithms… and Kentucky Fried Chicken’s famous recipe. It’s all IP. Have a great idea? Patent it. Trademark it. Do everything you can to keep it out of your competitor’s hands. Get your IP protected by law, threats, or secrecy – or all three. A thousand years ago, IP wasn’t worth much. There were no systems in place to protect creators, entrepreneurs, and investors. You were more likely to die from a bad meal than to patent the creation of a good one. But these days, the right IP in the right hands is worth *hundreds of billions of dollars*. Consider that in 2016, Google was worth 10 times more than Ford. It is worth that much because of its IP, which allows Google to present useful Internet search results. IP is common in the food and beverage businesses. Secret recipes can be worth a lot. IP is common in the technology industry. But it’s not so common in the natural resource business. After all, one ounce of refined gold is the same as another ounce of refined gold. A barrel of Brent crude oil on the commodity exchange is the same as millions of other barrels on the exchange. That’s why I rarely write about IP. Resource firms differentiate themselves by other means, like production costs, geological expertise, and management. However, there is a unique kind of IP in the natural resource business that is far more valuable than Coke’s secret formula or Google’s search algorithms. This IP is one of the real keys to power and wealth in our modern world. I’m talking about power on a *global scale*. **If this IP and the power it brings didn’t already exist, the U.S. government would happily pay more than one trillion (with a “t”) dollars to possess it. ** I’m talking about the proprietary technology and expertise – the IP – possessed by Western oil companies that allows them to inject pressurized fluid into deep rock formations, fracture them, and extract huge quantities of hydrocarbons. This process is more commonly known as “fracking.” And knowing how to use it is one of the most valuable sets of IP in world history. **Why Oil is Power** Do you know who the world’s largest consumer of oil is? It’s not Walmart, whose massive truck fleet hauls products all over America. It’s not McDonald’s, which trucks extraordinary amounts of food to its restaurants globally. The world’s largest institutional consumer of oil is the U.S. military. During the fiscal year 2014, the U.S. military consumed over 87 million barrels of fuel at a cost of almost $14 billion. Although some aspects of war and power projection have become high-tech, militaries still run on old-fashioned diesel fuel, jet fuel, and gasoline. A modern war machine has a very large, very thirsty engine. That’s why having access to massive quantities of oil is a requirement for being a world power. Trying to be a major player on the world stage without having access to oil is like trying to win the heavyweight boxing title with both arms tied behind your back. Oil is power. And power is oil. That’s why the U.S. government created the Strategic Petroleum Reserve in 1975. It’s the largest emergency fuel supply on Earth. At one point, it held over 700 million barrels of oil. The fact that oil is power is also why Western militaries have been a fixture in the oil-rich Middle East for more than 80 years. After all, the acquisition of power is the end goal for any true politician. So politicians must always be concerned with oil. In 2005, these concerns were very high in the U.S. In the early 1970s, U.S. oil production reached nearly 10 million barrels per day. At that point, most of America’s “easy oil” had been tapped, and production entered a long decline. In 2005, U.S. oil production hit a 50-year low. Meanwhile, U.S. oil demand was near its all-time high. This meant the U.S. had to import more oil than ever from foreign sources… which left it more vulnerable than ever to supply disruptions. You could say access to oil was becoming America’s Achilles heel. And you can be sure its enemies noticed. Around this desperate time, a gift from the heavens landed in Uncle Sam’s lap. Or more accurately, a gift from Texas… In the 1980s and 1990s, a small group of Texas oil drillers led by a man named George Mitchell pioneered the use of shale fracking technology. The technology allowed Mitchell to drill into oil-rich rock layers, fracture them, and extract large amounts of oil and gas. The technology showed promise back then, but it was in its infancy. By 2005, the technology was advanced enough to be **phenomenally successful**. Mitchell became a billionaire, and fracking was applied across the country to great effect. Through the application of this incredible technology, the bear market in U.S. oil production *turned on a dime*. In just seven years, U.S. oil production soared from its low of 5 million barrels of oil per day to 9.4 million barrels per day. It was stunning production growth… the fastest growth a major oil-producing country had seen in decades. You can see this incredible change in the chart of U.S. oil production below: As U.S. production soared, its vulnerability to foreign sources plummeted. U.S. imports from OPEC (aka “the Middle East”) declined 57% in seven years. **In less than a decade, America’s dangerous weakness turned into a virtually endless supply of fuel and power. ** Keep in mind that in terms of geopolitics, 10 years is a very short time. To return to the boxing analogy, it was like an over-the-hill fighter getting slower and weaker into the late rounds of a fight… but suddenly recharging between rounds to come out fighting like a 20-year old. Although the public focused its attention on fracking’s impact on oil prices and the environment, the people who run the world were focused on America’s stunning and rapid increase in power. It’s the big fracking story you didn’t hear about. I’ll say it again: The goal of any true politician is the acquisition of power. Every power-hungry politician around the world – from Russia to China to Iran to Mexico – knows the incredible story I just told you. They know that fracking massively increased America’s power in a short period of time. They want to see that happen in their country, on their watch. However, a fracking-created abundance of wealth and power won’t happen in their countries soon. Once fracking was sufficiently advanced, it changed America’s fortunes in short order. However, it took decades of experimentation and hundreds of billions of dollars in capital investment to develop. You could say fracking needed years of practice to become an overnight success. This long road of fracking development was traveled only by American companies. Other powers like China and India are more than 20 years behind in this race. But they desperately want to play catch-up. **That’s why North American firms that possess cutting-edge fracking technology and expertise are like Google in 2003… or Coke in 1950**. They hold the keys to the world. Those keys are worth billions – even trillions – of dollars. Countries like China, Saudi Arabia, India, Australia, Brazil, Mexico, and Iran are lining up to spend hundreds of billions of dollars with the owners of the world’s best fracking IP. Everyone wants a repeat of the “American Shale Miracle” in their country. Meetings at the highest levels of government and business are taking place right now. They will lead to a huge, worldwide fracking boom over the next 20 years. During this boom, massive new shale formations will be found. Shareholders in the right companies will make fortunes. This goes for “pick and shovel” suppliers of technology and drilling services as well as exploration and production (E&P) firms that use this technology to find oil and gas. I believe this is one of the biggest investment themes of our time. Even if you’re not a dedicated resource investor, you should follow this story. It will massively influence financial markets and geopolitics for decades. As a Katusa Research reader, you’ll receive constant coverage of this trend and actionable recommendations to play it for a long, long time. Regards, Marin --- # Depending on Where You Stand, This is Either Thrilling or Terrifying - URL: https://katusaresearch.com/depending-stand-either-thrilling-terrifying/ - Type: article - Published: 2017-05-26 - Updated: 2019-05-07 - Author: Marin Katusa One of the most fascinating things about the age we’ve living in is how the “rate of change” (or ROC) is increasing. Driven by huge increases in computing power, technology is advancing at an exponential rate. This not only means that conventional change is occurring… but the rate at which it is occurring is speeding up. Depending on where you stand, this is either thrilling and lucrative… or confusing and harmful. For example, think about ride-sharing service Uber. Uber caused massive change in an entrenched industry in just a few years. One day, the taxi business is big and powerful. The next day, it’s road kill. You also have Netflix gutting movie-rental chain Blockbuster in just a few years. Those kind of tectonic industry shifts used to take a lot longer to play out. Sometimes decades. Retail stocks are another recent example of how seemingly stable and dominant entities can lose their power and value in a very short time. Amazon and other online businesses are killing many retailers. Of course, Amazon has been Amazon for a long time. It’s been eating into bricks and mortar for a long time. But the speed at which retail stocks have been falling over the past 24 months is incredible. One day, you’re big bad Macy’s. You’re the retailer people say is the “best of breed.” You have your own Thanksgiving parade. Your share price is in a steady uptrend and just hit $65. Less than two years later, you’re in shambles. Your share price is $23. Again, depending on where you stand, the fact that seemingly powerful companies and industries are getting demolished in a few years is great news or bad news. If you don’t like to change with the times or learn new skills, then you’re in trouble. But if you’re willing to learn and look out for these changes, you can make a lot of money in a very short amount of time. As the taxi business was crippled, early Uber investors made fortunes. Netflix is up 990% since it went public. Netflix founder Reed Hastings is a billionaire. Of course, you don’t read Katusa Research for commentary on Silicon Valley. But as a resource investor, you should know how rapid changes in technology can make or break your portfolio. Yes, technology is bringing incredible change to the “old school” industries like mining and oil. For example, the introduction of fracking technology has increased energy production so much that the price of natural gas fell from $5.82 to $1.61 per MMBtu in just over six years. This crushed natural gas stocks. Since coal is competitive to natural gas in the electrical power generation industry, coal and coal companies plummeted in price as well. The bluechip coal producer Peabody Energy went bankrupt. The rapid deployment of fracking technology has supercharged oil production in the US. And the rest of the world’s top oil producing nations are taking notice. Take a look at the oil production numbers in the US. This kind of output has not been seen in a generation. And now take a look at how fracking is accelerating the oil production numbers in the US. This produced such a dramatic effect on the oil market (and oil price) that in the spring of 2016 – for the first time ever – more oil was produced from fracked wells than from traditional oil wells. The variable that best exemplifies what technology can do to oil production is the new well production per rig. This variable measures the quantity of oil that is produced from a new well, per drilling rig. The chart below shows how wells in the Permian Basin in the United States went from producing under 100 barrels per day to nearly 700 barrels per day. Major oil countries will apply technology that has had hundreds of billions of dollars used to advance the technology. Countries like Saudi Arabia and China will be fracking. Fracking took time to develop and accelerate to the level it’s at today. It will take time for other countries to experience the same rate of change of fracking technology – but it will come. The only difference is this: the countries that are new to this technology will have the benefit of decades of North American innovation, investment, and experience to lean on. In fact, in Saudi Aramco’s Spring Technology Issue, it highlighted the increased use of frac stages, fracturing fluids, proppant and well completion designs in a recent test well. Unsurprisingly, it was the best test well reported to date. The test well had 7 frac stages. For comparison, companies in the Permian basin now drill wells with 20 frac stages. In 2008, the average Bakken well in 2008 had a 7 stage frac design. Saudi Arabia is 9 years behind in this technological revolution. While initial production wells in the Middle East are kept as secret as the US nuclear codes, rough production numbers indicate initial onshore production rates of 4,000 plus barrels per day. If we apply Permian Basin new oil well production growth rates to Middle Eastern wells, it is not unthinkable that these new wells will produce over 7,500 barrels per day. And by 2040, I expect that Saudi Arabia will produce 25% of their oil from shale. Before you invest another dollar in the resource market, ask yourself, “Will the increasing rate of technological progress help or hurt my investment?” The answer could cost or make you a lot of money… faster than you think. -Marin --- # Introducing: A Great New Tool for Gold Investors - URL: https://katusaresearch.com/introducing-great-new-tool-gold-investors/ - Type: article - Published: 2017-05-19 - Updated: 2019-05-07 - Author: Marin Katusa **The Katusa Research team just completed a ground-breaking research project. The result of this project is an incredible system for making reliable profits in gold stocks. Below, we explain how it works and how it fits into our brand-new Market Intelligence Center.** Of all the ways to make money quickly in the gold market, few can match the power of “*the buyout*.” Own a small gold stock on Monday… then, suddenly, overnight, you’ve made double or triple-digit gains by Tuesday. A buyout occurs when a gold miner sees an opportunity to grow and buys all the shares of a smaller gold company – often at a large premium. The result is an overnight windfall for the smaller company’s shareholders. For example, on December 11, 2008, miner IAMGOLD announced a buyout of Orezone Resources…for a 150% premium over its share price at the time. Orezone shareholders reaped overnight windfalls in the process. Or, consider the story of Orbis Gold. On October 13, 2014, large gold miner SEMAFO bought Orbis out for a 96% premium over its share price at the time. These buyout windfalls are rare, and don’t happen every day. But as it turns out, they’re more frequent than you think. What if you knew how to find these situations… before they happened? You could make some of the biggest short-term gains you’ve ever seen in your life, overnight. That’s what this essay is all about. **Cracking the Code of Gold Buyouts** Despite the incredible wealth building power of the gold buyout, the process behind it is a mystery to many people…even to supposed gold “experts” that follow the sector. For decades, people have tried to crack the code behind gold buyouts…the qualities large gold companies look for when they shop for smaller companies. Their efforts have largely resulted in failure and frustration. For every stock someone named as a buyout target, there are five “run of the mill” companies that went out of business. As you probably know, I’ve devoted my professional life to investing in natural resource projects. I’ve flown more than one million air miles to visit over 400 resource projects in over 100 countries. Along the way, I’ve become friends with some of the world’s top gold executives, mining engineers, and geologists. My friend Ian Telfer, Chairman of gold mining giant Goldcorp even wrote a blurb for my New York Times Bestselling book, *The Colder War*. I’ve published exclusive interviews with gold mining legends like [Pierre Lassonde](https://katusaresearch.com/dinner-billionaire-wine-connoisseur/) (founder of mining royalty firm Franco-Nevada) and [Rob McEwen](https://katusaresearch.com/qa-gold-titan-rob-mcewen-exclusive-qa-marin-katusa-part-2/)(founder of Goldcorp). I’m referencing my experience to show you that I have insight into the world of gold buyouts that most people do not. Through friendships, due diligence, and my status as a top financier, I’ve learned exactly what the guys making buyout decisions are thinking when they pull the trigger. Because gold buyouts can be so lucrative for shareholders, my team and I recently took on a massive research project. This project – which required over 1,000 man hours, hundreds of thousands of dollars, and massive data processing capacity – had a simple goal: *Develop a reliable “model” that pinpoints gold stocks most likely to hand gold investors overnight windfalls via buyout*. The results of our study are incredible. I believe we’ve built the most reliable system ever for pinpointing gold buyout targets. We’ve found the SIX key qualities that make gold producers attractive buyout targets for majors. You can think of the gold stock sector like you would a beauty pageant… Large gold miners are the judges. Well, we’ve found exactly what the judges are looking for. We’ve found the gold stock equivalent of beauty, brains, talent, and charisma. **Why Buyouts Are So Attractive to Gold Majors** Buyouts occur in the gold market for a simple reason… Every time a gold miner pulls an ounce out of the ground and sells it, it depletes its balance sheet a little. If a gold miner doesn’t direct some of its revenue into the acquisition of new gold resources, it will mine itself out of existence. It will consume its asset base and cease to exist. And that is why “buyouts” frequently hand gold investors massive overnight gains. You see, when it comes to adding gold resources to its balance sheet, a big gold miner has two options… **Option #1: The Hard Way** It can spend hundreds of millions of dollars on the risky business of mineral exploration. It can spend a fortune wandering around deserts, jungles, and Artic regions looking for gold deposits. When you consider that less than 1 in 3,000 mineralized anomalies ever becomes a mine, you realize that exploring for gold is a “long shot” activity. Also consider: If by some fortunate event the miner actually finds gold, it is now looking at 5 to 10 years of development headaches. In its quest to build a gold mine, the miner will wrestle with crooked politicians, red tape, lawyers, environmental activists, and bankers. And then you have… **Option #2: The Easy Way** The gold company can bypass the headaches that come with Option #1 and simply buy another company. That’s it. No long shot drilling programs in the middle of a desert. No swatting mosquitos in South American jungles. No hacking through miles of red tape to get mining permits. Just one simple transaction, executed from the comfort of an office….and the gold miner adds a lot of gold to its balance sheet. Now put yourself in a gold executive’s place… *Is it worth paying a premium to buy proven, productive gold assets…and sidestepping the expenses and risks of Option #1?* You’re darn right it is. In some cases, it’s worth paying double a gold company’s stock market value. That’s why high-quality operating gold mines are some of the most highly coveted assets in the world. It’s why buyouts can hand you overnight windfall gains… *…And it’s why knowing exactly what kind of gold projects large miners want to buy is an incredible “blueprint” for making money in gold stocks.* But as I mentioned, nobody has been able to unlock the secrets of gold buyouts and know in advance when gold windfalls will likely occur…until now. My team and I recently performed an enormous amount of work in this area. We studied 35 years of data and 340 individual gold buyouts of at least $50 million since the early 1990’s. We’ve determined exactly what large gold miners are looking for. **We compiled the 6 most important qualities a gold producer must have in order to attract a premium buyout offer. Below, I describe each “key” for a buyout.** I’ve prepared a large report that goes into these qualities, but in the interest of keeping this piece relatively short, I’ll name the qualities and go over them quickly… Key #1 **Big Enough to Move the Needle**: Big miners are only interested in significant deposits that can make it worth their time to acquire and develop. Key #2: **Ability to Grow:** Big miners aren’t just looking for mines with sizable current gold production. It’s expensive and time consuming to move people and equipment around the world. That’s why a big miner wants to acquire properties it can mine that also have the potential to yield new gold discoveries. Key #3: **Low Costs, High Margins**: Big miners want to buy deposits with good economics. Enough said. Key #4: **Short Payback Period**: Big miners want to see their investment get paid back in a relatively short amount of time, like less than five years. Key #5: **Simple Gold Recovery**: In the mining world, as in life, simple is always better. The more complicated a project’s geology is, the, the more difficult it will be to extract gold from the ore, the more it will cost to mine it, and the lower your profits will be. Key #6: **Excellent Mine Safety Record**: An underrated and rarely discussed – but very important – quality a gold mine needs to have to be a buyout candidate is a good mine safely record. **A Gold Formula Worth Millions** I know reviewing our criteria is a lot to take in. But really, it’s all just common sense. Major gold companies want to acquire gold mines with substantial current gold production… that can grow in the future… have good economics… and are operated with the safety of workers in mind. Based on our extensive study of 340 mining deals over the past 35 years that have generated overnight windfalls like 150%, 108, and 96%, we’ve developed the specific criteria above based on those simple principles. Using just the six keys listed above will put you ahead of 99.9% of your fellow gold and resource investors. I believe monetary and political instability will drive the price of gold much higher over the coming years. By using our Gold Stock Buyout System, I plan to make a series of large capital gains with my readers during that time. We’re won’t just be buying stocks that fund managers and individual investors want to own, we’ll be buying elite assets in the ground that deep-pocketed gold miners will jump at the chance to buy. Regards, Marin P.S. My team and I are working on a new project I think you’ll like. We’re building a free online “[Market Intelligence Center](https://katusaresearch.com/katusa-market-intelligence-center/)” hosted on KautsaResearch.com. In this center, you’ll find gold stock screen results, gold stock buyout candidates, oil stock screen results, and other useful data you can use to generate natural resource investment ideas. This project is in its early stages, but we’ve posted a list of gold stock buyout candidates that meet some of our buyout criteria. You can check it out [right here](https://katusaresearch.com/katusa-market-intelligence-center/)(for free, and no strings attached). --- # Should You Buy Bitcoin Right Now? - URL: https://katusaresearch.com/buy-bitcoin-right-now-dont-stupid/ - Type: article - Published: 2017-05-12 - Updated: 2019-05-07 - Author: Marin Katusa Bitcoin has rallied 175% in the past five months. Should you jump on board for the ride? Early this week, I offered my take on the subject in a Twitter post. It garnered a lot of interest and comments from Bitcoin fanatics. My take on Bitcoin and cryptocurrencies in general? It might make you angry… but hear me out. Bitcoin was initially designed to be a digital currency and a store of value. It was going to be a key component in the global commerce system, seen to many as owning Bitcoin was a way to reserve a slot on the Internet’s ledger. Many people believed it would revolutionize the online financial world. Guess what? It didn’t happen. Right now, there is no meaningful amount of global commerce being transacted with Bitcoin. There’s some niche retail, but that’s about it. Computers have advanced so much that cryptocurrency engineers are creating alternatives to Bitcoin, and the whole argument of “reserving a slot on the Internet’s ledger” has proven to be false by the rise of the many competing cryptocurrencies. In addition to facing competition from other cryptocurrencies, Bitcoin is at risk of being diluted. The core Bitcoin community is debating the current reality. The debate is on, and it’s only a matter of time before human greed destroys the designed *store of value factor*. A quick Google search shows these discussions are ongoing in real time—dilution will be coming to Bitcoin. My team knows of and tracks about 700 crypto and digital currencies. The top three by market cap are Bitcoin ($28.7B), Ethereum ($7.9B) and Ripple ($6.8B). Bitcoin is by far the behemoth of the industry… for now. (To put things in perspective, the world’s largest gold producer, Barrick has a smaller market capitalization than Bitcoin.) The original intentions of Bitcoin were great, I’ll give them that (but then again, so were communism’s, and we all know how that turned out). For example, Bitcoin and Blockchain were supposed to destroy credit cards such as Visa. But guess what, they’re still here. Blockchain didn’t destroy Visa. Visa has already created its own technology to handle the issues. With trillions of dollars on the line in transactions, large companies that have the majority of market share will make big waves into this arena and maintain control. The global financial biosphere has evolved and solved its own issues with in-house applications. The desperate need for Bitcoin’s blockchain came and went. The social media and commerce platform WeChat in China is a great example. It doesn’t use Bitcoin’s blockchain. The whole Bitcoin blockchain revolution didn’t happen. Competitors to Bitcoin, all promising better features than Bitcoin, arose from this “coming need.” There are numerous amounts of blockchains (such as Ethereum blockchain trying to gain traction), and frankly, the Bitcoin blockchain missed its window of integration. But let me get back to the flawed basic logic of the Bitcoin argument. Counter to what many people believe, Bitcoin is NOT an irrefutable store of value. Gold is. So, if you’re sitting on big Bitcoin profits, sell some Bitcoin and buy gold with it. And if you’re thinking about jumping on the Bitcoin train, don’t do it. Buy gold instead for a store of value. For the record, I support the spirt of cryptocurrencies, as I believe in the free markets. My issue with the Bitcoin crowd is the BS theory that Bitcoin is a “store of value.” Because of the incredible growth in computing power, what was once a “complex” algorithm is no longer complex. So, the rarity of Bitcoin fundamentally is flawed because the design rule of one block every ten minutes will eventually be changed to perhaps nine minutes… then seven… then five… and you get the point. If people can find a way to debase a currency, they will debase it. On the other hand, I do see gold as money. Thanks to its unique physical properties, gold has been used for money for thousands of years. Folks have used everything from butter to seashells, stones, livestock, salt, and cigarettes to transfer wealth and trade for goods. Yet, gold is the undisputed tangible king of the “store of value” argument for six fundamental reasons…that of which Bitcoin cannot meet. One, gold does not rust, tarnish, or crumble. Folks have used cattle as money, but cows don’t survive long in a locked vault. Two, gold is easily transported. Land is a good store of wealth, but you can’t move it around or take it with you in case of an emergency. Three, gold is divisible. If I owe both Elvis and Priscilla and I have just one piece of gold, I can split it in half. Four, gold is consistent all over the world. I’ll accept refined gold mined in Alaska just as easily as I’ll accept refined gold mined in China. Five, gold has intrinsic value. Gold is a great conductor of electricity, it’s extremely malleable, and it doesn’t break down… so it has lots of industrial uses. Seashells lose big on this one. So does Bitcoin. Six, gold cannot be printed by governments. Paper money can. Believe it or not, so can Bitcoin, and it is (in an electronic form). This difference was on display during the great inflation of the 1970s. In recent years, citizens of Zimbabwe and Argentina were clobbered by money printing. Recently, a seventh quality has set gold apart from other forms of money. It is hack-proof. You can’t hack the gold market and crush it like you can Bitcoin and other cryptocurrencies. Remember, in August 2016, a group of sophisticated hackers stole millions of dollars in Bitcoin from a single “user.” Also, back in 2014, in the most famous cryptocurrency heist, the Bitcoin depository Mt. Gox was penetrated to the tune of $500 Million. Since gold is real wealth that you can hold in your hand, it’s also “wealth insurance.” Also, you can obtain insurance on your gold. So for all those who want to argue that “people can steal your gold” that is true, but I can get insurance on my gold. Good luck getting insurance on your Bitcoins. Seriously, phone up your home insurance agent and ask for Bitcoin insurance, and see what they say. Gold is insurance against governments doing crazy things with their finances and wrecking the value of paper money. Gold tends to rise in value when the financial crap hits the fan. Think of it like car insurance or home insurance. You buy a policy and hope to never use it. With gold, it’s smart to buy it and hope to never use it. You see, a currency is sort of like the share price of a country. Over time, if a country manages its finances well… if it produces more than it consumes, saves plenty of money, and maintains a modest amount of debt, its currency will rise. If a country consumes more than it produces… if it spends lots of money, and prints money to pay for that spending, it will “dilute” the value of its currency… and it will fall in value. While currencies fluctuate for all sorts of reasons in the short term, over the long term, countries that manage their finances intelligently will enjoy strong currencies. Countries that mismanage their finances will watch the value of their currencies plummet. When paper currencies plunge, gold traditionally holds its value. For example, during the 1970s, the U.S. government massively debased the dollar to pay for expensive wars and social programs. It was a decade marked by wars, recession, and inflation. The dollar fell 26% in value from 1970 to 1980. As people fled U.S. dollars, U.S. stocks, and U.S. bonds, they rushed into gold. Gold gained more than 1,500% during the decade, making some people rich. The chart below shows the returns of gold, the Dow Jones Industrial Average, and the U.S. dollar index during the 1970s: The example above shows why it makes sense to buy gold as a form of insurance. I don’t know about you, but I’d rather not live in a highly inflationary environment like the 1970s. I’d rather see the unprecedented central bank experiment we’re living through not end in disaster. However, I do want some “wealth insurance” in case something like it happens. In my book, Bitcoin is not this kind of insurance. Gold is. When it comes to putting serious money to work for serious wealth protection, buy the form of money that has passed the test of thousands of years. By the way… Bitcoin’s logo is a GOLD coin with the Bitcoin logo. Psychologically, it is trying to legitimize Bitcoin with gold. Something to think about. Don’t be stupid. Preserve your wealth. Lock in your gains. Buy gold. Regards, Marin P.S. Here’s another important thing you should know: As one of the top financiers in Canada, I’m constantly approached to invest in all kinds of businesses. Well, my office is getting hounded daily by cryptocurrency promoters looking for money to back the next “hot” cryptocurrency. I haven’t this much exuberance and this kind of rush to raise money since resources in 2007, right before an epic selloff. There’s a saying in the market, “When the ducks are quacking, feed them.” This means when the public goes wild for an asset class, smart, early investors should take profits and unload their holdings while prices are high. The Bitcoin ducks are quacking. --- # Junior Gold Stock ETF Poised to Create “Fire Sale” Opportunity in Gold Stocks - URL: https://katusaresearch.com/junior-gold-stock-etf-poised-create-fire-sale-opportunity-gold-stocks/ - Type: article - Published: 2017-05-08 - Updated: 2019-05-08 - Author: Marin Katusa The creator of the wildly popular junior gold stock ETF has a 4 billion dollar problem. Although the mainstream media is reporting on this big problem, it’s missing the story’s most important detail… one that could help you make large capital gains over the next 12 months. I believe that very soon, a major issue with the junior gold stock ETF will create an opportunity to buy some of the world’s most valuable junior gold companies for pennies on the dollar… all thanks to a coming tsunami of selling that has nothing to do with the companies themselves. And it’s all thanks to a developing story in the popular VanEck Junior Gold Miner ETF (symbol GDXJ). I expect the opportunity around the corner will be so big that I’m getting millions of dollars of my own money ready to deploy. You could say I’m “amassing troops at the border.” This situation is urgent. It’s going to arrive quickly and play out quickly. And as I’ll explain, what’s coming in just a few short months may be the last great gold stock buying opportunity you get for a decade. **How ETFs Could Create a Big Gold Opportunity in Less than 2 Months** Over the past decade, ETFs have become one of the world’s most popular investment vehicles. Investors love idea behind ETFs: Buy and sell broad baskets of stocks with “one click” ease. This area of the market now holds over $2.5 trillion worth of assets. One particular ETF, the VanEck Junior Gold Miners ETF (GDXJ), is a big hit with gold stock investors. It’s a one click way to buy a basket of small cap (aka “junior”) gold exploration, development, and production companies. Investors reckoned that by holding GDXJ, they get “juice” on the upside, but not the downside risk associated with owning just one or two gold juniors. The chart below shows the growth in market capitalization for GDXJ. From January 2010 to May 2017, the market capitalization of GDXJ grew by 480%. At one point, the fund amassed more than $5 billion in assets. Believe or not, this tremendous growth is a problem for the ETF company… GDXJ buys and sells companies according to changes in an underlying index created by VanEck called the MVIS Global Junior Gold Miners Index. The fund essentially mirrors the activity within the index fund, or at least it did until recently. By definition, junior gold stocks don’t have large market caps and their shares don’t have tremendous trading liquidity. GDXJ grew in popularity so much so that it had too much cash and not enough places to put it. Many junior gold stocks are Canadian. As soon as an entity owns more than 20% of a Canadian-listed company ,regulations restrict its trading ability and make holding the position a general pain in the behind unless you are in it for the very long haul. VanEck didn’t want to own 20% of any gold stock. So, it restricted itself to ownership stakes in individual names to “just” 19.9%. This is important because it essentially caps how much VanEck can invest into each gold company… and would eventually cause it to run out of stocks to buy. No sane financial firm will willingly turn down cash to manage and collect fees on. So, instead of leaving the cash on the sidelines, Van Eck used the cash to invest in companies with larger market caps, known as the mid-tiers. GDXJ was created to give investors exposure to juniors, but because so much capital flowed in, the “Gold Junior ETF” became more of a “Gold Mid-Tier” ETF. The GDXJ most notably began to deviate away from the index in September 2016 when it began purchasing shares in the large mid-tiers (+$1 billion market cap), while its underlying benchmark index MVIS Global Junior Gold Miners Index did not. The MVIS Global Junior Gold Miners Index is set to be reviewed and rebalanced on **June 9th 2017**. Between now and then, I expect there to be significant volatility in all the sub $1 billion market cap junior and mid-tier gold companies. Companies’ shares will be sold by GDXJ so the new ETF can become a “large mid-tier to small major” gold ETF. Once this is done, and the new positions are bought, the GDXJ will rebrand itself accordingly. Then, within 12-24 months, a new ETF for juniors to replace the demand of the old GDXJ will be created. This “reshuffling of the ETF deck” will create a great opportunity for informed gold stock speculators. **Understanding Company Selection for GDXJ ** To qualify for inclusion into GDXJ going forward, companies must meet a new set of requirements. The goal of these new requirements is to “tilt” the fund away from very small companies and in the direction of mid-sized companies. To qualify for GDXJ, companies must have a market cap of at least $150 million. Also, a stock’s average trading volume each day must be at least $1 million per day over the course of the past 90 trading days. Furthermore, to avoid any company having more pull than the others, the weighting of each company in the fund itself is capped at 8%. The index will be reviewed every quarter to make sure the index is working properly. This quarter’s rebalancing is so important because the index is allowing larger companies to be included. By increasing the maximum size allowed into the index, mid-tier companies such as Yamana Gold, Pan American Silver and Eldorado Gold will be included in the index. **To free up cash to pay for these new investments, holdings in every other company within the index will need to be reduced. ** Small gold companies that don’t have enough size or liquidity to be included in the new fund will be hit with massive amounts of selling. Again, the GDXJ fund owns more than 19% of some juniors. When 19% of a small company’s “float” is sold, it can send its stock price down 20%… 30%… even 50% in a month. I know this might sound crazy, but it happens often in thinly-traded junior resource stocks. Here’s why I believe this could create an epic gold buying opportunity (perhaps the last one we see for a decade). **The Chain Reaction I Love to See** The forced selling I expect to see in many junior gold stocks will force share prices much lower. Add in the hedge funds that are short selling before the GDXJ starts selling its position, and this will create extra selling. This will create an incredible opportunity, but only after the selling pressure of the hedge fund short positions and the GDXJ subsides. It also goes much deeper than just the index itself rebalancing. Other ETFs which benchmark against the MVIS Global Junior Gold Miners Index will also be forced to reposition themselves accordingly or change their fund mandate, including other funds hitting stop losses, and the selling will provide an ideal environment for alligator buying. This forced selling will cause some gold stock investors to hit stop losses and dump shares… which will create more forced selling… which will cause more stop losses to be hit and more share dumping… which will create more forced selling… and so on… Eventually an “avalanche” of selling will hit the market… and it will have absolutely nothing to do with the underlying values of the gold companies themselves. The selling avalanche will strictly be a function of a market warped by robotic, unthinking computer programs. This selling will exhaust itself in a final “last gasp” puke out… where the final few dozen desperate, ignorant sellers sell their shares with no regard to their intrinsic value… And that will create an incredible stock market anomaly…. Where VALUE decouples from PRICE… Where SMART operators buy assets from DUMB operators. Where you can buy DOLLARS for 50 CENTS. **Those words should be music to your ears… because that is the kind of opportunity any investor worth his salt looks for in the market.** Again, what is coming our way is a self-reinforcing cycle of forced, ignorant selling that will feed on itself and cause a panic in some of the world’s best small cap gold stocks. In a matter of days, the share prices of high quality junior gold stocks could plummet 25% – 50%… leaving them absurdly undervalued… and opening awesome windows of opportunity. I doubt these windows of opportunity will stay open more than a month in individual stocks. Some windows will be open for just a few days. That’s because at the bottom, a small group of very well-funded, very well informed investors will be there waiting… ready to scoop heaps of bargain gold shares into their baskets. And when normalcy returns to this panicked market, artificially depressed shares could easily rally 50% – 100% in a matter of weeks. It will be a true windfall for smart operators. History shows us what is possible here. **Changes in the Junior Gold Stock ETF: How to Triple Your Money After a Panic** To give you an idea of how self-reinforcing liquidation cycles create great opportunities in the resource market, we can look at the story of Glencore… Glencore is one of the world’s biggest commodity companies. It owns mines, refining facilities, and transportation networks. It deals in commodity trading. It’s a giant company that has a hand in almost every resource you can think of. As large and powerful as it is, Glencore was in crisis back in late 2015. In the years prior, Glencore had borrowed massive amounts of money. Then, commodity prices plummeted from 2014 levels, which crushed profit margins and impaired Glencore’s ability to service its debts. Some industry experts believed it was headed for bankruptcy. With these concerns in mind, large investors began to sell Glencore shares. The share price fell from 300 pence (this is what British shares are quoted in) per share to 250 pence per share in one month. The share price decline caused other Glencore investors to hit stop losses and dump their shares, which created more selling pressure. Glencore shares fell another 50 pence to 200 pence per share. This decline caused more investors to hit stop losses and dump more shares… which in turn set off more stop losses and created more forced selling. It was a chain reaction that fed on itself. Short sellers, who bet on falling prices, jumped into the market and created even more selling pressure. Soon, Glencore shares hit 120 pence… then 100 pence… then 80 pence. It was a vicious cycle with seemingly no end in sight. Everyone was selling because everyone was selling. Eventually, the last few “weak” holders gave up the ghost and sold their shares in the fall of 2015. They couldn’t take any more pain… they couldn’t take any more losses. This final climactic “puke out” sent shares below 70 pence per share. It was a 78% decline from the 2015 high. At this deeply depressed level, the fire sale was on. Smart investors stepped in and started buying Glencore. These investors realized the company would find a way out of its dire situation. The horrible commodity market would get less horrible. Glencore would somehow raise more capital, keep going, and make it through the valley of death. After the smart money accumulated heaps of bargain shares, the rest of the market caught on. Depressed like a coiled spring by the self-reinforcing liquidation cycle, Glencore shares rebounded spectacularly. Shares leapt 50% from their lows to hit 100 pence… and then leapt another 50% to hit 150 pence… and then leapt another 50% to hit 225 pence… and eventually hit 300 pence per share. Shares climbed 385% off their depressed levels in just 14 months. Of course, Glencore was going through a tough time. But the self-reinforcing liquidation cycle forced the share price much, much lower than the fundamentals merited.* People had to sell because other people had to sell.* This caused Glencore’s real business value to “decouple” from its market value. That’s when smart operators bought from dumb operators. When a bit of normalcy returned to Glencore shares, they rebounded spectacularly and produced huge returns for [alligators](https://katusaresearch.com/the-way-of-the-alligator/) waiting at the bottom with cash. The global financial crisis of 2008 provides another example of how self-reinforcing liquidation cycles create big opportunities… **Why You Should Learn to Appreciate a Good Crisis** If you remember the 2008 financial crisis, you remember it was a time where most people sold first and asked questions later. Asset prices of all kinds were marked down quickly and suddenly. The junior resource sector was particularly hard hit. Take small cap copper miner Taseko Mines for example. Taseko owns the open pit copper-molybdenum Gibraltar mine in Canada. Its management team is experienced and well respected in the industry. Its mine is among the largest copper producing mines in North America. But that didn’t count for much in 2008. As you probably recall, it was an epic case of everyone selling because everyone is selling. Taseko went into the financial crisis with a share price of CAD$5.50 per share. But once investors began selling all kind of stocks and bonds, Taseko shares declined to CAD$4 per share. The decline in Taseko and the rest of the sector triggered stop losses and massive fund redemptions, which produced more selling. This forced selling sent Taseko down to CAD$3 per share… then CAD$2 per share. The selling fed on itself until a final climactic “puke out” sent shares below CAD$1. Around this time, smart operators stepped in to buy bargains in the junior resource sector, including Taseko. Just like Glencore, Taseko was going through a tough time. But the self-reinforcing liquidation cycle forced the share price much, much lower than the fundamentals merited. *People had to sell because other people had to sell*. So, the company’s intrinsic value decoupled from its market value. You can guess what happened next… As investors realized the world wasn’t really falling apart, Taseko shares rallied 100% off their lows to reach CAD$2… and then to CAD$3… then to CAD$4… then to CAD$5. Shares rallied more than 400% of their lows in just over a year. Again, the self-reinforcing liquidation cycle depressed the shares like a coiled spring. When the horrible conditions abated, shares soared. **How Much Pain and How Much Gain is Ahead?** In addition to pressure from the forced investor selling I just described, shares face pressure from a group of market players called “short sellers.” Short sellers are traders who bet on stocks falling, rather than rising. When they see shares falling, they often “pile on” and push weak shares even lower. Their actions can crush the share prices of thinly-traded stocks. These traders will increase selling pressure and the speed at which stock prices break down. To be clear, I’m not saying what’s ahead for the junior gold sector will be a repeat of the 2008 financial crisis. I’m sharing these stories to show you what’s possible when companies are sold to levels far below what the fundamentals merit. Could junior gold stocks decline 33% – 50% in a weak gold market marked by large amounts of forced selling? Absolutely. Are we guaranteed to see declines of this size? Absolutely not. There are no guarantees in the market. But there are situations you need to stay informed on and be prepared for. This is one of them. In just a few months, we could see some of the world’s best junior gold companies go on sale. Given the never-seen-before levels of government around the world, the never-seen-before amount of central bank credit creation around the world, and the huge political wildcard of Donald Trump, I believe we are very likely to see $2,000 gold in the next five years. This means the coming fire sale in junior gold stocks could be the last great gold stock buying opportunity we see for many years. Here’s how I’m preparing… and how I suggest you prepare as well. **The Ultimate Gold Stock Shopping List for Summer 2017** A major decline in junior gold stocks will create panic with many gold stock investors, but smart operators will use this panic to their advantage. The ideal set ups will occur if GDXJ selling pressure forces lots of other investors to sell as well… creating self-reinforcing liquidation cycles… which leaves shares very cheap. To capitalize on the forced selling I expect we’ll see, I’ve taken the list of GDXJ holdings and created my own method for analyzing their assets, liquidity, market values, and various other qualities. A key part of my team’s analysis is something called the “*Days to Liquidate Position*” number. This is the number of days it would take to sell the fund’s entire position in a stock based on the number of shares the fund owns and the stock’s average daily trading volume of the past 90 days. To be clear, the fund won’t liquidate or reduce positions based on the time frames in our table. This is just a measure of how much of a stock the fund owns in relation to its typical trading volume. You can think of it as a measure that factors in how much water needs to be drained out of a bathtub and the size of the drain. This measure is critically important to our analysis because simply looking at a GDXJ’s holding’s market value in a vacuum doesn’t tell you enough. We need to know how much of it GDXJ owns and what kind of trading liquidity it has. The higher a stock’s *Days to Liquidate Position* number, the more selling pressure from GDXJ that stock will experience, should GDXJ make a major move in it. We expect stocks with very high *Days to Liquidate Position* ratings will get hit the hardest. For reference, here is a snapshot of how our spreadsheet looks for 20 GDXJ holdings that are expected to be reduced: In addition to using *Days to Liquidate* analysis, I’m also tracking the actions of the short sellers I described above. I plan on using these guys as my allies and I will use their negative energy and short dollars to my advantage. I am tracking the short positions in every gold company in the GDXJ fund and I update this data constantly. In addition to the analytical tools cited above, we use good old fashioned security analysis to pinpoint the best opportunities. As longtime Katusa Research readers know, the people running the business is the most important factor in my analytical process ([read all about it here](https://katusaresearch.com/katusas-keys-method-investing-worlds-best-resource-companies/)). **In Summary** Although some of the holdings in GDXJ have sold off recently, I believe the biggest and most important selling phase is ahead of us. I believe it will play out over the next 120 days. The GDXJ is a multi-billion-dollar fund making large moves in a small sector. These moves will create big swings in junior gold stock share prices. Again, I believe share prices could decline as much as 50% in the months ahead, which will open windows of great opportunities for smart operators. This will be one of those rare market opportunities where values become decoupled from prices. I doubt these windows of opportunity will stay open more than a month. Windows in some individual stocks will be open for just a few days. That’s why we need to be armed with information in advance, prepared to profit, and be ready to scoop heaps of bargain gold shares into our baskets. I expect to make big moves for myself and my subscribers in the coming months. Regards, Marin Katusa P.S. To make sure you’re armed with the right information and you receive critical “buy” updates when quality junior gold companies go on fire sale, consider coming on board as a member of *Katusa’s Resource Opportunities*. [Click here to learn more](https://katusaresearch.com/subscribe/). Again, the coming fire sale in junior gold stocks could be the last great gold stock buying opportunity we see for many years. --- # Q&A With Gold Titan Rob McEwen: An Exclusive Q&A with Marin Katusa Part 2 - URL: https://katusaresearch.com/qa-gold-titan-rob-mcewen-exclusive-qa-marin-katusa-part-2/ - Type: article - Published: 2017-04-29 - Updated: 2019-11-05 - Author: Marin Katusa Yesterday, you received [Part 1](https://katusaresearch.com/qa-gold-titan-rob-mcewen-exclusive-qa-marin-katusa/) of our Q&A with Rob McEwen. Below is the second part of the interview series with one of the world’s best dealmakers. **Marin Katusa:** Wouldn’t you agree that you and I have co-invested in early-stage companies where we were backing a smart management team via private placements because we couldn’t get the allocation size in the open markets? **Rob McEwen:** Absolutely. **Marin Katusa: **What percentage of Rob McEwen now – not any of the companies that you’re involved with, but just Rob McEwen the speculator or the gold investor – would you say is in private placements versus open-market buying. Would you say well over 90 percent in private placements? **Rob McEwen:** Yes. **Marin Katusa:** Can you name some industry names that you will invest in, someone that we both respect? Think of Pat DiCapo, who has a long track record of success and always has his nose to the ground and is involved early stage with great teams. What other names would you put up there that you really like? The people that you follow and you’re willing to have them come into your office, pitch their idea and Rob McEwen will write a cheque? **Rob McEwen:** Well I won’t say every time that someone I know and respect who comes into my office that I write a cheque for them. **Marin Katusa: **Definitely not. **Rob McEwen:** I will certainly listen to as many stories as possible. Because I never know when someone is going to walk in with a story that strikes me as one that I have to own. There are players out there that bring good stories. I’d say, I do not want to restrict it to one person or small group of people because it’s just the nature of the business. You just need to have a large flow of ideas coming at you and you filter them and say those work and the other ones, well, I’ll watch. **Marin Katusa: **Are there any analysts or investment bankers that you think people should pay attention to? **Rob McEwen: **Pat DiCapo certainly has got a strong track record. I’ve had my head down a lot lately just concentrating on our own situation, so I don’t have any that come to mind right now. **Marin Katusa:** During the November 2015 San Francisco Silver and Gold Summit, when we featured you and McEwen Mining and you were up on the stage that Cambridge House and Katusa Research co-hosted, you and I did a gold Q&A…our subscribers made multiples off your stock in a very short while. You stated that we were at the bottom of the market. It was exactly the theme that Ross Beaty was saying at the time. Your stock ran before most of the others did, and then it was a +500% win. You’ve invested over $100 million into McEwen Mining personally. I stated this fact on stage at the 2015 San Francisco Cambridge-Katusa Conference– that you invested more into the company than the entire market cap of the company at the time, as I believed that alone was a good indicator that we were close to the bottom in gold. For the benefit of my readers, can you name three other junior stocks that you’ve invested in personally, that you think the retail or institutional audience should take a look at? Stocks that may not be well known but ones that you invested your own money into and that you think have significant potential? **Rob McEwen:** Well, back then I suggested a company called GoldQuest, which has property in the Dominican Republic. Agnico Eagle just bought 15 percent of GoldQuest. Pure Gold is in Red Lake working the old Madsen mine, and they think they have a folded structure that might host the same as the Madsen mine hosted in the past – about three million ounces of gold. **Marin Katusa: **That’s a Mark O’Dea’s company. He is definitely someone people should be watching. I think he is a very, very bright mining executive who I think will be a serious mover and shaker in the mining industry moving forward; and he is a young guy – he’s not even 50. **Rob McEwen:** And he won second place in the Goldcorp Challenge back in 2001. **Marin Katusa:** That’s correct. **Rob McEwen:** Another company called White Gold is a fascinating story because what Shawn Ryan has done there is just brilliant and very strategic. **Marin Katusa:** Here is an example of a very smart prospector, Shawn Ryan, teaming up with one of the most powerful mining financiers in the industry, Pat DiCapo. Together, they have built up an incredible land position that has district scale. Agnico just invested in the company, and it has incredible potential. Pat DiCapo is someone I’ve been watching for years. I know most if not all the major financiers in the resource sector, and Pat is among the best in the industry. He is smart, aggressive and puts his own money on the line. And he is in his early 40’s, so he still has a very long career ahead of him. **Rob McEwen:** Pat is definitely on a roll. I like Pat a lot. **Marin Katusa:** My last question for you is outside of the gold sector. Do you have a couple of books that you recommend that will help investors expand their horizon and that really hit you in a way that made you think to yourself, I am going to buy that book for a friend? **Rob McEwen: **Sure, but I should mention one other company first: Golden Predator, which is a Yukon play as well. **Marin Katusa:** Their 3 Aces sure has come out with incredible grades. **Rob McEwen:** Yeah. That’s right. **Rob McEwen:** The first book I recommend is Shoe Dog, which is the story of Phil Knight and Nike. it is not an investment story, but it is a good depiction of building a company and the challenges that he faced while building it. When he went public, his interest in the company was worth just under $200 million, and by 2007 he was worth $10 billion. **Marin Katusa: **Not a bad return. **Rob McEwen:** Anyone looking to start a business or who wants to look at how businesses are built should read it. A great inspirational book that I read recently is called No Barriers, written by Eric Weihenmayer. He has climbed a number of the tallest peaks in the world, including Everest, and he recently kayaked down the Grand Canyon. What makes the story quite amazing is that he is blind. When he got to the top of Mount Everest, the expedition leader told him to not to make it the biggest thing in his life, but to go on and do more. Erik is a tremendous inspiration to everyone. **Marin Katusa:** And that’s a good way to wrap up this Q&A, as I think that the gold market has much more room to run. You and I even realise that the big investment funds, pension funds, and the Sovereign wealth funds are all at their historic lows for their percent allocation towards the gold sector; if that just changes a little bit, you are going to see a massive increase in the gold sector. Rob, I look forward to seeing you at the November San Francisco Silver and Gold Summit. We are going to have a great talk there – another one-on-one Q&A. It is always a pleasure talking to you. Are there any inspirational word you would like to leave with our viewers? **Rob McEwen: **A lot of people have discounted gold. We had a great run last year up until the end of the summer, and then it slowed down. If you look at gold and silver versus the Dow the S&P right now silver for the last two years has outperformed the S&P and gold has run up tide with that, so people are saying: “Hey this story isn’t over yet.” The dollar has gone up and gold is still increasing, and maybe we will see the dollar and gold running in the same direction at the same time. **Marin Katusa:** We live in exciting times. Rob, thank you so much for your time and I look forward to catching up with you again in San Francisco in November. **Rob McEwen: **Thank you, Marin. --- # Q&A With Gold Titan Rob McEwen: An Exclusive Q&A with Marin Katusa - URL: https://katusaresearch.com/qa-gold-titan-rob-mcewen-exclusive-qa-marin-katusa/ - Type: article - Published: 2017-04-28 - Updated: 2019-05-08 - Author: Marin Katusa When it comes evaluating and buying gold assets, few, if any, people know more than my friend Rob McEwen. Rob is the extremely successful founder and former CEO of gold giant Goldcorp. He’s a member of the Canadian Mining Hall of Fame and the current CEO of McEwen Mining. Recently, I discussed gold acquisitions with Rob and even got him to mention some of his top junior gold stock holdings. Below, you’ll find insights from one of the gold world’s greatest dealmakers. **Marin Katusa:** I’m here with Rob McEwen, a legend in the gold mining business. Rob, thanks for doing this for my subscribers. First question: where are we currently in the gold market when it comes to the spot price of gold? **Rob McEwen: **We are in the early stage of a major uptrend. There are a number of reasons for this: one is the extreme amount of debt that has already been incurred by governments around the world. It is rapidly becoming a larger burden that will eventually become unmanageable. I expect to see widespread devaluation of currencies relative to gold. Combine that with some geopolitical strife and economic problems floating around the world, and you are going to see more people turning towards gold as a form of insurance for the balance of their wealth. It’ll once again be used as it has been used for millennia: to preserve value, the ultimate currency. **Marin Katusa:** I am with you 100 percent. I think we are in the early part of the gold “glory days.” I think gold is well-positioned to have a great run this year. The President of the United States just stated that the USD is overvalued, so you know we are in for an interesting year for currencies and gold. Where do you see the price of gold in the next 12 months and in the next 5 years? **Rob McEwen:** Let me answer the second question first; In five years, we are going to be at $5,000 an ounce. This year I am expecting a higher price by the end of the year than gold is at now, possibly $2,000/oz. **Marin Katusa:** Gold is a great hedge against the future value of a fiat currency, whether it’s the US dollar, the Euro or the Yen. A great example of this was what happened to the Russian Ruble from late 2014 and during 2015, where the Russian currency dropped in value by 50%, but those who had gold were protected by the currency depreciation. A lot of people say gold will do incredibly well in an inflationary market. But if we enter a period of global deflation, I believe that gold will still do well; whereas the old argument was…it’s about inflation. What’s your opinion there? **Rob McEwen: **I agree with you. In a deflationary environment, gold offers extreme liquidity. I’ll give you an example. Let’s compare having your money in gold or in real estate. If you want to sell your house, it is virtually impossible to sell it and get your money in two days. Gold, on the other hand, you can sell in two days and achieve instant liquidity. It offers that form of insurance in a deflationary environment where it gives its holder a clear advantage over most other asset classes. **Marin Katusa:** I totally agree. We all saw that in 2008 when liquidity just went away. **Rob McEwen:** Yes. **Marin Katusa:** So you and I are on the same page when it comes to the price of gold. Now as the founder of Goldcorp – the second largest gold producer today – and the Chief Owner of McEwen Mining, you’re a legend in the gold business. You are no stranger to M&A, mergers and acquisitions. We’ve seen a flurry of PP’s by majors into juniors whether its Goldcorp, Agnico, Barrick, or the recent take out of some of these juniors’ non-producing gold companies. Do you see further consolidation in the gold space, or do you think the majors have kind of bit off what they need to chew for the next few years? **Rob McEwen:** The majors now see the juniors as a sweet spot in the market. They bloated their balance sheets with debt from 2005 up to 2012. Then gold and silver prices collapsed and suddenly their revenues were insufficient to service their debt. The way of dealing with the problem was selling properties and drastically cutting back their exploration budgets. As a result, most majors, now have negative growth profiles. So to deal with this falling production curve, they have to come up with some excitement for their shareholders. They have to be able to say “we have growth in these other areas”, and that’s why we see them jumping into the junior space. They are aggressively looking for the juniors with potential and also looking at geopolitical areas closer to home where there seems to be a district developing. Look at the Yukon and what Goldcorp’s doing. It bought Kaminak and some others immediately around Kaminak. They are consolidating properties in safer jurisdictions. **Marin Katusa:** And district scale potential… **Rob McEwen:** …in communities that are more predictable and closer to home. **Marin Katusa:** I think the sweet spot here is going to be the mid-tiers. I personally believe that there is going to be consolidation in the mid-tiers, where mid-tiers is defined as between 100,000-1,000,000 ounces of annual production. Do you see active M&A within the mid-tier gold producer sector? **Rob McEwen:** Absolutely. The mid-tiers’ production curve is going up. The seniors’ production curve is going down. So the performance is going to be in the mid-tiers and the juniors. But the mid-tiers need to get size as the market has become increasingly dominated by passive investment through ETFs, rather than active investment managers. The number of the indices that the company is in is going to increasingly determine the volume and market liquidity of a company’s shares. Therefore, some mid-tiers are probably going to be looking for stocks that are ignored by the indices and ETFs. So if you have a good project that’s got room to grow and you’re not in a lot of indices, you might want to be looking over your shoulder or people should look at you to buy before the bigger guy steps in. **Marin Katusa:** That’s a perfect segue into my next question. When Rob McEwen is the head of a company as a corporate, what are the key items you would like your corporation to look at when you are evaluating a potential takeover candidate? Let’s say, what are the five key important items? **Rob McEwen:** I’ll look at management and what their past successes have been. I’ll look at how much commitment they have made to the company financially. How many shares do they own and what is their cost of those shares? How many options have they been granted? Do they grant themselves a lot of options, and do they pay themselves excessively? If they are frugal with their options and their compensation and they have an interesting business plan, I go “Okay, I like that.” Are they any good at math, and what’s their view of the future? In other words, have they gone out and sold royalties on their property? Have they sold metal streams? Have they hedged their future? And if they’re telling me they’ve got the best story out there and it’s going to keep growing and they also believe gold is going higher but they’ve sold a stream or royalties or hedged then I know they are talking from both sides of their mouth and I don’t invest. **Marin Katusa: **This is Rob McEwen as an investor – what about Rob McEwen as a corporate entity? **Rob McEwen:** The same rules apply because if management is out promoting and saying gold’s going higher and the value of their assets is going to benefit significantly. Then they should be exercising discipline and not giving in to that temptation to take money from a metal streaming company or royalty company or to hedge their future production. They should be preserving as much of the price upside as possible for their share owners. **Marin Katusa:** What other key factors do you look for? **Rob McEwen:** The strip ratio. What is the cost of moving all this material? I’ve always been a big fan of grade. In fact, I have probably focused too much on grade, having being spoiled by Goldcorp’s grades. **Marin Katusa:** The Red Lake mines have truly been phenomenal grade. **Rob McEwen:** …and look at the profit margins. An area that investors should take more time looking at is the company’s ownership of property and what payments might be required. Because often a company may say “Well, we got this property.” But perhaps they don’t own it or there are large outstanding payment yet to be made. Have they just optioned the property and have to make more payments? You need to ask if the property is owned and fully paid for. This isn’t usually in a presentation; you have to dig into the documentation. **Marin Katusa: **I agree. I love this line – I don’t know where I picked it up years ago – grade is king and oxide is queen. Do you look at and do you prefer certain types of geology over others? Do you prefer open pits over undergrounds? Do you prefer oxides over sulphides, or do you just look at project specifics for your situation? **Rob McEwen:** Project specifics and profitability. **Marin Katusa:** It’s all about the profitability. Are there any other items that you look at, that you think investors should learn about and focus on, such as metallurgy, safety records, district scale potential and the ability to increase production? **Rob McEwen:** All of those are also very critical. On a private basis, I will go much earlier stage. I am prepared to take more risk on a property if I like the concept. P.S. Stay tuned tomorrow, because in Part 2 of the Q&A Rob will reveal to you the junior companies he’s looking at and investing his own money in. --- # Not All Oil Is Created Equal: A Quick Guide to Knowing What You Own as an Oil Investor - URL: https://katusaresearch.com/not-oil-created-equal-quick-guide-knowing-oil-investor/ - Type: article - Published: 2017-04-21 - Updated: 2019-08-26 - Author: Marin Katusa On the nightly news, crude oil is referred to as one simple homogeneous product. Anchors say things like, “*oil climbed $2 a barrel today*” or, “*oil plunged 7% today*.” The reality of the oil business is much different. Not all oil is created equal. There are actually dozens of kinds of oil… and small differences in them can make big impacts on the money you make as an oil investor. If you want to be a successful oil market player, it’s critical to know these differences. For example, smart oil investors might be very happy to sell oil for $40 a barrel… even when the news anchor says oil is trading for $50 a barrel. Below, I cover why… and explain several other keys to success in the oil and gas market. *****The first ****factor** you need to know about is “heavy” vs. “light” oil. In preview, light oil is worth more than heavy oil. Here’s why… The American Petroleum Institute (API) has a scale called the API gravity scale. It measures the density of petroleum. The scale goes from 0 to 75. For reference, water is rated a 10. If an oil type has an API gravity greater than 10, it will float on water. If an oil type has an API gravity of less than 10, it will sink in water. Any oil with an API gravity below 22 is considered “heavy oil.” Less dense, or “light oil” has an API gravity of greater than 31. Light oil is preferable to heavy oil because a higher percentage of the hydrocarbons are converted into things like gasoline. That’s why light oil trades at a premium to heavy oil. The oil that comes out of basins like the Permian and Eagle Ford has an API gravity of approximately 38-42. This means the basins produce valuable “light oil.” In contrast, oil produced from Canada’s famous Athabasca tar sands has an API gravity of 8. It’s among the world’s heaviest types of crude oil in production. It requires greater amounts of refining than light oil. Heavy crude is thicker, which means it is more resistant to flow and usually it contains lots of chemicals such as sulfur. Before the refiners can turn the oil into gasoline, they must remove the impurities, which costs time and money. Also, some heavy oil is so thick that it won’t flow through pipelines on its own. A “diluent” must be added to make it transportable via pipelines. This also adds to the cost. It’s another reason why heavy oil trades at a discount to light oil. For example, on March 1, 2017, Bitumen from the Athabasca tar sands sold for $34 per barrel while the light oil benchmark, West Texas Intermediate crude, sold for $54.50 per barrel. This isn’t to say you can’t make money in heavy oil. I’ve made great money in heavy oil. But all things being equal, you’d rather produce light oil than heavy oil. *****The second factor** you need to consider when evaluating a firm’s oil production is what comes along with it. Some oil and gas basins contain wet natural gas that can be split apart to unlock an extremely valuable substance called “condensates.” You see, hydrocarbons “chain” together. The more carbon atoms in the chain, the more “liquid rich” it is. The more “liquids rich” it is, the more valuable it is. These liquids are called condensates. You know some of these condensates. Jet Fuel is a condensate. Condensates are the building blocks used to produce plastics, kerosene, and even jet fuel. Without condensates to act as a diluent, the transportation of the tar sands heavy oil via pipeline would be nonexistent. Condensates are also used in the ethanol blends you may use at your local gas station. Condensates have API gravity ratings on the 45 – 75 scale. They are so useful and valuable to society that a barrel of condensates is worth more than the best oil coming out of the Bakken or Eagle Ford shales. Condensates sell for a **premium** over the benchmark price you always see for crude oil. You could say condensates are the “King of Hydrocarbons.” When I evaluate oil and gas companies for investment, I like to see lots of potential for condensate production. *****The ****third factor** you need to know about your oil and gas company is how it’s getting its product to market. It’s one thing to get 10,000 barrels of oil out of the ground. It’s an entirely different thing to get those barrels to market so they can be consumed. Doing so requires transportation networks (like pipelines and tankers), storage facilities, and oil refineries. The harder it is to get oil to market and refine it, the less a barrel is worth at the wellhead. For example, oil produced in Texas takes a quick and cheap pipeline journey to the large refinery complexes located along the Gulf Coast. Oil produced from offshore wells in the Arctic Circle has a much more expensive journey. It must be loaded onto tankers, which must occasionally navigate choppy, icy waters… and then travel more than 1,000 miles. Every dollar an oil and gas firm pays for its product’s transportation is a dollar that it isn’t keeping as profit for shareholders. That’s why I prefer to own oil and gas assets located in the vicinity of major pipelines. I know it will result in more profit for shareholders. **In Summary** There’s a lot more to say about each of these three factors, but I’m keeping this essay relatively short so it acts as a quick “executive summary.” Most investors think of oil as simply “oil.” They think if oil is trading for $50 on the exchange, that’s what their oil company is getting for it. However, that’s not the case at all. Before investing in a company, determine what type of oil it produces. Determine what comes with that oil. Determine how the company gets its production to the market. Knowing what questions to ask and what answers you want to hear will give you a huge advantage over other investors… and help you consistently make smart oil and gas investments. Regards, Marin P.S. Right now, it’s critical to know the ins and outs of the oil market. That’s because a brief window of opportunity is open to buy your share in one of the world’s richest, biggest oil and gas fields… at a huge discount to what others are paying for similar top tier assets. I don’t believe this opportunity will last for long. I estimate this world-class oil field is selling for an 80% discount to what others are buying for similar top tier assets. Soon, the world will wake up and realize what is going on and there will be a rush to buy these assets. But if you act quickly, you can secure your spot at a bargain price… before the crowd arrives. I’m so confident this is a low-risk way to make massive capital gains that I’m willing to “bet” $3,500 on your success. --- # Why “Peak Oil” or “Peak Anything” is “Peak Nonsense” - URL: https://katusaresearch.com/peak-oil-peak-anything-peak-nonsense/ - Type: article - Published: 2017-04-07 - Updated: 2020-02-14 - Author: Marin Katusa I’m sure you’re familiar with this serious problem… The world is facing a supply shortage of crude oil, the lifeblood of the modern economy. Around the world, oil fields have reached “peak” production. Experts are in in the mainstream press, issuing grave warnings: *We’re running out of oil. If we don’t find another fuel source, we’ll have a global calamity.* Your first thought of this story surely goes back to around 2006. Back then, big name experts like Matthew Simmons and T. Boone Pickens grabbed everyone’s attention with proclamations that we’d hit “Peak Oil,” and prices were set to rise dramatically, which could cripple the global economy. Actually, the “Peak Oil” claims I’m talking about come from 1937… and then 1945… and then 1956… and then 1977. Most people don’t realize it, but for generations, all kinds of “experts” have been claiming we’re about to run out of oil. Unless you know your oil history, you wouldn’t have known that Simmons and Pickens were whistling a very familiar tune. You see, claims of “peak oil” and “peak this” and “peak that” have been around for a long time. Falling for them is one of the most common errors in the entire resource market. But if you brush up on your history, you’ll learn to associate terms like “peak oil” or “peak gold” with “peak nonsense.” Here’s why… **The Worst Bet in The World** You can say a lot of bad things about the human race. We pollute the environment. We fight wars over silly things. We created reality TV. However, you can’t say we aren’t incredibly inventive and resourceful. Human inventiveness and resourcefulness has produced manned space flight, computers, cars, artificial hearts, the telegraph, the smartphone, the microwave oven, and millions of other useful things. It is the driver of human progress. If you take a few minutes and think about that progress, you’ll realize why betting on “peak anything” or a crisis brought on by a resource shortage is a very bad bet. Betting on **Substitution, Conservation, and Innovation** is far more likely to pay off. Frightening claims that we’re running out of resources is older than the internal combustion engine. In the late 1790s, an English cleric and scholar named Thomas Malthus claimed the world’s population was set to outgrow its ability to feed itself. The alternatives to the trend of the day were either reduced population or famine. Mathus’ claims greatly influenced the thinking of the times. Yet today, his thinking is largely mocked. Instead of a shortage of food, we got more than we could eat. The introduction of mechanized farm equipment, advanced seeds, and fertilizers have helped mankind create an abundance of food. In North America for example, these innovations have increased crop yields per acre by more than 400% over the past 80 years. These yields would be unbelievable to a farmer working in Malthus’s time. They would strike him as what we call science fiction. Yet, human innovation regularly makes today’s science fiction tomorrow’s reality. The changes in farming happened slowly over the course of centuries. But when a natural resource experiences a short-term price spike, huge changes can happen in just months and avert major problems. This is thanks to **Substitution, Conservation, and Innovation**. **Substitution** You can see the power of substitution in your own life. When the price of a resource soars, we find cheaper alternatives. It’s our natural reaction to high prices. If the price of chicken climbed 10-fold, you’d eat more fish and beef. If the price of granite climbed 10-fold, you’d probably find a different material for your countertops. If the price of copper were to rise 10-fold, builders might start using PVC pipe instead. When the price of a resource soars, **people find ways around the prohibitively high prices**, just like water finds its way to the lowest elevation. **Conservation** Conservation works hand in glove with substitution. Take those price spikes in the resources I just mentioned: chicken, copper, and granite. If one of those resources was deemed vital to a country’s national interests, the government would order the conservation of it. There would be penalties for wasting the resource. There would be consumption quotas. There would be breakthroughs in using the resource more efficiently. You see this kind of conservation already in areas with limited water resources, like California. It’s an effective tool for preventing shortages. (To be clear, I’m not saying I support government intervention in markets, I’m simply pointing out it’s a fact of life.) Lastly, we have the most powerful tool of all… **Innovation** The story of mankind is a story of constantly finding better ways to do things. These progressions often leap over resource concerns and render them non-issues. Instead of using candles to light our homes, we use electricity. Instead of riding around in horse-drawn buggies, we use cars. Instead of crossing oceans on ships, we fly over them in planes. We didn’t stop using the horse and buggy because we ran out of horses. We didn’t stop lighting rooms with candlelight because we ran out of candles. We didn’t stop using sailboats to cross the ocean because we ran out of sails. Instead, we jumped over those potential concerns by innovating. As for a very recent example of innovation alleviating a “resource shortage,” consider the innovations made in the horizontal drilling and hydraulic fracturing of shale fields. In 2005, resource shortage concerns were high in the U.S. In the early 1970s, U.S. oil production reached nearly 10 million barrels per day. After that, most of America’s “easy oil” had been tapped and production entered a long decline. In 2005, U.S. oil production hit its lowest level in more than 50 years. Meanwhile U.S. oil demand was near all-time highs. This meant the U.S. had to import more oil from foreign sources than ever… which left it more vulnerable to oil supply disruptions than ever. Access to oil was becoming America’s Achilles heel. It was around this desperate time that a gift from the heavens landed in Uncle Sam’s lap. Or more accurately, a gift from innovation. In the 90s, a small group of Texas oil drillers led by a man named George Mitchell pioneered the use of shale fracking technology. The technology allowed Mitchell to drill into oil-rich rock layers, fracture them, and extract large amounts of oil and gas. The technology showed signs of success back then, but it was in its early stages.[![060417 fracking_katusa_research]](https://katusaresearch.com/wp-content/uploads/2025/07/Placeholder.png) By 2005, the technology was advanced enough to be incredibly successful. Mitchell became a billionaire and fracking technology was applied across the country to great effect. Through the application of fracking, the bear market in U.S. oil production turned on a dime. As the chart below shows, U.S. oil production went from its low of 5 million barrels of oil per day to 9.4 million barrels per day in just seven years. It was stunning production growth… the fastest growth a major producing country had seen in years. [![060417 well productivity katusa research]](https://katusaresearch.com/wp-content/uploads/2017/04/060417-well-productivity-katusa-research.png) Most of this production growth came from new innovation. The green line in the chart above shows that production per well has increased 10 fold over that decade. You can thank massive increasing in drilling technology for this. The reasoning is simple, oil and gas companies are profit driven enterprises and will do whatever is necessary to add value to its share price. Technological changes such as reservoir modeling, horizontal drilling, and hydraulic fracturing have completely redefined and improved oil and gas production, both in the United States and abroad. This had profound impacts geopolitically as well. As U.S. production soared, its vulnerability to foreign sources plummeted. U.S. imports from OPEC (aka “the Middle East”) declined from 5.6 million barrels to 3.6 million barrels. This represents a 37% drop in foreign oil reliance from 2007 to 2017. [![060417 U.S. oil imports katusa research]](https://katusaresearch.com/wp-content/uploads/2017/04/060417-U.S.-oil-imports-katusa-research.png) In less than a decade, the U.S. went from a superpower with a dangerous weakness to a superpower with a virtually endless supply of fuel and power… all thanks to innovation. We are in the early innings of a major technological energy revolution. For example, just a decade ago, completing a 12 stage frac was science fiction. We are now completing over 10 times that amount, with 10 times more sand and pressure. Pin Point fracturing is the new catch phrase you will hear about in the coming months and years. North American innovation is currently being adopted in China (4th largest oil producer in the world) and many Middle Eastern oil and gas rich producing nations. I track these developments closely. My subscribers are familiar with these game-changing advances in technology because I recently brought a film crew with me on site to get a look at a company that is at the forefront of exactly this type of innovation. **When You Hear “Peak” Anything, Do This** The next time you hear claims of “peak this” or “peak that,” don’t fall for it. Someone is almost surely trying to sell you something you don’t want to buy. Protect your wallet and your portfolio and remember the driving force of human progress. A near-term or even long-term shortage of a resource is no reason to panic. Again: We didn’t stop using the horse and buggy because we ran out of horses. We didn’t stop lighting rooms with candlelight because we ran out of candles. Today’s science fiction is tomorrow’s reality… and apocalyptic claims or “peak anything” are always “peak nonsense. -Marin Katusa P.S. My subscribers are no strangers to the leading, innovative junior company in the North American oil and gas industry. This soon-to-be powerhouse stock partnered with one of the top well technology companies in the world and it’s poised for tremendous upside. I’ve put millions of dollars in the market accumulating shares, and in this special report, I’ll show you why I’m so excited about making money from it. --- # How to Use The AK-47 Indicator - URL: https://katusaresearch.com/use-ak-47-indicator/ - Type: article - Published: 2017-03-31 - Updated: 2025-09-10 - Author: Marin Katusa In the wake of World War II, as the United States spied on the Soviet Union for signs it had developed an atomic bomb of its own, another deadly Soviet weapon took America by surprise. This weapon was a revolutionary new kind of machine gun. The new gun was powerful. It was durable and cheap to produce. Almost anyone could quickly learn how to use it… and it was extraordinarily reliable. All these traits ensured the AK-47 would become the most widely sold, most widely used machine gun in history…and a mainstay in third world conflicts, where “*cheap, simple, and reliable*” are the preferred qualities of firearms. It’s estimated that more than 75 million AK-47s are in circulation around the world. The gun’s profile, created by its stubby barrel and “banana clip,” is unmistakable. I’ve traveled to more than 100 countries to visit more than 500 resource projects, so I’ve seen my share of AK-47s. One of my most memorable experiences came in 2010 while researching oil investments in Iraq with my friend Doug Casey. Our bodyguards rode in the vehicle with us, AK-47s in their laps. Over the past 17 years, I’ve been all over the world—often to places that many people would never dare to go. Besides Iraq, I’ve traveled to Kosovo, Venezuela, Russia, China, Argentina, Colombia, Mexico, Turkey, Nigeria, Kenya, Ethiopia, and dozens of other countries. Yet if you read my work and look at my portfolio these days, you’re sure to notice a lack of “third world” excitement that many resource investors crave. As a new resource investor, it’s hard not to get interested in the excitement and drama that comes with investing in far-off lands. After all, many countries in Africa, Asia, and South America are less picked over by exploration geologists. You get to visit new places and meet interesting people. And the prospect of finding the next giant gold deposit in some jungle is just plain exciting. All these things got me on many plane trips. Yet, now…after many successes and many mistakes**, I tend to avoid places where people hold AK-47s in the streets**. All the travel I’ve done…all that time spent on planes…has shaped my portfolio and the research I write today… which* overwhelmingly features companies that operate in my backyard, Canada*. In other words, after flying millions of miles on planes and visiting more than 100 countries, I’m right back home. But the reason I invest so heavily in Canada and other English-speaking countries isn’t nostalgia for where I’m from…**it’s strictly a matter of making money.** I’ve learned the hard way that if you’re interested in making money, you need to trade excitement for boring old rule of law and a simple respect for business. The places where people with AK-47s walk the streets tend to be the places that have very few of the roads, bridges, power lines, railroads, and ports needed to transport raw materials. That kind of infrastructure is critical for turning resource deposits into free cash flow. The places where people walk around with AK-47s also often lack contract laws, property rights, and worst of all, respect for human life. If you’re reading this, there’s a good chance you live in the U.S. or Canada. As much of an SOB as you think the politician in your state or province is, trust me, he has nothing on the average lunatic running a third-world country. Or think of it this way: if Donald Trump doesn’t like you, he sends out a nasty tweet. If your average third world dictator doesn’t like you, he sends out a hit squad. After doing business all over the world – and in more than a few war zones . I would now much, much rather put my capital to work in countries with long histories of respecting contracts and property rights, and which have the roads, power lines, bridges, and ports that are critical to extracting and transporting natural resources. I say let the novice investors have all the third-world excitement they want. I’ll take the money. Regards, Marin --- # Dinner with a Billionaire Wine Connoisseur - URL: https://katusaresearch.com/dinner-billionaire-wine-connoisseur/ - Type: article - Published: 2017-03-24 - Updated: 2019-05-08 - Author: Marin Katusa Over an amazing 40+ career in the mining industry, Pierre Lassonde has pulled off a lot of incredible deals. But just this month, I saw what might be his most impressive move yet: He got Rick Rule to pick up a big dinner check. If you’ve invested in the mining sector for a while, you know who Pierre and Rick are. Pierre is the billionaire founder of the huge mining royalty firm Franco-Nevada. Pierre is a legend in the resource business. Rick Rule is the CEO of Sprott U.S. Holdings… and another resource investing legend. He’s also notoriously smart with his pennies. It’s tough to pin a big dinner check on him. I’ve been on the road for most of the last seven weeks, and the grueling flight schedule involved with multiple site visits does take its toll. But a dinner with Pierre and Rick in Toronto made it worth it. Pierre is a wine connoisseur. He picked out some very expensive and very good wines. Hearing firsthand over a great cabernet sauvignon how Pierre and his longtime partner took a struggling energy company with $2 million in cash and a market cap of less than $10 million and transformed that company into $15 billion mining powerhouse was a great experience. (And I loved it that Pierre got Rick to pick up the check.) Pierre’s passion for life and business is contagious. He’s one of the most entertaining people I’ve ever had dinner with. Anyone could have taken away several valuable lessons. For example, regardless where you are in the world, make sure you get home for the weekend to be with your family—a new rule of mine. The story of Pierre’s first mining site visit should be in a movie… I’ve been in the industry for 15 years, and this is one of the funniest stories I’ve ever heard. Before our legend was a billionaire wine connoisseur, he was an ambitious young resource entrepreneur looking for his big score. And like most mining entrepreneurs, he organized a site visit to showcase the potential of his projects. Well, not only was this his first mining site visit, the company did not have a lot of money left in the bank account… and really needed to impress its investors. They wanted to impress one large fund manager in particular. He was out of Europe… and was considering the company as an investment. Pierre wanted to get him to invest in the company and help the struggling venture. As this large fund manager checked into the hotel, Pierre had a full slate of two days with geologists and site tours planned. As is customary on site visits, the group had dinner together before the next day’s activities. The large fund manager didn’t show up to dinner. Not a good start. The next morning, the group waited for the big fund manager to come down from his room. He was one hour late. So, Pierre phoned the fund managers hotel room, and was told, in a European accent: *“Oh Pierre, I cannot come to the site visit today, I am extremely busy.” * Pierre was really down, but since they already had the day’s trip organized, they proceeded with the site visit. The second morning, the same thing happened. The group waited for an hour for the fund manager. Like before, a phone call was made to the fund manager’s room. Again, the fund manager answered the phone and said: *“I am sorry Pierre, I cannot go on today’s site visit, I am extremely busy”* Feeling deflated, our young entrepreneur moved forward with the planned site visit. He wondered why a fund manager would travel all the way from Europe to Nevada for a two day site visit and not attend either day. He found out the next morning. As a good host would do, Pierre wanted to say goodbye to the European fund manager who he intended on impressing and getting a lead order from. However, the fund manager was late again. He missed breakfast and was on the verge of missing his flight back to Europe. A phone call was made and the fund manager rushed to the airport. Pierre noticed that the woman the fund manager met at the elevator before he went to his room on the first day was the same woman that came out of the elevator with him as he left for the airport. Pierre used his last few moments to try to obtain a lead order from the fund manager. Pierre said it was unfortunate that the fund manager was too busy to make the site visits. They contained so much potential. The fund manager said to him, “*This was the most pleasant site visit, and very promising!”* After hearing all that from Pierre, I asked, “Did you get the lead order from him?” Pierre responded “I did, and he made a fortune!” That was one of many, many stories over a two hour dinner. But the dinner got me thinking about our mining legend. What more can he and his company do in the mining space? Lots. I’ve tracked the mining space for many years, but one space I’ve had a keen interest in has been the royalty and streaming business. It is simply one of the best sectors to be in. For example, since Jan 1, 2008, the royalty/streamers index I created have significantly outperformed both the gold mining index and the actual price performance of the yellow metal itself. The chart below shows how the royalty index (in yellow) has delivered over 200% gains since Jan 2008, whereas the GLD (Gold ETF backed by “gold”) has returned just under 50% and the actual miners have delivered negative returns during the same time. [![240317 KII Dinner with a Billionaire Streamer vs Chart1]](https://katusaresearch.com/wp-content/uploads/2017/03/240317-KII-Dinner-with-a-Billionaire-Streamer-vs-Chart1.png) **This one chart tells us that we need to be exposed to the royalty/streaming companies.** But many people have stayed away from the royalty/streaming companies because they appear to be expensive relative to the miners using traditional financial metrics. Katusa Research has spent months working on our **“Royalty Buyout Report”** that we will publish on **April 5, 2017**. In this report, we will break down all the different financial metrics you need to know about the sector. Most importantly, in this report we will highlight the one royalty company we believe will be bought out—and one I personally plan on buying. And, you’ll find out who I believe will be the buyer. I think the next time I have dinner with our Billionaire Wine Connoisseur, he will have another exciting story to share. Please don’t miss this the April edition of *[Katusa Resource Opportunities,](https://katusaresearch.com/subscribe/)* as I believe it will be the most important issue published to date. You can learn more about becoming a member [right here](https://katusaresearch.com/subscribe/). Regards, Marin --- # Why the Crude Oil Bulls Are Wrong - URL: https://katusaresearch.com/crude-oil-bulls-wrong/ - Type: article - Published: 2017-03-17 - Updated: 2019-05-08 - Author: Marin Katusa Two weeks ago, a barrel of oil traded for around $54. This week, that same barrel traded for $48. It’s an 11% decline in value in just a few weeks. It’s a huge short-term move that shocked many people. But should you be surprised oil has dropped below $50 a barrel? Not if you’ve been reading Katusa Research for a while. Back in October, I published my thoughts on the oil market that differed from the conventional wisdom at the time. At the time, many oil market players had turned bullish because OPEC announced a major production cut. It was the first time OPEC had attempted a production cut since 2008. The promise of reduced supplies sent oil prices 5% higher on the day of the announcement. I didn’t share the market’s giddiness. I noted that while OPEC’s announcement made for a good media soundbite, it wouldn’t lead to higher oil prices over the long-term. I said oil would likely hit a ceiling in the $55 per barrel area. That’s exactly what has happened. Below is a chart for the price of crude oil since the OPEC announcement. [![Crude Oil_Katusa_Research]](https://katusaresearch.com/wp-content/uploads/2017/03/Crude-Oil_Katusa_Research.png) Contrary to what many people believe, OPEC simply doesn’t have the power it used to have. It’s a dying cartel. Its relative importance to the oil market has plummeted in the past decade. This is because Russia, a major, non-OPEC producer, badly needs export revenue and is pumping out more than 11 million barrels of oil per day. This puts Russia in the world’s top three producing countries, alongside the United States, which is the other reason OPEC’s power is sinking. Thanks to amazing advancements in shale drilling technology, the best U.S. shale fields can be produced very profitably with oil at just $45 or $50. It’s part of the shale revolution that has allowed the U.S. to increase its oil production from 5.3 million barrels in 2009 to 9.1 million barrels in 2017. This huge production increase has allowed the U.S. to produce almost as much oil per day as OPEC leader Saudi Arabia. When oil climbs to $55 per barrel, U.S. oil producers can borrow huge amounts of money, hedge their future production, and make tons of money. Here are a few other very interesting things that lead me to think oil isn’t climbing above $55 – $60 any time soon: ***A big piece of news that has received little fanfare, is a March 13th announcement from Iraq Oil Minister Jabbar Ali al-Luiebi that Iraq will reach production levels of 5 million barrels of oil per day in 2017. Currently, Iraq produces 4.4 million barrels of oil per day. If Iraq increased production to 5 million barrels of oil per day, it would be a clear sign that Iraq – OPEC’s number two producer – is paying no heed to OPEC’s stated production quotas. If Iraq decides it is done with the quotas and starts acting purely in self-interest, it could easily set of a chain reaction of other countries following suit. ***Also, global oil inventory levels are still near record highs. Based on the latest IEA figures, there is 99 days’ worth of OECD oil demand currently stored on land. The OECD is the Organization for Economic Co-operation and Development. It’s a group of economically-developed countries like the U.S., the U.K, Australia, Japan, Canada, Germany, France, and Mexico. The group’s demand and inventories figures are useful gauges in the oil market. The chart below displays the number of days of OECD oil demand the world has inventoried. As you can see, inventories have surged higher in the past five years and still near all-time highs. This glut is a significant overhang on the market. It shows there is an abundant supply of crude at current prices. [![Global Oil Inventories_Katusa_Research]](https://katusaresearch.com/wp-content/uploads/2017/03/Global-Oil-Inventories_Katusa_Research.png) ***And here’s one more chart for you… As I mentioned, U.S. shale producers can make plenty of money with oil in the $55 area. You can see this through “breakeven analysis.” Breakeven analysis looks at a shale field’s “all in” costs and determines at what price the shale field starts making money or losing money. The chart below displays the major U.S. shale field’s current breakeven prices. As you can see, they are in the $30 – $40 area. (It also displays the breakeven price for my favorite spot in my favorite Canadian shale field, the Montney. Its breakeven price is even better than the best U.S. fields) [![Major North American Shale Play BEA_Katusa_Research]](https://katusaresearch.com/wp-content/uploads/2017/03/Major-North-American-Shale-Play-BEA_Katusa_Research.png) As drilling technology improves, I have no doubt these breakeven prices will go even lower… even lower than $30 per barrel. This means U.S. shale producers can get enormous bank loans, hedge future production at profitable prices, and produce like crazy. I believe U.S. oil production will continue to climb higher for years. Through the oil market’s recent ups and downs, my long-term take has not changed. I believe oil isn’t going north of $60 any time soon. Inventories are huge. OPEC doesn’t have nearly the power it used to. Its members will ignore production quotas. U.S shale producers will flood the market with prices over $50. Global economic growth will continue to be unimpressive. This doesn’t mean you can’t make a lot of money in oil. You just have to be smart. Soaring oil prices won’t bail you out of dumb decisions. It’s critical for oil investors to focus on the low-cost producers operating in the best shale fields, like the Permian in the U.S. and the Montney in Canada. Regards, Marin --- # Katusa’s Keys: My Method for Investing in the World’s Best Resource Companies - URL: https://katusaresearch.com/katusas-keys-method-investing-worlds-best-resource-companies/ - Type: article - Published: 2017-03-13 - Updated: 2025-09-10 - Author: Marin Katusa Investing in the resource sector has huge potential rewards. But I won’t sugarcoat it… It also has huge risks. Many resource firms simply aren’t worth the paper their shares are printed on. They might have incompetent managers, low-quality (or non-existent) assets, questionable accounting, or all three. They aren’t worth your time or your money. However, some resource firms are well worth your money. They are great investments that can deliver huge returns. I use a simple 6-factor analytical process to find these winners. I call these factors “Katusa’s Keys.” They are: 1. People 2. Projects 3. Financial Structure 4. Promotion 5. Catalysts 6. Price The first key is by far the most important, so let’s start with it. **Key #1: People** Let’s say you have a major business decision. It’s come up because you have a large chunk of money set aside. You’d like to see it grow into a much bigger chunk of money…one that can ensure your family’s financial wellbeing. You know owning good businesses is a cornerstone of building wealth, so you’re going to buy an ownership stake in a local business. It’s a beer brewing company. You have two potential operating partners in this business… One is Brad, a 35-year-old guy you’ve spoken with at several cocktail parties. He’s a fun single guy known for being flashy and loud. He wears a big Rolex and drives a brand new Porsche (neither are paid for). Brad is ambitious, but his business track record is spotty. Several of your most trusted business associates don’t trust him. Your other potential partner is Charles, a 53-year-old guy who has been doing business in town for over 30 years. He has three kids in school. He drives an old pickup truck. He has a fantastic reputation. Everyone who has worked or invested with Charles raves about his integrity and his knowledge of the beer business. He’s serially successful. With these facts in mind, who would you rather partner with? If you’re like me, you pick the guy with modest spending habits, a great reputation, and a long history of success. All things being equal, most reasonable people would rather invest with a proven winner. You might think this is an exercise with no purpose. But it actually has enormous implications on your wealth. You and I face this kind of decision every time we consider investing our hard-earned money in a public company. Making the right choice can mean the difference between making multiples on an investment or losing money. And while making the right choice in the scenario above was simple and obvious, logic often flies out the window when you buy stocks. My goal with this essay is to help you always make the right choice. **Have You Made This Mistake Before?** There are over 10,000 publicly traded companies on the North American stock exchanges. There are over 3,000 mutual funds. Throw in hundreds of TV “talking heads” who have differing opinions on everything, and it’s easy for an individual investor to get overwhelmed. It’s easy to forget basic common sense that will help you safely and surely build wealth. For example, after reading about the choice between Brad and Charles, you probably thought, “Of course I’d rather partner with the proven winner!” But if you’re like most of us, you’ve made the mistake of investing with unproven losers in the past. Remember, when you buy shares of a public company, you are buying shares of a real business. You become an owner of that business. You are buying a claim on the company’s assets and future cash flows. The managers of that business become your partners. As I mentioned…if you’re like most people (myself included), you’ve partnered with some people who were either unproven, dishonest, incompetent, or all three. It’s easy to get caught up in a good story and invest without making sure you have solid partners. But again, when you buy a stock, you become a business owner. That’s why you should treat your money with respect and only partner with proven winners. Success breeds success. Winners tend to keep on winning. That’s why for me, the single most important factor when analyzing a business is the people running it. It’s even more important than the quality of a deposit or the company’s financial position. In the resource business, many people think that if you just find a good deposit in the right country, you’ll make money. But an incompetent or unscrupulous management team will make your investment a loser, regardless of the quality of the deposit. They’ll find a way to screw it up. They’ll dilute your stake by issuing too many new shares. They’ll take on foolish levels of debt. They will panic at bottoms and sell assets for much less than they are worth. They will panic at tops and buy assets for much more than they are worth. High-quality owner/operators will do the opposite of all that. They will find a way to win. Everything depends on the quality of the people. For example, if the metals sector is very cheap, I’m going to want to invest with Ross Beaty. Ross is a serially successful billionaire entrepreneur who built Pan American Silver into one of the world’s largest silver companies. Investors made over 900% in under seven years. He built Lumina Copper into a huge winner in the copper space. Investors made 2,642% in under four years. Given Ross’ history of success, it’s obvious why you’d rather partner with him than with any one of a hundred other managers. Yet many people decide to partner with those other managers. They choose SPAM over filet mignon. Another guy I always look to invest with is Lukas Lundin. Lukas is the son of the legendary resource entrepreneur Adolf Lundin…but Lukas is a legend in his own right. I’ve done business with Lukas, and I know him personally. He’s a first-class person all around. The Lundin name is synonymous with success in the resource sector; they know how to buy low and sell high as well as anyone. They’ve delivered extraordinary returns to investors, like a 2,508% gain in Denison Mines in under five years…and an 1,138% gain in Tenke Mining in just three years. Investing with the Lundins is how my readers made over 600% in Africa Oil. Proven winners also tend to attract the right shareholders. I’m talking about expert institutional investors who think long-term. This is key because the other shareholders are essentially your partners in the business. The right shareholders will do what is right for the long-term interests of the business. Getting the benefit of good partners is icing on the cake when you invest with proven winners like Ross and Lukas. As I mentioned earlier, I’m a big believer in the Pareto Principle. It’s so important that it’s worth going over again. It states that 80% of your results come from 20% of your efforts. For that reason, it’s also called the “80/20” rule. For example, your business may generate 80% of its sales from 20% of your clients. The Pareto Principle is alive and well in the resource sector. About 20% of resource operators create 80% of the value in the sector. I’ve even taken Pareto’s principle a step further. Years ago, I coined the 64/4 Rule—I took the 80/20 Rule and subjected it to Pareto’s principle again. The result states that 4% of entrepreneurs create 64% of the wealth (80% of 80% is 64%, 20% of 20% is 4%, hence the 64/4 Rule). If making a lot of money is your goal in the resource sector, I encourage you to do what I do; focus on the 4% of superstar entrepreneurs who own large stakes in their own companies. Invest with the best. The choice is often as simple and obvious as the choice between Brad and Charles. Success tends to follow success. Winners tend to keep on winning. Those are the guys you want your money with. And you want them to have “skin in the game.” Here’s why that’s so important… **Why “Skin in the Game” is so Important to Your Investment Returns** Have you ever waxed and polished a rental car before returning it? Chances are good that you’ve never done it. Chances are good nobody you know has done it. Chances are good nobody, ever, has done it. If you take a moment to think about why people don’t wax and polish rental cars, you can correct a major investment mistake that is probably costing you money right now. And you can vastly improve your investment returns. People don’t wax and polish rental cars for the same reason they don’t mow their neighbors’ lawns: They don’t own them. Not caring about things you don’t own is simple human nature. You might be thinking I’m just stating obvious. But have you ever invested in a company ran by executives who owned little to no company stock? Have you purchased a mutual fund or an ETF that held companies whose managers owned little to no stock? Have you ever trusted your hard earned capital with managers that don’t have skin in the game? Chances are very good that you have. You probably own some of those companies right now. Your holdings are the manager’s rental cars. And they just nicked a telephone pole while you read the last paragraph. Don’t worry. You’re not alone. Investing in a company whose managers have no skin in the game is one of the most common investment mistakes in the world. They don’t teach you this critical investment secret in high school, college, or business school. But once you think of it in terms of rental cars, it’s utterly obvious. Ownership brings a respect and care for expenses, assets, and cash flows that has no substitute. It instantly transforms the mind. Ownership will turn a salaried manager who thinks nothing of spending $3,000 on nice office chair into a guy who will sit on a bucket in order to save a few bucks. Ownership will turn a conventional “9-to-5” employee into a guy who will happily work Friday and Saturday night. On a larger scale, ownership transforms a reckless CEO who plays fast and loose with shareholder capital into a watchful, prudent shareholder advocate. It turns a CFO who uses aggressive, very questionable accounting into a boy scout. Just think of the indifferent, uncaring people you’ve worked with the past. It’s virtually guaranteed they didn’t own a piece of the business you were in. The might have stolen company property. They probably wasted supplies. They were hard on equipment. They left paper towels on the bathroom floor. Now, think of all the extremely hardworking business owners you’ve worked with in the past. They treated equipment with respect. They used supplies carefully. They took pride in their work. They got to work early. If they saw a piece of trash on the floor, they picked it up. Now take all those little differences and multiply them times a million. That’s the difference between a business operated by managers with no skin in the game versus a business operated by managers who own substantial amounts of company stock. Which business would you rather own shares in? What kind of people would you rather work with? It’s an easy choice for me. That’s why when I start analyzing a potential investment or talk to managers about placing money with them, my first question is always “How much stock do you own?” If the answer is “not much” or “zero,” my analysis is finished. I don’t want my money treated like a rental car. Neither should you. **The Other Critical Factors For Evaluating a Resource Company** Once you’ve checked the box of investing with the right people, you’re ready to investigate the other five keys. **Key #2: Projects** Turning resource deposits into money is the game we’re playing. Whether we’re buying a company with existing production, a company developing a single asset, or a company exploring for deposits, we want to invest in high-quality projects that are large enough to attract the attention of majors who will buy them out. We also want projects with production costs in the lowest-cost quartile of the industry. We have to ask many questions during this due diligence phase. Some of the most important are: **– Is the resource there as management claims it to be?** The history of the resource industry has many stories of companies that overstated their assets. By reviewing the geologic data, we verify the company has the resources it says it has. We want to invest in companies with resources we know are actually there. **– How big is the resource?** This one is obvious, so we won’t go into it much. We’ll just say we want to back companies with large, high-quality, tier-one resources. These are the resources that are attractive to large producers. They can get bought out at large premiums. **– Where is the resource?** Countries like Canada and Australia have laws that make resource extraction an attractive business. Some countries in South America and Africa, on the other hand, have histories of confiscating resource projects. I focus my investments in resource-friendly jurisdictions. I tend to avoid places ruled by communists or warlords. **– How much will it cost to produce the resource?** If a resource is located near highways or railways and an electric power source, the cost to extract and transport it is relatively low. But if the resource is in a remote area far away from infrastructure, it can cost billions of dollars to develop. Some terrific deposits can actually be worthless because they require so much infrastructure investment. There are many other factors–such as the metallurgy–that need to be studied to get a better understanding of the potential problems with the project. The right geology is critical to any successful resource project. **Key #3: Financial Structure** If a company has great managers and attractive projects, we’re ready to investigate its financial structure. We want to see companies with low or minimal debt. We want to see them with plenty of cash to fund their operations. If they don’t have that, they are likely to dilute shareholders by issuing more shares (more on this in a moment). As discussed previously, we want to see the company’s managers with plenty of skin in the game. We also want to know who the company’s major shareholders are. Most companies will count some large financial institutions, like hedge funds, mutual funds, and pension funds as shareholders. I prefer to see “strong” institutions as my fellow shareholders. I’m talking about expert institutional investors who think long-term. This is key because the other shareholders are essentially your partners in the business. The right shareholders will do what is right for the long-term interests of the business. It’s also important to know if the company has issued warrants and stock options that could be exercised in the future, which would dilute the value of your shares. **Key #4: Promotion** Even the best assets in the world need promotion by strong management teams. If a company has great potential, the rest of the world needs to know about it. If the world doesn’t know about it, there won’t be anybody around to buy shares and drive up the company’s value. I make it a point to get to a story before anyone else. Once my readers are in a stock, I want to make sure management has a plan to “spread the word” with institutional investors and financial publishers. This will create the interest in a stock that is needed to drive the share price higher. **Key #5: Catalysts** What is it about the company that will drive up the price? Is it working on a big discovery? Is it furthering the development of a high-quality asset? Is the price of its resource poised to move higher? These questions must be asked and answered before you make an investment. One or more catalysts must exist that will drive a company’s share price higher. **Key #6: Price ** It’s said that “price is what you pay, value is what you get.” This is especially true in the natural resource market. You can find a company with great people and great projects, but if you pay too much for your ownership stake, you can still lose a lot of money. This whole idea comes down to treating your investments like you treat almost anything else you buy. You should focus on finding great values…and not paying stupid prices. When you buy a pair of shoes, you want to pay a good price. When you buy a house, you want to pay a good price. You don’t want to overpay. Yet, when it comes to investment, many people cast aside the idea of buying bargains. They get excited about a company’s story and they just buy stock. They don’t pay any attention to the price they’re paying…or the value they’re getting for their investment dollar. Don’t be a sucker and overpay. Make sure you get good value for your investment dollar. Hunt for bargains. **Summing Up** Please remember these six keys. The market has humbled everyone…from amateur investors to experienced billionaires. By doing your due diligence and checking these boxes, you’ll set yourself up for resource success. -Marin --- # Did Warren Buffett Just Try to Mislead You? - URL: https://katusaresearch.com/warren-buffett-just-try-mislead/ - Type: article - Published: 2017-03-10 - Updated: 2019-05-08 - Author: Marin Katusa Warren Buffett is *almost *right on renewable energy. Late last month, the world’s most widely-followed investor published his annual letter to shareholders. Buffett’s annual letter is always one of the most anticipated reports on the planet, so the latest one was analyzed by every big financial media outlet, analyst and hedge fund out there. The big takeaway from this year’s letter – and the idea that got the most press – is that Buffett doesn’t like hedge funds. He thinks they charge too much in fees for continual underperformance. And while everyone was focused on Buffett’s hedge-fund bashing, the media missed something… Warren Buffett made an uncharacteristic error in his letter. If you know about the subject he was covering, you could make some of the largest investment returns of your life. Buffett is well known for his ownership of strong consumer franchises like Coca-Cola and insurance company GEICO. But his holding company Berkshire Hathaway also owns a large business called Berkshire Hathaway Energy, or “BHE.” The company owns a portfolio of power generation, transmission, and distribution assets. In other words, it keeps the lights on for people. BHE is a major electric power provider to the state of Iowa. But it’s not burning coal or natural gas to keep the lights on for most of its customers. In his letter, Buffett notes that 55% of the power BHE sold to its retail customers was generated by wind energy. The company plans to ratchet up that percentage to 89% by 2020. When many investors hear “wind energy” or “renewable energy,” they immediately think of government boondoggles… or environmentalist pipe dreams that will never be economic. But as Buffett points out in his letter, you’d be wrong to think that… Buffett noted that BHE’s average retail power price in Iowa is 7.1 cents per kilowatt hour (KHW). This is significantly less than 9.9 cents per kilowatt hour, which is the average retail rate of the other major electric power provider in the state. It’s also significantly less than other rates in neighboring states like Nebraska, Illinois, and Minnesota. Buffett then went on to say that “*in wind generation, no state comes close to rivaling Iowa*,” and “*when it comes to wind energy, Iowa is the Saudi Arabia of America.*” As a large investor in the infinite resource space (aka “renewable energy”), I like seeing Buffett highlight how renewables can generate huge amounts of cheap power. In the past 20 years, renewable energy has gone from an expensive pipe dream to an amazing source of clean, cheap energy that can produce incredible returns for investors. **But… two of Buffett’s statements are wrong.** With respect to the great state of Iowa and Buffett, when it comes to wind energy, no state *comes close* to rivaling Texas. In the case of wind energy, everything really is bigger in Texas. Although Iowa produces a large amount of electricity from wind, Texas produces much more. In 2016, the most recent year on record, Iowa Utility Scale facilities produced 2,408 Thousand Megawatthours of wind energy. **Texas produced more than twice as much** during the same time at 5,363 Thousand Megawatthours. In 2016, Texas produced 23% of the wind power in the US, while Iowa produced 10.4%. So, when it comes to wind energy, Texas is the “Saudi Arabia” of America. You can think of Iowa as Iran or Kuwait.. And here’s another interesting fact about wind power in Texas. On December 20th, 2015, sustained winds of 20 – 30 miles per hour allowed Texas to produce 13.9 gigawatts of electric wind power. It set a record for single-state wind power production… and allowed Texas to get 45% of its enormous electricity needs from wind power. For the record, I’m not critiquing Buffett out of a dislike for the guy. Far from it. Most people don’t realize it, but in the investment industry, there’s a small group of people who love to hate Warren Buffett. It’s become cool to dislike Buffett because he’s so popular. Buffett is the richest, most successful investor in the world. He’s the capitalist hero of the Midwest. He’s the brilliant grandfather who provides common sense advice to regular people. For those reasons, a lot of people like Warren Buffett. So, bashing Buffett is cool to some guys who like to do the opposite of whatever the crowd is going. Plus, there’s an element of jealousy there. People love to hate the Yankees and the Patriots. Well, I’m contrarian against the contrarians. I think Buffett is a genius. He’s a genius investor. He’s a genius businessman (the two work together hand in glove). Buffett is also a PR genius, although he doesn’t get much credit for it. He’s a master at maintaining his “aw shucks” image… which is what PR is all about. You see, when it comes to business, Buffett is a killer. He will eat you alive in a negotiation. He’ll eat competitors alive on the playing field. But his public image is one of a folksy, successful grandpa… instead of rapacious hedge fund manager or corporate raider. Believe, me, it’s a carefully crafted image that has helped him in business. Yes, I’m a big fan of Warren Buffett. But if he wants to be truly knowledgeable about renewable energy, he should update his annual report with the most recent statistics released by the EIA on Texas. If you happen to know Warren, please pass him this essay and my sincere offer to talk about renewable energy with him. I know we’d both benefit from the discussion. Or… another possibility… **Is Warren Buffett misleading the market on purpose?** Maybe you didn’t know Texas produces almost a quarter of America’s wind power, but I believe the executives at BHE do. Perhaps Warren Buffett and BHE are overstating Iowa’s importance because they are building a position in Texas’ best wind power projects… and don’t want to attract competitors. **If I had to bet on it, I think the wily old legend is doing exactly that.** You see, I know for a fact that Warren Buffett’s BHE is making investments in Texas. My subscribers and I are invested in the same projects. Right now, you can buy exposure to them at a big discount to what Warren Buffett’s BHE paid just one year ago. You can do so by purchasing stock in the most undervalued, small-cap green power producer in North America. For all the bankers at Goldman Sachs, Bank of America and Merrill Lynch who read my material, this company has very high quality assets… it’s managed by a world-class operator who has lots of skin in the game… and it’s a prime take out candidate because of the deep discount it currently trades at. I recommend you (and Buffett) go through the numbers. I wouldn’t be surprised at all to see BHE eventually buy out this energy producer. If that were to happen, I’m confident you’d soon be reading a Buffett letter that states how Texas is the Saudi Arabia of American wind power… Because Buffett would already have his position. You might be stuck in the past and still think renewable energy is too high cost to compete with fossil fuels. But as I’ve pointed out many times in the past – and as Warren Buffett himself is pointing out now – renewable energy (even unsubsidized) is often cheaper than fossil fuel alternatives. Regards, Marin Katusa --- # Vancouver Resource Investment Conference 2017 – Where mining legend Frank Giustra is investing right now - URL: https://katusaresearch.com/vancouver-resource-investment-conference-2017-mining-legend-frank-giustra-investing-right-now/ - Type: article - Published: 2017-03-03 - Updated: 2019-08-26 - Author: Marin Katusa Dear Katusa Research Reader, There’s not many people I can say the following about… But when Frank Giustra talks investments, I listen. Frank is one of the smartest, most successful investors most people have never heard of. He’s become a billionaire because he’s able to see what’s around the corner well before others. For example, in the early 2000s, as gold and natural resource prices were extremely low, Frank partnered with Ian Telfer. The pair took over gold company Wheaton River and built it into Goldcorp, which is one of the world’s largest gold mining companies. The now-famous silver streaming company Silver Wheaton was spun out of the deal as well. Frank and Ian created tens of billions of dollars of shareholder value through their work. Frank also created one of the world’s most successful movie production companies, Lions Gate Entertainment. Lions Gate has won 20 Oscars, and did $2.4 billion in revenue in 2015. Over the years, I’ve become friends with Frank. The fact that he’s had huge success in two very different industries (mining and movies) is a testament to his skill and knowledge. Attendees of the recent Vancouver Resource Investment Conference had the good fortune to hear to Frank’s current thoughts on the world… and where he is investing right now. My public interview with him was one of the conference’s highlights. Because the interview was so well received and so educational, I’m making it available to all Katusa Research subscribers, absolutely free. If you weren’t able to make it to the conference, watching this interview is a way to access one of the show’s biggest benefits. I hope you enjoy the interview. I think you’ll learn a lot. Regards, Marin Katusa Ps. I’m working on something special for Katusa’s Investment Insights readers, so if you haven’t signed up already I encourage you to do so. I’ll be bringing readers access the best video content from the conference at a BIG discount to the regular price. Keep an eye out for these very soon. --- # The Ultimate Way to Use Other People’s Money - URL: https://katusaresearch.com/ultimate-way-use-peoples-money/ - Type: article - Published: 2017-02-23 - Updated: 2025-09-10 - Author: Marin Katusa Years ago, a smart guy told me that if I want to explain financial concepts to people, I should use house analogies. A house is a tangible asset. You can see it and touch it. And most people can identify with buying or selling a house…or at least paying rent. I’m glad this is the case, because a simple house story can teach you a strategy that can make you hundreds of thousands – even millions – of dollars in the natural resource business. It’s by far one of the most important investment strategies I know. If you can understand it, you’ll be ahead of 99% of your fellow investors. Let’s go house hunting… Let’s say you’re looking to buy a house. The area you’re looking in has just been through a bust, which most areas suffered in 2008. There are few buyers and lots of sellers. Real estate agents are losing their jobs left and right. The market’s mood is terrible. You tour a nice four-bedroom house with an asking price of $300,000. The house is big. It’s new, high-quality construction. It’s in a great neighborhood. You find out from a contractor that it would take $380,000 to build the same house. It’s a bargain. But it gets even better… On your tour, you notice the owner *spent a fortune* on the house. The kitchen has beautiful granite countertops that cost at least $20,000. All of the kitchen appliances are new and top-of-the-line; their total cost is $22,000. The first floor has beautiful new hardwood flooring. You learn it cost $42,000. The driveway is expensive stone. Price tag: $30,000. Between the floors, the driveway, the kitchen, and the bathrooms, the guy easily dumped more than $120,000 into what you’ve seen so far. Then there is the top-of-the-line home entertainment system ($31,000) and the huge back patio ($55,000). And since the owner is broke and desperate to sell and move on, he wants to leave all the furniture in the house ($89,000). The guy dumped more than $300,000 into this house, nearly as much as it would cost just to build it – even without the bells and whistles. I’ve just described something most home buyers would love to encounter. We all like to buy assets loaded with as much value as possible for as little money as possible. Whether we like to admit it or not, we’d all jump at the chance to benefit from someone’s big mistake and buy “sunk” assets at fire sale prices. In this example, some guy got in way over his head and you’re looking at an incredible deal. This story is important because it illustrates one of the most powerful wealth-building concepts in all of resource investing…one that can make you 20 times your money on a single investment. In my essay titled “The Biggest Key (By Far) to Making Huge Money in Resource Stocks,” I detail how natural resource markets are some of the most “cyclical” markets on Earth. One year, the value of a resource like oil will skyrocket 75%. The next year, it will fall 50%. (If you aren’t familiar with resource cyclicality, please read that essay [here](https://katusaresearch.com/biggest-key-far-making-huge-money-resource-stocks/)). In other words, resources tend to go through huge booms and huge busts. During a bust, resource firms and resource investment funds act just like that desperate guy in our house example. They become despondent, strapped for cash, and willing to sell projects they spent fortunes on developing for huge discounts. Mining and energy are very expensive businesses. Simply finding and delineating a resource in the ground can cost over $300 million. Building the roads, bridges, powerlines, and processing facilities necessary to mine a deposit can cost more than $1 billion. In 2014, I visited a site where a $90 million oil well was being drilled. The road to get to the well cost $14 million. That gives you an idea of how much one little thing can cost on a resource project. In a resource boom, there is plenty of cash flow and plenty of new investor capital to spend on all those things. Mining and energy executives get carried away and start believing the good times will last forever. For example, in 2003, the copper industry spent less than $5 billion on new projects (called “capital expenditure” or “capex” spending). In the years that followed, the price of copper climbed more than 300%. Rising copper prices and free-flowing investor capital led the copper industry to increase its capex to $25 billion by 2011…and then to $33.7 billion in 2012. Soon after, the copper price collapsed and made a lot of those investments “uneconomic,” which is a polite term for “losers.” For example, Barrick Gold, the world’s largest gold producer, purchased Equinox Minerals’ Lumwana copper deposit for $7.65 billion near the 2011 peak in copper prices. In 2013, Barrick took a **$4.2 billion** writedown on the acquisition. A writedown is when a company reduces the value of an asset on its books. Barrick’s $4.2 loss on Lumwana was a whopper of a writedown. This kind of mistake is a common occurrence near market tops. The gold industry spent massive amounts of money on capex from 2005 to 2011. A huge bust followed. The oil and gas industry spent massive amounts of money on capex 2010 to 2014. A huge bust followed that as well. All the money spent on drilling projects, geologic studies, roads, bridges, powerlines, processing facilities, wages, lawyers, permitting, and insurance was “sunk” into the ground…much like our desperate home seller’s hardwood floor. During a bust, desperate resource companies (who are often going out of business) will dump their assets for discount prices. This is when the deep value resource investor swoops in and starts sifting through the capital expenditure wreckage. Or, as some investors put it, you start “dancing on graves.” For example, the Pebble project in Alaska is the world’s largest undeveloped gold and copper deposit. It’s a monster. But it took a lot of money for the mining industry to figure that out. From 2000 to 2015, mining companies like Anglo American and Northern Dynasty spent more than $800 million drilling into Pebble and defining the huge resource. However, a resource bear market and environmental issues crushed the market value of Northern Dynasty, the company that owns Pebble. By 2016, you could buy the company at a market valuation of around $100 million, a huge discount to the value of other people’s money that had been sunk into the project. It costs a fortune to discover, define, and develop large resource deposits. In some cases, more than $800 million. During boom times, people are more than happy to spend that much on a deposit. During bust times, when sentiment is terrible, they are happy to sell the same deposit for a 75%+ discount. That’s when you need to be ready to buy. Remember, an asset trading for 90% off its intrinsic value has to rise 10-fold in order to get back to normal. That’s why the gains after a bust can be huge. The next time a resource sector is down big from its high and industry sentiment is terrible, start looking around for projects that have enormous amounts of capital sunk into them. Look for deposits firms have spent hundreds of millions of dollars studying, drilling, and permitting. You’ll often find you can buy all their work and knowledge for pennies on the dollar. It’s the ultimate way to use other people’s money (OPM). By applying this deep value approach to resource investing, you’ll be able to acquire valuable assets that are already far along the development curve…while letting those who came before you pick up the tab. --- # One of the World’s Greatest Geologists Talks Northern Dynasty’s Pebble Deposit - URL: https://katusaresearch.com/one-worlds-greatest-geologists-talks-northern-dynastys-pebble-deposit/ - Type: article - Published: 2017-02-21 - Updated: 2019-05-08 - Author: Marin Katusa | The debate over Pebble, the world’s biggest undeveloped gold and copper deposit, rages on. As you probably know, Pebble is owned by Northern Dynasty, a company I recommended in July 2016. Some of our readers were able to get into the stock before it soared hundreds of percent higher. Now, the company is the focus of intense debate. Short sellers say Pebble isn’t economically viable. Bullish shareholders say the shorts are wrong and spreading misinformation. It’s become one of the biggest stories in the natural resource industry. To give you an expert’s perspective on this debate, I sat down face to face and discussed Pebble with the legendary geologist David Lowell. David Lowell is one of the greatest geologists of all time. He discovered the Escondida project, which became the world’s biggest copper mine. He’s discovered more than a dozen world-class economic mineral deposits as well. It’s an incredible achievement when you consider that the top tier geologists are lucky to discover one world class deposit in their career. David’s discoveries have given him the title of “world’s greatest mineral exploration geologist.” He’s forgotten more about finding deposits and building mines than most people will ever know. David is also a mining engineer, which gives him unique insight on the costs involved in building a mine. I got to know David a lot better when he traveled to the Pebble project with me last year. As the debate over Northern Dynasty got louder and louder, I knew David would be a great source of insight on the topic. The transcript of our discussion is below. --- **MK: **David it’s a pleasure to sit here with you. I’d like to you get your professional opinion about Pebble on the record. Today there is a lot of controversy going on in the market between the shorts and the longs and I thought it would be an incredible resource tool for the whole market to get the opinion of the greatest porphyry geologist that I know of which is David Lowell and ask his opinion. What are your thoughts on the Pebble project after actually walking on site, looking at the core samples, looking all the publicly available information on the Pebble deposit which is owned by Northern Dynasty? **DL:** Well it was a unique opportunity, all the work that has been done to date is a very large amount of diamond drilling, which all we know about the ore body are the cores obtained by the diamond drill operation, and I examined some of these, hopefully a representative sample of the core and looked around at the surface and read the very comprehensive reports on engineering and geology that had been made, including long-term environmental studies which include fisheries study which suggested in almost all cases I am aware of, the habitat increases. And I read the engineering reports recommending the project be carried out. A kind of a horrible statistic is that because of interference by environmental clubs, and a wealthy fisherman that has a cabin within 100km radius of the project and by the American EPA bureau, the project has never been possible to move into the next stage. But something on the order of $700 million dollars has been spent thanks to interference by environmentalists and government agencies. **MK:** Majors such as Anglo have invested a significant amount of dollars into it. How would you rank the Pebble project relative to other porphyry copper projects in the world that you are familiar with? **DL:** It is the biggest deposit that I know of, that is ready to be put into production at this time and when it is in production, eventually, it will very likely be become the largest copper-gold mine in the world. **MK:** So you do believe this is an economic deposit and the Pebble project will be in production one day? **DL:** I am certain of that. And it’s possible to design a pit and concentrator assuming average grade which includes the higher grade and the lower grade, which will produce an optimum tonnage from the mine. **MK:** And you believe there will be an open pit and underground portion to the project? **DL:** Yes. And I believe there will be 2 or 3 different open pits. In the mining business, it’s common to begin to build the mill and begin on a high grade near surface part of the ore body. **MK:** Wasn’t that how Escondida was originally started? **DL:** Yes. Escondida and probably 20 other large scale mining operations. **MK:** For open disclosure David, are you a shareholder of Northern Dynasty? **DL:** Yes I am. **MK:** What would you say to all of the critics and shorts out there and all of the so called geologic ”experts” who are saying the project is worthless? I’ve read and heard some people state including professional geologists, claim that the project is not economically viable or there’s nothing of value at Pebble What would you say to those individuals? **DL:** I would say try to get back in a mining college and learn more. **MK:** That’s exactly the response another Mining Hall of Famer, Bob Dickinson said on stage at my investment conference in Vancouver in January when I asked the same question. **DL:** I totally agree, I think that it’s such a ridiculous statement it hardly bears arguing with, but I don’t know all the background of what they stated. **MK:** Other than cyclicality of our business or the commodity price do you see any other fatal flaws to the Pebble project? **DL:** No. **MK:** I want to discuss the social aspects of a mine such as Pebble being brought into production and the effects to the community. We drove around the communities around the Pebble project such as Iliamna and other areas in the region where a gallon of milk is $15, a case of beer is $60 because everything is chartered in. I truly believe that not only will there be 15,000 jobs created by the development of the Pebble deposit, but the community will benefit as a whole. Schools, hospitals the municipalities will have more money from the wealth generated from the mine and that will improve the standards of living for all. You’ve seen the social effects of mining more than anyone, what is your opinion? **DL:** Well there almost all helpful, productive, higher standards of living, increased security, especially a mine like Pebble, which will probably span several generations. And in Alaska, the Alaskan government is in favor of the development, the district government is in favor of the development and most of the indigenous communities are in favor of development. So it’s surprising that they have been able to stop this development. Money from mines is new wealth. The money that comes out of a large high-grade mine benefits all. **MK:** What do you see as the final outcome with respect to the Pebble project? You’ve worked with many majors, developing the deposits, finding deposits, selling them to the majors, what do you see as a shareholder yourself in Northern Dynasty as the eventual outcome for Northern Dynasty shareholders? **DL:** I think the best outcome would be for a large company already experienced in producing copper and gold or a consortium of producers to take the project over. **MK:** Like what took place with Escondida for example? **DL:** Escondida was a consortium. A lot of additional money will have to be put into the development **MK:** So you believe this project will warrant and attract billions of dollars in capital for infrastructure? **DL:** Absolutely, I have, no question whatsoever. Pebble’s published ore grade of the deposit is higher than the ore grade in many of the Arizona, New Mexico mines, and higher than the number of big mines in production today like Highland Valley. **MK:** And it will also be a clean concentrate? **DL:** Yes **MK:** Whereas Escondida is more of a dirty concentrate now **DL: **Yes, that’s right. **MK:** Do you want to explain why clean concentrate is so important to my subscribers? **DL: **Well there a number of minerals that typically occur with the copper minerals, and minerals that contain gold and some of these minerals like enargite, which contains arsenic, and minerals that contain mercury produce a dirty concentrate. **MK:** And Mother Nature blessed Pebble because none of those ‘nasties’ are an issue in the Pebble concentrate? **DL: **That’s right. **MK: **So to conclude this Q&A; I just want to make sure we’re absolutely clear here, you’re a shareholder and you believe this is a world class deposit, you believe its economically viable, you believe it will be developed and put into production and it will be a multi-generational asset, am I correct on all fronts there? **DL: **You are. **MK: **I agree completely, as a large shareholder myself, I agree 100% with everything you said. David I thank you for your time in and sharing your thoughts with my subscribers. **DL: **Good, thank you Marin. | | | | | --- # World’s Elite Investment Clubs - URL: https://katusaresearch.com/join-one-worlds-elite-investment-clubs/ - Type: article - Published: 2017-02-09 - Updated: 2022-10-13 - Author: Marin Katusa As I mentioned in this [essay](https://katusaresearch.com/learn-secret-might-never-buy-regular-stocks-2/), private placements are in high demand with wealthy, knowledgeable investors. They allow you to buy large blocks of stock at discounted prices… while getting massive upside “kickers” in the form of warrants. If you forced me to invest for the rest of my life with just one strategy, I would choose private placements. However, because these deals do not take place on a regular stock exchange, you cannot look up their prices on websites like Yahoo Finance. Also, the money involved in a private placement is often tiny compared to the money involved in a big-name IPO like Tesla Motors. For example, many private placements in the resource sector raise $5 – $25 million. This is less than 1% of a heavily-publicized tech IPO that raises a billion dollars. That’s why you’ll **never** see these deals featured on the front page of the *Wall Street Journal.* It’s why people on mainstream financial television never talk about them. This lack of mainstream popularity turns many folks off. They simply aren’t comfortable with investments that aren’t splashed over mainstream magazine covers. But if you’re like me, you realize this is a GREAT thing. If you’re like me, you realize investing alongside the masses is a sure way to lose money… while paying very high fees to brokers and bankers. I love the fact that private placements are a small and uncovered area of the market. This means there aren’t millions of investors reading the same news stories and piling into these deals. It means these deals are off the radar of billion-dollar investment funds. **Said another way, it means private placements are extraordinary opportunities for the small group of investors who are willing to do the necessary legwork and research to understand them.** Having said all that, investing in private placements isn’t easy. It takes work and connections to succeed in this field. And thanks to the government, it’s not for everyone. There’s one simple requirement for participating in private placements. You must be an “accredited investor.” An accredited investor is someone who can demonstrate an annual income that exceeded $200,000 (or $300,000 with a spouse) for the last two years and can reasonably expect to the same for the current year. One can also be considered an accredited investor by having a net worth of over $1 million. In other words, you must have a quite a bit of money to be considered an “accredited investor.” Why does the government restrict private placements to accredited investors? For one, there simply isn’t as much easily-accessible information on private placement deals as say, Microsoft shares. You can’t get a quote for the price of these deals on Yahoo Finance. Also, the government considers private placements riskier than most other investments. For those two reasons, the government restricts participation in private placements to accredited investors. The government restricts access to private placement deals to accredited investors because it figures rich people are more knowledgeable about finance, more comfortable with riskier investments, and better able to handle investment losses than most folks. You may disagree with the government’s position. Personally, I’ve seen rich people make horrible investment decisions and I’ve seen people with less money make great investment decisions. But I don’t make the rules. I just play by them. In tomorrow’s essay, I’ll tell you more about the rules and how to profit from private placements. Regards, Marin Katusa P.S. This information is critical for you to have right now because some of the world’s best resource investors – like Lukas Lundin and Ross Beaty – are lining up to invest in a rare private placement opportunity. I believe 1,000% gains are possible in this deal. --- # The Secret to Making 1,000% In Natural Resources - URL: https://katusaresearch.com/secret-making-1000-natural-resources/ - Type: article - Published: 2017-02-07 - Updated: 2019-08-26 - Author: Marin Katusa “Private Placements.” In yesterday’s essay [Learn This Secret and You Might Never Buy “Regular” Stocks Again](https://katusaresearch.com/learn-secret-might-never-buy-regular-stocks-2/), I described why elite investors cherish private placements. Private placements can make you 10, 20, even 50 times your money on a single investment. Despite their power, private placements are one of the most misunderstood financial vehicles on the planet. In today’s essay, I’ll explain more about “warrants,” which are a critical component of private placement investing. Because of the creation of “Project Ironman,” having this information is incredibly valuable right now. **The Basics of Warrants** When a company raises money in a private placement, it issues a “unit,” which consists of a share and a warrant. You know the basics of “shares.” They are ownership stakes in businesses. This section will cover the second part of private placement financings: warrants. Like many financial vehicles, warrants have some “moving parts” you need to understand in order to properly use them. Remember, a warrant gives the holder the right but not the obligation to buy a stock at a predetermined price at a predetermined point in the future. There are many different types of warrants. For example, a warrant might grant its owner the right but not the obligation to buy a stock at $2 per share at any time over the next two years. Or, a warrant might grant its owner the right but not the obligation to buy a stock at $1 per share over the next five years. **Strike Price: Lower is Better** The first aspect of a warrant you need to know about is the “strike price.” This is the price at which you can buy stock at some point in the future. If a warrant has a strike price of $2, that means you will be able to buy company stock at $2 at some point in the future. In the case of warrant with a strike price of $2, if a resource company is trading for $1 per share, the warrant has no intrinsic value. But if the company achieves major success and sees it stock price soar to $6, the warrant will have an intrinsic value of $4, since it allows you to buy stock for $2 per share, which you could then sell for $6 per share (6 -2 = 4). When the share price of a stock is trading above the warrant’s strike price, we say the warrant is “in the money.” When the share price of a stock is trading below the warrant’s strike price, we say it is “out of the money.” The closer the strike price is to the current stock price, the more likely the warrant is to go or expire in the money, and the more it will be worth. In most private placements, the strike price of the warrants is higher than the private placement share price. **Expiration Date: Longer is Better** The second aspect of a warrant you need to know about is the “expiration date.” This is the date at which the contract expires. After the contract expires, neither the company nor the holder have any rights or obligations that were associated with the warrants. If a warrant expires “out of the money,” it is worthless. The longer out the expiration date is in the future, the more time a company has to achieve success and a higher share price, and the more the warrant will be worth. In other words, all things being equal, a “3-year” warrant is worth more than a “1-year” warrant… and a “5-year” warrant is worth more than a “3-year” warrant. Most warrants issued in private placements have expiration dates 1 – 5 years in the future. It’s rare that more valuable “5-year” warrants are issued by companies. **Conversion Ratio: More is Better** The conversion ratio of a warrant is the number of shares applicable to the warrant. Some warrants are good for one-quarter of a share, which is known as a quarter warrant. This means you need four warrants to buy one share. Some warrants are good for one-half of a share (you need two warrants for one share). These are called “half warrants.” Some warrants are good for a full share (you need one warrant for one share). These are called “full warrants.” Obviously, a full warrant is better than half a warrant. You want warrants that can convert into as many shares as possible. With all this in mind, the best warrant “sweeteners” for private placement investors will have: –**Lower, rather than higher, strike prices**. This makes the warrants more likely to go or expire “in the money” and have intrinsic value. If I participate in a private placement at say, $0.50 per share, I’d rather get warrants with a strike price of $1 instead of $2. –**Longer, rather than shorter, expiration dates**. This gives the company more time to achieve success and a higher share price… which gives the warrants more time to go or expire “in the money” and have intrinsic value. I’d rather get 3-year warrants than 1-year warrants. I’d rather get 5-year warrants than 3-year warrants. –**Higher, rather than lower, conversion ratios**. You want warrants that convert into as much stock as possible. This is why I prefer full warrants. **Freely Tradable Vs. Non-Tradable** Some warrants trade freely on stock exchanges. You can buy and sell them on the open market. Some warrants are not freely tradable. You cannot buy or sell them on an exchange. Freely tradable warrants are much better than non-tradable warrants for both investors and the company. Freely tradable warrants are better for the investor because they trade freely and there is a real bid-ask market for the warrants. Free trading shares are also much better for the company issuing the warrants. It expands its base of investors. This is because many fund managers are prohibited from buying stocks under $1 per share (sub $1 stocks are seen as riskier). However, the same fund managers are allowed to buy warrants. Those managers can buy the warrants and become investors in the company. Whether a warrant is freely tradeable or not depends on whether it is *listed* or not. In a company’s news release, it will mention something like, *“The warrants are listed on the TSX Venture Exchange under the trading symbol XYZ .WT”* A freely tradable warrant will have “.WT” in its symbol. Ideally, we get warrants that are freely tradable. It’s good to be able to sell the warrants whenever you like on the open market. But you do not have the obligation to sell or exercise the warrants when they are listed. It’s just an extra option for the investor. The other advantage of a freely tradable (or listed) warrant is that it doesn’t have to be above the strike price to be able to realize a profit. When a non-tradable warrant has a strike price of$1.00 but the stock is at 75 cents, you wouldn’t want to exercise the warrant. It’s not in the money. In this situation, a freely tradable warrant still has value. If you wanted to, you could sell the warrant on the exchange. You couldn’t do this with a non-tradable warrant. **The best type of warrant is a free trading, full 5-year warrant with a strike price that is 50% higher than the share price at the time of the financing. ** **You could think of free-trading full 5-year warrants as the “Ferrari” of warrants.** Regards, Marin Katusa P.S. To learn about the world’s best private placement opportunity – that comes with complete with the “Ferrari” of warrants – you’ll want to click here. --- # Learn This Secret and You Might Never Buy “Regular” Stocks Again - URL: https://katusaresearch.com/learn-secret-might-never-buy-regular-stocks-2/ - Type: article - Published: 2017-02-07 - Updated: 2019-08-26 - Author: Marin Katusa In nearly every aspect of life, there’s an “express lane” to success… a fast track available to the privileged few. Traveling on one of these fast tracks is like being a member of an exclusive V.I.P. club. Members get all the breaks. They get the perks. They get preferential treatment. For example, some kids are born into wealth and privilege. When a kid from this club breaks a rule, he’s more likely to get a slap on the wrist than face serious consequences. You also have fast tracks at tourist attractions and amusement parks. Members of these clubs get instant access to rides while others wait in line for hours in the hot sun. There are special clubs for when you fly. Buy the expensive ticket and you bypass the lines. After taking your seat, you sip champagne instead of getting elbowed by the fat guy in coach. Whether you’re traveling, entertaining your kids, or anything else, getting the perks and skipping to the front of the line is good fun. You deal with less hassles. Thing happen for you faster and easier. VIP of clubs exist for investors as well. Members of these clubs earn bigger returns in less time than “regular” investors. I’m a member of such a club… and it’s been extraordinary for me. I’ve made investment returns of 1,450%, 1,800%, and 2,440% using the strategy this club employs. It has literally made me millions of dollars. But even small investments can pay off big with this strategy. A good friend of mine once turned a single investment of **$4,800 into over $150,000** by using it. I hope you start using this strategy very soon. It could make a huge difference in your net worth. If you feel like you’re behind on saving for retirement, this club could radically accelerate your retirement plans. In this essay, I’ll explain how this club works… and how it relates to the all-new Project Ironman. But before I do, please realize this club isn’t for lazy people. It’s not for those who refuse to learn new skills. But what good club is? Here’s how you can join this club… and get on the fast track to earning hundreds of thousands – even millions of dollars – from your investments (including the amazing Project Ironman)** **** Why Top Investors Love “Private Placement” Deals ** When natural resource firms need to raise money to do things like drill for oil or develop gold mines, they often do it through “private placements.” A private placement allows a company to sell shares to investors outside of the normal stock market. In a private placement, companies typically offer shares at a discount to the current market value. This discount is often in the 5% – 25% range. The price of shares and the dollar amount raised are negotiated in advance. For large investors, negotiating the price and the amount invested in advance is a huge positive. It means they can acquire large blocks of shares without dealing with the market’s day-to-day fluctuations. It means the share price can’t “run away” and shoot 25% – 50% higher while the position is being acquired. Being able to acquire a large number of shares in a company at a set, discounted price is enough to make private placements a very attractive investment vehicle for large investors. But there is another component of private placements that makes them even better–it’s the icing on the cake. A private placement offering can also include a stock option component, which are called “warrants.” Warrants act like stock options in that they allow investors to buy a stock at a predetermined price in the future. They have finite life spans. Some warrants expire in one year. Some expire in 2, 3, even 5 years. And just like stock options, warrants can soar hundreds of percent in value when a company does well. For example, a company doing a private placement at $0.50 per share could include a warrant with each share that would allow investors to buy additional stock for $1 per share at any time in the next three years. If the company does not find success and the share price does not climb to $1 within three years, the warrants expire worthless. But if the company does find success and its share price climbs to $4 per share, the investor makes a profit of $3.50 on his shares ($4 minus $0.50), or a 700% gain. He can also “exercise” his warrants and buy stock for $1 per share and then sell it for $4 per share. This would net him an additional $3 per share profit, or an additional 600% gain on the original investment… An investment of $10,000 turns into $80,000 with just the shares. An investment of $10,000 turns into $140,000 with the shares and the addition of the warrant. The gain in the stock is great, but the warrant made the investment, much, much more profitable. That’s the power of a warrant…and it’s why they are such an attractive component of private placements. In fact, it’s a rare, rare case that I will invest a private placement that does not include warrants. As I mentioned, a modest $25,000 can grow into $500,000 when a resource firm achieves success and you own warrants along with stock. Because you can buy stock at a discount AND get a warrant in a private placement, these deals are in high demand with wealthy individual investors and large institutional investors. This demand makes private placements a good way for companies to raise large amounts of money quickly and easily from the best investors in the business. In tomorrow’s essay, I’ll tell you more about participating in these incredible deals. Regards, Marin Katusa P.S. To learn about the world’s best private placement opportunity – a totally new way to invest in gold on the same terms as some of the world’s best gold investors – click here. --- # Here’s What’s Next for the World’s Biggest Mining Story - URL: https://katusaresearch.com/heres-whats-next-worlds-biggest-mining-story/ - Type: article - Published: 2017-01-27 - Updated: 2019-05-08 - Author: Marin Katusa *(Photo from the August issue of Katusa’s Resource Opportunities and taken on July 24th, 2016.** From left to right: Doug Casey, David Lowell, Marin Katusa and Bob Dickinson standing over top of Northern Dynasty’s Pebble deposit. In the picture, we are standing on the outcropping where the original discovery hole was drilled. Behind us is where the large open pit will eventually be. As you can see from the picture, it’s a great setting for a large mine. It’s flat. Flat is good. Less than a 2:1 strip ratio, which is an excellent ratio of overburden (waste material) to ore. This mine has some of the most desirable economics on the planet for a bulk tonnage mine.)* --- About one year ago, I urged a huge crowd to buy shares in a small company that controlled the world’s largest undeveloped gold and copper deposit. At the time, this small company traded for around 34 cents per share. I was personally one of its largest shareholders. I urged others to become shareholders as well. Despite this company’s extraordinary potential, some said I was crazy for owning and recommending the stock. Just recently, that same company traded for $4.40 per share… a 1,194% gain. It’s now the biggest story in the natural resource industry. Everybody is going wild for shares. Recently, it was the main story on Bloomberg’s home page. You probably know this company’s name: Northern Dynasty. Northern Dynasty has become such a huge story because it was once the enemy of Obama’s Environmental Protection Agency (EPA)… but now Donald Trump will likely approve the development of its giant deposit. It’s one of the biggest wins of my career. Every $10,000 invested into Northern Dynasty when I recommended the stock (far earlier than anyone else) is worth more than $100,000. For the early investors who owned the company’s warrants (which are basically stock options) alongside me, it’s a more than 17-fold win. However, I’m not writing this update to brag. I’m writing to share my thoughts on what has become a huge news story and the subject of plenty of misinformation. You see, unlike most everyone who is now writing about Northern Dynasty, I owned this stock long before it became headline news. I’ve visited the deposit and met with management many times. I’ve read through all the geological and environmental reports. I know the company’s founders and executives. And I’m still one of the company’s largest shareholders. So, I may have unique insight on the situation that others do not. Here are my thoughts on this incredible story… and where the company’s shares will go next. First off, this stock will go a lot higher if the company is allowed to enter a normalized permitting process. In my opinion, Northern Dynasty’s deposit, called Pebble, has been unjustly held back by an overreaching EPA. If we get a normally functioning EPA, Pebble will likely enter a normalized permitting process. I believe this will happen for many reasons, but the most obvious one is Scott Pruitt, the expected new head of the EPA. Just this week, Pruitt stated that he believes the Obama administration’s EPA overreached and didn’t follow proper procedure in its actions against the development of Pebble. It was the most direct, on-the-record statement about Pebble from the Trump admiration so far. It was a key statement, in my opinion. Let me be very clear here: Once the expected EPA resolution occurs and Northern Dynasty can enter a normal permitting process, just like any other project in the U.S., this stock is going to get lots of attention from major mining firms. What does that mean to the share price? One of two outcomes will happen in my opinion. One, a major will partner with Northern Dynasty to pay the costs of the permitting and construction. It will invest in Northern Dynasty via a financing at a premium. Two, a major will buy 100% of Northern Dynasty at a much higher price. Either way, this stock is going a lot higher. This deposit is so big and world class that every major should want a piece of it once the permitting process is fair. There’s no guarantee Pebble gets the permit. But I’ve done my own due diligence and hired individuals involved in the discovery, permitting and construction of some of the world’s largest mines. They all went and bought shares in Northern Dynasty after they submitted their findings to me, because they all believed the mine will be built. Second, here is a personal insight that only I have. I met a remarkable young individual whose family spent USD$25 million to oppose the Pebble Mine. This individual is a subscriber of mine. His family is worth over a billion dollars and lives in Alaska. I got the feeling the family who opposed the mine understands the mine will be built. Now, they want to make sure it will be built in the most environmentally-friendly way. (The mine was always going to use the most innovative and advanced mining techniques. It will become the world’s largest operating mine.) It was an enjoyable breakfast and a personal reminder why I write my investment newsletter. I meet so many incredible people who are subscribers. Third, think of this situation from Donald Trump’s perspective. Pebble will become one of the largest mines in history. Building it will create over 15,000 high paying jobs. A starting salary, with no experience, at a mine in North America is $100,000/year. With the stroke of a pen, Trump can lay claim to creating a lot of high paying jobs in a region that badly needs them. Green lighting Pebble would be a huge PR win for the man who loves PR. I can go on and on. But this stock is going higher, which is why I still own a lot of stock. And as my subscribers know, I am one of the largest shareholders of the company. In summary, I’m very glad some rational, intelligent people might approve this world class asset that will boost America’s economy, create 15,000 jobs, and give the country access to strategic minerals. I’m proud of the job Northern Dynasty’s executives have done to get the company this far… and I look forward to seeing this company and its share price grow even more in the near future. Regards, Marin Katusa --- # Prepare to Profit Series Part 3 – A Huge Part of the Russia/Trump Story Nobody is Talking About - URL: https://katusaresearch.com/prepare-profit-series-part-3-huge-part-russiatrump-story-nobody-talking/ - Type: article - Published: 2017-01-25 - Updated: 2019-05-08 - Author: Marin Katusa To most U.S. citizens, Russian President Vladimir Putin is a movie-quality villain. He’s a former KGB officer. He meddles in presidential elections. People that speak out against him tend to disappear. That’s why most Americans would be astonished and angry to learn how U.S political leaders have put America in a vulnerable situation… and dependent on Russian uranium to keep its lights on. Remember, as I noted [in this essay](https://katusaresearch.com/prepare-profit-series-im-make-one-biggest-bets-career/), the U.S. generates 20% of its electricity from nuclear power. It consumes just over 45 million pounds of uranium each year. Yet, it gets just 7% of its supply from domestic U.S. uranium mines. The U.S. gets a little uranium from its rapidly-declining stockpile of decommissioned nuclear warheads, a little from Canada, and a little from Australia. But the U.S. gets the bulk of its uranium (more than 50%) from unfriendly, Russia-influenced sources. This is a dangerous positon for the United States. Over the past decade, Russia and the United States have gotten into a variety of low-level disagreements. They have one currently in Syria. If a disagreement were to escalate, Vladimir Putin could easily “play the uranium card” and cut off Russian uranium supplies to the United States. Putin could also exert influence over Kazakhstan and block uranium shipments to the U.S. This would cause an American power crisis. The U.S. cannot rely on big producers like Canada and Australia for uranium imports. Neither country can supply enough uranium to fulfil American demand. More importantly, both Canada and Australia have signed long term agreements with India and China. This means there is even less uranium available for U.S. imports. Raw, physical uranium is of no use to nuclear power producers. It must be refined or “enriched” to a specific grade to be of use. This refinement process is extremely expensive, extremely difficult, and extremely time consuming. In the uranium market, enrichment capacity is even more important than raw, physical uranium supply. Russia controls over 50% of the world’s uranium enrichment capacity. The enrichment facilities in the U.S. and in countries friendly to the U.S. *are running virtually flat out*. A trillion pounds of uranium could magically appear in the U.S., and couldn’t be used to produce power because the U.S. doesn’t possess or have access to the needed enrichment capacity. *Building this capacity would take more than 10 years*. The U.S. cannot simply “flip a switch” and get its electricity from other power sources like dirty coal, solar, wind, or natural gas. It does not have the infrastructure to do so. Building it would take a decade. **The U.S. has painted itself into a corner. It must have nuclear energy or the lights will go out.** This mishandling of America’s energy supply has given Russian President Vladimir Putin a ridiculous amount of leverage over America. Just imagine if the U.S. depended on Russia for more than 50% of its crude oil needs. *People would be protesting in Washington D.C*. The U.S. has just one possible path forward in the short term if it wants to keep the lights on for the equivalent of two Californias. It will have to pay tens of billions of dollars to secure enriched uranium from Russian-controlled sources… at prices much higher than the current spot price or long-term price. As for the long-term, the U.S. must encourage a massive expansion in domestic mine supply and enrichment capacity. This includes “fast tracking” the permitting process for new mines and enrichment facilities. Over the past ten years, the U.S. made amazing advancements in domestic oil production by encouraging shale oil projects. It needs to do the same with uranium. It’s literally in the interest of U.S. national security to take these steps. (If you happen to know anyone with any say in the U.S. government, please forward them this essay.) Again, American citizens would be protesting in the streets if they were heavily dependent on Russian-controlled oil to power their cars. They should be equally concerned about being so dependent on Russian-controlled uranium for much of their electricity needs. In summary… Climate change is the number one worry for many people around the world. However, those people also want reliable, reasonably priced electricity to power their modern way of life. Nuclear energy provides stupendous amounts of secure, always on, always there, base load power. And as amazing stories like what happened at [Onagawa](https://katusaresearch.com/prepare-profit-series-im-make-one-biggest-bets-career/) show us, nuclear power can be very safe. I expect more and more people to realize what is going on… which will be very rewarding for contrarians who take positions right now in deeply depressed uranium stocks. These stocks have been obliterated over the past five years. The industry is in crisis. But the worse a situation is, the greater the upside when things turn around. That’s why I’m making uranium one of my biggest bets of 2017. Regards, Marin Katusa P.S. Back in December, I began writing about how uranium is setting up to be a big opportunity. Since then, uranium stock prices have jumped. But just a few days ago, a major uranium company announced news that caused a big correction in the sector. My team and I are tracking every company in the uranium space. We’re preparing a special report for paid subscribers that will share our best ideas for making huge gains in the sector. You can learn how to come on board as a *Kat**u**s**a Resource Opportunitie*s subscriber [here](https://katusaresearch.com/subscribe/). --- # Prepare to Profit Series Part 2: A Clear Path to Much Greater Uranium Demand - URL: https://katusaresearch.com/prepare-profit-series-part-2-clear-path-much-greater-uranium-demand/ - Type: article - Published: 2017-01-13 - Updated: 2019-05-08 - Author: Marin Katusa **Publisher’s note**: In last week’s letter, we mentioned uranium is setting up to be a huge investment opportunity in 2017. To make the biggest possible gains, you need to be armed with the best possible information. That’s why we’re running an educational “Prepare to Profit” essay series on uranium. Below, you’ll find Part 2 of this series, which explains critical supply/demand factors in the uranium market. --- A case for investing in any natural resource always starts with supply and demand. When we talk about those things in uranium, we talk in terms of pounds. Uranium is an especially unique market because there is primary production (which comes from mine production) and secondary production (uranium from decommissioned nuclear warheads and other sources such as reprocessing tails). In 2015, 86% of uranium supply came from mines and 14% came from decommissioned nuclear warheads and other secondary uranium production sources. As a result, a uranium investor must not only analyze mine production like he would in the copper or silver market, he must analyze nuclear warhead inventories as well. On the mine supply side, the central Asian country of Kazakhstan (yes, where Borat is from) is currently responsible for 41% of global mining production. Canada is a distant second (16%) and Australia is a distant third (8.9%). A handful of countries produce modest, but meaningful, amounts of uranium, but what goes on in Kazakhstan dominates the mined uranium market. Below is a pie chart that shows global uranium production, red represents Russian friendly nations and blue represents US friendly nations. ![Global Uranium Production Katusa Research] All of Kazakhstan’s uranium production comes from ISR (in-situ recovery). ISR is the cheapest way to produce uranium. This is because ISR involves no digging, hauling, or crushing of rock. There’s no conventional open pit mines or underground mines. You don’t need big dump trucks or mining shovels for ISR production. ISR pumps the equivalent of soda water into porous rock that hosts elevated uranium concentrates. The water becomes “impregnated” with uranium and is then pumped out of the rock. An ISR operation is more like a water processing facility than a mine. It’s important to keep in mind that ISR production is similar to oil and gas production. It produces a lot when the well is first tapped and then production declines. As the production declines, new wells are drilled to offset the production decline rates. Kazakhstan is producing a lot of uranium now, but it is just starting to experience production declines. The current price of uranium does not warrant drilling new wells in Kazakhstan. It has the lowest cost of uranium production in the world, but drilling new wells is not economic at $20 per pound uranium. To bring on new production in Kazakhstan, $35 – $40 per pound uranium is required. And logically expected, Kazakhstan just announced it plans on reducing its uranium production by 10%. When the world’s largest producer of uranium announces a 10% reduction, speculators must pay attention. The decommissioned nuclear warhead market is dominated by Russia and the U.S. At the end of The Cold War, Russia and the United States agreed to reduce their nuclear weapon stockpiles and use their uranium for nuclear power production. As part of the agreement – nicknamed “Megatons to Megawatts” – the United States agreed to buy 500 metric tons of surplus uranium from Russia. This program lasted from 1993 to 2013. After selling a portion of its inventory, Russia is estimated to hold 134 million pounds of uranium. The U.S. inventory is estimated to hold 260 million pounds of uranium. **Uranium Demand** On the demand side, the Big 5 consume 130 million pounds of the global uranium consumption of 182 million pounds per year. The Big 5 are: United States (30%), France (15%), China (11%), South Korea (8%), and Russia (7%). Together, these five make up around 71% of global demand. Japan’s disaster staggered the global nuclear industry, but it didn’t knock it off track. Although some countries like Germany and Italy are moving away from nuclear energy, much of the world is moving towards it. As I mentioned last week, if you’re a country without significant fossil fuel resources and you want large amounts of safe, secure energy to power your economy, nothing beats uranium. Giant energy consumer China currently has 29 nuclear reactors under construction. Russia has 9 reactors under construction. India has 6. The United States has 4 currently under construction. Also, Japan has stated that it plans to get two-thirds of its nuclear reactors back online in the next four years. This means that soon, approximately 14 million pounds of uranium will be needed to meet just the Japanese demand. Growing Asian demand and steady demand from massive current consumers (United States and France) means that uranium demand will grow to 190 million pounds per year by 2020 and to 220 million pounds per year by 2030, a growth of 20% in 15 years. As much as any natural resource, uranium has a clear path to much greater demand over the next 15 years. However, that demand will not be satisfied with spot prices under $20 per pound. It costs the mining industry more than that to get it out of the ground. Either the price of uranium will go up or the lights will go out. **The Cure for Low Prices…** Seasoned resource investors know one of the ultimate signs of a market bottom is when an industry’s lowest cost of production is below the current market price. When this situation occurs, either the price of the resource goes up or the producers go out of business and the world goes without the resource. In the case of energy resources, the world **always** chooses to keep the cars running and the lights on. That’s why the saying goes, “The cure for low prices is low prices.” In the case of uranium, the average production cost of North America’s conventional uranium mining industry is about $60 per pound. This is an “all in” cost that takes into account the cost of capital, labor, equipment, fuel, and insurance. The highest-grade uranium project in the world, the McArthur River project in Canada, needs about $30-35 uranium to break even. Kazakhstan’s ISR projects need $25-$30 uranium to be economic. Uranium is sold two ways. One is through the spot market, where an end user can buy uranium whenever it wants. Two is through the long-term contract market, where end users enters into agreements with producers to buy set amounts of uranium over set periods of time. Currently, the spot price of uranium is $22 per pound. The long-term contract price is about $31 per pound. Historically, the majority of sales are in the long-term market, but that has changed since Fukushima. Because of the flood of Japanese stockpiles, the spot market became more active. But that is now starting to change. This anomaly appears to have started to reverse and that is good news for the price of uranium. Both prices are currently well below the industry’s average cost of production. Eventually, the laws of capitalism will exert themselves. The price of uranium must rise or companies will stop producing it and the lights will go off. People will choose lights. A transition to bear market to bull market won’t happen overnight. In all likelihood, a significant price increase won’t happen in the next 12 months. There is still supply overhang to work through. But demand is surging. Supplies are starting to curtail, as seen with the announcement from Kazakhstan this week. And the industry’s production costs are much higher than current prices. This is a mixture that will send uranium prices 50% – 100% higher within three years. Since natural resource stocks are leveraged to commodity prices, deeply depressed uranium stocks could climb 5-fold during that time. You might think these projections sound outlandish, but they are actually very conservative. Just 12 years ago, the price of uranium started on a climb that took it from $12 per pound to $137 per pound (a 1,041% rise) in just three years. Many uranium stocks climbed more than 3,000% during the rally. The world’s largest publicly traded uranium miner Cameco increased in value by 30-fold. Some smaller, more speculative uranium stocks climbed more than 100-fold. Uranium enjoyed that stupendous bull market because supply was constrained, demand was healthy, and because fund managers speculated that the end of the U.S./Russia uranium deal would constrain supply further. That’s the situation we have now as well. The choice of paying higher uranium prices or watching the lights go off will be put to America in a unique way. That’s because the U.S. has painted itself into a very dangerous corner… one few people know about and even fewer people talk about. In my next “Prepare to Profit” letter, I’ll explain America’s dangerous energy position… and how it could lead to astronomical gains in uranium stocks. More to come. Regards, Marin Katusa P.S. Since we began writing about uranium setting up to be a big opportunity (in December), uranium stock prices have jumped. They’re vulnerable to a short-term correction to buy now, so remember how volatile the resource market can be. Uranium stocks could suffer a large decline very soon, which would present a good buying opportunity. --- # Prepare to Profit Series: Why I’m About to Make One of the Biggest Bets of My Career - URL: https://katusaresearch.com/prepare-profit-series-im-make-one-biggest-bets-career/ - Type: article - Published: 2017-01-06 - Updated: 2019-05-08 - Author: Marin Katusa **Publisher’s note**: Last month, we mentioned the uranium market is sizing up to be a huge investment opportunity soon. That’s why it’s critical to know how the uranium market works… and why it could make you a lot of money over the next few years. Below, you’ll find our first installment in our “prepare to profit” series on uranium… --- There’s an old saying in the news business, “*If it bleeds, it leads*.” “*If it bleeds, it leads*” is a rule the media uses to decide what goes on the front page of newspapers and what kicks off the evening news. People are hardwired pay attention to reports of shootings, natural disasters, wars, and anything else that causes bloodshed. It’s rubbernecking from the comfort of your own home. Ask any newsman and he’ll tell you: The average Joe is 10 times more likely to watch a story about 10-car pile up than he is to watch one about a medical breakthrough. The news business is like any other business. It must cater to its customers. So, the average Joe gets what he wants… and *if it bleeds, it leads. * No recent event demonstrates this better than what followed Friday, March 11, 2011, when one of the biggest earthquakes in recorded history struck the east coast of Japan. The monster quake and the resulting tsunami killed more than 15,000 people and caused over $200 billion in damage. In the weeks that followed, events at Japan’s Fukushima I Nuclear Power Plant dominated global headlines. The earthquake and tsunami caused structural damage to the power plant, which knocked out vital cooling systems. This caused reactor meltdowns and released radioactivity into the air. The name “Fukushima” is now etched in history alongside Chernobyl and Three Mile Island. [![uranium-fukushima-katusa-research-010617]](https://katusaresearch.com/wp-content/uploads/2017/01/uranium-fukushima-katusa-research-010617.jpg) What went virtually unreported in the media is this: Fukushima I was not the closest nuclear power plant to the earthquake’s epicenter. That distinction belongs to the Onagawa Nuclear Power Plant. Onagawa was 60 kilometers *closer *to the epicenter than Fukushima. Although the nearby town of Onagawa was largely destroyed by the tsunami, all three of the plant’s nuclear reactors withstood it without incident. The Onagawa plant’s 46-foot tall seawall was large enough and strong enough to prevent extensive flooding. The construction of the Onagawa plant was solid enough to endure high levels of ground shaking. The facility’s staff was trained to handle problems. Instead of evacuating the area like people did at Fukushima I*, Onagawa locals sought refuge at the nuclear power station*. It was the safest place around. You probably didn’t hear this story on the news. It wasn’t sensational. But the fact remains that in 2011, a well-built nuclear power plant took a direct hit from one of the largest earthquakes in recorded history, without incident. The story of Onagawa is an important chapter in the story of nuclear power. It shows how the right people can make nuclear power very safe… and it shows that used the right way, nuclear power is the ultimate form of clean energy. Yet, in the years that followed Fukushima, nuclear energy fell out of favor. News of the biggest nuclear disaster since Chernobyl sparked protests around the world. Japan shut down its nuclear reactors, which accounted for about 12% of global reactors. Germany vowed to phase out its nuclear power industry by 2022. Italy halted future nuclear power plans. The backlash dealt a huge blow to the nuclear power industry. Since uranium is the fuel in power nuclear plants, it was dealt a huge blow as well. Before the earthquake, uranium traded for over $70 per pound. After the quake, Japan dumped its substantial above ground uranium supplies onto the market. This dumping, paired with reduced demand, sent uranium into a bear market that has taken prices down 69% to their current level of $21.63 . [![u308price]](https://katusaresearch.com/wp-content/uploads/2017/01/U308price.png) *The $20 per pound range– is a crisis price for the uranium industry*. Anything under $30 per pound will prevent any new mines from being built. Prices are now so low that most uranium mines are losing money on every pound they sell at spot pricing. All U.S. uranium mines are losing money at current prices. Uranium spot pricing is below levels set during the 2008 financial crisis. “*There has never been a worse time*” than now an industry CEO recently told Reuters. Statements like this scare most investors away from a market. But bargain hunting contrarian investors know these statements often mark the point of maximum pessimism… and signal major investment opportunities. Investment legends like Warren Buffett and Sir John Templeton built their fortunes and reputations on buying assets when it seems like “*things can’t get any worse*.” After all, when things can’t get any worse, they can only get better. Risk is directly correlated for the price you pay for an asset. I believe we are at such a point in the uranium sector. Taking a position in high-quality uranium stocks right now stands a very good chance of working out well for investors. In fact, a good case can be made that higher uranium prices are not a matter of “if,” but a matter of “when.” That’s why I’m making this sector one of the biggest bets of my career. **Nuclear Power 101** The average citizen’s knowledge of nuclear power comes from disaster movies or soundbites about accidents like Japan and Chernobyl. It’s easy to paint nuclear energy as the boogeyman. The reality is that nuclear energy has provided – and continues to provide – the world with stupendous amounts of clean, safe, emission-free electric power. Coal, which is also used to generate electricity, has killed far, far more people than uranium. The average citizen also doesn’t know nuclear power’s vital role in the American economy. America gets 19.5% of its electricity from nuclear power. It powers about 23 million homes, or about twice the amount of homes in California. Without nuclear power, the lights would go off for many Americans. Below is the breakdown of the major types of energy produced in the United States. You can see that nuclear is one of the top three. [![us-electricity-generation-by-source-katusa-research-010617]](https://katusaresearch.com/wp-content/uploads/2017/01/US-electricity-generation-by-source-katusa-research-010617.png) Nuclear energy is responsible for about 10% of global electricity production. If the world wants to cut carbon emissions and keep the lights on, nuclear energy’s share of production has to grow. Nuclear energy provides “base load” power. Base load power is consistent, dependable power. It’s always there and always on. It is the foundation of a healthy electric power grid. Base load power is in contrast to power derived from solar and wind, which can fail to produce power during the night (in the case of solar) and during periods of calm (in the case of wind). There are over a dozen radioactive elements, but uranium is far and away the best fuel for nuclear reactors. It offers the best combination of supply, ease of use, and ease of disposal. Naturally-occurring uranium is not concentrated enough to be useful in today’s nuclear power plants and weapons. It must be “enriched,” which can happen through various processes. The most common enrichment process is with “centrifuges,” a term you’ve probably heard a TV talking head mention when talking about Iran’s nuclear program. The energy content of uranium is approximately 3 million times greater than that of fossil fuels. To put it in perspective, realize that one tenth of an ounce of uranium contains the equivalent energy of 6,613,868 pounds of coal. If you’re a country with little fossil fuel resources like South Korea or Japan and you want safe, secure energy to keep your economy running, **nothing beats uranium**. Regards, Marin Katusa P.S. I don’t want to overwhelm you with information in one day… so please keep an eye out for Part 2 of our “Prepare to Profit” series on uranium. I believe it will be some of the most valuable information you read this year. --- # A Huge Investment Opportunity is Setting Up in 2017 - URL: https://katusaresearch.com/huge-investment-opportunity-setting-2017/ - Type: article - Published: 2016-12-09 - Updated: 2019-08-05 - Author: Marin Katusa Over the past five years, the price of uranium has fallen more than 70%. The price of the critical power plant fuel is so low that no North American uranium mine can operate at a profit. The uranium mining industry is in crisis. One industry CEO recently said “things can’t get any worse.” A crisis situation like this scares away most investors. But if you’ve followed my work for a while, you know investing during a crisis is where huge fortunes can be made. During a crisis, panicked investors and companies sell assets with no regard to their underlying values. During a crisis, the price of assets becomes “unhinged” from the value of assets. That’s when we step in and take our positions. I believe uranium is setting up to be a huge investment opportunity. But there’s still a supply overhang in the market that will take 6 – 18 months to work off. Therefore, there’s no rush to get into uranium stocks right now. And that’s a good thing. It gives me plenty of time to write you and show you how the uranium market works. I think you’ll find it fascinating. With all this in mind, I’m going to be writing a lot about uranium over the next few months. If you get familiar with this market and learn how it works, I believe you’ll set yourself up to make enormous gains from the coming uranium rally. Although there is no rush to get into uranium stocks, I know many folks will get impatient and won’t wait to buy at the right time. That’s why, before we get into the specifics of the uranium market, we need to talk about a critical factor in your resource investment success. That’s why we’re re-publishing our essay, The Way of the Alligator, today. We’ve received a ton of great feedback on this piece… and the idea it covers will help you make a lot of money in uranium soon… The hottest mining story in the world right now is Northern Dynasty Minerals. The Way of the Alligator led me to publish my thoughts and research on Northern Dynasty in February 2016. Northern Dynasty is sitting on the world’s largest undeveloped gold and copper deposit. Its shares have skyrocketed since my research went out. Now, some very large funds are positioning themselves in this monster world class deposit. We were the first to the story… the rest of the world is catching on… and we are sitting on a huge win. It’s happening because we go **The Way of the Alligator…** **The Way of the Alligator** In 1980, a geologist named Walter Alvarez and his father, the Nobel Prize-winning scientist Luis Walter Alvarez, put forth an outrageous idea. In what is now known as the “Alvarez Hypothesis,” the father and son team claimed dinosaurs went extinct due to the effects of a large asteroid striking the earth. The impact caused huge tidal waves and earthquakes. It threw up a dust cloud that blocked sunlight, killing most of the planet’s species…including all the dinosaurs. At the time, most in the scientific community thought the idea was absurd. They believed dinosaurs had gone extinct over a long period of time. But years of close examination of the evidence, combined with the discovery of a massive impact crater off the coast of Mexico, put the debate to rest. About 66 million years ago, a large asteroid struck Earth with a force millions of times greater than any atomic bomb and caused the greatest extinction event in the planet’s history. It is estimated that more than 75% of all species were killed off by the strike. Only the hardiest species survived. You can probably guess one of the survivors: The cockroach. But you may not know that “Crocodilians” are members of this elite survivor club as well. This is the order of predatory reptiles that includes the alligator and the crocodile. That’s right: Alligators survived what the dinosaurs could not. Over sixty million years later, they’re still going strong. There are various theories as to why alligators have survived and thrived for so long. They’re cold-blooded, which means they don’t have to eat very often. They live in fresh water, not salt water, which seems to have increased their chances of surviving the asteroid strike. They have incredible immune systems. But one huge thing alligators had–and continue to have–in their favor is their brilliant and efficient hunting strategy. Alligators are “ambush predators,” as opposed to “pursuit predators.” They don’t spend their days chasing gazelles or monkeys. They don’t expend lots of energy sprinting after their prey. Instead, alligators take a patient “sit and wait” approach to hunting. They spend long periods of time doing nothing but waiting in the water for the perfect time to strike at obvious opportunities. When unsuspecting prey approaches the water, alligators spring forward with awesome speed and force. The alligator’s ambush hunting strategy is very efficient. It allows the alligator to get huge returns on the energy he invests in hunts. It has helped the alligator become one of the most resilient, successful species in the history of the planet. I know you don’t read Katusa Research for nature lessons. I’m telling you all this because I believe The Way of the Alligator is one of the great secrets for achieving investment success. **The Counterintuitive Way to Make Big Money** When we’re children, we’re taught that if we work hard enough at anything, we’ll achieve success. More hard work in the gym means performing better at sports. Working hard on your studies means getting into the right schools. Working long hours means getting ahead in business. Working hard has its rewards. It’s a great way to get what you want in life. But “hard work” and its corollary “staying busy” actually works against investors. Staying busy typically translates into losing money instead of making money. Most people who have earned enough money to invest have the natural urge to “do something” and “stay busy.” That’s how we got the money in the first place. But unless you’re a skilled, lightning-fast day trader, the market does not reward frequent activity. In fact, it penalizes it. The urge to “do something” leads you to be impatient and less selective with your investments. It forces you into mediocre opportunities. Said another way, the quality of your investments typically moves inversely to the quantity of your investments. For investors who look to hold positions for months and years, the market simply does not serve up truly great opportunities every day. Sometimes, we only get two or three per year. Just like doing nothing and waiting for a great opportunity is often the right move for an alligator, it’s also often the right move for investors. To many investors, having a large cash balance in an investment account feels like having a wad of cash in a casino. Why let it sit there and do nothing when you can “play” with the money? Why not at least take a shot at something? This amateur thinking is why casinos earn billions of dollars in profit at the expense of impatient, probability-ignorant gamblers. Doing nothing, staying patient, and waiting for a no-brainer opportunity is often the right move. **Warren Buffett on Waiting for the “Fat Pitch”** The investment legend Warren Buffett makes a great point about patience with a simple baseball analogy. Buffett says investing is like playing a baseball game where there are no called strikes. You don’t get penalized for not swinging. You can stand at the plate for a year and not have to swing. So, it makes a lot of sense to stay patient and selective and only swing at “fat” pitches. You only need to swing when the odds are overwhelmingly stacked in your favor. One of your ultimate goals as an investor is to buy assets for less than they are really worth. Said another way, your goal is to buy bargains. However, true bargains are rare. The financial market correctly prices most assets most of the time. Most of the time, stocks, bonds, and commodities trade for approximately what they are worth. But every so often, there is a crisis in some market somewhere in the world. During a crisis, investor emotion overwhelms investor reason. Terrified investors sell first and ask questions later. They sell assets with no regard for their underlying value or ability to produce cash flow. I often say that during crashes, the price of assets becomes “unhinged” from the value of assets. If you’re impatient and you’re always “doing something,” you won’t have the cash to buy up bargains during a crash. It’s the financial equivalent of not bringing your helmet if you were to play in the Super Bowl. I like to put my money to work as much as anyone. I love the game of investing. But I always keep The Way of the Alligator in mind. I see my cash as “big returns in waiting.” There’s a reason the alligator survived the biggest extinction event in history. There’s a reason he has thrived for more than 60 million years. He’s nature’s ultimate patient opportunist. By staying patient and only acting when the odds are overwhelmingly in your favor, you’ll survive and thrive in the investment world. Regards, Marin Katusa P.S. The Way of the Alligator can pay off spectacularly like it has with Northern Dynasty. Right now, an opportunity to make huge returns in gold and in uranium is taking shape. To find out where I’m putting millions of my own money like an alligator, you’ll want to become a subscriber to [Katusa’s Resource Opportunities](https://katusaresearch.com/subscribe/). --- # How You Can Help Break the Canadian Air Cartel…and Start Flying Like a First-World Citizen - URL: https://katusaresearch.com/can-help-break-canadian-air-carteland-start-flying-like-first-world-citizen/ - Type: article - Published: 2016-12-06 - Updated: 2019-05-08 - Author: Marin Katusa Tiny bathrooms. Screaming children. The snoring guy sitting right next to you. Airline travel can be a crapshoot for anyone. It’s just an unpleasant experience you put up with in order to visit family, do business, or go on vacation. But for Canadian travelers, it’s even worse. We’re at the mercy of a Canadian airline cartel that gouges us on price, provides limited choices, and cheats our country’s poorest citizens. It’s time for us to speak up. It’s time to break the cartel. And it’s time for Canadian citizens to get **better service at a lower price**. My work as a professional investor takes me all over the world. Over the past ten years, I’ve taken more than 500 flights, traveling more than one million air miles. As a frequent traveler based out of Vancouver, I’m in a good position to offer an informed assessment of Canadian airlines. Here’s one conclusion with which I’m sure many will agree: Canadian citizens suffer from the complete absence of discount airlines (“low-cost carriers”) and the even more cost conscious ultra-low-cost carriers (ULCCs). You know the ones I’m referring to—companies like Ryanair, JetBlue, Allegiant, Spirit and even bigger low-cost carriers (LCCs) like Southwest Airlines. The introduction of low-cost carriers has made air travel possible for hundreds of millions of people around the world. It has given people a huge range of choices. Yet we Canadians don’t have the option of flying with a low-cost carrier. Canada is the only G7 country that does not have ultra-low-cost airline service. In Canada, we have only Air Canada and WestJet, which together control approximately 80% of the domestic market. Both companies are doing very well. In fact, they’re enjoying record profits. In 2016, pre-tax profit for all Canadian airlines is expected to be around $1.5 billion. But are those cartel-sized profits coming at the Canadian flyer’s expense? The aviation safety rating firm JACDEC ranks the low-cost carriers and Ultra-Low-Cost Carriers I mentioned above higher than those of American Airlines, Air France, Alaska Airlines, Air China, AeroMexico, Alitalia, and many other G20 nation airlines. It is proven that safety is **NOT** compromised with ultra-low-cost carrier (ULCCs) airlines. Low-cost and ultra-low-cost carriers have a 26% market share of the global air travel market. The have 30% of the “short haul” market (flights of up to 3,000 miles). Excellent safety records and low prices have allowed ULCCs to flourish everywhere except here in Canada. This has produced some very predictable consequences: - Canadian travelers face an artificially limited number of choices and pay unnecessarily high prices. The Canadian Airports Council, a lobby group that represents 120 airports, estimates that Canadians are paying, on average, $428 more per round-trip fare than an American would in the U.S., even after taxes, fees and surcharges are factored in. - Many secondary destinations that could use jet air service are either underserved or not served at all. - In many cases, cost-conscious customers—including leisure travelers, students, families, and businesspersons—can’t afford the unnecessarily high fares. - Residents of Canadian border towns and cities with easy U.S. access, especially Toronto and Vancouver/Victoria, are voting with their feet. They frequently drive to the States in order to take advantage of ULCCs available there, **thus exporting dollars that would otherwise be spent domestically**. In 2012, the Conference Board of Canada estimated that as many as 5 million Canadians do this annually. That number will surely rise in October, when Allegiant begins wooing Ottawa residents by adding cheap Ogdensburg, NY-Orlando flights). - A significant number of Canadian travelers are simply not flying to trans-border destinations, either because the necessary service is not currently offered, or because it is offered only via an annoying number of stops and connections. Canada is a huge, geographically diverse country. It’s a leader in banking, resources, and manufacturing. Its citizens are among the most educated in the world. We deserve to have affordable air travel that will connect us to each other, enhance our national unity, and benefit our families and businesses alike. There is a clear-cut need waiting to be filled here. Enter ***Jetlines***, a company eager to fill it. ***Jetlines*** is a startup ULCC with a business model equivalent to those of its highly successful counterparts in other countries; it aims to sell over 90% of its tickets via its website. ***Jetlines*** will primarily fly point-to-point routes (i.e., excludes hubs, interline, code-sharing or other commercial passenger feed agreements). It features a world-class management team and Board of Directors, all of whom possess significant experience in the airline industry and a proven ability to raise capital. ***Jetlines*** is proposing a route structure that will eventually encompass some 200 destinations–including many not presently served–with scheduled, all-jet flights. ***Jetlines*** will be a national airline, with primary bases at Vancouver and Hamilton International Airports, a secondary base at Winnipeg International, and expansion plans for Atlantic Canada. In addition to operating flights throughout the country, ***Jetlines*** will also offer service to locations in the U.S., Mexico, and the Caribbean. ***Jetlines***’ motto says it all: *Affordable Airfares with a Passion for Service*. The company estimates that there are 10 million potential passenger trips per year (or a projected 15% market share) that are currently not flown due to high costs that the average Canadian traveler can’t afford. That will change as ***Jetlines*** brings a 36% net cost reduction vs. the Canadian airline cartel operators. Adding this ambitious new provider to the current transportation mix is truly a no-brainer. But here’s the rub: in order to get ***Jetlines*** off the ground, so to speak, it must raise the money needed to complete licensing and certification, roll out a marketing strategy, and build the necessary IT infrastructure. Problem is, Canada has a relatively small number of financiers with the expertise and interest in airline investment. So, ***Jetlines*** must reach out and dip into the international capital pool. The money is there for the taking. However, the company can’t access it without clearance from the Canadian government. That is not a deal breaker. In fact, it could be accomplished in short order, without the passage of any new legislation. Let me explain… Under the *Canada Transportation Act*, foreign ownership of an airline is restricted to 25% of voting equity. While the legislation—enacted in order to keep control of Canadian companies firmly in Canadian hands—is well-intentioned, it places a serious roadblock in the path of those who must cast their fundraising net farther and wider. The Government is aware of this dilemma. An amendment has already been passed by the Canadian Parliament which would allow for 49% foreign ownership. That would open up the market to vast new sources of capital, while ensuring that the ultimate control of a company remains with Canadians. Unfortunately for ***Jetlines***, the amendment requires a federal cabinet decision before it goes into force. There is a reasonably good chance the change to 49% foreign ownership will be approved by the cabinet following a recommendation by the Minister of Transport. However, this necessary action may not be coming anytime soon. Transport Canada strongly prefers to go through an exhaustive consultation exercise. In addition, time would also be required to develop and roll out the requisite regulatory framework. All of this is projected to take up to 24 months. ***Jetlines*** has already raised the funds required to get the ball rolling. It is committed to raising another C$6 million. Among other things, these funds will allow ***Jetlines*** to enter into agreements to acquire initial planes and to complete Transport Canada’s Air Operator Certificate (AOC) process. I am backing the Chairman of ***Jetlines***, Mark Morabito, in a big way. I have personally written a large check, and plan on being a very large shareholder in what I believe will not only be a great investment, but more importantly, a service that will benefit all Canadians alike. My friends own fancy private jets. I plan on owning a lot of shares in a great ultra-low-cost carrier that serves Canadian citizens. This, in turn, advances ***Jetlines’*** efforts to get licensed by the Canadian Transportation Agency (CTA) and vault the final hurdle before commercial launch. The company has already completed Stage I of the CTA’s licensing procedure. In order to complete Stage II, it will need, in addition to its AOC, C$27.233 million in working capital to satisfy the financial requirements for a domestic airline license. That amount of money is simply not available in Canada for a startup airline. However, some very bright European investors stand ready to participate in this second round of funding, provided that the foreign ownership restriction is raised to 49%. This can happen if the amendment is soon put in place. But, since the amendment may be delayed too long to help ***Jetlines***, there are two suitable alternatives. One would be for the Governor in Council, upon recommendation by the Minister of Transport, to pass a regulation increasing the foreign ownership limit to 49%. The other alternative would be for the Minister to issue an exemption order, specific to ***Jetlines***, immediately lifting that ownership ceiling. The Minister has the lawful authority to do this. It would resolve the issue in the timeliest manner. ***Jetlines*** has lawfully applied for just such an exemption. Granted, there may be objections raised, especially from you-know-who (the cartel), but ***Jetlines*** has anticipated and addressed each of them: **1) Question: What about the loss of passengers by Air Canada and WestJet?** ***Answer*:** In order to avoid this, Jetlines will focus on under- and non-served markets, and will develop its own clientele among Canadians currently priced out of flying. It will not compete with legacy airlines on the vast majority of its routes. Further, it will have to avoid service to or from Pearson International or Montreal Trudeau Airport, as their high costs would disrupt the ULCC model. **2) Question: What about Indirect Service Providers (ISPs)? ** ***Answer*: **It has been argued that ISPs—which don’t operate any aircraft, but rather market and sell air services—could serve Jetlines’ target markets by reselling these contracted services. For example, the recently launched NewLeaf service doesn’t own or operate any planes; instead, it contracts out flight services to Flair Air from Kelowna and Enerjet out of Calgary. First, that means two companies have to make a profit instead of one, which makes sustainability highly suspect in a low margin business. Second, while ISPs could benefit some specific-purpose tour operations (e.g., vacation packages), their model would not hold up if they attempted to apply it to flights to secondary markets on a scheduled basis. **3) Question: What about the pitfalls of foreign ownership?** ***Answer*:** The worry here is that significant foreign ownership may allow foreign airlines to use their interest to direct Canadian passengers into their own network system(s), as opposed to them being directed to the Air Canada or WestJet networks. This is of special concern with regard to the so-called ME3 airlines (Emirates, Etihad Airways, and Qatar Airways), which are heavily government-subsidized, enabling them to undercut competition on price. Jetlines, however, has pledged to not enter into an agreement with any international carrier to supply feed or connectivity access. Moreover, it not only will not, it cannot. The ULCC model only works when there are no code-sharing, interline or other commercial agreements for passenger feed. **Jobs**: Granted an exemption order, ***Jetlines*** believes it can secure the requisite funding within two months and be in a position to fully launch 4-8 months after that. In its first three years of operation, the company expects to hire or create 1,000 direct new jobs and 4,000 total jobs. **Economic stimulus**: By year three, when ***Jetlines*** expects to have 16 routes (city/pairs), the projected 750,000 added passengers in B.C. alone will generate an estimated gross new passenger economic output of C$560 million. **Local industry support**: Once up and flying, ***Jetlines*** can, under its current business plan, purchase 24 C-Series aircraft from Quebec-based Bombardier. ***Jetlines*** has done a deep dive on the C-Series with Bombardier’s assistance and handed over their findings to the Department of Transport. The C-Series is a winner and would fit well into the ***Jetlines*** model. ***Jetlines*** could provide significant revenue ($1.9 billion) to Bombardier at a critical time and showcase Canada’s flagship aircraft to domestic and international travelers. This potential contract with ***Jetlines*** for Bombardier would be equal to 50% of the revenue that Bombardier received from Air Canada’s most recent order for 45 Bombardier C-Series jets. This is a win-win for everyone. This not only benefits Bombardier and its employees, but also benefits the Canadian Federal and Provincial governments, as well as the entire Canadian air transportation sector. The benefits to adding this ULCC to Canada’s airline mix are huge, while the downsides are basically non-existent. I call on Canada’s Minister of Transport to approve ***Jetlines’*** request for an exemption from the 25% foreign ownership rule, in order to expedite the launch of the company. Canadian travelers deserve the service ***Jetlines ***can provide, and they deserve it now. They should not have to wait any longer to enjoy what travelers in other G-7 countries have been enjoying for years. The Canadian air cartel should not be allowed to gouge citizens who struggle to afford high-cost airfares. If you agree with me, please let your voice be known and contact: The Honourable Marc Garneau, Minister of Transport Canada Email: [marc.garneau@parl.gc.ca](mailto:marc.garneau@parl.gc.ca) Physical Address: 330 Sparks Street Ottawa, Ontario K1A 0N5 Also, please carbon copy the following key players: Sara Wiebe, Director General Air Policy Transport Canada Email: [sara.wiebe@tc.gc.ca](mailto:sara.wiebe@tc.gc.ca) Office of the Minister of Transport c/o Alain Berinstain, Director of Policy Email: [Alain.Berinstain@tc.gc.ca](mailto:Alain.Berinstain@tc.gc.ca) Regards, Marin Katusa --- # Your Edge in the Energy Sector – How Katusa’s Green Barrels of Energy (GBOE) Metric Works - URL: https://katusaresearch.com/your-edge-in-the-energy-sector-how-katusas-green-barrels-of-energy-gboe-metric-works/ - Type: article - Published: 2016-11-28 - Updated: 2022-10-11 - Author: Marin Katusa In the wake of Donald Trump’s surprise win, investors sold off many stocks in the green energy sector. At the same time, they bought coal stocks, believing they would enjoy an extended Trump rally. The thinking is that Trump is pro-coal and pro-oil and might roll back laws that are friendly to solar, wind, and geothermal energy. My position on this is clear: The best green energy stocks will perform very well during a Trump presidency. The reality is solar, wind, and geothermal are now economic and competitive with natural gas and coal. Plus, the cost of producing green energy will continue to fall. I’m as bullish on green energy as I was before the Trump win. I believe the ultimate tool for investing in this era is Katusa’s Green Barrels of Energy Equivalent (GBOE). Below, I describe how it works… and I’ll show how it reveals some incredible things… **Why We Use Barrels of Oil Equivalent (BOE) ** Right after you start learning how to analyze oil and gas securities, you meet something called “barrels of oil equivalent.” It’s a common term in the industry… and a critical tool for evaluating oil and gas businesses. This is because when we drill for oil and gas, we can find different forms of fossil fuels. You can find crude oil, which we use to make gasoline and diesel fuel. You can find natural gas, which we use to heat homes and power factories. You can also find deposits that are rich in hydrocarbons called “natural gas liquids.” You’re likely familiar with one such liquid, propane. It’s a common fuel for gas grills. All of these fossil fuels are valuable. But they are all different. They have different refining requirements. They have different transportation requirements. They have different end uses. They have different market prices. A single hydrocarbon deposit can contain a variety of these fuels. An oil and gas company can have a variety of them on its balance sheet. The “barrels of oil equivalent” (or “BOE”) metric was created so we can compare the value of oil and deposits with each other… and so we can compare the value of oil companies with each other. BOE is a unit of energy that is equivalent to the energy released from burning one barrel of crude oil, or 42 gallons. By combining the BOE values of all kinds of reserves, we can get an idea of what an energy company is worth. In other words, BOE is as close to an “apples to apples” comparison as you can get when evaluating oil and gas companies. While BOE is a useful tool, it’s important to know about its limitations. In the oil business, a well’s production is measured in how many barrels of oil per day (bopd) it produces. Each well produces oil at a certain rate; oil producers are evaluated based on the total volume of oil produced by all of their wells during an average day. It is still important to consider a few other factors, like the grade of the oil, but in general bopd is a reliable yardstick for comparisons in the oil sector. That reliability starts to go out the window when natural gas enters the picture. Gas volumes are measured in cubic feet, not barrels, and the energy contained in a certain volume of gas is markedly different than the energy in the same volume of oil. But oil and gas companies needed a way to describe their combined daily production. Thus was born the concept of barrels of oil equivalent (BOE). As mentioned, BOE is a unit of energy, defined as the energy released when one barrel of crude oil is burned. Since different grades of oil burn at different rates the value is an approximation, set at 5.8 x 106 BTU or 6.12 x 109 joules. The BOE concept allows us to combine different forms of fuel reserves and production rates in a standardized manner. Using the BOE concept, one barrel of oil is equivalent to 5,800 cubic feet of natural gas because both produce approximately the same amount of energy on combustion. Pre shale revolution, oil generally traded six times the price of natural gas. The concept would be great if we valued companies based on the energy contained in their reserves, but we don’t anymore (fracking changed that) – we care about the money they can earn from those reserves. And that does not depend on contained energy but on the market prices for oil and for gas, which are very different. One barrel of oil is equivalent in energy to 5,800 cubic feet of natural gas. Historically, that meant oil traded at about 5.8 times the price of natural gas. Hence, 1 barrel of oil was both equivalent in energy and price to 5.8 times a barrel of oil equivalent (boe). Feel free to skip the math, as all I am showing is how proof that explains those numbers. Here’s what I mean: Using an oil price of US$45 per barrel and a natural gas price of US$2.24 per thousand cubic feet, let’s calculate the ‘value’ for a BOE of natural gas priced as gas.[![5800-equals-12992]](https://katusaresearch.com/wp-content/uploads/2015/12/5800-equals-12992.png) Today a BOE is priced at US$12.99, hence BOE’s are not priced like actual oil. Now let’s calculate the ‘value’ of that BOE of natural gas if we price it as oil, since the two are supposedly equivalent.[![5800-equals-45]](https://katusaresearch.com/wp-content/uploads/2015/12/5800-equals-45.png) Not so equivalent after all! The barrel of oil is actually worth 3.46 times more than the ‘equivalent barrel’ of natural gas. I will now explain why this is so important and why I bored you through some math. Despite this major discrepancy, analysts regularly value BOE production and reserves as though all of the barrels are worth the same amount. The result is that natural gas BOEs are given 3.46 times their worth in the valuation of an oil and gas company, and on the balance sheet and this is acceptable according to accounting practices today. So we have to be careful with BOE numbers. The BOE concept is useful because it lets us compare the energy production and potential of companies producing two different kinds of fuel, but we should not use BOE data in evaluating companies financially. Even though the BOE system has limitations, it is without a doubt the main parameter analysts and investors use to compare energy companies. Everybody in the resource industry stopped at fossil fuels when using BOE. But not me… I thought, why use BOE with just oil and gas? Why not use it to evaluate and compare any and all energy companies? I’m talking about solar energy, wind energy, geothermal energy, and hydroelectric energy. If we want investors to start seriously considering green energy producers as energy investment options, we have to be able to compare the green energy producers with oil and gas companies on an apples-to-apples basis. After all, energy is energy. It either makes your lights turn on or it doesn’t. It either makes your car go or it doesn’t. It’s either worth something or it isn’t. Renewable energy often gets a bad rap with investors. But hydro, solar, and wind projects can be fantastic investments. In just the past five years, the cost of wind energy and solar energy have dropped so much that they’re as cheap as fossil fuels in many countries. That’s why I created something called “green barrels equivalent,” or GBOE. **How Katusa’s GBOE Works** GBOE is essentially a BOE metric for renewable energy sources like geothermal, solar, wind, and hydro. It allows me to take any solar farm, wind farm, or geothermal plant and put it into terms I can use to value the assets. I once taught a very smart, very rich energy entrepreneur how to perform the math behind GBOE. He was floored. He didn’t think anyone would understand it. That’s fine with me. My GBOE equation has become a huge edge for me as an investor. I can use it to accurately value any green energy asset. I can use it to see things other investors do not. Here’s how it works… Green energy production and reserves are counted in megawatts. Officially, the unit is a megawatt year, which just like a kilowatt hour is a rate: the number of megawatts produced in a year. Since the megawatt hour is a unit of energy and GBOEs are based on energy, we just need to do a little unit conversion to transform megawatts into what we like to call *green barrels of oil *(GBOE). For example, let’s say we have a geothermal power plant. Geothermal energy production works by sinking wells into the ground, allowing steam to rise to the surface, and using the steam to make turbines spin. We have to assume that our geothermal power plant operates at 100% capacity, 365 days a year, 24 hours a day. Then we can take a megawatt year (remember, this is how electricity is measured) and convert it into kilowatt hours. Here’s the math for math lovers (others can skip it).[![1mw-equals-876000]](https://katusaresearch.com/wp-content/uploads/2015/12/1MW-equals-876000.png) Our megawatt year of green power is now 8.76 million kilowatt hours (kWh). Now we convert kilowatt hours into megajoules using the defined ratio:[![8760000-equals-31536000]](https://katusaresearch.com/wp-content/uploads/2015/12/8760000-equals-31536000.png) Now we can convert to green BOEs, using the definition of a BOE as 6.12 x103 MJ.[![31536000-equals-5154]](https://katusaresearch.com/wp-content/uploads/2015/12/31536000-equals-5154.png) All cleaned up, the conversion goes like this:[![1mw-equivalent-5145-of-oil]](https://katusaresearch.com/wp-content/uploads/2015/12/1MW-equivalent-5145-of-oil.png) Now we know that 1 megawatt of green power produced over one year is equivalent to 5,154 barrels of oil per year or 14 barrels of oil per day. **Comparing US green energy assets: Looking long term** Using our math to use green power modeling to turn green megawatts into equivalent barrels of oil *per day.* Let’s use our concept of green BOEs to compare the full potential of green energy production with that of an oil well. Oil wells have decline rates. That means the initial production of an oil well will definitely not be the same production in 6 months. Production declines significantly on unconventional wells. A “decline rate” is a huge issue in the energy business because oil and gas wells typically produce a lot of volume right after they are tapped and fracked, but then produce a lot less as the months and years go by. Decline rates must be factored in when evaluating oil and gas assets. Conventional Oil and gas wells decline at an average 14% annually. Unconventional wells have decline wells as high as 75% annually, and its generally accepted the average decline of an unconventional well is about 35% (and that is being optimistic). That means the oil wells need further EOR (enhanced oil recovery) or refracking the wells or they will run dry. Oil and gas companies have to constantly establish new wells just to maintain their production levels. Green energy, such as geothermal wells, on the other hand, decline at roughly 2% each year, solar and wind farms don’t decline. For example, a hundred years after a geothermal well is tapped it will still be producing some 35% of the power it kicked out in its first year – that is a seriously long-term asset. So in the geothermal world new wells do not just replace production that is drying up; they add new, long-term production. Same can be said regarding wind and solar farms (or fields—if we are going to compare apples to apples, we should say wind fields or solar fields like we say oil fields). Let’s crunch some numbers on overall well potential. If you don’t like calculus, don’t worry about all of the equations below – just skip them and read the text below for the conclusions. I’ve included the calculus for all my alligator mathematicians! To model the production from a geothermal well we use a harmonic decline rate. In the equation below, *P* represents the well productivity, represents initial geothermal well productivity, and *Di* represents the constant harmonic decline rate.[![well-productivity-equals]](https://katusaresearch.com/wp-content/uploads/2015/12/well-productivity-equals.png) We took three realistic decline rates and modeled the 100-year production from a geothermal well that started at 175 MW or 901,950 gBOE per year. If we want to do the same for a wind or solar farm, just replace the MW amount. This is the key part of Katusa’s Green barrel of Oil Equivalent production. We need to make the production comparable on an apple to apple basis. To do this, we have to bring in some calculus. To calculate the cumulative production over the first *T1* years we use an integral:[![cumulative-gboe]](https://katusaresearch.com/wp-content/uploads/2015/12/Cumulative-GBOE.png) The key question is: what would a comparable oil well look like? The question we have to ask ourselves is, **“what initial production rate would an oil well need if it were going to produce the same cumulative number of BOEs over its much-shorter lifespan?”** To calculate that we need to model the production from an oil well. The equation below does just that, with as initial oil well productivity and as the exponential decline rate, which we set at 14% because of the average conventional oil well decline rate.[![model-the-production-of-an-oil-well]](https://katusaresearch.com/wp-content/uploads/2015/12/Model-the-production-of-an-oil-well.png) Again, to calculate cumulative production over the first T2 years we use an integral:[![cumulative-boe-production]](https://katusaresearch.com/wp-content/uploads/2015/12/Cumulative-BOE-production.png)Remember, we’re trying to figure out how much oil a well would have to gush *initially* in order to produce the same number of BOEs over its lifespan as a geothermal well (or any solar or wind farm) can produce over its much longer life span. These life spans vary, so we chose three representative values for each kind of well. For the oil field wells we looked at life spans of 10 years, 15 years, and 20 years. For the geothermal field wells we chose 20 years, 50 years, and 100 years. Now we set our cumulative production equations equal to each other, insert decline rates (1.75% for the harmonic geothermal decline and 14% for the exponential oil decline), and run through our well life spans (*T1* = 20, 50, and 100 and *T2* = 10, 15, and 20). **Initial production rates necessary for oil wells to match geothermal wells in BOEs produced over producing life spans** [![initial-production-10-15-20]](https://katusaresearch.com/wp-content/uploads/2015/12/Initial-production-10-15-20.png) So for a conventional 10-year oil well to produce the same amount of energy as a 49.5 MW geothermal well kicks out in its first 20 years, it has to start producing at over 2,200 barrels per day. There are no conventional wells in North America even close to producing anything near that number. It would take a dozen conventional wells to produce such numbers. Really, though, there’s no need to cut the geothermal well, solar field or windfarm off at 20 years; if we want to get the same energy from a conventional 10-year oil well field as we expect to get from a geothermal well field over 100 years it has to start off by producing more than 7,500 barrels of oil a day! It’s often easier to understand these things graphically. The graph below shows the 49.5 MW geothermal well modeled at a harmonic decline rate of 1.75%, contrasted with a 10-year oil well declining exponentially at 14%. [![barrels-and-years-after-production]](https://katusaresearch.com/wp-content/uploads/2015/12/Barrels-and-years-after-production.png) The constancy and longevity of geothermal power is very evident. And note that the geothermal well still has plenty of production left at the 100-year mark. **Conclusion** For investors to start seriously considering green energy production under a Trump Presidency, investors, fund managers and Trump himself will need to be able to compare the power of a green energy field with the barrels of an oil or gas well. Now they can, thanks to the Katusa Calculus Class By putting oil and gas and green energy companies on common ground, we can compare production, reserves, and valuations…and finally prove what we have been saying for some time now: that green energy companies are undervalued in the energy sector. Clean energy will constitute a major part of our future, even with Trump as president. Oil and gas producers will soon realize that the perfect way to neutralize their carbon emissions is to also produce green energy. I believe over the next decade, we will see the mid-tier and large oil and gas companies will start consolidating and buying out North American green energy producers. But before any of that can happen we need investors to wake up to the fact that green energy is economic in the present energy matrix. The math I’ve presented is completely sound and correct. The math that allows natural gas to be included on the financial books as BOE (barrels of oil equivalent) **also allows for green energy produced from a solar, wind, geothermal field.** I am surprised nobody has done this yet, but I am sure the folks at Goldman Sachs will read this report, repackage it as their own concept, and make billions from consolidating the undervalued green energy sector. They can, apply the GBOEs (Green barrels of oil equivalent) concept and get bankers to accept the GBOEs on the balance sheet as they BOEs. That’s fine, I hope they do. I have already have run all the numbers on the best and most undervalued green energy producers in the North America. Once word gets out, the buyers will pay my subscribers and I premium prices for our holdings. Regards, Marin Katusa --- # The San Francisco Silver and Gold Summit – The Katusa Advantage - URL: https://katusaresearch.com/san-francisco-silver-gold-summit-katusa-advantage/ - Type: article - Published: 2016-11-04 - Updated: 2019-05-08 - Author: Marin Katusa Dear Katusa Research Reader, One of my major goals in founding Katusa Research is to level the playing field in the natural resource sector… to provide individual investors with the insight and tools they need to compete with large funds and connected players. According to the huge amount of positive reader feedback, we’re achieving that goal. Through our educational efforts, exclusive videos, and profitable investment recommendations, members are getting the “Katusa Advantage” and sitting at the top of the resource investment pyramid. I’m writing today to make sure you’re aware of another great resource we’re making available to you, **absolutely free**. Once per year, the respected Cambridge House International and I bring together the world’s top precious metals investors and entrepreneurs to San Francisco Silver & Gold Summit. The show has a long history of success, as it has been running for many decades. This year, like last year, it is being held at The Park Central Hotel in San Francisco, California on November 14 & 15. As a special thank you**, I have arranged for all my guests to have breakfast for free with me** starting at 7:30am on both Nov 14 and 15th. During breakfast, I will give an off the record discussion and share my current thoughts on the state of the market. I will also have a few special guests join me. If you’ve ever seen my workshops, you know you definitely don’t want to miss “Breakfast With Marin.” During this conference, attendees hear fantastic presentations from top industry players. They see me “interrogate” company management in my search to find great investments for myself and readers. And just as importantly, they get the chance to speak one-on-one with company executives, fellow attendees, and professional investors like myself. This year will be extra special as Mr. James Dines is being inducted into the Resource Hall of Fame. Also many of my good friends will be joining me on stage including, Doug Casey, Rick Rule and Frank Holmes. Another special treat will be the debate that I will be moderating between Rob McEwan and Nolan Watson on the topic of to “Stream or Not to Stream”. We’ve made it a truly great event for folks who want to stay on top of the precious metals market. This conference is about making money. I personally pick the speakers. Take for example last year’s NexGen panel where I invited Amir Adnani, Ivan Bebek, Robert Guistra and Marcel De Groot to answer my tough questions in front of a packed audience. More importantly, if you just bought shares in their four companies (equal weighted) you would have made over 200% gains since the conference and outperformed the index by over 400%.[![katusas-2015-next-gen-panels-share-performance]](https://katusaresearch.com/wp-content/uploads/2016/11/Katusas-2015-Next-Gen-Panels-Share-Performance.png) But its not just the next generation of superstars I have speaking at the conference. Take for example the Mining Legends panel I moderated last year. I had Ross Beaty (Hall of Fame Member), David Lowell (Hall of Fame), Ron Netolitzky (Hall of Fame) and Ron Thiessen answer my tough questions. How did their stocks perform since the Legends panel at last year’s conference? Quite impressively. If you bought shares in the companies of the four legends above, you would be sitting on 200% gains and outperformed the comparable index also by a little over 400%. [![katusas-2015-mining-legends-panels-share-performance]](https://katusaresearch.com/wp-content/uploads/2016/11/Katusas-2015-Mining-Legends-Panels-Share-Performance.png) Another cool feature I do at the end of every day is I invite the management of the company’s that most impressed me at the conference to join me on the stage in the big hall at the end of each day. The chart below shows the performance of these “end of day best of conference” at the San Francisco Silver and Gold Summit 2015 Panel. Their share price performance since that panel is extremely impressive. If you hung around until the end of the day panel and bought shares of the management teams (equal weighting) of the company’s I asked to come up on stage, you would be sitting on 223% gains right now. Not to mention everyone had a lot of fun from the answers to the some of the questions I asked. [![katusas-2015-best-of-day-panels-share-performance]](https://katusaresearch.com/wp-content/uploads/2016/11/Katusas-2015-Best-of-Day-Panels-Share-Performance.png) Expect me to ask questions on stage that most people are too polite to ask but deep down want to ask. I’m not shy, and I don’t hold back. Expect more of that at this year’s conference. As part of your “Katusa Advantage,” I’ve arranged for any Katusa Research reader to get **FREE** tickets to this conference. Just register online with this special link: [http://cambridgehouse.com/e](http://cambridgehouse.com/event/53/register)[vent/53/register](http://cambridgehouse.com/event/53/register) While registering, select the quantity of tickets you wish to purchase and then click “Enter Promotional Code.” In the box that appears, enter the code **SGSVIP** and then click “Apply Code.” The discount will be applied on the next page. I believe the precious metals sector has massive upside from these levels. Attending the conference will be a tremendous way to arm yourself with the knowledge and connections you need to make the biggest possible returns. I hope to see you there. Regards, Marin Katusa --- # Write Down This Date… November 15, 2016 - URL: https://katusaresearch.com/write-date-november-13-2016/ - Type: article - Published: 2016-10-20 - Updated: 2019-08-26 - Author: Marin Katusa Katusa Research is first to the story. Others are sure to follow… I bring all this up today because I know where the next Big Score is going to happen. And news of it will make front page headlines in less than six months. I believe the lid will blow off this story on November 15. That’s less than one month away. It’s a very tight time window to act. But it’s still enough time for you to review what’s happening… stake your claim in the next giant shale field… and secure a chance to make enormous capital gains over the next 12 months. Marin Katusa --- # What OPEC’s Latest Announcement Really Means - URL: https://katusaresearch.com/opecs-latest-announcement-really-means/ - Type: article - Published: 2016-10-07 - Updated: 2022-10-11 - Author: Marin Katusa Last week, the Organization of Petroleum Exporting Countries (OPEC) announced its intention to reduce its oil production by one million barrels per day. This is the first time OPEC has attempted a production cut since late 2008. The promise of reduced oil supplies sent oil prices 5% higher on the day of the announcement. OPEC’s announcement was a good soundbite for the media, but what you won’t hear from the mainstream press is that OPEC’s move will not make a difference. Contrary to what some people believe, it’s not going to lead to higher oil prices over the long term. Below, I’ll tell you why. **A Cartel That is Losing Its Power** OPEC is a group of 14 countries: Saudi Arabia, Iraq, Iran, United Arab Emirates, Kuwait, Venezuela, Angola, Nigeria, Algeria, Qatar, Ecuador, Libya, and Gabon. For decades, OPEC has been a driving force in influencing the oil market. It has produced 30%-38% of the world’s oil for the past 20 years. Currently, OPEC produces 33.75 million barrels per day (35% of global oil production). However, OPEC’s power is slowly eroding. This is because of Russia and fracking. Over the past 15 years, Russia has increased its oil production so much that it’s now the world’s largest oil producer. Fracking has helped the U.S. increase its oil production by over 70% over the past eight years. It now produces nearly as much oil as Russia. Russia and the U.S. are NOT part of OPEC. You can see the production increases in the following chart: Thanks to the increased Russian and U.S. production, OPEC’s share of global oil production has been in a downtrend for the past 20 years. ![opec-share-of-global-oil-production] In addition to knowing that OPEC doesn’t have the power it used to, you need to know **that OPEC lies**…all the time. **OPEC’s Long History of Ignoring Quotas** Surprisingly, almost no one is mentioning the fact that current OPEC production is more than two million barrels above its own self-designated quota. We compiled the chart below exclusively from OPEC’s own documents to compare the organization’s production since 1996 and its stated quotas during the same period. You can see that it almost always produces more than its stated quotas. This is because individual OPEC members often need oil money more than they need to conform to the group’s rules. So, they pump more oil than the quotas allow. [![opec-production-vs-quota]](https://katusaresearch.com/wp-content/uploads/2016/10/OPEC-Production-VS-Quota.png) History has proven that OPEC rarely produces within its stated quota. OPEC currently produces 33.75 million barrels per day. If it does what it says it will do and cuts production by a million barrels per day, it is still well above the self-designated quota of 31.5 million barrels per day. The production cut will narrow the gap between the target and actual production, but I am skeptical much will change. It is very hard for OPEC to reverse the strategy it has been following for the past year, which has been to “pump and dump” as much oil as it could. **It’s All About Market Share** The last time OPEC cut production in late 2008, it lost market share to the Russians, who increased production. It was a lesson OPEC will not forget. In 2014, I stated why OPEC can’t cut production for two reasons: Russia and North American shale oil production. Both sources can cut into OPEC’s market share if it cuts production. They won’t stop pumping. OPEC is well aware of both the Russians and the innovation in shale production since the oil crash of 2014. OPEC does not want to lose that market share. I do not expect them to produce at or below their quota. OPEC production will slowly creep up towards current levels again and the quota will end up being raised. Two years ago, I stated that “OPEC will lose this price war”, as OPEC pumped as much as it could in an attempt to force US shale producers and the Russians out of the market place. OPEC lost that war. Again, OPEC’s biggest problem is that Russia and the United States are not participating in the production cut. Russia is pumping more oil today than ever. The United States has dropped shale production costs by 50% in the last 24 months. And we are just entering something I call “The Shale Revolution 2.0.” Technology is improving at an incredible pace, which is rapidly lowering the cost of shale oil production. Pioneer Resources recently announced its operational costs were as low as $2.25 a barrel in the sweet spot of the Permian basin. The Permian basin produces 1.9 million barrels per day. To put it in perspective, if the Permian basin were a country, it would be the 7th largest producer in OPEC. This OPEC cut (let’s pretend they actually cut by one million barrels) has caused–and will continue to–inflation in oil prices for the short term. However, like I said before, there’s nothing stopping the Russians (who benefit from a depreciated currency) or the Americans (who benefit from technological innovations in the shale sector) from increasing production. Higher prices incentivize increased oil production, which will eventually push the price back down. **Why Hedging Will Put a Cap on Oil Prices** Another consequence of the weak oil market of the last 24 months is that oil companies are looking to lock in higher oil prices by hedging new production. The bankers who lent money to the oil companies will request it, management teams who got burnt in the last down cycle will also want to hedge, and most importantly, shareholders will want hedges in place to lock in enough cash flow to guarantee dividends in a negative interest rate world. We will see North American oil producers begin to hedge production as oil creeps above $50/barrel. Significant hedging will occur between $55-$60 per barrel. The takeaway from this short missive is that I expect the ceiling on oil prices in the $55 area to continue. I think OPEC’s latest move will prove to be a failed attempt to raise prices. I expect the cartel as a whole to continue to produce above its quota. It has never been more critical to be invested in only the lowest-cost, highest-quality oil producers than it is today. Regards, Marin Katusa --- # Why Gold Stocks Have 300%+ Upside From Here - URL: https://katusaresearch.com/gold-stocks-300-upside/ - Type: article - Published: 2016-09-30 - Updated: 2019-05-08 - Author: Marin Katusa If you think big gold stock gains are behind us, think again. Although gold stocks have climbed 100% off their late 2015 bottom, they have at least 200% upside from here. Owning gold stocks is still one of the smartest trades you can make right now. There are two simple reasons why gold stocks will most likely be much higher in a few years: Government insanity and leverage. I’ll start with the first reason, government insanity… I could just mention the first debate between Trump and Clinton and leave it at that. But I want to explain the importance of understanding the deranged fiscal policy of all the central bankers and how it has resulted in financial heroin Eight years ago, governments around the world faced a desperate situation. The world’s financial system was about to collapse. The response was extreme… and unprecedented in world history. For the first time ever, the world’s central banks acted in a concerted manner to create oceans of money and credit. Their agreed upon goal was to “paper over’ their debt problems. Trillions of new currency units in the form of U.S. dollars, Japanese yen, Chinese renminbi, Euros, and other currencies were created and borrowed. This monetary experiment is still going strong. Nobody, including Fed Chair Janet Yellen, know how it will turn out. However, not one government did a thing to confront the root problem. We have a global monetary system that is backed not by real wealth, but by IOUs and faith. This faith-based “funny money” system allows governments to spend and borrow nearly limitless amounts of money… which constantly produces currency debasement and huge market distortions. In other words, over the past eight years, governments treated a heroin addict with more heroin. Over the past few years, a new form of heroin has appeared on the scene. You’ve probably heard of it. It’s called “negative interest rate policy,” or NIRP. In a healthy economy, you get paid to lend money to the government. In the past, you could buy a government bond and earn 5% or 6% in interest. But the global economy is not healthy right now. Governments in the U.S., Europe, and Asia are desperately trying to jump start their economies by employing very low or even negative interest rate policies. In a negative interest rate environment, you get charged a negative interest for saving money. There is now over $10 trillion of outstanding government bonds with negative interest rates. Politicians believe that making it unattractive for people to keep money in the bank will cause people to save less money. Instead of saving, they’ll spend money on cars, gadgets, and vacations. They’ll invest in things like real estate and stocks. Hopefully, all that spending will “stimulate” the economy. This thinking is crazy. The facts are proving the central bankers are wrong and the global economy is slowing. No matter what the government does, it can’t force you to spend money. It can’t force you to buy stocks. Negative interest rates also promote all kinds of crazy financial decisions. When borrowing money is ridiculously cheap, people will borrow incredible amounts of it in order to speculate in real estate, stocks, and commodities. I believe that over the long-term, negative interest rates will cause many currencies to plummet in value. They could even cause a financial crisis more severe than the 2008 crisis. The asset that will soar in that environment is gold. Gold is the currency that governments cannot debase. It is the only currency that is not someone else’s liability. With interest rates negative or near zero, there is no “carrying cost” for holding gold. Since gold pays no interest, gold owners typically “give up” interest income they would earn by owning conventional currencies. NIRP is a financial cancer that will consume savings you hold in cash. NIRP cannot eat your savings if you store it in gold. As paper currencies decline in value, more and more people will buy gold. That’s why I believe $1,500 gold… and eventually $2,000 gold is in the near future. This brings us to the second reason gold stocks have huge upside from here: Leverage. You probably remember leverage from high school science. A lever allows you to get a very powerful result by applying only a modest amount of force–think of how a crowbar works. In the financial markets, leverage occurs when the price movement of one asset results in the amplified movement of another financial asset. Knowing how to use leverage properly can make you a fortune in the natural resource market. Leverage is easy to understand when you think of it in terms of a house… Let’s say you put $50,000 down to buy a $250,000 house. A few years after you buy the house, its value has increased by 20% to $300,000. Although the increase from $250,000 to $300,000 is just 20%, you’re actually up 100% ($50,000) on the original $50,000 down payment. Because of leverage, a 20% gain in the value of the house translated into a 100% gain on your capital. Leverage in gold stocks works in a similar way… Let’s say you own a gold mine. You produce one million ounces per year. When you add up all your costs like equipment, fuel, insurance, and labor, it costs you $1,100 to produce one ounce of gold. Since gold is selling for $1,300 an ounce, you make $200 per ounce in profit. Now, let’s say for the reason I described above, gold increases 15% in value to reach $1,495 an ounce. But because of leverage, your profits don’t increase 15%. They increase much, much more. Since your production cost is $1,100 an ounce, the gold price increase means your profit per ounce is now $395 per ounce. This is a 97.5% increase in profit. **The inherent leverage of the gold business meant a 15% increase in the price of gold translated into a 97.5% increase in your profits.** Of course, this huge increase in profitability makes your gold business much more valuable. If it’s publicly traded, you could see a 100% – 200% gain in share price. What if gold rallied further… to say, $2,000 per ounce? This is where you see leverage fireworks. At $2,000 per ounce, you’ll make $900 per ounce in profit, which is a 350% increase in profit over today’s level. If your gold business is publicly traded, you could see a 600% – 1,000% gain in share price. This is how leverage works in natural resources. A modest increase in the price of a natural resource can cause a huge increase in a natural resource company’s profits and overall value. I believe governments will continue to act as they’ve done for centuries. They’ll continue to fight economic problems by spending, borrowing, printing, and debasing. This will send the price of gold much higher than today’s levels. And thanks to the leverage, gold stocks will be multiples higher than where they are now. Regards, Marin Katusa **P.S.** Every month, I reveal all the stocks I’m putting millions of dollars of my own money into exclusively to subscribers of *Katusa’s Resource Opportunities*. To find out which gold stocks I own and see soaring 300% – [click here to learn more](https://katusaresearch.com/subscribe/) --- # The Biggest Key to Safely Speculating In Natural Resource Stocks - URL: https://katusaresearch.com/biggest-key-safely-speculating-natural-resource-stocks/ - Type: article - Published: 2016-09-16 - Updated: 2025-09-10 - Author: Marin Katusa ***By most accounts, the first case of an audience throwing tomatoes at a performer was reported in the October 28, 1883 edition of The *New York Times*. The paper reported how an acrobat named John Ritchie was pelted with tomatoes after disappointing a crowd in Long Island. Ritchie purportedly fled for the stage door through a “perfect shower” of tomatoes. Throughout the years, audiences have thrown other foods, like eggs and turnips, to express displeasure over a performance. But for some reason, the tomato became the protest food of choice. It’s how the world’s most powerful movie review website, Rotten Tomatoes, got its name. ***Like it or not, we are all performers in one way or another. We are all trying to satisfy or entertain somebody. Even as a fund manager and as Chief Investment Strategist of Katusa Research, I’m on a stage–a public one at that–performing for investors. And like any performer, I’ve had tomatoes thrown at me. It doesn’t take long to become a target in the investment business. Successful investing is a task where the difficulty is on par with brain surgery. The financial markets are astonishingly complicated. Even the best guys can’t help but make embarrassing mistakes. For example, google “Warren Buffett mistakes” and you’ll find thousands of articles about the legendary investor’s missteps. But today, I’m not going to talk about the mistakes of famous investors. Today, I’m going to talk about you. We’re going to discuss the most common–yet most misguided–source of investor anger and nasty letters at every research firm. You might be making this mistake yourself. What I’m going to say will sound critical. But there’s a big benefit for you in all this. If you learn why this source of anger and criticism is so misguided, you stand to become a much better investor. This is “master’s level” knowledge that will vastly improve your results. ***With that said, here is the most common–and most misguided–source of anger and nasty letters among investment research consumers. The comments you see below differ in wording, but they come from the same source: Comment #1: *“What you said about ABC Stock didn’t happen. You are the dumbest SOB on the planet. Because of my losses in ABC, I can’t retire.” * Comment #2: *“I can’t believe ABC Stock didn’t work out. I put everything into that stock. You’ve ruined me.”* *Comment #3:* *“You were wrong. ABC Stock didn’t go up. It went DOWN. I had half of my portfolio in that stock. You’re worthless. Your company is worthless. I’m screwed now.” * ***Around the world, investment managers and financial analysts who read those words are nodding their heads in acknowledgement. They know exactly what I’m talking about. Because one single stock recommendation didn’t work out, normally polite, normally reasonable people will insult you in ways that would shock a member of the Hell’s Angels. Because one single stock you recommended went down instead of up, a nice little schoolteacher from Kansas City will say the worst things in the world about your mother. An unsuccessful stock pick will make people say** truly awful things to you**. These kinds of comments come from a common source: Ignorance of what truly leads to a lifetime of successful investment. In fact, these comments reflect what is perhaps the greatest difference between successful investors and investors who always struggle with investing and lose money in the market. The difference? **The unsuccessful investor regularly places 100 times too much importance on what happens with a single stock position. ** Because he gets so excited and emotional about the prospects of individual companies, the unsuccessful investor makes critical *position sizing* mistakes. This harms him every single year…and kills his returns over his career. ***Position sizing is the part of your investment strategy that dictates how much of your portfolio you place into a given stock, bond, fund, or commodity. For example, suppose an investor has a $100,000 account. If he buys $2,000 worth of stock in a company, his position size would be 2% of his capital. If he buys $5,000 worth of stock, his position size is 5% of his capital. Position sizing is far, far more important to your success than any one single stock position. You could think of your investment career like going on a road trip. Position sizing is as important as having tires on the car. The result of any one single stock position is as important as the color of the hood latch. Yet many investors go their whole careers without developing even a working knowledge of this critical factor. And many people who actually do think about position sizing think about it all wrong… Many people think of position size in terms of how many shares they own of a particular stock. But it’s much, much smarter to think of it in terms of what percentage of your total capital is in a particular stock. ***Position sizing is the most important way investors can protect themselves from what’s known as a “catastrophic loss.” A catastrophic loss is the type of loss that erases a big chunk of your investment account. It’s the kind of loss that destroys retirement accounts…and even marriages. I’m talking about a loss that leads to a $250,000 account plummeting to $100,000 or $50,000 in value. The most common cause of catastrophic losses is going “too big” on risky positions. This occurs when an investor takes a much larger position size than he should. He’ll find a stock he’s really excited about…he’ll start thinking of all the profits he could make…and then he makes a huge bet. He’ll place 30%, 40%, 50%, or more of his account in that one idea. He’ll go for broke and buy 6,000 shares of a stock instead of a more sensible 1,000 shares. If the position doesn’t work out, he can suffer a 50% hit to his capital. In some cases, he can suffer a devastating 100% loss of capital. For example, some Enron employees put all of their retirement money in the company’s stock…and then lost everything when it blew up. Those people made *horrible* position sizing mistakes by risking everything on just one stock. The obvious damage from a catastrophic loss is financial. An investor who starts with $100,000 and suffers a catastrophic 80% loss is left with $20,000. It takes most people years to make back that kind of money from their job. The less obvious damage from a catastrophic loss is worse than losing money. It’s the mental trauma that most people never recover from. They consider themselves failures. They see years of working and saving flushed down the toilet. Most never recover. Imagine someone spending 10 years scraping together $80,000 only to blow it all in 10 days by gambling on risky stocks. I’m telling you all this to emphasize a simple point: **Avoid the catastrophic loss by carefully sizing your positions! ** ***Generally speaking, most top investors will never put more than 5% – 10% of their account into any one position. Some professionals won’t put more than 3% in one position. My personal limit is 10%. Skilled investors can vary their position size depending on the particular investment. For example, when buying a blue chip stock that has increased its dividend payment for 30 consecutive years, a position size of 5% – 10% makes sense. When dealing with more volatile vehicles like small cap resource stocks, position sizes should be smaller. I suggest that you never put more than 1% of your wealth into a single resource stock. This will keep your risk level at an acceptable level. Put another way, before you start speculating in junior resource stocks, you should know how much money you want to allocate to the sector as a whole. This should be money that you can lose without it affecting your lifestyle. Never allocate more than 10% of your junior resource portfolio into any one stock. Unfortunately, many investors will risk three, five, or ten times as much as they should. It’s a recipe for disaster if the company they own suffers a large unforeseen decline. These large declines happen with much greater frequency than most folks realize. No matter how promising a company sounds, its fortunes can always turn south. Smart position sizing will keep the damage it causes to an acceptable minimum. I like to get as excited about a company’s prospects as anyone. I love analyzing balance sheets and visiting projects. I love taking a stake in a small company and watching it achieve success. But here’s the thing… I never lose sight of what is truly important for achieving long-term investment success. And that is making sure I’m not exposing myself to catastrophic losses. Successful investing is a marathon. It’s not a sprint. Building long-term wealth for your family comes down to regularly making intelligent decisions that provide a good balance between capital growth and capital safety. **It does not** come down to rolling the dice and “going big” on a single stock. ***As the Founder and Chief Investment Strategist of Katusa Research, I will make mistakes. Only frauds would claim otherwise. We find stocks with huge upside potential. But we follow a time-tested approach used by the greatest investors throughout history. We never bet the farm on one position. We play great defense. Our winners more than make up for our losers. Over the long run, this approach will allow anyone to grow their wealth. Your number one job as an investor is “don’t lose money.” Smart position sizing will help you do your job well. The next time you feel rage or despair over what one single stock is doing, take a deep breath. Take a long walk. Ironically, the same goes if you miss out on a stock. Don’t worry. Be an alligator speculator. Don’t chase the stocks. Be patient and wait for a market correction to happen; they always have, and they always will. And if you do miss one stock, don’t worry–there will always be a new idea coming to you shortly. Then, with a clear head, review your position size. Review your portfolio. Ask yourself, *“Am I taking insane risks? Does this position make up far too much of my portfolio? Is my anger or despair an indicator that I’m doing this all wrong?” * If you think the answer to these questions is even *“possibly,”* it’s probably time to reduce your position size. Cut it by at least 50%. Your net worth will thank you. Marin Katusa P.S. To see what I’m doing with my own money, you’ll want to become a subscriber to Katusa’s Resource Opportunities. I can’t make the trades for you, but you can learn from the bets I’m making. You can [get started right her](https://katusaresearch.com/subscribe/)[e](https://katusaresearch.com/subscribe/). --- # The Single Most Important Factor in Resource Stock Analysis - URL: https://katusaresearch.com/single-important-factor-resource-stock-analysis/ - Type: article - Published: 2016-08-11 - Updated: 2019-05-08 - Author: Marin Katusa Let’s say you have a major business decision. It’s come up because you have a large chunk of money set aside. You’d like to see it grow into a much bigger chunk of money…one that can ensure your family’s financial wellbeing. You know owning good businesses is a cornerstone of building wealth, so you’re going to buy an ownership stake in a local business. It’s a beer brewing company. You have two potential operating partners in this business… One is Brad, a 35-year-old guy you’ve spoken with at several cocktail parties. He’s a fun single guy known for being flashy and loud. He wears a big Rolex and drives a brand new Porsche (neither are paid for). Brad is ambitious, but his business track record is spotty. Several of your most trusted business associates don’t trust him. Your other potential partner is Charles, a 53-year-old guy who has been doing business in town for over 30 years. He has three kids in school. He drives an old pickup truck. He has a fantastic reputation. Everyone who has worked or invested with Charles raves about his integrity and his knowledge of the beer business. He’s serially successful. With these facts in mind, who would you rather partner with? If you’re like me, you picked the guy with modest spending habits, a great reputation, and a long history of success. All things being equal, most reasonable people would rather invest with a proven winner. You might think this is an exercise with no purpose. But it actually has *enormous implications on your wealth.* You and I face this kind of decision every time we consider investing our hard-earned money in a public company. Making the right choice can mean the difference between making multiples on an investment or losing money. And while making the right choice in the scenario above was simple and obvious, logic often flies out the window when you buy stocks. My goal with this essay is to help you always make the right choice. **Have You Made This Mistake Before?** There are over 10,000 publicly traded companies on the North American stock exchanges. There are over 3,000 mutual funds. Throw in hundreds of TV “talking heads” who have differing opinions on everything, and it’s easy for an individual investor to get overwhelmed. It’s easy to forget basic common sense that will help you safely and surely build wealth. For example, after reading about the choice between Brad and Charles, you probably thought, “Of course I’d rather partner with the proven winner!” But if you’re like most of us, you’ve made the mistake of investing with *unproven losers* in the past. Remember, when you buy shares of a public company, you are buying shares of a real business. You become an owner of that business. You are buying a claim on the company’s assets and future cash flows. The managers of that business become your partners. As I mentioned…if you’re like most people (myself included), you’ve partnered with some people who were either unproven, dishonest, incompetent, or all three. It’s easy to get caught up in a good story and invest without making sure you have solid partners. But again, when you buy a stock, you become a business owner. That’s why you should treat your money with respect and only partner with proven winners. Success breeds success. Winners tend to keep on winning. That’s why at Katusa Research, the single most important factor in our business analysis is the people running the business. It’s even more important than the quality of a deposit or the company’s financial position. In the resource business, many people think that if you just find a good deposit in the right country, you’ll make money. But an incompetent or unscrupulous management team will make your investment a loser, despite the quality of the deposit. They’ll find a way to screw it up. They’ll dilute your stake by issuing too many new shares. They’ll take on foolish levels of debt. They will panic at bottoms and sell assets for much less than they are worth. They will panic at tops and buy assets for much more than they are worth. High quality owner/operators will do the opposite of all that. They will find a way to win. Everything depends on the quality of the people. For example, if the metals sector is very cheap, I’m going to want to invest with Ross Beaty. Ross is a serially successful billionaire entrepreneur who built Pan American Silver into one of the world’s largest silver companies. Investors made over 900% in under seven years. He built Lumina Copper into a huge winner in the copper space. Investors made 2,642% in under four years. Given Ross’ history of success, it’s obvious why you’d rather partner with him than hundreds of other managers. Yet, many people decide to partner with those other managers. They choose SPAM over filet mignon. Another guy I always look to invest with is Lukas Lundin. Lukas is the son of the legendary resource entrepreneur Adolf Lundin…but Lukas is a legend in his own right. I’ve done business with Lukas, and I know him personally. He’s a first class person all around. The Lundin name is synonymous with success in the resource sector; they know how to buy low and sell high as well as anyone. They’ve delivered extraordinary returns to investors, like a 2,508% gain in Denison Mines in under five years…and an 1,138% gain in Tenke Mining in just three years. Investing with the Lundins is how my readers made over 600% in Africa Oil. Proven winners also tend to attract the right shareholders. I’m talking about expert institutional investors who think long-term. This is key because the other shareholders are essentially your partners in the business. The right shareholders will do what is right for the long-term interests of the business. Getting the benefit of good partners is icing on the cake when you invest with proven winners like Ross and Lukas. Long time readers know I’m a big believer in the Pareto Principle. It states that 80% of your results come from 20% of your efforts. For that reason, it’s also called the “80/20” rule. For example, your business may generate 80% of its sales from 20% of your clients. The Pareto Principle is alive and well in the resource sector. About 20% of resource operators create 80% of the value in the sector. I’ve even taken Pareto’s principle a step further. Years ago, I coined the 64/4 Rule—I took the 80/20 Rule and subjected it to Pareto’s principle again. The result states that 4% of entrepreneurs create 64% of the wealth (80% of 80% is 64%, 20% of 20% is 4%, hence the 64/4 Rule). If making a lot of money is your goal in the resource sector, I encourage you to do what I do; focus on the 4% of superstar entrepreneurs who own large stakes in their own companies. Invest with the best. The choice is often as simple and obvious as the choice between Brad and Charles. Success tends to follow success. Winners tend to keep on winning. Those are the guys you want your money with. Regards, Marin Katusa PS. Having the right management teams at the helm is the most important aspect of where I put my money. You’ll also want to read [this article](https://katusaresearch.com/skin-game-important-investment-returns/) to find out why “Skin in the Game” is just as important. --- # The Secret of Making 20-Fold Returns: How Leverage Works in Natural Resource Stocks - URL: https://katusaresearch.com/secret-making-20-fold-returns-leverage-works-natural-resource-stocks/ - Type: article - Published: 2016-08-04 - Updated: 2025-09-10 - Author: Marin Katusa From 2003 to 2007, a supply/demand crunch forced the price of copper 400% higher. But shares of the large copper miner Freeport-McMoRan climbed a lot more…**1,300%**. That kind of gain turns a $10,000 investment into $140,000. That huge gain was the result of something called “leverage.” You probably remember leverage from high school science. A lever allows you to get a very powerful result by applying only a modest amount of force–think of how a crowbar works. In the financial markets, leverage occurs when the price movement of one asset results in the amplified movement of another financial asset. **Knowing how to use leverage properly can make you a fortune in the natural resource market.** Leverage is easy to understand when you think of it in terms of a house… Let’s say you put $50,000 down to buy a $250,000 house. A few years after you buy the house, its value has increased by 20% to $300,000. Although the increase from $250,000 to $300,000 is just 20%, you’re actually up 100% ($50,000) on the original $50,000 down payment. Because of leverage, a 20% gain in the value of the house translated into a 100% gain on your capital. Leverage in natural resource stocks works in a similar way… Let’s say you own a profitable oil company in Texas. You produce 10 million barrels of oil per year. When you add up the costs of things like labor, equipment, and insurance, it costs you $35 to produce one barrel of oil. Since oil is selling for $40 per barrel, you make $5 per barrel in profit. Let’s say the demand for oil increases over the next year. It sends the price from $40 per barrel to $56 per barrel, a 40% increase. Because of leverage, your profits don’t increase “just” 40%. Since your production costs are $35 per barrel, the oil price increase to $56 per barrel means your profit is now $21 per barrel. That’s a 320% increase in profit. What if oil were to climb from $40 per barrel all the way to $68 per barrel? That’s a 70% price increase. This would give you a profit of $33 per barrel, which is a 560% increase in profit. Of course, this increase in profitability makes your business much more valuable. If it was publicly traded, it would be one of the stock market’s biggest winners of the year. This is how leverage works in natural resources. A modest increase in the price of a natural resource can cause a huge increase in a natural resource company’s profits and overall value. When you combine that leverage with the resource market’s cyclicality, you get a market that can send stocks 1,000% higher in less than a year. **How “Extreme Leverage” Works** In the Texas oil business example, your production cost was $35 per barrel, and the price of oil was $40 per barrel. You were making $5 per barrel. But what if your production costs were much higher? What if your production costs were $45 per barrel? If oil is selling for just $40 a barrel, your field isn’t worth much. After all, you’d lose $5 per barrel just by turning the pumps on. When a resource project like an oil field or a gold mine can’t produce at a profit, its value plummets. After all, it’s a money loser. It’s like owning a rental property where the rents don’t cover the repair and maintenance costs. In some cases, these kinds of resource deposits are virtually given away. This is where a unique concept comes into play…one that can make you over 50 times your money. This concept is “extreme leverage.” An oil field that costs you $45 per barrel to produce isn’t worth much when oil is at $40 per barrel. But what if oil were to climb to $68 per barrel? This is where extreme leverage comes in. Your profits go from zero to $21 per barrel…and the value of your field skyrockets. **It can go from virtually worthless to worth hundreds of millions of dollars**. When the price of a natural resource increases so much that money-losing deposits become money-making deposits, the share price gains in resource producers can be extraordinary. Stocks can climb more than 50-fold in value. For example, in the early 2000s, the brilliant mining entrepreneur Ross Beaty believed the price of copper was set for a big increase. The copper market had been in a bear market for a long time, so production capacity was limited. Meanwhile, copper demand from growing emerging markets like China was increasing. Instead of buying copper assets that were profitable at low copper prices, Ross and the shareholders in his company Lumina Copper bought copper assets that would only be profitable if copper prices increased. Because the assets weren’t valuable at the copper price at the time, Ross bought billions of pounds of copper in the ground for peanuts. Ross was right to expect higher copper prices. From 2003 to 2007, copper prices increased 400%. Projects that were money losers at low prices became money machines at higher prices. As the value of copper projects soared, Ross sold to willing bidders. From the company’s inception to the sale of its final asset, early Lumina investors made 68 times their money. Another “extreme leverage” winner is Silver Standard. By the late 1990s, silver had been in a bear market for over 15 years. Silver deposits were practically being given away. A tiny company named Silver Standard began buying millions of ounces of silver in the ground at fire sale prices. Eventually, supply constraints and growing demand turned the silver bear market turned into a silver bull market. The price of silver soared from $5 an ounce to more than $45 an ounce. The value of Silver Standard’s projects exploded higher. Early investors enjoyed a more than 40-fold increase in the value of their shares. Companies that buy uneconomic resource deposits, sit on them, and wait for prices to climb are often called “hoarders” or “land banks.” As you can see, they offer incredible upside. Most people know about leverage because of the housing market. Don’t forget that leverage works both up and down. But you can put it to work for you and make 5 times, 10 times, or as we’ve seen, over 50 times your money in the natural resource market. Regards, Marin Katusa --- # How Many Stocks Should You Own? - URL: https://katusaresearch.com/how-many-stocks-should-you-own/ - Type: article - Published: 2016-07-28 - Updated: 2025-09-10 - Author: Marin Katusa One of the most common questions we receive at Katusa Research concerns the number of stocks an investor should own. Is 10 the right number of stocks to own? Is 20 the right number? Is it 50…or 100? The number of stocks you own has a huge effect on your performance. In this essay, I’ll walk you through my thinking on this critical topic. I hope it helps you make great decisions with your own portfolio. First of all, you should know that I have some unconventional beliefs about the number of stocks an investor should own. These beliefs work for me. They may not work for you. Your financial advisor might say these beliefs are risky, but I happen to know they are incredibly profitable. And you should at least know my line of thinking. You should also know that many of the world’s best investors (including the legend Warren Buffett) agree with me. My belief–and the incredible power behind it–can be summed up with the word “concentration.” **How the Pareto Principle Can Make You Wealthy** You’ve probably heard about “diversifying” your stock portfolio. This is the idea that an investor should own dozens or even hundreds of different stocks. Spreading your investment dollars around reduces the risk that troubles at a single company could wreck your portfolio. For example, you don’t want to lose half your money in a meltdown like Enron. For people who don’t want to work on their investing, diversity is a good idea. Rather than trying to select individual companies, they can own hundreds of stocks…through a mutual fund or an ETF. Owning hundreds of stocks is simple and easy. And it will earn you average stock market returns. In fact, buying an index fund is what most investors should do. It’s a good “set it and forget it” option for people who don’t want to work on their investments. If you’re not sure how to start or what to invest in, you can even use an [online stock analysis website](https://www.wallstreetzen.com/) to provide you with more insight.​​​​​​​ But if you are willing to do extra work in order to earn extra returns, should you own 200 or 300 stocks? I say “NO WAY.” I don’t know about you, but I believe in focusing my efforts in every area of life. I don’t chase dozens of business opportunities every month. I focus on a small group of really, really big opportunities. I don’t try to keep up with dozens of friends. I focus on the small group of people I’m closest with. Ever hear of the Pareto Principle? It says that 80% of your results come from 20% of your efforts. For that reason, it’s also called the “80/20” rule. For example, your business may generate 80% of its sales from 20% of your clients. Long-time readers have heard me say that 20% of resource operators create 80% of the value in the sector. I’ve taken Pareto’s principle a step further. Years ago, I coined the 64/4 rule—I took the 80/20 rule and subjected it to Pareto’s principle again. The result states that 4% of entrepreneurs create 64% of the wealth (80% of 80% is 64%, 20% of 20% is 4%, hence the 64/4 rule). Productivity experts agree that people should concentrate their efforts on the “magic” 20% that really produces results. I believe it should be the same with investments. Why chase dozens of mediocre ideas? Why not concentrate and focus on the really big ideas? If I can own 8 – 14 **exceptional** **opportunities** that I know inside and out, why would I water down my results and own 100 or 200 companies? There simply are not 100 or 200 truly exceptional opportunities in the market at any given time. The market doesn’t work like that. You might see things like I do. If so, you’re in the same boat as the world’s best investor, Warren Buffett. Rather than buy hundreds of stocks, Buffett has always focused his time and efforts on a small group of businesses he can truly understand and track. Buffett has said that diversification, “*makes little sense if you know what you are doing*.” Buffett’s focus on a small group of great businesses he can understand and monitor has helped him become the most successful investor in the world. If you chase hundreds of opportunities, it’s inevitable that you’ll lose focus on the biggest and best opportunities. You’ll dilute your efforts. You’ll achieve mediocrity. And consider… **How Many Resource Firms Can One Guy Really Understand?** It takes a huge amount of time and work to really understand and monitor a resource business. It requires balance sheet analysis, geological analysis, meetings, phone calls, and site visits to really understand a resource business. Even the most dedicated, hardworking business analysts can’t do all of the necessary work to really understand and monitor more than 25 companies at a time. If an analyst says he covers something like 40 or 60 companies, some of his analysis is sure to be superficial. Yet some analysts cover more than 100 stocks. I’ve met individual investors that own over 100 stocks. And some mutual fund managers own more than 300 stocks! You can do what you like, but I’d much rather own a small, concentrated group of companies that I can genuinely understand and track. I want to concentrate on the biggest and best opportunities, ignore the rest, and generate big returns. This thinking is in contrast to the thinking at many large investment funds and many investment newsletters, but it has worked wonders for me. I recommend that you never put more than 10% of the funds in your speculative resource portfolio into any one stock. This will keep your exposure to a single company to an acceptable minimum. A portfolio of 8 – 15 high-quality stocks will provide you with a good mix of diversification and potential upside. Through site visits, financial analysis, industry analysis, and staying in touch with my network, I make sure I know more about the companies we own than anyone else. I also view every public company we own as if it were a private company we own. At Katusa Research, we do not view stocks as flickering lights on a screen. We view our holdings for what they are: *Ownership claims on real assets and real businesses. * And by owning a small, concentrated group of high-quality assets and businesses, we make large, “undiluted” returns. Regards, Marin Katusa P.S. To find out which companies I believe are positioned to beat their peers and make me put my own personal money into right now, [click here to find out my best picks.](https://join.katusaresearch.com/kr-products-services/) --- # When Bad Means Good: How to Spot a Resource Market Poised to Skyrocket - URL: https://katusaresearch.com/bad-means-good-spot-resource-market-poised-skyrocket/ - Type: article - Published: 2016-07-22 - Updated: 2019-08-05 - Author: Marin Katusa Dear Katusa Research Reader, Buy low, sell high. Buy when there is blood in the streets. Be greedy when others are fearful. If you study the careers of investment legends, you’ll hear this advice over and over. You’ll quickly learn that buying stocks, real estate, and natural resources during times of crisis, panic, and fear is how you make enormous returns. “*Buy when there is blood in the streets*” has become a cliché because it works. ([Read this essay for more](http://katusaresearch.us10.list-manage.com/track/click?u=a34b101c645e07666a65ff377&id=3fa377cedd&e=4339e4ed05).) But how exactly can you pinpoint a natural resource sector in crisis? How can you tell when a market is offering you the opportunity to make 5 or 10 times your money? After all, if you can buy an asset trading for 90% below its intrinsic value, it has to increase 10-fold in value to get back to normal. I know it sounds extreme, but it happens a lot in natural resources. Spotting a real bottom in a natural resource market is as much an art as it is a science. This essay will show you the five most important “keys” to knowing when a resource market has the potential to generate enormous gains for you. *****KEY #1: The natural resource is trading for below the industry’s average production cost.** Production cost is how much it costs a company to produce a resource. Since deposits and companies vary widely, production costs vary as well. But when a resource industry *as a whole* cannot sell its product for more than its average production cost, it has no choice but to curtail production. This will lead to supply constraints in the future…which will lead to higher prices. During the 1990s, uranium was in a terrible bear market. It was reeling from nuclear power accidents at Chernobyl and Three Mile Island. Near the end of that bear market, miners were producing uranium at a cost of $18 per pound and selling it for just $9 per pound. In response to those miserable conditions, the industry curtailed production…which sowed the seeds of a historic bull market. From 2002 to 2006, uranium prices climbed from $10 per pound to $130 per pound. Some uranium producers soared more than 5,000%. *****KEY #2: Prices are down 75%+ from their high.** There’s nothing magical about the “75%” figure. We could say “down 70%” or “down 80%.” The key is that you want a market that has plummeted from its highs. The highs could be from 20 years ago…or from seven years ago. A market down massively from its highs is a market that has curtailed production. It is a market investors have abandoned. It has been through a lot of suffering. Assets are probably getting very cheap. *****KEY #3: Mentioning you’re thinking about buying the asset induces a “gag” reflex with mom and pop investors.** Mom and pop investors typically “chase performance.” They buy popular assets that have enjoyed large price increases. These assets are always the most expensive. By the time amateur investors hear about a bull market, the big, easy money has been made. Remember these investors were heavily long tech stocks in 1999, just before the crash. They were heavily long real estate in 2006, just before the crash. Now, consider what the average investor thought of gold in 2001. He wanted nothing do with it. Gold had been in a bear market for 20 years. The average investor still wanted to hear about tech stocks. Meanwhile gold was set to enter a massive bull market that took it more than 500% higher and gold stocks more than 1,000% higher. When amateur investors can’t stand the thought of buying an asset, that’s when you get ready to buy with both hands. *****KEY #4: High profile bankruptcies, investment fund closures, and suicides.** It’s unfortunate and morbid to talk about, but three things that often mark a bottom in a resource industry are high-profile corporate bankruptcies, investment fund closures, and executives taking their own lives. When resource producers start declaring bankruptcy, it’s a sign production is being shut down. When resource investment funds close up, it’s a sign nobody can stand the thought of investing in the sector any more. When industry executives take their own lives as a result of these failures, it’s a sign sentiment has become terrible. For better or worse, all that despair is an indicator the market has made its lows and is offering incredible bargains. *****KEY #5: Absolutely horrible news about the industry comes out, yet prices don’t fall…or even climb.** When absolutely horrible news comes out regarding an industry, yet prices hold like a rock–or even climb–it’s a positive sign. It’s a sign all the negative factors are “priced in” to the market. It’s a sign we’ve reached the point of maximum pessimism…and there is nobody left to sell. For example, let’s say the oil market has crashed. Prices are down 40% in the span of a year. If a story about surging global oil production were to hit the front pages, you’d expect people to react by selling oil and oil stocks. But if oil and oil stocks were to climb 4% after the story hits the front pages, it’s a sign the worst is over. **Summing up**… Investing in supercheap, beaten-up resource markets can make you giant capital gains. Remember, an asset trading 90% off its intrinsic value has to increase 10-fold in value to get back to normal. By keeping these five keys in mind, you’ll know exactly how to spot these moneymaking situations. Regards, Marin Katusa PS. These keys are important for investors to understand. But finding the right investment ideas to put them into action is even more crucial. To find out which gold stocks I believe are poised to make incredible profits in a skyrocketing market, you can find out where I’m investing my own money by clicking right here. | | --- # Why “Skin in the Game” is so Important to Your Investment Returns - URL: https://katusaresearch.com/skin-game-important-investment-returns/ - Type: article - Published: 2016-07-19 - Updated: 2025-09-10 - Author: Marin Katusa Have you ever waxed and polished a rental car before returning it? Chances are good that you’ve never done it. Chances are good nobody you know has done it. Chances are good nobody, ever, has done it. If you take a moment to think about why people don’t wax and polish rental cars, you can correct a major investment mistake that is probably costing you money right now. And you can vastly improve your investment returns. People don’t wax and polish rental cars for the same reason they don’t mow their neighbors’ lawns: They don’t own them. Not caring about things you don’t own is simple human nature. You might be thinking I’m just stating obvious. But have you ever invested in a company ran by executives who owned little to no company stock? Have you purchased a mutual fund or an ETF that held companies whose managers owned little to no stock? Have you ever trusted your hard earned capital with managers that don’t have skin in the game? Chances are very good that you have. You probably own some of those companies right now. Your holdings are the manager’s rental cars. And they just nicked a telephone pole while you read the last paragraph. Don’t worry. You’re not alone. Investing in a company whose managers have no skin in the game is one of the most common investment mistakes in the world. They don’t teach you this critical investment secret in high school, college, or business school. But once you think of it in terms of rental cars, it’s utterly obvious. Ownership brings a respect and care for expenses, assets, and cash flows that has no substitute. It instantly transforms the mind. Ownership will turn a salaried manager who thinks nothing of spending $3,000 on nice office chair into a guy who will sit on a bucket in order to save a few bucks. Ownership will turn a conventional “9-to-5” employee into a guy who will happily work Friday and Saturday night. On a larger scale, ownership transforms a reckless CEO who plays fast and loose with shareholder capital into a watchful, prudent shareholder advocate. It turns a CFO who uses aggressive, very questionable accounting into a boy scout. Just think of the indifferent, uncaring people you’ve worked with the past. It’s virtually guaranteed they didn’t own a piece of the business you were in. The might have stolen company property. They probably wasted supplies. They were hard on equipment. They left paper towels on the bathroom floor. Now, think of all the extremely hardworking business owners you’ve worked with in the past. They treated equipment with respect. They used supplies carefully. They took pride in their work. They got to work early. If they saw a piece of trash on the floor, they picked it up. **Now take all those little differences and multiply them times a million. That’s the difference between a business operated by managers with no skin in the game versus a business operated by managers who own substantial amounts of company stock.** Which business would you rather own shares in? What kind of people would you rather work with? It’s an easy choice for me. That’s why when I start analyzing a potential investment or talk to managers about placing money with them, my first question is always “*How much stock do you own?*” If the answer is “not much” or “zero,” my analysis finished. I don’t want my money treated like a rental car. Neither should you. Regards, Marin Katusa --- # Will Electric Cars Kill Big Oil? Here’s the Answer… - URL: https://katusaresearch.com/will-electric-cars-kill-big-oil-heres-the-answer/ - Type: article - Published: 2016-07-14 - Updated: 2022-10-11 - Author: Marin Katusa On June 29, 2007, Apple released its now-iconic iPhone for sale in the United States. In the years that followed, Apple sold over 700 million iPhones, dominated the smartphone market, and became the world’s most valuable company. Around the time Apple rolled out the iPhone, Netflix rolled out its streaming movie service. In the years that followed, streaming became a phenomenon. More than 60 million subscribers signed up for the service. Demand was so high that at times, streaming represented more than 35% of Internet traffic. Netflix shares climbed more than 3,200%. There’s another side to these success stories. There’s always a loser choking on the dust of a winner. Apple’s iPhone became a huge hit at the expense of the then-popular BlackBerry phone. The maker of BlackBerry, Research in Motion, suffered a spectacular collapse. The rise of Netflix meant the demise of brick-and-mortar movie rental giant Blockbuster. Blockbuster fell behind the times and filed for bankruptcy in 2010. These stories are extremely important for resource investors right now. The success of another innovator, Tesla Motors, has raised some big questions… “*Will electric cars eventually make oil worthless*? *Will they kill ‘Big Oil?’”* The answer has major economic implications; it has major investment implications. After all, if electric cars explode in popularity, most oil investments will be huge losers. Your shares of ExxonMobil or Chevron could plummet in value. Trillions of dollars of oil deposits could take a 90%+ haircut in value. In this essay, I’ll answer the big electric car question…and tell you how to invest in what’s coming… **Why This Question is Finally Relevant** The threat of electric cars is nothing new for the oil industry. People have claimed electricity would replace gasoline for a long time… and they’ve been wrong for a long time. The reason why is simple economics. The cost of building electric cars and a grid to fuel them was astronomical compared to the cost of sticking with the status quo. But over the past 10 years, electric car technology has radically improved. Battery technology has radically improved. Power efficiency has radically improved. And performance? The Tesla Roadster can go from 0 – 60 mph as fast or faster than any comparable gasoline-fueled sedan. The Tesla Model S was named *Motor Trend’s* Car of the Year in 2013, beating Porsche and BMW products. Meanwhile, electric vehicle costs are plummeting. Batteries make up about a third of the cost of an electric vehicle. They’ve dropped in price by about 60% in the past five years. They’re expected to drop another 55% in the next 10 years–and that is a conservative estimate. In reality, costs will drop much more, much faster. So the EV revolution is real. The EV sector is going to get a lot larger. And it’s not just Tesla. Volkswagen, GM, Ford, BMW, and many non-motor companies like Google and Apple are entering the sector in a big way. With all these companies investing in EVs, the technology will continue to improve. But will it kill the need for oil? Will it make oil investments losers? The answer is “NO.” In 2016, over 95 million barrels of oil will be consumed every day. Gasoline used in motor vehicles is the largest consumer of that oil; approximately 44.4% of every barrel is used to make gasoline.[![140716 Gallons of petro products per barrel of oil1]](https://katusaresearch.com/wp-content/uploads/2016/07/140716-Gallons-of-petro-products-per-barrel-of-oil1.png) Many people suggest that oil demand has peaked, but I think it’s quite the opposite. Forecasters fail to remember that outside of North America and Europe, most societies are relatively poor…but growing rapidly. Economic growth rates in the “**BRICS**” (**B**razil, **R**ussia, **I**ndia, **C**hina, **S**outh Africa) countries are double those of the developed world. These expanding economies will drive massive demand for gasoline powered cars, trucks, planes, and boats. They will demand huge quantities of oil. The chart below shows how demand from emerging markets (in green) is steadily rising, while demand from developed markets is slowly declining (blue line). [![140716 Global Oil Demand1]](https://katusaresearch.com/wp-content/uploads/2016/07/140716-Global-Oil-Demand1.png) Oil demand in the developed world (OECD in the chart) hasn’t changed much in the past 20 years, but demand in the developing world (Non-OECD) has nearly doubled over the same time period. We can expect this trend to continue. Blue collar workers in China and India cannot afford $100,000 Tesla electric vehicles…but they can afford small gas-powered cars that will get them from point A to point B. The point is that EVs are “still” luxury vehicles in the OECD nations, while gas-powered vehicles have become so cheap that a blue collar worker in China can now afford one. This won’t change for many decades. **In other words, the glass is half full for oil companies, not half empty.** Currently, there are 1.1 billion cars on the road. By 2025, there will be 1.5 billion. By 2040, it is expected that there will be 2 billion cars on the road. It’s forecasted that by 2040, EV sales will represent 35% of new car sales. The math works out to approximately 40 million new cars and in total about a quarter of all cars on the road will be electric. This does represent a changing of the guard, so to speak, but by no means does it indicate that EVs will kill oil. **Why Big Oil Will Survive and Produce Shareholder Returns** Big Oil is about as smart as it gets. After all, that’s why it is Big Oil. Big Oil executives know the EV is out to get them. The best way for Big Oil to stick around is to become Big Green… to become diversified energy companies that produce whatever type of energy the world demands, whether it’s oil, natural gas, solar, or wind. Big Oil will realize it is in the “energy” business…not just the “oil and gas business.” The 400 million electric vehicles in 2040 have to be powered by something. Bloomberg forecasts we’ll need 1900TWh of electricity to power all the electric vehicles…that is equivalent to 10% of global electricity consumed in 2015. This means we will need a lot of new power capacity. Over the long-term, we’ll produce more of that power from solar, wind, geothermal, and nuclear sources. It would be incredibly hypocritical to power electric cars from coal or natural gas generating plants. Big Green and nuclear will play a much larger role globally over the next 25 years. In May 2016, one of the world’s largest oil companies, Total SA, made a billion dollar acquisition in the renewable energy space when it acquired Saft. Saft is a French renewable battery manufacturer, one of the largest in the world. I expect to see Big Oil do a lot more branching out like this…and continue to rack up profits by powering the world. Not only will the EV not kill oil, but it will also be the catalyst to get Big Oil into the green sector and offer investors even bigger profit opportunities by being ahead of the curve. Regards, Marin Katusa **P.S.** Big Oil’s investments are just one part of a giant wave of money headed towards the renewable energy sector. One of the biggest spending programs in history is about to make a small group of energy investors very rich. You can profit alongside me over the coming years as a member of *Katusa’s Resource Opportunities*. --- # Is It Finally Time to Start Buying Copper Stocks? - URL: https://katusaresearch.com/finally-time-start-buying-copper-stocks/ - Type: article - Published: 2016-07-14 - Updated: 2022-10-11 - Author: Marin Katusa On January 15, 2009, the price of copper traded for $1.70 per pound. Two years later, on February 1, 2011 copper traded for $4.69 per pound, a 176% increase. Copper miners, which are leveraged plays on the copper price, soared. Some copper miners increased in value by over 1,000% during that time period. Copper is a vital building ingredient in nearly everything around you. It’s used for wiring and plumbing in houses. It’s used in cars and appliances. It’s a major component of power lines and electric motors. And as the 2009 – 2011 period shows, this vital building material is capable of staging incredible rallies. Is it ready to stage another one soon? In this essay, I’ll answer that question. Like all natural resources, copper goes through huge booms and busts. That’s why we say resources are “cyclical.” Get in early before the booms and avoid the busts, and you can make a lot of money in natural resources. That’s why people who bought copper and copper stocks in 2009 made a killing. As you can see from the chart below, copper experienced a huge bust during the 2008 financial crisis. Investors were terrified the next depression was around the corner… which would mean a lot less copper consumption. [![130716 Copper Price]](https://katusaresearch.com/wp-content/uploads/2016/07/130716-Copper-Price.png) But as we know, there was no depression. Central banks stepped in and created enormous amount of credit…so much that asset prices soared off their 2009 bottoms. Copper was no exception. Over the past four years however, it’s been all downhill for copper investors. Global economic growth has been sluggish…and copper has plummeted from $4.50 per pound to $2 per pound, a decline of more than 50%. [![130716 Copper Price to 2016]](https://katusaresearch.com/wp-content/uploads/2016/07/130716-Copper-Price-to-2016.png)Given this huge decline, you might think copper producers have curtailed production. That’s not the case. As you can see in this chart of global copper production, miners have increased production.[![080716 Global Copper Production]](https://katusaresearch.com/wp-content/uploads/2016/07/080716-Global-Copper-Production.png) Why are miners producing more at lower prices? And how are they not going bankrupt? The copper producers had no choice. They’re doing whatever it takes to keep their operations alive, including “high grading” their mines. High grading occurs when a miner extracts the highest-grade ore in a mine in response to low prices. It’s a near term solution, that has a negative long term effect on the ore body. Nothing is worse in mining than high grading your deposit during a period of low commodity prices. This is because when the market turns around and r prices are higher, you are left with a high strip ratio and low grade ore. You’re left with the worst stuff. Other miners had no choice but to dilute their shareholders by doing equity raises to keep the lights on. And there were a few producers that did both of the above, and then shut their mines down because they couldn’t make it. Since copper production is near its high and global economic growth is weak, I believe copper will stay near its lows for the next 12 months. But over the long term, say 24 months out, I am very bullish on copper prices. Low prices are going to squeeze miners so much so that production will be curtailed. Meanwhile, emerging markets like China and India are still building incredible amounts of infrastructure. That’s why I want to own the largest, highest grade deposits located in countries where the rule of law protects capital investments. However, before you invest, you need to know about the biggest secret in the copper sector that nobody wants to talk about. **Why You Could Get Killed in the Wrong Copper Stock** The big secret concerns something called “clean concentrate.” Copper concentrate is what a miner sends to a smelter after an initial processing of the ore. The smelter turns concentrate into the copper we use in building and manufacturing. When a copper producer sends its concentrate to a smelter, it can contain nasty stuff like mercury, arsenic, and antimony When copper concentrate has high levels of “nasties,” it is “dirty” concentrate. Not only does a producer get “penalized” for dirty concentrate (meaning it gets less per pound of copper than “clean concentrate”), some smelters flat out refuse dirty concentrates. You probably didn’t know that for years, smelters have been dealing with this secret by “blending” the dirty concentrate with clean concentrate. Ironically, I expect mines in the world’s largest copper producer Chile, such as the giant Escondida mine will start showing higher nasties compared to when they first started many years ago. Many of the large copper producing mines will go through the same thing. The smelters who are now dealing with a lot of supply can dictate smelting fees, which means the dirty concentrate producers are getting slaughtered. BHP, Rio Tinto, MMG and Freeport all are dealing with this very dirty secret. Nobody is talking about this, but they will be soon. This is a small nuance that can have huge effects on a copper investment. A company can have a lot of copper in the ground, but dirty concentrate production can kill it, and your investment. To sum up, I am very bullish the lowest-cost, clean concentrate copper producers in safe jurisdictions right now. They will be the mining companies that take over companies with weaker balance sheets and eventually consolidate the industry. I expect to issue my first “buy” in this sector very soon. Regards, Marin Katusa P.S. I expect to make at least 300% in the coming copper rally. To get my top recommendations, along with all my other research, consider becoming a member of *Katusa’s Resource Opportunities*. Our incredible charter membership offer is closing very soon. --- # An Investment Secret You Might Not Want to Share With Friends - URL: https://katusaresearch.com/investment-secret-might-not-want-share-friends/ - Type: article - Published: 2016-07-11 - Updated: 2025-09-10 - Author: Marin Katusa Dear Katusa Research Reader, It’s not politically correct… And it’s not something I talk about with my family around the holidays… But I root for financial disasters. I root for stock crashes, government debt defaults, and currency crashes. I like to see chaos in commodities, debacles in the Dow, and bad times for bonds. I know it’s not popular to say you root for chaos. I don’t wish ill on anyone. But the simple fact is that financial disasters produce the world’s greatest investment opportunities. If you’re interested in making huge returns on your capital, never let a good crisis go to waste. Most financial advisors will tell you that making 10% in the stock market is a good year. But if you play your cards right during a crisis, you can make 100%…even 1,000% in a year. I know because I’ve done it many times. I once made 1,850% on an investment thanks to a crisis. Below, I explain why crisis and chaos can lead to triple- and quadruple-digit returns… and how you can make huge, politically incorrect profits as a result of them. One of your ultimate goals as an investor is to buy assets for less than they are really worth. This goes for real estate, stocks, commodities, bonds, and every other investment. Put another way, our goal as investors is to buy bargains. However, buying real bargains is difficult. You rarely see them. This is because the financial market *correctly prices most assets most of the time*. Most of the time, stocks, bonds, and commodities trade for approximately what they are worth. The key phrase in that last sentence is “most of the time.” **There are billions of dollars to be made in the difference between “most” of the time and “all” of the time.** Financial academics will tell you the market correctly prices assets all of the time. They’ll tell you people always make rational financial decisions. But that’s hogwash. Academics don’t invest for a living. I do. And I can tell you that people tend to do crazy, emotional things…especially when it comes to money and investments. I can tell you that governments love to meddle in the financial markets. Most government bureaucrats don’t know anything about money and investments. (That’s why they are bureaucrats.) Markets have a natural ebb and flow. They rise and fall as economies change. Throw in the actions of emotional people who do crazy things AND the meddling of financially ignorant governments, and you get a variety of things. *Most importantly for making huge investment returns, you get markets that go through booms, bubbles, panics, and crashes*. For example… ***From early 1998 to March 2000, the Nasdaq stock index climbed 219%, an incredible gain in just over two years. It then plummeted 78% over the next two and a half years. ***From their 2000 low to their 2008 high, gold mining stocks, as measured by the Gold Bugs index, climbed 1,300%. After hitting a peak in 2008, gold stocks crashed as much as 70%. ***On June 18, 2014, the price of crude oil was $106 a barrel. Just nine months later, the price had declined by 59% to hit $43 per barrel. It eventually fell as much as 73% off its 2014 high. ***In 2008, the benchmark S&P 500 index fell 53%. Harmed by mortgage market losses, banking stocks fell more than 90%. These examples are just from the past 20 years. You also have the market crash that accompanied the start of the Great Depression. Stocks lost over 80% of their value. Or take the 1987 stock market crash. Stocks lost 22.6% of their value in a single day. Here’s why these moves are so important for making huge returns… A market crash produces huge opportunities because it introduces incredible amounts of emotion into the market. Remember, markets are rational most of the time. They price most assets correctly most of the time. But when emotion levels go off the charts–like they do in a crash–**emotion completely overwhelms reason**. During a crash, terrified investors sell first and ask questions later. They sell assets with no regard for their underlying values or ability to produce cash flow. During crashes, the price of assets becomes “unhinged” from the value of assets. This, of course, means you can buy bargains during a crash. If you can keep a level head while others are losing theirs, you can buy at fire sale prices. For example… During the 2008-2009 financial crisis, the share price of Canada’s largest diversified miner, Teck Resources, plummeted from $50 per share to under $4. It then soared back to $50 per share and beyond within 12 months (a gain of more than 1,100%). Another great example is the well-known gold company NovaGold. At one point in 2007, NovaGold traded for $16 per share. It fell to under $0.50 a share during the financial crisis. As the crisis subsided, NovaGold soared past $14 per share (more than a 28-fold gain). My personal favorite example of crisis creating opportunity is Copper Mountain Mining. It’s one of the largest copper producers in Canada. The company had a successful IPO in May 2007, but fell from over $2 a share to below $0.40 per share during the financial crisis. By 2011, the crisis was over, and the stock climbed over $7 per share. I personally made over 1,800% on that move These examples show that when you buy assets at depressed prices, they can return hundreds–even thousands–of percent when the market returns to normal. Depressed assets can shoot higher like coiled springs. Remember, when an asset sells for a 90% discount to its intrinsic value, it has to climb 900% in order to get back to normal. When most investors hear about a crash in a market, their instinct is to sell or completely avoid that market. Great investors learn to develop an instinct to buy into those kinds of markets. They learn to run towards a crisis. They know it could present the rare opportunity to buy valuable assets at extreme bargain prices. There’s a good reason legendary billionaire investor Warren Buffett says one of the secrets of success is to “*be greedy when others are fearful*.” There’s a good reason a quote attributed to the legendary financier Nathaniel Rothschild is “*buy when there is blood in the streets*.” We’re wise to follow the advice of these two legends. It’s not politically correct to say you profit from financial disasters. It’s not going to get you invited over for tea. But I don’t make the rules. I just play by them. And those are the rules. A crash introduces enormous levels of emotion in the market, which leads to indiscriminate selling, which “decouples” prices from values and creates investment bargains. The sooner you start seeing financial disasters as the breeding ground of huge opportunity, the sooner you’ll make huge returns on your money. And you’ll never let a good crisis go to waste. Regards, Marin Katusa --- # Introducing a Revolutionary New Tool for Gold Investors: Katusa’s Gold Per Share Metric - URL: https://katusaresearch.com/introducing-revolutionary-new-tool-gold-investors-katusas-gold-per-share-metric/ - Type: article - Published: 2016-07-09 - Updated: 2019-05-08 - Author: Marin Katusa I have a question for you… If there was a simple way to evaluate gold stocks that would give you a huge edge over other investors–even top professionals–would you use it? You’re probably thinking, “*Of course Marin, don’t be stupid. If I could gain a big advantage over other investors, I’d do it in a second.”* You might also think something like that doesn’t exist. But if it does exist, it can’t be simple, right? Maybe you’ve been brainwashed by Wall Street or academia to think beating the market is impossible…or extremely complicated. If you’re thinking this, you’re dead wrong. I’m about to show you an extremely simple way to evaluate companies that will give you a big advantage over 99.9% of your fellow investors. This way of evaluating businesses will help you tell–almost instantly–if a stock is worth buying, or if it is headed for disaster. You could think of it as a pair of special glasses that will let you see opportunities–and potential dangers–well before other investors. Even highly-paid, highly-trained professional investors are totally ignorant of this valuable concept. You can learn how to use it in less than five minutes. Here’s how it works… One of the most misunderstood concepts in all of finance is something called “share issuance.” When a company is low on cash and wants money to invest in things like new factories, new equipment, or new hires, it has two general options. It can either borrow the money, or it can sell new shares of itself, an act called “share issuance.” Now…you know what you need to know about debt. Some debt can be useful. Bu too much is almost always a killer. What most investors don’t understand is how share issuance affects their investments. Ignorance of this financial mechanism costs investors billions of dollars every year. When a company issues new shares, something called “dilution” takes place. It’s called dilution because when a business creates new shares of itself to sell to investors, it “dilutes” existing shareholders. For example, if a business has 1,000,000 shares outstanding and sells 500,000 more shares, it has “diluted” the previous set of shareholders by 33%. (It’s not a 50% dilution like you might be thinking. A share total of 1.5 million is 33% more than 1 million). You can also think of it like a pizza… Let’s say you and some other people own a pizza. It’s divided into eight slices. You own one slice. Now, let’s say someone cuts each slice in two. There are now 16 slices. Some things are still the same. It’s still a pizza. You still own one slice. But the slice “dilution” just made your share a lot smaller. This is how dilution works in corporate finance. **When Share Issuance Is Bad and When It Is Good** Not all share issuances are bad. If a business sells shares to buy a good asset for a good price, the deal can work out well for existing shareholders. For example, let’s say the gold industry is deeply depressed. Many companies are going bankrupt. Investors are pulling money out of gold funds. This results in a mass unloading of gold assets by desperate sellers. Assets that would be worth a lot in a good gold market are selling for peanuts. Now let’s say there’s a gold mining business with very smart owners. They know the bad times won’t last forever. They know the gold market will eventually recover. They know good assets are being sold at fire sale prices. They know it’s a buyer’s market. If the owners of that gold business sell $10,000,000 worth of new shares to buy a resource that would be worth $80,000,000 in a good gold market, then share issuance is a good idea. The business issued more shares, but did it in such a way that will create value for shareholders over the long term. However, **share issuances rarely work out like that.** All too often, a new share issuance is a terrible deal for existing shareholders. Instead of issuing shares to buy assets at bargain prices, most corporate managers issue shares to buy assets for expensive prices. Instead of buying intelligently at the bottom, they buy stupidly at the top. This happens for two general reasons… One, many corporate managers have perverse incentives. They get compensated based on a company’s short-term growth. Corporate managers who issue lots of shares or take on lots of debt to grow a company over the short-term (like 2-3 years) can make millions of dollars in bonuses and stock option grants. Institutional investors and retail investors love to see growth. And they will pay for it above everything else. Two, corporate managers are human. When times are great, corporate managers think they will stay great forever. They see what has happened in the past and extrapolate it into the future. They get “drunk” on the good times. If things are going to be great forever, why not do everything you can to grow, including issue new shares and new debt to expand? All this short-term thinking leads to long-term problems. When businesses chase short-term growth at all costs, they do incredibly stupid things. They pay too much for assets. They take on too much debt. They issue too many shares. This leads to a massive reduction in value for shareholders over the long-term. It often leads to bankruptcy. Investors get killed in the process. Share issuance is why I created Katusa Research’s **Gold Per Share (GPS) metric. ** **How to Tell if a Resource Business Is Growing Intelligently** Katusa’s GPS is a number that factors in share issuance while evaluating a gold company and its worthiness as an investment. Katusa’s GPS is a number that instantly cuts through the B.S. you hear from corporate executives, crooked stock brokers, and slick salesmen. It will tell you in a matter of seconds if a company is growing intelligently or headed for disaster. It will tell you if a company is worthy of your hard-earned capital or a furnace that will burn your money. **Here’s a short story of why GPS is important…** Let’s say ABC Gold is a growing gold producer. Its executives like to send out press releases about its fantastic growth. In 2013, ABC Gold had 2 million ounces of gold in reserves. In 2014, its reserves grew to 3 million ounces. In 2014, its reserves grew to 4 million ounces. In 2015, its reserves grew to 5 million ounces. All that growth should be good for the folks who held shares in 2013, right? Not necessarily. ABC Gold didn’t pay for those ounces out of its cash flow. It didn’t find them by exploring its original properties. It issued shares to buy those ounces. In 2013, ABC Gold had 2 million shares outstanding. It had one ounce of gold reserves for every outstanding share. In 2014, ABC Gold issued 1.2 million new shares to buy new ounces in the ground. This gave it 3 million ounces in total and 3.2 million outstanding shares. That’s 0.93 ounces of gold per share. In 2014, ABC Gold issued 1.5 million new shares to buy new ounces in the ground. This gave it 4 million ounces in total and 4.7 million outstanding shares. That’s 0.85 ounces of gold per share. In 2015, ABC Gold issued 1.8 million new shares to buy new ounces in the ground. This gave it 5 million ounces in total and 6.5 million outstanding shares. That’s 0.77 ounces of gold per share. You can see where this is going. The press releases sound great. ABC Gold is growing like a weed. The managers are getting big bonuses and slapping each other on the back. Newsletter writers say ABC Gold is experiencing “solid growth.” But if you look under the hood, you see this growth *isn’t creating long-term value for shareholders*. Shareholders of record in 2013 have actually watched the per-ounce-of-gold value of each share decline by 23%! This is an overly simplified example. But it shows you the general idea. This is how it works all over the world. Most corporate managers–especially in the resource business–are habitual diluters. Yet 99.9% of investors out there never take it into account. Katusa’s GPS metric takes it into account… and provides you with a revolutionary new way to evaluate companies. **How We Calculate GPS ** Calculating GPS is simple. All you do is take a company’s total shares outstanding and divide that number by the company’s measured, indicated, and inferred reserves… The result is a ratio which shows the amount of gold in the ground each share has a claim on (we typically update our ratios a few times per month). In the example above, ABC Gold had 5 million ounces in the ground and 6.5 million shares outstanding. This gave it a GPS of 0.77. The amount of shares outstanding can vary widely among gold companies. For that reason, it’s not useful to compare one company’s GPS to another company’s GPS. **What is important is a company’s GPS trend.** As gold investor, you want to see a company’s Gold Per Share increase, not decrease. A decrease in GPS means you own less gold per share than you did previously. Instead, we want to own companies that increase gold reserves without diluting shareholders. We typically look at a company’s GPS in chart form. We want to see an uptrend in GPS. For example, one gold company I like, Brazil Resources, increased GPS from .038 in early 2014 to 0.11 in early 2016. That’s 192% “gold growth.” It produces the kind of uptrend we like to see: [![070716 GPS OpEd BRI Chart]](https://katusaresearch.com/wp-content/uploads/2016/07/070716-GPS-OpEd-BRI-Chart.png) Believe it or not, even most supposed “smart money” institutional investors don’t look at gold companies this way. They simply look for growth, whether it is creating long-term value for shareholders or not. I want to own growing gold companies, but I want to see intelligent growth that is creating long-term value for shareholders. Our Gold Per Share metric is the ultimate tool for finding companies that are growing intelligently…while avoiding serial diluters who make their shareholders poorer, in terms of gold, every year. If you truly want to make money in gold stocks, you’ll never buy another one without carefully reviewing its Gold Per Share trend. Regards, Marin Katusa --- # Are you Buying Stocks Like a Pro… or Getting Fleeced Like an Amateur? - URL: https://katusaresearch.com/buying-stocks-like-pro-getting-fleeced-like-amateur/ - Type: article - Published: 2016-07-07 - Updated: 2019-05-08 - Author: Marin Katusa As I’ve covered in previous essays, the resource market’s extreme cyclicality means the sector regularly produces 200%…500%…and 1,000%+ winners. But buying your stake in these potential winners isn’t like buying a stake in a giant company like Microsoft or ExxonMobil. There’s a right way to do it and a wrong way to do it. This essay will show you the right way. The resource market’s biggest winners come from companies with small market caps. I’m talking about companies with market caps of less than $1 billion. To get an idea of how a small cap compares to the giants of the stock market, just realize that in mid-2016, ExxonMobil’s market cap was $370 billion. A small cap company with a market value of $200 million is less than one-tenth of one percent the size of ExxonMobil. Small caps have much, much larger upside than large caps. After all, it’s much easier for a $200 million company to grow 10 times larger than it is for a $200 billion company to grow 10 times larger. That’s why I typically keep my investments in companies with market caps of less than $1 billion. I even occasionally invest in companies with market caps of less than $10 million (which is a rounding error on ExxonMobil’s balance sheet). Because these companies are so small, they typically have limited trading liquidity. A company like ExxonMobil trades millions of shares on a typical trading day. Some small caps trade less than a thousand shares on a typical trading day. A large amount of buying or selling in a small cap can make the shares swing wildly in value. That’s why we have to “stalk” small cap resource opportunities. We have to wait for exactly the right time to buy. You have to remain patient…like a lion that waits and waits for **just **the right moment to strike. **The ability to “stalk” assets and wait for GREAT prices is essential to your success in small cap resource stocks**. This is a volatile sector. One-day moves of 10%…15%…and 20% are common in small resource stocks. One day, the share price of a good company will be $1.50. The next day, it will be down 20% to $1.20. That’s why when I find a stock with huge potential, I don’t jump into the market and buy at any price. Instead, I stay patient and wait for great prices. I “stalk” the asset. I wait for the market to “mark down” the merchandise I want to buy. And if it takes me weeks to accumulate the amount of shares I want at the price I want, so be it. That’s just how the resource market works. If you can’t accept this reality and practice patience, small cap resource stocks just aren’t for you. Buying at great prices has a huge effect on your overall returns. For example, let’s say a stock is trading for $1 per share. If you buy the stock at that price and it climbs to $3 per share, you’ll make 200%. But if you “stalk” the shares and wait for a sell-off to mark shares down 25% to the bargain price of $0.75 per share, you’ll make 300% on a move to $3 per share. By simply waiting for the right price, your returns are hugely amplified. Over the course of a year, it means a lot of extra money in your pocket. If an investor puts a “market” order in for a thinly-traded stock which tells the market he’ll buy at any price–he’ll get fleeced by market pros. He’ll end up paying anywhere from 10% – 100% too much for his stake. But by entering a “limit” order–which tells the market he’ll only buy shares up to a certain price–the skilled investor gets the price he wants. And he’s fine with waiting weeks or even months to acquire the amount of shares he wants at the price he wants. By now, you can see why “stalking” is so important to your success. It can literally mean the difference between making 50% in a year and losing 50% in a year. To succeed in resource stocks, you must be willing to stalk assets and wait for exactly the right time to buy. That’s why my research works a little differently than the conventional stuff out there. When I find a great opportunity and determine a great price to pay for it, I publish my research. Since the resource market is volatile, the price of one of my “chosen few” stocks could be $1.25 per share one day…then fall to $1 per share the next day. When that type of move happens, you need to be ready to buy shares. This approach is in contrast with many of the research services you’ve probably encountered before. Most publishers aren’t real investors. Their analysts aren’t real investors. These amateurs pound the table and urge people to “buy right now” on anything and everything. They believe this is the only approach their ignorant, impatient customers will adopt. That’s not how I operate. It’s not what I believe. And if that’s what you want, any number of amateurs can give it to you. If you want to make crappy returns and “buy at any price,” be my guest. You don’t need my help. You don’t need to “stalk” anything. But if you’re interested in operating like a pro and making 100%…200%…even 500% a year in small cap stocks, “stalking” is an essential tool. When the stars align and we get a great price on one of our stocks, we strike. You’re the lion. Your list of potential assets is your prey. By “stalking,” you’ll get them at the right time, at the right price. Regards, Marin Katusa --- # Why the “Home Run” Mindset is Essential For Winning in the Resource Market - URL: https://katusaresearch.com/home-run-mindset-essential-winning-resource-market/ - Type: article - Published: 2016-07-06 - Updated: 2025-09-10 - Author: Marin Katusa I don’t live in Silicon Valley. And I’m not technology expert. But I do think it’s impressive how “venture capitalists” like Marc Andreessen and Peter Thiel have made billions by funding small tech startups. They are among the richest investors on the planet. After all, an early investor in a hit like Facebook or Uber can turn a $10,000 investment into $10 million Making huge money in tech startups actually has a lot in common with making huge money in natural resources. Probably the most important commonality is that master tech investors and master resource investors alike don’t place a focus on how often they are right. It’s simply not much of a concern for them. This runs counter to how most amateur investors think. Amateurs place a ton of focus on “winning percentage.” They get entirely too worked up when they are wrong and lose money on an investment. They have a misplaced desire to be “right” as often as possible. And most find the idea of a 50% “win rate” to be completely unacceptable. If you’re in this camp, I have news for you: You’re placing a lot of focus on something that doesn’t matter much. Two simple stories can show you the power of this idea… First, I’ll tell you the story of Babe Ruth…and how he became a legend. Babe Ruth is considered one of the greatest baseball players of all time. He hit 714 home runs, a league record at the time. Over his career, he collected 2,873 base hits. He was a seven-time World Series champion. He made baseball’s “All Century” team. However, Babe Ruth was also known as the “King of Strikeouts.” Ruth led the league in strikeouts five times. He was the all-time leader in strikeouts when he retired. In other words, Ruth succeeded a lot…but he also failed a lot. Because of his aggressive style, Ruth would often either hit a home run or strike out. His home runs could win games instantly. The opposing team could spend hours gradually building up a lead…only to watch a Ruth home run destroy it in seconds. In other words, when Ruth achieved success at the plate, the success was often very meaningful. Ruth was okay with a few failures because he knew his successes would more than make up for them. This approach helped Ruth become one of the greatest baseball players in history. To achieve success as a resource investor, you need to adopt the Babe Ruth mindset… **You must make your wins large and meaningful…and your losses small and insignificant.** Folks like Babe Ruth have used the “home run” mindset to achieve success for centuries. Professional gamblers have used it to clean out casinos. Top traders have used it to generate 100%+ annual returns. And the venture capitalists I mentioned earlier have used it to make billions in startups. Venture capitalists invest in dozens of different deals. The majority of them fail. Less than 20% turn out to be big winners. But venture capital winners are so massive that the venture capitalists’ overall returns are huge. You see, top performers fail as often as anyone. But top performers ensure their failures are small and limited…while their successes are large and meaningful. Why is the “home run” mindset important to your resource investment success? **Because it allows you to maximize your wins while minimizing your losses**. You’re not going to achieve success on 100% of your resource investments. That’s fine. You probably won’t achieve success 75% of the time, and that’s fine too. If you adopt a “home run” mindset, you can make huge profits even if you’re right the same amount as someone betting heads on a coin flip (50%). That’s the story of Babe Ruth. Here’s story number two… Over the past 60 years, George Soros has made more than $20 billion by trading the financial markets. Twenty billion is a huge number. If someone makes $2 million in the market, they are considered very successful. George has made more than 10,000 times that. (Whatever you think about Soros’ political views, there’s no denying the guy knows how to make money.) Soros is a master of knowing how government actions will markets. He’s skilled at finding industries poised to boom. But there’s a simple mindset that’s more responsible for Soros’ success than either of those things…. Soros once summed up the mindset like this: ***“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”*** Now…think back to Babe Ruth’s strategy. Babe didn’t focus on how often he succeeded. He focused on making his successes large and meaningful…and making sure his mistakes were small and insignificant. Like Ruth, Soros knows that his winning percentage is relatively insignificant. It’s much, much more important to make a lot of money when you’re right… and lose a little money when you’re wrong. When you make sure to win a lot when you’re right, and only lose a little when you are wrong, you can be right just half the time…and still make **huge** profits in the resource market. ### The Power of the Big Home Run To get an idea of how powerful this strategy can be, consider a hypothetical investment scenario… On January 1st, you buy ten different stocks. You hold them for one year. The return of these ten stocks after the one-year holding period months is listed below. - 20% - -80% - -76% - 32% - -55% - 235% - 80% - -99% - -40% - 383% You bought ten different stocks. Five went up. Five went down. That’s just a 50% success rate. But because you hit a few big winners (#6, 235% and #10, 383%), you made an excellent average return of 40%. And you made this excellent return *while being right just 50% of the time*. This is the power of making your winners large and meaningful while keeping your losers small and insignificant. Don’t get me wrong. I like to be right as much as anyone. I try to cut my downside as much as possible on my investments. But the simple fact is that resource investments carry risk. I know I’m not going to be right 100% of the time. Resource investments frequently produce triple- and quadruple-digit returns. Participating in these massive winners is a major component of our success. Focusing on winning percentage is not. Regards, Marin Katusa --- # The Biggest Key (By Far) to Making Huge Money in Resource Stocks - URL: https://katusaresearch.com/biggest-key-far-making-huge-money-resource-stocks/ - Type: article - Published: 2016-07-04 - Updated: 2019-05-08 - Author: Marin Katusa On June 18, 2014, the price of crude oil traded for $106 a barrel. Just 19 months later, the price had plummeted 73% to $28 per barrel. After reaching $28 per barrel, oil then skyrocketed 88% in just four months. What sort of asset regularly goes through massive price swings like that? Not your house…and not government bonds. Natural resources do. More than any other asset, natural resource prices go through extraordinary booms and busts. One year, the value of a resource like oil, silver, or copper will skyrocket 75%. The next year, it will fall 50%. Because natural resources cycle through huge booms and busts, they are said to be “cyclical” assets. Many things in our world move in cycles. The weather moves in cycles. The planets revolve around the sun in cycles. Animals move around their habitats in cycles. You also see cycles in the financial markets…especially in the natural resource sector. Because resources cycle through booms and busts, they are said to be “cyclical” assets. Understanding this concept is by far the biggest key to making huge returns in the natural resource sector. If you don’t understand how resource cyclicality works, nothing else you do will matter. It’s the most important thing. The cyclicality of natural resources contrasts with “noncyclical” businesses like those that sell toothpaste, toilet paper, or food. Demand for everyday things like these is relatively constant. No matter what is happening with the economy, you’re probably going to brush your teeth, go to the bathroom, and eat lunch. Natural resources, however, exhibit extreme cyclicality. **And their massive price moves produce massive opportunities to profit**. In the year 2000, for example, shares in the world’s largest uranium mining company, Cameco, traded for $1.35 per share. Seven years later, Cameco shares had increased in value by 3,600%, reaching $50 per share. Gains like that are possible in natural resources because of their unique supply/demand dynamics… When the price of a natural resource soars, it encourages lots of new production. Natural resource producers always want to cash in on high prices. For example, if corn soars in price, farmers will plant a lot more corn. If the price of oil soars, oil companies will pump a lot more oil. This natural response to high prices leads to an increase in the supply of the natural resource. The soaring price also encourages consumers of that resource to find cheaper replacements. For example, if gasoline were to triple in price, you would be more likely to take the bus or cut back on car trips. If the price of coffee soars, you might start drinking tea instead. This natural response to high prices leads to a decrease in demand for the natural resource. When the supply of a natural resource increases and demand for it decreases, you get much lower prices. You get a bust. In other words, a *resource bull market eventually sows the seeds of its own destruction*. When a boom ends, it’s not unusual to see the value of a natural resource plummet in a short amount of time. Remember, the price of oil plummeted 73% in less than two years. [![300616 Crude Oil]](https://katusaresearch.com/wp-content/uploads/2016/07/300616-Crude-Oil.png) A natural resource boom is the mirror image. When the price of a natural resource is very low, it discourages production. After all, why ramp up production if the price is in the toilet? The farmers who planted as much corn as they could when prices were sky high will plant a lot less corn if prices are low. The oil companies that produced as much oil as they could when prices were high will produce less if prices are low. Low prices also encourage consumption. You’re probably going to drive more if the price of gasoline plummets. When the supply of a natural resource shrinks and demand climbs, you get a boom. In other words, *a resource bear market eventually sows the seeds of its own destruction*. Recent history in the copper market provides a great example of this. During the 1990s, the price of copper was very low. This led to decreased production. Meanwhile, demand for the cheap resource soared. This “increased demand/decreased supply” sandwich caused the price of copper to soar from $0.75 per pound in 2003 to $4 per pound in 2008 (a 400%+ gain). When a natural resource moves in price, the share price movements of natural resource producers are amplified. During the big 2003 – 2007 copper rally, the large copper miner Freeport-McMoRan skyrocketed from $3.50 per share to over $50 per share during this time–a 1,300%+ increase. [![300616 Freeport-McMoRan Chart]](https://katusaresearch.com/wp-content/uploads/2016/07/300616-Freeport-McMoRan-Chart.png) By now, you surely see what we need to do as resource investors. *****We need to invest in individual resource markets when prices are very cheap and depressed, yet poised to climb. ** **This setup led to the 1,300% gain in Freeport McMoRan…and the 3,600% return in Cameco.** To make huge gains in natural resources, we have to buy assets after bear markets…when they are very cheap and depressed. In these situations, you’ll be buying something the investment crowd doesn’t want. But that’s a sign you’re probably doing the right thing. When the crowd finally realizes a boom after it has already started, it will bid the price of your assets up to incredible heights. That’s when you–the contrarian–can sell for huge profits. Resource markets are extremely cyclical. Their enormous booms and busts make it tough for most people to make money in them. But extreme resource cyclicality offers huge opportunity to those of us who understand it. Regards, Marin Katusa --- # Trump’s Energy Plan: How to Profit from the Trump Trade - URL: https://katusaresearch.com/trumps-energy-plan-profit-trump-trade/ - Type: article - Published: 2016-06-02 - Updated: 2019-05-08 - Author: Marin Katusa Donald Trump wants to make America great again. His energy plan is full of clever slogans and big claims. It’s clear “The Donald” wants to get his message out to the masses. Trump says his plan will create jobs and lead to American energy independence. It’s a familiar tune. Many politicians before him have sung it. So how does The Donald’s energy plan break down? First off, he wants to breathe life back into the coal industry. Long-time readers are familiar with the call I made in 2011 to stay away from coal. I’ve stuck with it for years. Avoiding coal investments has been the right move. The U.S. coal index is down more than 90% since 2011. Many coal companies have gone bankrupt. Coal mining is an industry in a steady decline for many reasons. There are many better bets to make with your capital. The Donald knows this also. While promoting coal will win him votes in coal states like West Virginia, the simple fact is that coal is now one of the most expensive power plant fuels in the United States. Promoting coal is flat out “bad business.” Here is something that Trump totally ignored in his energy plan (Hillary, you can thank me later—as I am sure your strategists will benefit from this also)… The cost of electricity from coal fired plants has **doubled since 2009.** The other clean energy alternatives, which are favoured by the masses, actually make much more sense *economically* and *environmentally*. The energy industry measures fuel costs with a metric called LCOE. It stands for “Levelized Cost Of Electricity.” LCOE is a measure of how much it costs to produce one megawatt hour of electricity with a given fuel source. It’s a comprehensive, “all in costs” figure. You get it by tallying up all the costs related to building and operating a power-generating asset like a coal-fired power plant or a wind farm… and dividing that number by the expected output of the asset over its lifespan. LCOE is a vital measure these days because it allows for direct comparisons across different types of power plant fuel, like coal, natural gas, and solar energy. The lower a fuel’s LCOE, the cheaper and more attractive it is for consumers like you and me. As you can see from the chart below, solar power and wind power are much cheaper than coal power. [![Trump Energy Plan LCOE]](https://katusaresearch.com/wp-content/uploads/2016/06/Trump-Energy-Plan-LCOE.png) Even states like Texas are seeing a green revolution completely change the price of electricity. That is how you make America great again Donald, **by reducing electricity costs. Not increasing them for a few votes from the canaries in the coal mine**. Rather than restrict free trade, use technology (including lower electricity costs) and undercut the emerging market nations who have cheaper labour. But I digress. Back to Trump’s energy plan. Wind prices are getting very cheap with federal tax credits, inexpensive land, decreasing costs of installation and improvements in technology. This will be a huge benefit to the all-powerful US consumers (retail, commercial and industry). Why? Utility electricity rates will decrease, leaving more money in consumers’ pockets. Trump mentions the “Millions of jobs and trillions of dollars” of wealth that would be destroyed under the climate change policies of Hillary Clinton. Trump’s policies would also cause massive losses if he were to subsidize the coal industry and its expensive fuel. Coal industry workers stand to benefit from a transition to green energy. They would begin learning valuable new skills that will be relevant decades from now. And that’s perhaps where Trump’s analysts failed to remind him of the projected spending guised under the climate change policies of world governments. According to every climate change think tank and NGO, there is a drastic lack of spending to fight increases in carbon emissions. They want trillions of dollars of investment. They’re going to get it. Now, for as much controversy as Trump gets in the mainstream media, it’s important to separate the truth from his prolific statements. And this goes for any political candidate. Trump’s promises will resonate with a large unemployed audience. He will get votes. Don’t underestimate The Donald. But at the same time, Hillary will do anything to win. This is going to be a dog fight—and there will be a lot of money to be made from this election. I’ve been positioning my investments accordingly, so that I can leverage a Clinton or even a Trump victory. Should Trump win, I know exactly the kind of investments that will see capital favoring. I call it the **‘Trump Trade’. **This is going to be a close race until the end. And the smart hedge funds will start to position themselves into the Trump Trade. However, my money is not on a Trump presidency. ***Doug Casey who is a dear friend and partner believes Donald Trump will defeat Hillary. So, as I always do, I put my money where my mouth is and we bet 100 ounces of silver.*** But I like positioning my portfolio in such a way that heads I win, and tails I win also. That is exactly what I will be publishing shortly in the “Trump Trade Portfolio”. Next week I will publish an in-depth research report on all of the factual errors in Donald Trump’s energy plan. It’s part of understanding the Trump Trade. And Hillary, you’re not off the hook either. I will publish all of the factual errors in your energy plan also, after I read it. – Marin --- # Dragon Economics 101 – How Chinese Money Will Supercharge Asset Prices - URL: https://katusaresearch.com/dragon-economics-101-how-chinese-money-will-supercharge-asset-prices/ - Type: article - Published: 2016-05-12 - Updated: 2019-05-08 - Author: Marin Katusa Beware of the Gurus telling you that the US Government has lost control of their printing press. It’s one dimensional if it’s not put in perspective. So, let’s do just that. The chart below reveals some startling truths. It is China that has lost control of its printing press, not the US. China is aggressively devaluing their currency. And few are talking about it. And the unintended consequence of all this Chinese printing are the bubbles in specific markets. If you live in Vancouver, Sydney or London you see it daily. Vancouver is in the midst of a property crisis not seen in recorded history. Almost every human mania behaviour detailed in Charles Mackay’s *Popular Delusions and the Madness of Crowds* is on display in my hometown. Foreign Chinese money is the main catalyst for the insane bubble in Vancouver real-estate prices. There are high-end neighborhoods in Vancouver where the whole block is empty. For example, on my block, 4 of the 5 homes are vacant. It’s not just real estate. The Chinese printing presses have caused incredible levels of speculation in other markets. For example, more cotton was traded in one day because of Chinese speculation than the world combined YTD. To put this into perspective enough cotton traded to put a pair of pants on every person on the planet. This is the power of Dragon Economics. It can send any market it touches into the stratosphere. And with that, it can make you a lot of money… or lose you a fortune very quickly. Volatility is now the norm. Fire breathing dragons are not real, but fire breathing Dragon Economics is. It can create spectacular bubbles in a short period of time and leave profits to smart investors that take risk off the table. Others are left holding the bag of spectacular losses. **The Chinese are Coming! The Chinese are Coming!** So what does this mean for our resource juniors that have given us great profits in 2016? One of the ultimate risk markets – the TSX Venture – is still down 80% from its 2011 peak, even after a [25% run so far this year](https://katusaresearch.com/greed-back-next/). I’ve had a fantastic run, and it sounds like many of my readers have as well. The funds I run are all well cashed up to accumulate more shares in spectacular resource plays managed by the best people in the business. Stay tuned, as I will share what I will be doing next. It’s going to be an exciting summer. Marin Katusa --- # Greed is Back and This is What You Should Do Next - URL: https://katusaresearch.com/greed-back-next/ - Type: article - Published: 2016-04-29 - Updated: 2019-05-08 - Author: Marin Katusa Most junior natural resource companies are listed on the TSX-Venture and, needless to say, it’s been an interesting first 4 months of the year. We can see since the turn of 2016, the TSX-V is up over 25%. There is a lot of enthusiasm in the streets and online and for good reason. Many companies, through merit or not, are sitting at over +100% gains YTD. This is why I love this business. The juniors provide massive upside leverage with the hint of new capital entering the markets. So what’s changed? A couple of things… First, the US Dollar has trended down against currencies of commodity rich nations like Canada, Norway and Russia. These currencies perform well when oil rises. In turn, the price of assets like gold, silver and oil rose too. [![Greed is Back - 2016 YTD Gold Oil Silver]](https://katusaresearch.com/wp-content/uploads/2016/04/280416-Greed-is-Back-table.jpg) Second and most important – confidence. With confidence edging its way back in, the market presents an opportunity for you to get out of the crap you own that hasn’t panned out in the past. Only position yourself in the absolute best junior exploration companies, run by the best management teams, which have a considerable amount of their own capital at risk. Only own the best of breed. We’re a long way from a frothy secular bull top. This could be the beginning of the lucrative stealth phase climbing the wall of worry. Even with the uptick in the juniors in 2016, we’re still at levels near the bear market bottom of the early 2000’s before the greatest bull market run in commodities ever. I’m closely watching companies that were nearly bankrupt now raising money through financings to keep the lights on and pay management fees. A few months ago I saw eviction notices plastered on the doors of many company offices around downtown Vancouver – the natural resource hub of the world. These financings will keep them afloat for the foreseeable future. And I must say, I’m shocked that some of financings are oversubscribed. This shows the appetite that investors have to deploy their capital in high-risk, high-reward asset classes. Just know what you are buying. I know I do. I hope you do too. Greed is back. -Marin Katusa **PS**. I’m thankful for all the kind notes from readers that did well with Newmarket Gold and McEwen Mining. I have plenty in the pipeline that will give you an edge to the street. --- # The Interview That Caused All Gold Stocks to Run (117% in 90 days) - URL: https://katusaresearch.com/early-risers-locked-in-117-gains-in-90-days-since-this-conference/ - Type: article - Published: 2016-04-20 - Updated: 2019-05-08 - Author: Marin Katusa “Exercise discipline and wait this storm out, it is going to change. This is a cyclical business. Too many people are thinking it’s going in one direction forever. This is the fourth cycle I’ve been through.” **Rob McEwen, Chairman of McEwen Mining** On a crisp Vancouver Sunday morning in late January, I took the stage at the Cambridge-Katusa Vancouver Resource Investment Conference with a mining legend and his company’s CEO, Colin Sutherland. It was the first major fireside discussion of the morning. I even told all my friends and family not to miss it. In my signature no-holds-barred style that I call the *Katusa Krossfire*, I threw questions at these two individuals. It was all live and captured in front of nearly a thousand conference attendees. These retail investors were brave and bold enough to wake up early on a Sunday and attend a conference with the best leaders and innovators in the resource sector. And in the 90 days following the resource conference, the returns and rewards have been off the charts for this company and many more that myself – and others – talked about on stage. I said in front of 1000 people that you should have exposure to this proven winner and his company. And it’s on the video here below for all to see. I personally selected many of the best leaders to come up on stage with me and pitch their deal to all in attendance. This is one example of many that have delivered +100% gains in less than 100 days. I have video of all the talks…and you will get them all soon enough. Watch this video. It’s real. It’s from one of the best in the industry, Rob McEwen. I am bringing the best in the sector to you. Now it’s up to you to sit back, watch and learn how to make +100% gains from the best and most experienced industry leaders. Take the return of the company I interview in this video. Its share price has climbed 117% since we shared the stage together and the Chairman said to all of us… “*Maybe I can make money here again. And when the markets starts saying you can make money in this sector… I think you will see a rush… You have big runs when the cycle is going up*.” [![McEwen Mining 2016 YTD Return VRIC]](https://katusaresearch.com/wp-content/uploads/2016/04/McEwen-Mining-2016-YTD-Return-VRIC.png) In this video, find out why he invested $120 million into his own company when he could’ve taken his vast fortune from previous mining successes and walked off into the sunset. His answer will surprise you. He also takes no salary being Chairman. He also reveals an interesting take about buying distressed companies. And, I tease Rob whenever I see him that my goal is to have a business card like his “Occupation: Chief Owner”. When a Chief Owner talks—you should listen, I know I do. By the way, in the video you will see why I say Rob has the best hair in the mining industry! I hope you enjoy watching the interview as much as I did speaking with these gentlemen in front of the audience. You don’t want to miss this. [emaillocker id=”2265″] [/emaillocker] **Marin Katusa** --- # How to Beat a Billionaire, and Make a 120% Gain in less than 11 Months - URL: https://katusaresearch.com/beat-billionaire-make-155-gains-less-11-months/ - Type: article - Published: 2016-04-11 - Updated: 2019-05-08 - Author: Marin Katusa Dear Katusa Research Reader, The market finally caught on… One of my top recommendations of 2015 is now one of the market’s most popular mining stocks… and Katusa Research readers are up 120% in less than a year. Below, I’ll quickly tell you what has happened… and exactly what you should do now. On May 14, 2015 I published a report to Katusa Research readers on Newmarket Gold, a small gold company that was a virtually unknown at the time. I thought Newmarket was a great opportunity because the company had a great asset, a great plan, and counted some of the smartest, most successful guys in the business as insiders. I openly disclosed I bought millions of shares for my fund and myself… and encouraged others to do the same (at the same price I was getting). At the time, we were buying shares at a discount to what the insiders had paid. Newmarket executives have done exactly what they stated, and even achieved exploration success. They should be congratulated. The first meeting Newmarket executives Doug and Blayne had when they announced their intentions was with me in my office in Vancouver. Within 24 hours, I put together a comprehensive report on the company. I had numerous negative emails from well-known industry names to the effect “*The company is renting names*” etc. Well, the naysayers were wrong. At the same time, I had some very smart investors email me about the report. They were amazed with my analysis. One of the legendary investment bankers even called me up on my cell (Peter Rockandel), one who I hadn’t chatted to in years. He agreed with my analysis 100%. Well, the naysayers have been proven wrong. Our Newmarket position is now up well over 120%. And those are exactly the kind of results I aim for with my money. But now, it’s time for me to take my chips off the table and close the position. I pride myself on being the first to a story. I was in this case. But now it’s time for me to sell. The story is loved and recommended by everyone. Billionaire fund manager Eric Sprott just bought 10 million shares at $2.25. Many analysts and newsletters are on the bandwagon touting the story. I wish them well. But it’s time for me and my readers to lock in the gains. When news of Eric Sprott’s hit the streets the shares jumped 25%. Fundamentally nothing has changed in the story, other than market expectations. We beat a billionaire to the story. I find it amusing that many of the names that sent me the negative comments about the management team of Newmarket are investors in and associates of exactly those who are now touting the company. Can the company go higher? I hope so—I really do like Doug and Blayne and the NMI story. But I am more than happy to lock in my triple digit gains, and have my powder dry (cash ready), as I am about to make one of my biggest investments to date. I suggest you exit as well. Also, please be on the lookout for details on my next big bet. There’s a huge, huge investment opportunity sizing up right now and I plan to place millions of dollars of my own money in this bet. It’s the biggest, surest bet of the next decade… and I’m going to do everything I can to ensure Katusa Research readers benefit from it. I’m going to send you the details very soon. Best, Marin Katusa P.S. I’m including my original research on Newmarket below, just in case you’d like to see how I walked through the numbers. —————————————————————————————————————————————————— **Original Write up May 14, 2015 [(link)](https://katusaresearch.com/an-easy-arbitrage-opportunity-the-next-new-gold/)** **Arbitrage **[ahr-bi-trahzh]: a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time. *Note: This is the first research report published on the combined company.* **Speculative Thesis****:**** ** ** **Newmarket Gold (NGN.V) is merging with a gold producer called Crocodile Gold Corp (CRK.TO). The Arbitrage opportunity is a 15% price difference between what CRK shares trade for in the open market and the PP price of NGN. The NGN management team will be taking over the board of the new company, and in reality, this is a friendly takeover (NGN will take control, with 5 of 7 board seats). The NGN management team is investing CDN$8.5 Million (1/3 of the total CDN$25M raise) into the Private Placement (PP) of the merged company at a 15% premium to what CRK currently trades for in the open market on the Toronto Stock Exchange (CRK.TO) and the CDN$25 Million PP is fully subscribed for. The new company will be a +200,000 ounce/year gold producer. Currently the combined newco trades at a +60% discount to its peer group. New management will implement cost efficiencies and as production costs decrease, there will be a revaluation when management executes its plan and without the Aurico overhang (explained below). **Open Disclosure: **The first meeting the management team of Newmarket and Crocodile (Doug Forster and Blayne Johnson) had after the announcement of the deal, was with me (Marin Katusa) in my Vancouver office. I was travelling last week, and one of my analysts (Rob F.) was on the ball with the announcement. Rob contacted me while I was in Georgia, and we went over the deal metrics. My team did a great job of running numerous peer comparables and going through the specifics of the producing assets. We liked what we saw. I flew back into Vancouver at 2 a.m. on Friday, and I met Doug and Blayne at my office at 830am. “In the room, in the deal” is a mantra of mine, and this is an example of having an edge over the rest of the market by having access to the stories before they get mainstream institutional coverage. I have known Doug and Blayne for years, and we came very close to doing a deal together in 2008. They are smart and savvy, and do not do too many deals, so I expect both to have their focus factor on this one. During the meeting, I had a list of questions I wanted to confirm answers to, and once the two (Doug and Blayne) left my office, I went into the market and bought over 1 million shares. I bought CRK.TO shares being offered at $0.31, 0.315, 0.32, 0.325, 0.33 in the open market. The arbitrage was between a 16% and 11% discount to the financing price. I will continue to buy in the open market as the arbitrage opportunity exists and my fund is participating in the private placement. **Current Price of CRK.TO:** $0.325. Takeover Price: $0.37, Arbitrage: 14%. ### **People Behind the Deal: **Doug Forster, Blayne Johnson, Lukas Lundin, Ian Telfer, Randall Oliphant, Ray Threlkeld, Mike Vitton and Rod Lamond **Doug Forster–President/ CEO:** (Newmarket Gold) – Co-founder of Terrane Metals which was acquired by Thompson Creek for $750 million & Potash One which was acquired by K+S for $434 million. Forster has been involved in a number of large-scale Canadian mine development projects including the Mt. Milligan gold-copper mine, the Kemess South gold-copper mine, the Golden Bear gold mine and the Legacy potash project. Doug is smart, doesn’t do many deals, and the ones he does, he sticks with them until they are a success. He was known as the boy wonder early in his career, and for my money, he is about as smart as it gets in the junior resource sector, a rare thing for me to be able to say. After a decade of dealing with Doug, he hasn’t once promoted me on anything other than the facts. He is a straight up, honest man. **Rodney Lamond—COO**: (Croc Gold) – Mr. Lamond was the Group General Manager responsible for the exploration and mine development strategies for the mining division of Nyrstar NV, which included nine mine operations in six different countries in North, Central and South America. Mr. Lamond was Vice President of Operations and General Manager of Gold Hawk Resources prior to the acquisition by Nyrstar. Rod has come in and fixed up the operating kinks that Crocodile Gold (CRK) has struggled with. Furthermore, he is directly responsible for the cost saving measures that have put the CRK mines back into the black. I don’t know Rod but vetted him with people who have worked with him in the past, and he has checked out with high marks. **Blayne Johnson– Exec VP**: (Newmarket Gold) – Long-time partner of Doug Forster’s and was the Co-Founder of Terrane Metals. Blayne got into some trouble in the 1990’s during his time at First Marathon and his involvement in Cartaway Resource Corp. The key guys of First Marathon are the banking titans at Haywood Securities, and I’m only mentioning this so any sceptics out there can’t say I didn’t bring all the facts to the table. Does this prevent me from investing in this deal? Hell, no. That was in the past, he paid his dues and learned from his mistakes–enough said. I have known Blayne for 8 years, and although we could not cut the deal we worked hard on in 2008, he has always been straight up and honest with me. I always have time for Blayne. **Lukas Lundin-Director: **Lukas does not lend his name to any deal unless he believes in it. The first thought one may have is why is Lukas on the board of a non-Lundin deal? No, Lukas is not on the board to keep an eye on things for Lundin Gold, in case they want the newco for production. Lundin Gold is focussed on putting the Fruta del Norte deposit in Ecuador into production, and no other deal will happen in Lundin Gold until then. Rather, this speaks highly of the endorsement Doug Forster and Blayne have from well-known market players like Lukas. Having Lukas on the board means he is invested, but will also state his mind if he feels the company is going off track or about to make a mistake. **Randall Oliphant – Director: ** If you are trying to become the next New Gold, it makes a lot of sense to have someone like Randall on board. Randall is currently the Executive Chairman of New Gold and is Chairman of the World Gold Council. Prior to his time at NGD and the WGC, he was President and CEO of Barrick Gold Corp, the largest gold producer in the world. **Ian Telfer—Advisor: **Mr.Gold. I was actually surprised when I saw Ian’s involvement in the deal but it all makes sense now. Ian was a key person making Gold Corp. the success it is today. Ian was also involved in the early success of New Gold. I believe this company has the potential to be the next New Gold. Again, having Lukas involved is big, and having Ian also interested and engaged really separates this newco from any of its peers. Ian is an incredibly smart person, whom I hold in the highest regard. **Ray Threlkeld—Chairman: **Ray and I have an interesting past. Our paths first crossed in 2010. But, first some background on this story, as it’s a good one. In 2006, I visited Rainy River’s gold project in Ontario, Canada for the first time (I visited it again later in 2010). It was years before Ray Threlkeld was involved, and in 2006 the company was run by Nelson Baker. As I was driving with the president of Rainy River on that cold miserable October Sunday morning, I noticed that the gold property was essentially a giant bog. After driving around the property, I came across an 80+ acre parcel that looked like it wasn’t part of the bog. Rainy River didn’t own the project yet, as it was owned by some locals at the time. For whatever reason, that block of land stuck out in my memory because of a road that cut the properties. A few years later, I ran into a few geologists I know, and they asked me if I could raise them some money. I’m always open to a new idea, and this rather unknown group showed me what their plan was. It was a small parcel of land that is adjacent to the Rainy River block. I knew the ground well as I had driven through that specific block of land and had seen it firsthand myself 3 years earlier, as I remembered that road from the map. I quickly left that meeting and went to the Rainy River website. This is where I got lucky. I pulled up, what at that time was the most recent Rainy River PowerPoint presentation, and noticed that the pit design by Rainy River in the presentation actually included what became known as the Burns Block. I only noticed this because of a specific road that I drove on getting to the project years earlier. I locked in the private placement and became a major shareholder of Bayfield Ventures (BYV.VN), along with my high net worth friends and subscribers. By the time I completed the private placement, Nelson Baker had moved on from Rainy River and Ray Threlkeld became the man in charge at Rainy River. So, I politely approached Ray with a proposal. I pointed out to him and his team that their pit design included land that Rainy River didn’t own. But, I happened to be one of the major shareholders and my group of investors would be more than happy to do a deal, at the right price of course. Ray wasn’t too impressed, and called the ground “deader than a door knob”. Literally, a week later, the press release for Bayfield announced very high gold drilling results. The ground was not “deader than a door knob”. I contacted Ray again. Always a professional, Ray told me why Rainy River didn’t need and wouldn’t buy the land. During this time, Bayfield stock was on fire and everyone in the financing was sitting on +500% gains. Eventually, Rainy River was bought out by New Gold (Ray was involved with both companies), and then New Gold bought out Bayfield. Although there were some intense discussions between Ray and me, he was always a professional, and I liked his style—I’m not sure he would say the same about me at the time. As it turned out, we were both right. Rainy River never did buy out Bayfield, it was New Gold. I was right on my thesis, and my investors and I made a bundle on the speculation. **Mike Vitton—Advisor: **Before Mike left BMO banking, he was the #1 investment banker in the resource sector. One of Mike’s mentors at BMO, Carl Rezoni—who started up the BMO resource investment banking arm—speaks very highly of Mike. I have known Carl since 2009, when he joined the Copper Mountain board, and Carl is very smart and experienced. I have dealt with Mike Vitton only once, in the early days of Copper Mountain and he is someone who is clearly smart and knows the resource sector. If Mike’s name is on a deal, you want to pay attention. Mike left BMO to work on a few large private deals and became the go-to banker for Eike Batista, who at the time was the most successful and famous mining icon in the world. **Deal Terms:** Under the terms of the arrangement agreement, each Newmarket shareholder will receive one NewCo common share for each Newmarket common share held. **Each Crocodile Gold shareholder will have the option to elect to receive consideration per Crocodile Gold common share of (i) 1.228 NewCo shares, (ii) 37 Canadian cents in cash, or (iii) a combination thereof subject to a maximum aggregate cash consideration of $20-million (Canadian).** Assuming full proration, shareholders of Crocodile Gold will receive 1.088 NewCo shares and 4.2 Canadian cents in cash for each Crocodile Gold share held. All NewCo shares will be issued in the transaction on a notional 1:5 consolidated basis. The cash component of the Crocodile Gold consideration will be financed from the proceeds of the private placement (as defined below). Assuming full proration, on completion of the transaction and private placement financing, it is anticipated that NewCo will have approximately 134 million NewCo shares issued and outstanding and approximately $40-million (Canadian) in cash on hand. We have spoken to a few a shareholders of CRK, and all have indicated they will be taking shares, not the cash. Luxor Capital Group, the largest shareholder of CRK, is also taking shares in the newco. **The transaction is expected to close in the third quarter of 2015.** We believe the best way for speculators to participate is to actually buy CRK shares, as they are trading at a 15% discount (as of Tuesday May 19th–the time of publication) to the financing price of the newco. That is how I took my initial position in the company. In connection with the proposed transaction, Newmarket has entered into an agreement with GMP Securities LP on behalf of a syndicate of underwriters including BMO Capital Markets as co-lead underwriter, to complete a private placement of subscription receipts for total gross proceeds of $25-million (Canadian) at a price per subscription receipt to be determined in the context of the market. One third of the financing is being taken down by management and insiders for a total investment of CDN$8.5 Million. Each subscription receipt will entitle the holder thereof to receive one NewCo share in connection with the completion of the transaction. Up to $20-million (Canadian) of the proceeds of the private placement will be used to finance the Crocodile Gold consideration payable to Crocodile shareholders who elect to receive cash in connection with the transaction. **Largest Stakeholder has already agreed to 12 month lockup** Luxor Capital Group LP, which together with its affiliates control approximately 56 per cent of the Crocodile shares, has entered into a lock-up and voting support agreement with Newmarket pursuant to which it will vote in favour of the transaction. Furthermore, Luxor has agreed not to dispose of more than 20 per cent of the securities of NewCo it will own for a period of 12 months following the effective date of the transaction. Assuming full proration, on completion of the transaction and private placement financing Luxor will own approximately 43 per cent of the issued and outstanding shares of NewCo on an issued and outstanding basis. In addition to Luxor, each of the officers and directors of Newmarket and Crocodile Gold have entered into a voting support agreement for the transaction, pursuant to which they will vote any securities of the companies, as applicable, that are held by them in favour of the approval of the transaction. **Simply put, what is the opportunity? Crocodile Gold was a poorly run gold company, hence the discount it trades at to its peers. I am speculating this will change and a revaluation will occur, not to mention that I am paying 15% less than the insiders are paying for the PP.** [![Crocodile Gold Market Cap]](https://katusaresearch.com/wp-content/uploads/2015/05/Mcap-EV-peer-comp.png) **All companies in peer group are Canada/US/Mexico, which avoids jurisdictional risk discounts.**** ** [![Gold Reserves and Resources]](https://katusaresearch.com/wp-content/uploads/2015/05/Current-Reserves-and-Resources.png) Currently Crocodile has 3 producing mines. The workhorse of the group is the Fosterville mine, which has been in production since 2006. Australia has a bit of a different style than we do when it comes to proving up ounces. Somewhat typical of the Aussie mentality, they use a “just in time method”, which means they do not move ounces from “measured and indicated” into the “proved and probable” category until they have to. Due to this, the 5-year plan that comes as part of the annual guidance always underestimates production in the later years. Doug and Blayne did an excellent job of explaining the deposit and how they go about proving up additional ounces. The Cosmo Gold Mine is the main upcoming priority for Newmarket Gold. Commerical production was initiated in 2013 and has ramped up quickly. There are numerous additional targets that are available to pursue. The deposit is open along strike with high grades being intercepted on plunging shoots. The corridor containing the known deposits at Cosmo and Howley extends approximately five kilometers along strike. At Howley, drilling to date has only extended to approximately 100 metres depth, so there is significant potential at depth and along strike while remaining an open pit operation.[![Cosmo Gold Deposit]](https://katusaresearch.com/wp-content/uploads/2015/05/Cosmo-deposit.jpg)From the discussions with Doug and Blayne, 240,000 ounces per year of production is by no means a stretch and looking at Q1 2015 numbers, likely a reality given they produced nearly 60,000 ounces in the first quarter. Furthermore, the replenishment cost is only $80/ounce, which yields free cash flow down to $1050 gold.** [![Cosmo Geology]](https://katusaresearch.com/wp-content/uploads/2015/05/cosmo-deposit-2.jpg)[![Gold Production]](https://katusaresearch.com/wp-content/uploads/2015/05/CRK-au-prod.png)**The CRK team under Rod has done a fantastic job cutting costs and renegotiating with the labour unions. Most notably was renegotiating their southern power agreement down to 4.5 cents per kilowatt hour. Why is this important? Because power in the northern territory currently sells for 24-25 cents and with their power agreement coming up to renegotiation time soon, being able to drop these costs down would generate significant additional savings to overall production costs.[![Gold Production Cash Flow Model]](https://katusaresearch.com/wp-content/uploads/2015/05/10-year-PCFO-excel.png)**Currency Gift Horse:[![Net Present Value]](https://katusaresearch.com/wp-content/uploads/2015/05/NPV-Gold.png)** The Aussie dollar is a bit of a wild card. Given how bullish I am on the USD based on the global currency deflationary environment, pressure on the USD/AUD is very important. Think of it like this, gold is valued in USD and as such revenue is earned in USD, but the labour and operational costs at the mine are priced in Aussie dollars. Given low Aussie interest rates and the Reserve Bank of Australia’s appetite for cutting rates, this weakens the AUD against other currencies such as the USD. This currency differential opens up the door for improved margins. [![Currency Exchange on Cash Flow]](https://katusaresearch.com/wp-content/uploads/2015/05/Aussie-NPV-impact.png) **Crocodile – Aurico Free Cash Flow Sharing Agreement bought out. Fantastic for CRK ** **Initial terms:** Free cash flow sharing arrangement, which was established when Crocodile Gold acquired the Fosterville and Stawell Gold Mines from AuRico in 2012. Crocodile Gold was entitled to cumulative net free cash flow from those mines of up to C$60 million. AuRico would then be entitled to 100% of the next C$30 million in net free cash flow, after which Crocodile Gold and AuRico would share the next C$30 million of net free cash flow on a 50/50 basis until C$120 million of cumulative net free cash flow was achieved, following which AuRico would then be entitled to 20% on an ongoing basis. **Under the revised agreement,** which will be effective upon final approval, Crocodile Gold will pay AuRico C$20 million in cash on the effective date and will grant AuRico a net smelter return royalty of 2% from the Fosterville Gold Mine, also commencing the effective date, and a 1% royalty from the Stawell Gold Mine commencing January 1, 2016. **Conclusion:** Buying CRK.TO in the open market at current prices (CDN$0.32/share) is a 15% discount to the private placement, which has no warrants and a 4-month hold period. The risk is the deal falls apart, but I believe that risk is quite low. Doug, Blayne and other insiders have committed to investing CDN$8.5 million into the private placement. This is what the newco will look like post consolidation and after a rollback:[![Newmarket Gold post Consolidation]](https://katusaresearch.com/wp-content/uploads/2015/05/KR-Box.png) The arbitrage opportunity will slowly go away as management completes the transaction. I also believe that Rod and his team will prove to the market that they will reduce costs and improve production. That will result in a reweighting without the Aurico overhang, and on P/CFO, P/E, Mktcap/P+P, Mkt etc. metrics Management currently has sustainable +200K oz/year of gold production for years to come, and I believe management will find more assets like the ones from CRK to acquire. I am long CRK at an average entry price of CDN$0.32. --- # Exclusive Report – The Do’s and Don’ts of Fund Activism in the Resource Sector - URL: https://katusaresearch.com/exclusive-report-financial-activism-view-hedge-fund-manager/ - Type: article - Published: 2016-03-07 - Updated: 2020-02-20 - Author: Marin Katusa Financial Activism in the Canadian Resource Sector ac·tiv·ism: a doctrine or practice that emphasizes direct vigorous action, in support of or in opposition to one side of a controversial issue. Since the global financial crisis, no subsector of the hedge fund industry has experienced as much growth as the activist funds. In 2013, the activist funds totalled less than $12 billion in cash. Today, they have access to in excess of $100 billion, a growth of over 700% in 3 years. And the number of activist campaigns has risen significantly since the financial crisis of 2008. [![annual-activists-campaigns]](https://katusaresearch.com/wp-content/uploads/2016/03/annual-activists-campaigns.png) The goal of an activist fund is to have a direct and immediate impact upon the target company. It sets its sights on board seats, in order to influence management decisions, leading to either a shakeup or a total breakup and sale of the company. The end game for all activist funds, including my own, is to generate returns above the market average. With the US markets reaching frothy levels, many US activist funds ventured north of the border and entered the beaten-down, undervalued Canadian resource sector. It seemed like a good plan, as the valuations were attractive. However, the success of the activist funds in the US markets has not been replicated in Canadian resource sector. Moreover, financial activism in the Canadian public market resource sector has become a real cause for concern among all shareholders. The collapse of commodity prices has had a negative effect not only on producers but also, ironically, on the activist funds that have tried to take advantage of the situation. Many have themselves become distressed and even insolvent—utterly destroying shareholder value along the way. The reason: Most activist funds have very little specific resource operating experience. They convince themselves and their own investors that they themselves and the consultants they retain can create operating efficiencies that the existing management could not. More often than not, it’s a fool’s errand. I like to contrast this with what I call positive activism, in which activist funds bring both intellectual and financial capital to the table, to forge a working relationship with the existing board and management and thereby improve shareholder value. In this special report, I will present case studies that illustrate both outcomes. On the one hand, I’ll outline the issues that caused negative returns for the negative activist funds and the businesses they chose as hostile targets. On the other hand, I will also detail instances in which positive activism has worked, and explain why. My hope is that what you find here will serve as a useful future guide for activist funds entering the Canadian publicly-listed resource sector. --- Table of Contents Ch. 1: Activism in the Canadian Mining Sector Case Study I: Taseko & Raging River Capital Ch. 2: Activism in the Canadian Energy Sector Case Study I: Bellatrix Exploration & Orange Capital Case Study II: Rock Energy & Front Four Capital Case Study III: The Blackbird --- Ch. 1: Activism in the Canadian Mining Sector Case Study I: Destroying Value: Taseko & Raging River Capital The copper landscape has drastically changed in the last five years following a 50% decline in the mineral’s price. Share prices of all the copper producers and developers have dropped like a rock. The large fall in equity prices across the copper universe has attracted both positive and negative activist funds, and caused a good bit of confusion. In my opinion, it’s crucial for all shareholders of a company to cut through the fog, to understand what type of activist group is entering the company they own shares in. My first case study comparison between the negative and positive activist funds conveniently involves the same management group. Both are happening simultaneously. While only time will tell which approach is the more profitable one, the empirical data so far support the positive activist approach. Case Study I: Destroying Value – Taseko Mines Ltd. (TKO.TO) vs. Raging River Capital Taseko Mines is Canada’s second largest copper producer; it also has a few development stage projects. Taseko is an HDI associated company, and its main assets were those which were brought to the company under the auspices of Hunter Dickinson Inc. (“HDI”). Today its board is in the majority independent of HDI, and is remains affiliated with HDI but fundamentally operates under its own management team in all respects, utilizing HDI services when convenient and cost effective. Raging River Capital (RRC), which owns slightly above 5% of Taseko, was created by Henry Park, Mark Radzik and their team as an activist attempt to remove certain management and directors of Taseko who are related with the Hunter Dickenson group. Matthew Wood of Vertex One, which owns 3.92% of Taseko, has released a public statement in support of Raging River Capital’s initiatives. Raging River’s focus was on building that 5% position in Taseko because that’s the level necessary to generate enough voting shares to requisition a shareholder meeting. Under Canadian law, ownership above 5% allows those shareholders to requisition a meeting, and management and the board must abide by their request. I spoke to both Henry Park and Matthew Wood. They are intelligent and I enjoyed my conversations with both. However, neither has direct experience in the copper mining sector, and I do not believe the slate of directors proposed by Raging River Capital is in the best interest of the existing Taseko shareholders. Let me explain why. As of the press release dated February 18, 2016, it was announced that RRC owns over US$10M in par value bonds. Mathew Wood of Vertex One shared with me on a phone conversation that Vertex One owns Taseko bonds also. There becomes a clear conflict here for the shareholders as the bond holders are higher up the food chain than the equity shareholders. And both Raging River Capital and Vertex One have larger investments in debt than they do in equity, yet are trying to take control of the board of Taseko, where the shareholders vote, not the bond holders. I will get into more detail on this later, but first let’s take a closer look on the overall situation. ![mines-share-price] On January 13, 2016, Raging River Capital LP (RRC) requisitioned a shareholder meeting of Taseko Mines. RRC had publicly stated they own 5.1% of Taseko at a cost base of $0.43 per share. The fund received shares from two major shareholders, according to my conversation with Henry Park. It purchased 3% of its position from Geologic Resource Partners, managed by Taseko director George Ireland at the time, and the remaining 2.1% of its position from SailingStone Capital. SailingStone Capital is a sub agent advisor of the larger mutual fund, RS Investment Management, which holds an additional 10.4% in Taseko. ![share-price-table] Neither RS Investment nor SailingStone want to be seen as participants in negative activism as they most likely have pension fund money invested in their funds. Most pension funds in the US do not invest in activist funds because of the money from the Pension could be potentially used against their own company. That is the reason so many American mutual funds distance themselves from activist initiatives. ![taseko-mines] Then on February 3, 2016, Vertex One announced it would lend RRC its support, stating: *“should Raging River’s independent nominees be elected to Taseko’s board of directors, Vertex One would be supportive of Raging River’s plan to focus Taseko’s business strategy, evaluate the relationship with Hunter Dickinson and address Taseko’s balance sheet.* *“Strong corporate governance, accountability and alignment with shareholder interests have always been important to Vertex One. As such, Vertex One supports the replacement of incumbent directors Ronald Thiessen, Russell Hallbauer and Robert Dickinson with Raging River’s independent nominees Paul Blythe, Randy Davenport, Henry Park and Mark Radzik.”* There are 6 key statements to break down in Vertex One’s statement, and we will address each of them in turn: - Raging River Capital’s plan to focus on Taseko’s business strategy - Evaluate the relationship with Hunter Dickinson - Address Taseko’s balance sheet - Strong corporate governance - Accountability - Alignment with shareholder interests have always been important to Vertex One: But no mention of the Taseko bonds in either Vertex One or Raging River Capitals press releases. But first, let’s get a visual breakdown of when Vertex One bought Taseko stock. ![taseko-share-price] Vertex One Asset Management is located in Vancouver, and I’ve been on site visits with their key executives. I’ve always liked and respected the Vertex One group, but on this one, they are wrong. Let me explain why. **Raging River Capital’s focus on Taseko’s business strategy** The information that follows regarding Raging River Capital represents my understanding from my conversation with Henry Park. Raging River Capital has raised between $4.5 to 5 million, and invested about $3.5 million buying Taseko stock in order to bring RRC to the 5.1% ownership level. The remaining $1-1.5 million was raised to defray the costs of its attempt to execute on its initiatives. I asked Henry if he bought any bonds and he said no. So perhaps they bought the bonds after my conversation. Clearly the amount he mentioned that Raging River raised was for Taseko Equity, and they bought over twice as much in bonds as they did in stock. In Raging River Capital (RRC) Henry Park invested $1M, Paul Blythe invested $750,000, and Randy Davenport invested $250,000 according to Henry. I wasn’t told who the other shareholders were. Jonathan Lee, who used to work for George Ireland’s Geologic Resource Partners Fund LLC is now in some way associated with Raging River Capital. George Ireland has been on Taseko’s board since July 7th, 2014, and on February 25, 2016 George Ireland resigned as a director of Taseko. Per my conversation with Henry Park, Geologic Resource Partners (George Ireland’s fund) sold 5.9 million shares of Taseko stock to Raging River Capital while George Ireland was a director of Taskeo. This represented 50% of George Ireland’s Geologic Resource Partners holding in Taseko. Henry also mentioned his major dissatisfaction with Taseko buying out Curis, which was another Hunter Dickinson affiliated company. He said he really didn’t like the Curis deal. But I pointed out to Henry that none of the independent board members of Taseko, including George Ireland—all of whom voted unanimously in favor of Taseko buying Curis—were targets of his proposed changes. Raging River Capital’s original stance would have had more pull with me if they went after the independent directors who were directly responsible for voting for the Curis deal. Henry stated to me that George Ireland wasn’t on the board at the time. I had to correct Henry and point out to Henry that George Ireland was in fact on the board, and that the approval of the Curis transaction on the Taseko Board was unanimous. I pulled up the exact dates during our conversation, and confirmed that information. Raging River Capital wants to remove Russ Hallbauer (President & CEO of Taseko), Ron Thiessen (Chairman of the Board and Director) and Robert Dickinson (Director), and replace those three with four of its own nominees: Paul Blythe, Randy Davenport, Henry Park and Mark Radzik. It’s significant that Raging River wanted to remove three directors but add four, because there was a direct link between RRC and George Ireland, yet there is no mention of this linkage. If RRC succeeded before George Ireland resigned from the board, that would have brought 5 of the 9 board seats under its Raging River’s influence, giving the company board control for less than 6% of the outstanding shares of the company. But with George Ireland resigning from the board, at most, if RRC is successful will have four board seats under its influence, and the board of Taseko will be at a stalemate. This is assuming Taseko will appoint a director to replace George Ireland. However, Taseko announced that it is adding two board seats, so it appears to me that even if Raging River is successful in getting its 4 nominees on the board, it will not have enough influence on the board to control the board. However this is where the bond investment becomes interesting. If RRC undertakes initiatives, which denigrate equity values but enhance bond values, then there is a definite conflict. Given they’ve likely bought the bonds at 50-60% of face value this could easily increase in value with a few steps such as asset sales. I believe that under the terms of the bond indentures any proceeds of asset sales may have to be paid to bond holders first at full face value; a 100% return on investment. Not a bad return on investment. One must give all due credit to Henry Park and the crew at RRC for attempting to seize control of Canada’s second largest copper producer for a mere $3.5 million in equity investment. Raging River Capital needed SailingStone’s vote, and from my conversations with Henry Park, what I gathered, they believed they would have SailingStone’s vote. On Friday February 25th after market hours, SailingStone filed a 13D form stating that they will vote for Taseko management and not with Raging River Capital. This is definitely bad news for Raging River. I earlier stated that SailingStone owns 10.44% of Taseko. I believe SailingStone made the correct decision. I’ll get to Raging River’s nominees in a moment, but first, here are the current board members RRC proposes to replace: Russ Hallbauer, Ron Thiessen and Robert Dickinson. During the Taseko takeover of Curis Resources; Hallbauer, Thiessen and Dickinson were all on the Taseko board, and all three are considered related parties with both companies by virtue of their positions in Hunter Dickinson Inc. The three did not vote on the issue for either Taseko or Curis, as there was a clear conflict of interest. That was the kind of situation where the independent directors on any board must be relied upon. And those independents on the Taseko board unanimously voted in favour of taking over Curis. Among them, remember, was George Ireland. I will restate here for emphasis that Jonathan Lee, who is working with Henry Park of Raging River Capital used to work for George Ireland. Whether they want to admit it or not, on my phone conversation with henry Park, he did state that George Ireland knew of Raging River’s intention, as he sold a lot of his funds stock to Raging River. Which raises an interesting question: If, as Henry said, the takeover of Curis Resources was such a bad deal, then why is Raging River not looking to remove any of the independent directors who voted unanimously in favour of it? Specifically, like George Ireland before he resigned. Also, I will get to George Ireland resigning later. It certainly looks as though he was the key to RRC’s activist plan, and that went awry after George Ireland’s resignation and with SailingStone deciding to vote with Taseko management. With George not on the board, Raging River would not be able to assume control, even if it’s successful in seating its own four appointees at the table. ***Before I continue, just let me add this disclaimer: I have no involvement in Taseko whatsoever. I am not a shareholder in the company, nor do I own any of their debt. Neither I nor anyone in my office who works for me is employed or compensated by Taseko. I have been asked by many investors what my thoughts on the situation was as I have experience on both financing mining companies and on operations. This report is an answer to all those who want to know my thoughts. I am voicing an independent opinion for all the existing shareholders of Taseko, as someone who understands the complexities of operating a BC copper porphyry mine. If there are any errors in my assessment, please send me a note at subscribers@katusaresearch.com and I will do my best to correct my assessment. This analysis is based on the best information I could find from my discussions with Matt Wood and Henry Park and all public documents.*** I am a neutral third party in that sense. But that doesn’t mean I’m disinterested. This industry is my life. So what I would also like to do is provide a voice for the thousands of Canadians working across our country’s operating mines. Everybody is aware of the harsh realities within the current commodity complex. Over 70,000 high-paying oil jobs were lost over the last 18 months in Alberta. The women and men working at the mines understand this. They are trying their best to do what they can, and what is asked of them, to help improve production and reduce costs, without putting any workers at risk. But there was a significant piece of information missing from both Vertex One and Raging River Capitals announcements that bothered me: The stellar safety record of Taseko at their Gibraltar Mine. It should have been discussed. The top priority of all management teams of operating mines is the safety of the men and women who work the mines. The operating mines in Canada have the top safety record in the whole world. That is something we Canadians should be proud of and continue to improve upon, and be a global leader on. As there is nothing more important than the safety of our people at all operations. And finally, I want to make it very clear that what my comments below I discussed with Henry Park, as I did about George Ireland being on the board and approving the Curis transaction. **The Requisition:** Raging River’s first target has been the ongoing relationship between Taseko and Hunter Dickinson Inc. (HDI). The fund alleges that HDI board and executive members of Taseko are unfairly influencing Taseko operations. They further claim that the services fees received by HDI from Taseko have improperly siphoned $25 million from the company in the last 4 years. They also maintain that HDI’s 2.6% position in Taseko is not large enough for them to have such influence over the company. In the case of HDI related or affiliated companies it’s the principals like Hallbauer Thiessen and Dickinson (there are 3 others Snyman, Cousens and Copeland) who own the shares in their personal capacity. I believe there is misrepresentation regarding HDI’s role in Taseko. Taseko is not managed by HDI. The reality is that HDI is a service provider. This service agreement can be scrutinized by the independent board which is made up of non HDI individuals, such as George Ireland while he was on the board. If the “service agreement” between HDI and Taseko is not at fair market prices, it is the responsibility of the independent board to revaluate such an agreement. Let me break down the numbers and differentiate between ‘number spinning’ and ‘factual numbers’. Raging River has planned to target three existing board members. All of them—Robert Dickinson and Ronald Thiessen and Russ Hallbauer—also work for HDI. Hallbauer is also Taseko’s President and CEO. ![directors] Before joining Hunter Dickinson, Russ Hallbauer was one of the top mining executives at Teck Resources (Canada’s largest miner) and was the Chairman of the JV committee on both Highland Valley and Antimina. At the time, Highland Valley was a JV between Teck and BHP, and today it is owned by Teck and is Canada’s largest operating copper mine. After coming to Taseko, Hallbauer and his team more than doubled the production at Gibraltar, Taseko’s producing copper mine in BC. Russ’s specialty is open pit, low-grade BC porphyries. That’s exactly what Gibraltar is, a porphyry averaging about 0.28% Cu grade. Because BC copper porphyries are low grade and bulk tonnage operations, they are difficult to manage. They require an experienced, very specific skill set. Which is what Russ and his team have. And do not underestimate Ron Thiessen’s financial ability and his foresight and Bob Dickinson’s geological ability (recall, Bob Dickinson is in the Canadian Hall of Fame of Mining). This is probably a good time to remind my readers that Ron Thiessen and Bob Dickinson were the driving force of Taseko’s acquisition of the Gibraltar mine. Boliden Mines which controlled Gibraltar through their takeover of Westmin Mines in 1996, shut down mining operations at Gibraltar at the end of 1998. Ron Thiessen had been negotiating with Boliden through the better part of 1998, on a transaction to acquire the Gibraltar mine as opposed to a shut down and reclamation. During the early part of 1999 Ron Thiessen on behalf of Taseko finalized the transaction which saw Taseko buy Gibraltar on July 19, 1999. But it wasn’t how much Taseko paid for the project that was impressive, it was how much Boliden Paid Taseko to take the mine. Boliden had a $17 million environmental bond in good standing with the BC government. Boliden transferred the full $17 million bond to Taseko, and then sold all the Gibraltar asset to Taseko for $1. Yes, you read that right as in one dollar. In addition to the Bond transfer, Ron was able to convince Boliden to invest $17 million cash in a 0% Coupon, with an out of the money Convertible Debenture (initial conversion was over 100% premium to the then Taseko share price, with annual fixed percentage escalation). At the time of the transaction, copper was trading at $0.62 per pound, and Gibraltar was showing only 4 years of reserves if copper was priced at $0.85. Bob Dickinson was adamant the resource was much larger than Boliden thought it was and Ron Thiessen structured a deal which essentially created Taseko into what it was today; 85,000 tpd open pit operation producing 145 million pounds of Cu in concentrates and a reserve life of +25 years. For $1, Taseko shareholders received one of the best copper projects in Canada. Ron was also able to restructure the $17 million bond with the government into a Reclamation Trust, and so these funds were actually then turned over to Taseko’s treasury. In addition when the mine was restarted in 2004, Ron and HDI structured a very unique Royalty for $16 million to Taseko, zero share dilution to the company and the royalty payments were funded from tax saving from Taseko’s historical tax pools. Ron Thiessen is an accountant whose whole career has been working within the mining sector. Without Ron Thiessen and Bob Dickinson, there would be no Gibraltar today in Taseko. This was one of the greatest deals ever structured in the mining industry. The only other one I know of that was similar was the one Jim O’Rourke structured with Newmont in the 1990’s to take over the Princeton mine. But Ron Thiessen knew to make Gibraltar a massive success for Taseko shareholders he needed an operator with the right skill set and testicular fortitude to get the job done. Ron Thiessen will tell you himself that the biggest achievement by far for Taseko was when he and Bob Dickinson were able to convince Russ Hallbauer to leave Teck where he was a senior VP, and come and take the helm of Taseko (a relative high risk junior at the time) to build an operating and development team to rebuild Gibraltar into the mine it is today. Russ put together one of the best open pit-low grade mine development and operating teams certainly in Canada if not North America. Like every operating management team, Russ Hallbauer and his colleagues have attempted to implement various cost-cutting measures without sacrificing the future mine production plan. To think that a new group can come in, and with the help of a few armchair analysts, make improvements to operations and reduce copper production costs is a farfetched dream to say the least. Above you see the guys who have been instrumental in building Taseko into Canada’s second largest copper producer. So who does RRC propose to replace them with? Here’s the list: ![nominees] That’s three new directors with no direct low grade BC copper porphyry mining experience. As should be evident, this plan lacks logic, and is bad for shareholder value. It’s hard to look at it and not think that RRC is chasing short-term solutions to a much larger, industry-wide problem that stretches a ways into the future: low metals prices. **The Would be CEO** Now, under Raging River’s proposal, Paul Blythe (currently not operating any mines and I was told was retired) would take control as CEO and assist in mine operations at Gibraltar, based on his experience in selling Quadra FNX Mining to the Polish conglomerate, KGHM, for $2.8 billion. Paul is a metallurgist, not a mine operator. Proposing that a metallurgist who hasn’t been involved in a BC operation or mine in over 20 years has the hands on understanding of the specific issues at hand and the ability to make mine operations more efficient and enhance shareholder value is a stretch. Let’s take a look at some of the specific mine operations of Paul Blythe’s track record that are not mentioned on his CV. Let’s look into Quadra’s Operational performance on their flagship copper mine in Nevada, the Robinson Mine which had struggled to perform to expectations. It was expected that copper production at Robinson would exceed 105 million pounds in 2011, but that was revised as Quadra FNX again after missing their targets. Mining is not easy, but I state this to show that on the sale of Quadra-FNX was a success for their shareholder, it has not been a success for their acquirer. Once acquired by Polish mining giant KGHM, the mine operations did improve, but never reached the original targets Paul Blythe and his team stated. ![robinson-copper-mine] KGHM was able to create operational efficiencies within the mine to bring costs down 20%. This was after Quadra had inflated costs by 100%. ![robinson-copper-mines-costs] Focusing in on Quadra’s flagship Robinson mine leaves me to ask more questions about Paul Blythe’s operational ability. So, I dug a bit further to look into the performance of two mines, Carlota in Arizona, USA and Franke mine in Chile. Let’s start with Carlota. This was a complete disaster, producing nowhere near what was expected, and this was because of development/operational issues. Carlota production was based on the solvent-extraction/ electro-winning (SX/EW) method. The ore is usually loaded into large haulage trucks and subsequently transported to the heap leach pad for conveyor stacking in fifteen foot (5 meter) lifts. Mining failed and reclamation of the mine started within five years of operations. I believe the mine failed because of operational errors with the dumps. The Carlota mine experienced what is known as “frozen dumps” where the solvent solutions needed to mobilize the copper minerals failed to penetrate the heaps due to over compaction of the heaps/dumps. This was attributable to the mine developer deciding to build the dumps entirely with truck haulage instead of using conveyor stacking. This was occurring under Paul Blythe’s watch. Another failure in my mind was the Franke mine. When I brought this up to Henry, we disagreed on this topic, but the fact is the Franke mine was a very high acid consumer. Franke was also an SX/EW heap leach project, but the amount of acid the ore consumed per unit of copper produced has made the project uneconomic from a recovery of investment standpoint. The Franke Porject was acquired by Quadra when it took over Centanario in 2009, even then it was known as a very high acid consumer. The Franke mine has never lived up to its original projections or subsequent projections by the Quadra team. In my estimation however it has lived up to its original nomenclature; Franke is short for the Frankenstien as it was originally known as the Frankenstein Project. Looks like the acid consumption was never under control. In any event these are the only 2 mines to my knowledge that were actually developed by Paul Blythe or at least under his management (he was CEO), and neither have worked financially; returned their capital and a return on capital. Paul Blythe and the team at Quadra FNX did capitalize on the window in 2010 and sold their company to the polish copper giant KGHM for over $2 billion. Paul Blythe and his team deserve credit for returning significant gains on the share price on the sale of Quadra-FNX. The purchase has not worked out well for KGHM. It was announced on Monday, Feb 22nd, 2016 that KGHM is being audited by the Polish government’s treasury. Essentially the Polish treasury is carrying out the audit of the acquisition of the Sierra Gorda copper-moly project it acquired from Quadra-FNX. The Polish ministry is “critically evaluating” the Sierra Gorda acquisition and other overseas purchases undertaken by entities owned by the Polish state. KGHM now will have to write down the purchased assets. The production has not been able to meet production nor cost guidance, and with the decrease in commodity prices, KGHM announced that it will write down the carrying value of the assets in its upcoming financial results. But, in the resource sector it is a team, not just one man that creates a success, In my opinion, Raging River would have a much stronger argument if William “Bill” Myckatyn agreed to join Paul Blythe in this battle. William “Bill” Myckatyn was co-founder and CEO of Quadra FNX along with Paul Blythe. Mr. Myckatyn is a professional engineer (P.Eng.) with 35 years of technical and management experience in mine financing, development and operations. After Quadra’s purchase of the Robinson mine from BHP for $14 million, the company re-started the mine in 2005. Mr. Myckatyn had the operational expertise to produce 126 million pounds of copper and 81,000 ounces of gold from the Robinson mine at the end of 2005. Before Quadra, Mr. Myckatyn worked at the Huckleberry open-pit copper mine in BC. He was also the mine manager and CEO of Gibraltar Mines (1991-1997), whose flagship project belongs to Taseko as of 1998. Mr. Myckatyn would have been a better candidate to pick a fight with Taseko, but the two together would have been a much better argument. Has anyone thought, ***“Geez, why isn’t Bill joining his former partner in this activist battle?”.*** Not a single media journalist or interviewer has asked this question, so I am going to. Maybe it’s because he knows RRC can’t do it? Maybe he doesn’t have the fight in him? Maybe he is happy being retired from mining and would rather not take on a full time job at this stage of his life. Maybe he knows the existing Taseko team led by Russ Hallbauer are the best operators for the job. I don’t know, as I haven’t asked Bill myself. But I do find it interesting that he isn’t involved. Ok, now what about those HDI service fees that RRC complains are unreasonable? **HDI and Taseko fees since 2011:** ![taseko-hdi-fee] Did you need your magnifying glass to spot the small sliver of costs per pound attributed to HDI fees? It must also be mentioned that these service costs also cover G&A costs from within Taseko. The HDI and Taseko G&A fees amount to $0.014 ($CAD 0.02) per pound of copper produced by Taseko. If you eliminated HDI services, TKO will have to get these services elsewhere, and I think that would result in higher costs to Taseko shareholders, not lower—as these services are not easily outsourced. Many of the fees are passed through such as rent insurance employee benefits. Also, costs overall will go up for TKO as they will not get the economies of scale by being affiliated with HDI and in some instances they will have to bring on full time staff to do jobs they currently outsource to HDI. This is actually at or below the peer group comparable, something both Vertex One and Raging River Capital did not mention in their public releases. It’s a great catchy media tagline to say you can reduce costs by doing this and that, but one must really develop an overall perspective on what that means. The above bar graph explains it well. Also as I understand it, many of these HDI costs are simply pass through costs or services, like rent, taxes, insurance, employee benefits on which no mark ups exist; Taseko is simply taking advantage of scale in conjunction with HDI to reduce their overhead costs. HDI is one of the most successful exploration and development groups in the Canadian resource sector and Taseko has access to their core competencies at costs which are more than competitive to other consultants and advisors. Again, the Audit Committee of Taseko must review these related party (HDI) costs each year and approved them (see the notes to Taseko Financial Statement), and only independent directors sit on the Audit Committee which has included George Ireland before he resigned. Also the HDI services agreement is pretty innocuous, and can be found in Taseko’s SEDAR filings; there are no guarantees or commitments, it’s a one way agreement; if Taseko wants to use a service they ask for it. HDI does not have a lock up agreement, force or push any services or costs on Taseko. Raging River Capital promises that they can cut an additional $8 million in costs from corporate overhead and spending on projects in Arizona and Northeast BC, thereby saving the company another $0.03 per pound of copper produced. But, can they deliver; where is their plan? Russ and his team are on site. They have proven they know how to develop, build and operate a mine. Why should we believe that someone from the outside would have a better understanding of where the possibility for cost reductions would be, rather than the ones who lives and breathe the day to day operations? If the plan is to cut out the HDI service costs, one must know that Taseko will have to obtain and pay for those services elsewhere. So, when I phoned Russ Hallbauer for a comment on this, he told me that his team has been reducing costs without sacrificing employee safety and without hindering any production efficiencies. Russ states that Taseko has reduced costs by $40 million, 500% more than what Raging River Capital intends on doing. Mining Economics – British Columbia, Canada Russell Hallbauer has succeeded at operating one of the best run open-pit copper deposits in BC. He will join the likes of his father, Bob Hallbauer, his partner Bob Dickinson, and friend Jim O’Rourke in the Canadian Hall of Fame mining sector. Let me just add a few more words about Russ’ botched BNN interview. First off, he shouldn’t have done the interview, as I am assuming the lawyers didn’t want him to say much of anything. Russ was in remote Vancouver studio and the interviewer was in Toronto all happening live. I’ve sat in the same CTV studios countless of times. And I am not making excuses for Russ but it’s an awkward process as you are in a dark room, with an ear piece, which might I add is tough to hear through and told to talk to the camera. I’ve done intense media training before the launch of my New York Times Bestseller ‘The Colder War’, and I don’t expect a mining executive to shine on camera, no more than I expect an NHL hockey player to have an eloquent and thought provoking post-game interview. Under Mr. Hallbauer, the Gibraltar mine has become one of the lowest cost major copper producers in BC and has seen cost reductions of 35%. Because of low moly prices, the moly circuit at Gibraltar is not operating. But if Moly prices do come back (which one day they will) that will result in additional cash flow. ![copper-mines-in-bc] Mr. Hallbauer has been a part of the operational oversight of two of the largest mines in BC. As noted earlier, he was the Chairman of joint venture committee for the largest copper mine in Canada: the Highland Valley copper mine in 2002. He is now shouldering the responsibility of keeping the Gibraltar mine one of the most efficient and cost-effective in a depressed copper market. It would be very difficult to explain to the employees and operation managers at Gibraltar that a mining veteran, Russell Hallbauer, who has built the company into what it is today, is leaving the company to make way for a retired metallurgist, Paul Blythe, whose last hands on site visit was in the 80’s. Mining is a tough business, and these miners have worked under Mr. Hallbauer for over a decade; loyalty and respect is a very hard bond to break, especially when the threat comes from an opportunistic corporate raider. Like operational managers at the Gibraltar mine, Canadian resource investors value a commitment to success and creation of sustainable value. In this depressed market a quick board shake-up is not going to add to sustainable value. Taseko’s commitment to being one of the lowest-cost producers of copper in BC—and having the experience to battle through a tough market—has built a reservoir of goodwill that probably won’t be realized until the market turns for the better after being held back for four years. Chapter 2: Activism in the Canadian Energy Sector The Canadian oil sector, like its shale peers to the south, underwent monumental growth from 2010 to 2014. In similar fashion to its US counterparts, share prices and cash flows have since cratered. Creating new value for shareholders from existing assets has become a common theme in the energy sector, primarily used as a tool to generate cash without dilution. Activists have flocked to the Canadian energy sector, but with limited success. There’s even a term for it: “spreadsheet activism,” meaning deal flow in the sector that looks good on paper, but in reality will never work. Case Study I: Bellatrix Exploration & Orange Capital Bellatrix Exploration is a mid-tier gas producer that underwent a siege of continuous buying from activist group Orange Capital, run by Daniel Lewis. Orange Cap’s investment thesis for Bellatrix involved increasing shareholder value without diluting the existing shareholders, and Lewis’s plan to achieve this was to capture board seats, push for debt issuance rather than equity, and unlock additional value through midstream asset sales. [![Orange Capital Position in Bellatrix]](https://katusaresearch.com/wp-content/uploads/2016/03/Orange-Capital-Position-in-Bellatrix-1.png) While Orange Capital were confident in their ability to turn a profit in an oil and gas company, no founding partner of Orange Capital had the necessary expertise to run an operating Canadian oil and gas company. The majority of their intellectual capital came from Lewis’s time spent in special situations and distressed debt at Citigroup. Their shortcomings were further illustrated by Orange Capital’s 13-F filings at the time, which were mainly composed of REITs and investments within the technology space. The demise of Orange Capital’s activist stake in Bellatrix stemmed from a basic misunderstanding of the Canadian gas markets—including the value of NGLs in the Canadian gas stream and their impact upon BXE cash flows—and the vital importance of vertical integration within the Canadian natural gas sector. Failure to understand Canadian Gas The Canadian natural gas industry is not like its US peers. It simply cannot compete with the Marcellus and Utica shales when it comes to gross production or new productivity per well. Production is not even a growing industry, due to transportation issues and the poor economics associated with LNG exports from Canada. At well under 1Bcf per day, Alberta’s natural gas output is dwarfed by the likes of the Marcellus (15.2 Bcf/d). Furthermore, Dominion North/South sells for $1.40/mcf, whereas Alberta’s AECO trades for $1.45, and going lower in my opinion. The ability to breakeven at $1.45 or lower shows how far ahead of Canada the Americans are. The Marcellus and Utica formations are a nightmare for Canadian natural gas producers. [![Nat Gas Production Marcellus v Alberta]](https://katusaresearch.com/wp-content/uploads/2016/03/Nat-Gas-Production-Marcellus-v-Alberta.png) In addition, the lack of competitiveness in Canada relative to the United States is evident when well outputs are compared across each basin. The productivity per new well has peaked in the Alberta formations, whereas in the US producers are continually squeezing extra gas out of the shales. [![New well productivity per rig]](https://katusaresearch.com/wp-content/uploads/2016/03/New-well-productivity-per-rig.png) Hidden costs, not hidden value An activist’s worst-case scenario should always include the ability to fall back onto a cheap valuation, thus limiting downside risk for the fund in question. Multi-stack formations are a quality way to achieve this. Value is unlocked when each layer of the shale play is delineated, increasing the company’s proven reserve base. This is exemplified across well-known formations such as the Permian, and in the Canadian WCSB where Bellatrix is located. Ideally, the fallback for the E&P activist would involve being able to unlock value through formations that have not been aggressively drilled, and which the market has heavily discounted. The exact opposite is true in the case of Bellatrix. Non-core operations are completely uneconomic; there is $0 in value add for the Duvernay acreage. At a development cost of $11 million, new wells can’t be drilled profitably. In fact, they would still be only borderline at $80+ per barrel oil during that time frame—but with time and enough experience and data, will decrease. Further due diligence reveals that the situation is actually worse, because even Bellatrix’s core acreage is uneconomic at current prices. For every Mcfe that comes out of the wellhead, Bellatrix loses $0.05. The pricing environment of NGLs in Canada were frothy and most failed to read the fine print on Bellatrix’s investor presentation, which vastly overstates the present NGL pricing environment: The NGL market in Canada continues to be oversupplied and has succumbed to the same pricing pressure as oil and gas. The big catalyst for the Canadian NGL market was the Oil Sands’ heavy reliance upon condensate as a diluent. However, as a result of poor bitumen prices and high capex, demand for condensate is now minimal. Lighter NGLs such as ethane are not even removed from the gas stream at fractionation facilities as the cost to remove them is higher than the market price—a phenomenon known as “ethane rejection.” [![NGL prices 032016]](https://katusaresearch.com/wp-content/uploads/2016/03/NGL-prices-032016.png) Value destruction, not addition Spinning off midstream assets has become a common tactic used by E&Ps to create cash without dilution or debt issuance. Pioneer Resources best exemplifies this value unlock, selling their EFS midstream assets for $1.3 billion. Similarly, there were individuals that believed Bellatrix’s midstream assets would be better sold off or spun into a new company, rather than retained within BXE. Bellatrix has invested $300 million into infrastructure assets, which in the first quarter of operation lowered transport and opex costs by 14% compared to the previous sequential quarter. The company’s deep-cut natural gas processing facility vertically integrates Bellatrix and allows it to bypass 3rd party midstream operators. If BXE sold these assets to a 3rd party, the cost reductions would be erased. On a per well basis, this 14% or $.20/Mcfe translates to a PV of $1 million in cost savings over the lifetime of the well. Additionally, third-party revenue for the midstream infrastructure business brings in approximately C$12 million per annum. If Bellatrix had substantial excess capacity that it utilized to process 3rd party gas then a SpinCo would be a viable option. However, as evidenced by their $12 million in annual 3rd party processing revenue, this is not worth the effort. [![well prod vs cost savings 032016]](https://katusaresearch.com/wp-content/uploads/2016/03/well-prod-vs-cost-savings-032016.png)The cost savings associated with the midstream assets are too high to give up. In a tough market environment, Bellatrix cannot afford additional margin squeezes that would come from paying a 3rd party gas facility. Furthermore, the supply of for-sale midstream assets is likely to increase as other companies are pushed to selling off infrastructure to increase their liquidity position, further driving down asset values. So an outright sale has to be off the table. Spreadsheet Activism—What Not to Do Orange Capital investment in Bellatrix did not work out. Lewis and his management team tried to enter a market which had its main commodity price slaughtered. Orange Capital has recently closed their fund and according to Bloomberg’s insider ownership, they still own 30,000,000 shares of BXE. Furthermore, as a testament to their lack of success Daniel Lewis has resigned from the Bellatrix board. Case Study II: Rock Energy & Front Four Capital Rock Energy is a Canadian heavy oil producer, in which Connecticut-based Front Four Capital has acquired an 18% stake. Hedge fund manager Zac George is taking an activist approach to the Canadian energy sector, which he should know extremely well given that his father was the founder of a $45 billion market cap major integrated producer, Suncor. George prides himself on being a value investor along with an activist approach. His 18% stake in Rock Energy has provided Front Four the opportunity to attain three board seats as a step toward facilitating an outright sale. So far so good. This is not new territory for Front Four. It attempted a similar activist-style shakeup at Renegade Petroleum in August 2013. With a brash sense of urgency, Front Four rejected the two offered board seats in the face of Renegade management, which began a saga of PR madness for both sides. The end result for Front Four was a loss at the special voters meeting to elect a new board. But, fortunately for George and his fund, Renegade sold itself without the activist’s assistance, netting Front Four a 40% gain. [![FrontFour position in RockEnergy]](https://katusaresearch.com/wp-content/uploads/2016/03/FrontFour-position-in-RockEnergy.png) Rock Energy to this day has not been acquired and in these difficult sector conditions Front Four Capital may be the only one who still sees value in a small heavy oil producer. Front Four has missed the market window to sell Rock Energy and experience the gains as they did with Renegade Petroleum. The economics of the Canadian heavy oil market has changed drastically and the pipeline issues surrounding heavy oil have resulted in a significant decrease in the Rock Energy share price. Lastly, the elephant in the room is Rock’s credit facility. It is well over 80% drawn. Further constricting funds, the Alberta Trust Bank rescinded their offer for a second credit line of $75 million. Failure to understand the WCS marketplace All Canadian oil trades at a discount to its southern benchmark—West Texas Intermediate (WTI)—for a couple of reasons. First, there is the quality difference in API between Canadian oil and WTI. API, or American Petroleum Institute gravity, is a measure of how heavy or light a petroleum liquid is compared to water. Specifically, the heavy crude which Rock produces has an API of 14o, compared to the WTI API of 39.6o and the standard Western Canadian Select (WCS) benchmark of 19o-22o. Second, there is a lack of infrastructure and pipeline capacity. This combination of lower quality and lack of takeaway capacity forces Canadian companies to take a discount to WTI in order to remain competitive. That includes Rock Energy’s crude, along with the benchmark WCS. If it wasn’t for the weak Canadian currency relative to the US dollar, many of the heavy oil producers would have gone bust last year. [![CDN Oil Prices WTI WCS]](https://katusaresearch.com/wp-content/uploads/2016/03/CDN-Oil-Prices-WTI-WCS.png) Heavy oil is a big boy’s game, because margins are smaller on a per well basis; quantity rather than quality has to make up the difference. The only successful heavy oil producers in the Canadian energy sector are multi-billion dollar operations with massive running room and infrastructure. No hidden value to unlock Rock Energy is a relatively young company with no midstream assets that can be unwound into a new investment vehicle to create value for shareholders at current oil prices. Without midstream to fall back on, Rock and Front Four must find a way to unlock value using their existing acreage. This could be attained through exploration drilling on their heavy and light oil properties. But in the current depressed market, exploration drilling is rare. It’s only minimally carried out by mid-tier and major E&Ps who can afford to spend money on exploration. Obtaining the funds for this activity will either result in significant dilution or have to come via a debt financing as Rock’s credit facility is nearly 100% drawn and all cash generated from operations will have to go towards existing production. Either route will decrease existing shareholder value. On a half cycle basis, their heavy oil assets will not generate positive free cash flow at current prices, which means no new value can be unlocked in the current environment. Rock’s Viking assets are the best chance for prolonging its survival under current conditions. However, breakeven point is $40-45 on a full cycle basis. Using current prices below, their wells do not come close to covering full cycle costs. This is a major reason why the Alberta Trust Bank rescinded their credit facility offering. Front Four’s current cost basis is approximately $2.95, which bodes poorly for a profitable sale in our low price energy environment. Furthermore, with minimal room on their credit facility, Rock has limited ability to create any new shareholder value. As a result, Rock—like the majority of unhedged small producers—is entirely at the mercy of market conditions. And that’s not good. Positive Activism in the Canadian Oil patch: Blackbird Energy BBI.VN Back in 2013, I became a major shareholder of Garth Braun’s Blackbird Energy (BBI.VN). My geologists spent considerable amount of time going through the information. After many meetings, Garth Braun and I were on the same page so I decided to become a cornerstone investor. I shared my vision with Garth. I didn’t like Blackbird’s Big Stone asset, and wasn’t particularly excited about the Montario project which was supposed to be a “Rock Energy Look alike”. But I was very excited about the potential of Blackbird’s Montney play. I wanted Garth to sell the Bigstone asset and focus on making the flagship project the liquid rich Elmworth in the Montney. Not only did Garth sell the Bigstone for more than I expected, he did everything he said he would. The investment was +400% gain, and one I am looking to re-establish a large position when the opportunity arises. Blackbird Energy’s last well is a testament to incorporating innovation and the best technology to reduce costs and increase production. Blackbird announced a 1,768 boe/d well (36% liquids; with 94bbl/mmcf) last week, and **the well results basically doubled all analyst expectations**. This is what a world class well looks like in Canada. The company has no debt (rare for any Canadian oil company in today’s environment), and has built a dominant land position in the Montney with 75 net sections of land. To survive a low priced oil market, management teams will have to innovate to deliver results. Blackbird Energy Inc. has made significant advancements in validating their dominant land position by using state of the art technology. Blackbird was able to deliver world class results by executing on a 70 stage energized frac using 20,000 m3 of CO2 and water while using 2,200 tonnes of proppant. This is what a world-class frac looks like. That is exactly what the oil companies in both Canada and the US will have to do to survive this horrible oil market…. Bring innovation and exceed expectations. – Marin Katusa --- # We’ve Just Seen The Hottest 55 Days of Any Year in This Sector - URL: https://katusaresearch.com/weve-just-seen-the-hottest-55-days-of-any-year-in-this-sector/ - Type: article - Published: 2016-02-29 - Updated: 2019-05-08 - Author: Marin Katusa There is money for resources on the sidelines. A lot of it. It’s been sitting there for a while, and now it’s coming in. In fact, the first 55 days of 2016 have already seen almost 50% of the capital raised in the mining sector during all of 2015. With resource majors like Freeport McMoRan up over 120% in less than 5 weeks, Barrick Gold Corp up over 75% and Kinross Gold Corp up 50%, investors are itching to get money into this gold market. For the last few weeks, I’ve been receiving at least six calls or emails per day from bankers, inquiring about potential Private Placements and bought deals. I have not seen this level of interest since the market top of 2011. In fact, 2016 has seen 50% more financings for the Canadian publicly-listed **miners than 2013 and 2014 combined **during the first two months of the year. ![JanFeb Capital Raised on TSX and TSX-V] ![TSX & TSX-V capital raised annually] What does it mean? A few things. First off, with (NIRP) Negative Interest Rate Policy becoming a harsh reality for most of the developed world, a tax on wealth and savers is happening now. ![2yr neg yields 2016] Thirty-five percent of the EU nations have negative interest rates. The other 65% are basket cases. This trend will only get worse. Meanwhile, many media pundits and newsletter writers are calling out the Fed’s ability and intelligence in a NIRP world. Sorry to pop your bubble, but the fed hires smart people. The writers who bash Yellen and all the other central bankers couldn’t last a week at the fed. So ignore the cattle calls from the cheap seats in our sector. Focus on the facts. So what’s a smart speculator to do? Gold is one of the few places where you can allocate money for the purpose of capital preservation and the hope of some return via price appreciation. Though there is a large group in the market who disagree and believe gold is still a negative carry and has down side risk. A negative carry is what happens when holding an asset costs you more money every year than you gain from it. So for example, if you hold gold bars, then you need to pay for the storage and safety of your asset while those bars don’t pay you anything in return, like interest or dividends. That’s called a negative carry. But what the pundits don’t understand is, with the currency depreciation around the world, gold has been the safest form of money to be in. Gold is now up in every global currency. This is a bullish sign. [![Gold Price Various Currencies 2016]](https://katusaresearch.com/wp-content/uploads/2016/02/Gold-Price-Various-Currencies-2016.png) [![Gold Return 2016 %]](https://katusaresearch.com/wp-content/uploads/2016/02/Gold-Return-2016-.png)The world is waking up to the fact that gold may be the best insurance plan at a time of universal currency depreciations. Thus it’s no surprise that, so far in 2016, the price of gold has appreciated around 15%. In the Canadian markets alone, we have also seen over $1.7 billion dollars raised for mining equities in the first 55 days. This is a huge amount of capital for that type of time frame. Take this for comparison purposes: $3.6 Billion was raised in total in the first two months in the last four years. As you read this, I am meeting with the top executives who make the decisions at the world’s largest gold producers. I’ll be at the BMO Capital Markets’ 25th Global Metals & Mining Conference from February 28th-March 2nd. I’m here to figure out what all the producers have to say about their own future. I have meetings booked with over 30 producers in a span of 4 days. Shortly, I will report whether this Golden Bull is for real or if it’s merely a Skinned Bull. ![Macintosh HD:Users:msvorinic:Downloads:Wall-Street-Golden-Bull.jpg] Marin Katusa --- # What Will Happen to all the Debt in the Oil Patch? - URL: https://katusaresearch.com/what-will-happen-to-all-the-debt-in-the-oil-patch/ - Type: article - Published: 2016-02-12 - Updated: 2019-05-09 - Author: Marin Katusa Here are the 3 key words: **Amend**, **Extend** & **Pretend**. As we all know, every business is driven to seek profits. Not long ago, energy prices were high and an endless supply of cheap money chased the oil patch. Profitability looked easy. To no one’s shock, the explorers and producers (E&Ps) took full advantage. They borrowed and drilled, then borrowed and drilled some more. They went full tilt—and why not? According to some talking heads, oil was headed to $200 a barrel. The irrationally exuberant times were going to last forever, right? Nope. They never do. Now, with oil collapsing to $30/barrel, many producers are breaching their debt covenants. But do the investors, bankers or private funds want to exercise their right to foreclose on the property and take it over? Not likely. **Solution:** more debt of course! It’s a touchy state of affairs. The ones lending the money are as much to blame as the producers for the current dilemma. As the following chart reveals, even in the wake of lower prices oil companies have still been allowed to load ever more debt onto their books. One could even make the case that the banks have turned into borderline predatory lenders. Since E&P-related debt is skyrocketing, interest payments must also be going up. That math might work just fine at $100 or maybe even $75 per barrel of oil. But at $50 or lower, the mandatory interest payments become a crushing weight on the shoulders of the E&Ps. At $30 oil, forgetaboutit! Charted below is the 300% increase in interest payments per barrel since 2001. Yet, the E&Ps cannot rein in production because they have taken on more debt. On the contrary. Lower oil prices mean reduced revenues, which requires more oil production to cover the rising interest costs. Which is bad news. The harsh reality is that many E&Ps are facing a dreaded *debt death spiral* from which they’ll be unable to recover. But all is not lost. **Part 1: Amend** Unlike in the housing crisis, where the banks could fall back on selling a foreclosed house, this is a far less viable option in the oil patch. Bankers are bankers, not petroleum engineers. They have no idea how to run a drill program. Thus, the last thing in the world a lender wants is for the E&P to whom it lent money to go bankrupt. If the driller does go under, the bank is stuck with a mountain of debt and an operation it does not have the ability to run. It also likely can’t sell the operation except at a big loss. Without question, it is in the banks’ best interest to keep these companies alive. As a result, the banks would much rather amend and alter the agreements they have with the oil producers. Or, in some cases, the only option may be to lend the E&Ps even more money, hoping to help them weather the storm. **Part 2: Extend** The easiest ways a bank can do this is four-fold: - To relax the covenants on the current debt - Make interest demands less stringent - Lower collateral requirements - Post a company’s reserves up against another loan As illustrated below, the gap has never been wider between available credit and credit used. Companies will have to turn to their line of credit as the only way to keep production at current levels. As a result—with companies aiming to please both shareholders and bankers at the same time—the gap should close quickly over the coming four quarters. In the Canadian oil patch, there are several prime examples of bankers loosening covenants to keep companies afloat. **Part 3: Pretend** Yes, pretend. Bankers do this all the time. So do management teams. And we all know investors do too. Amend and Extend on the balance sheet, and pretend everything will work out OK. But we all know it can’t work out well for everyone. Let’s look at some real time examples. **Income Trust to Income Bust: the Penn West Story ** It was once a $20 stock, now struggling to stay above $1. **Penn West’s** bankers have relaxed their grip on the debt restrictions, allowing the amount of senior debt to increase by 60% relative to EBITDA. All the while permitting total debt to EBITDA to increase by 20%. **Lighstream to Darkstream Story:** **Lightstream** was once a $20 stock and a Western Canadian Sedimentary Basin prized operator. It now fetches under 40 cents a share. Lightsteam only has one covenant, which is a standard debt to EBITDA covenant and the bankers have relaxed it considerably for them for 2016. **Amend, Extend and Pretend at its finest: Denbury Resources** Some of the best wizards in the sector are the bankers who are propping up **Denbury Resources**. Like the majority of E&Ps, Denbury has a credit facility as well as several note issuances. Times are so tough at Denbury, that its bankers have suspended all covenants for 2016 and 2017 except for a Senior Debt to EBITDA covenant. The only debt that is considered senior during this time period is Denbury’s credit facility. This is a cute bit of financial engineering. It means that Denbury can run up its credit facility debt, sell new notes in the public marketplace and use the proceeds to pay back the credit facility. End result, no new senior debt and lots more debt that is hidden under the mattress for later. **Oil Service Companies are Just as Affected** **Trican Well Services** was a once-prominent oil and gas services company in the Western Canadian Sedimentary Basin. The company recently also joined the growing line at the bank’s amendments desk. Its creditors have allowed Trican to waive all its covenants for at least half a year. **What about Mining?** Here you will also see **Amend, Extend and Pretend.** And the Bankers will come up with all sorts of justifications for the extensions. Let’s start with the base metal miners, which have seen cratering prices throughout 2015 and into 2016. ** ** **Interest Coverage Ratio:** Base metals have been hit hard as Chinese imports have slowed significantly. As with oil, it’s a demand issue. Consequently, there is significant supply available on the open market and that has suppressed metal prices. But just like in the oil patch, metal companies have interest obligations that need to be kept. Below is a plot of the *interest coverage ratio* for the global base metals group. The interest coverage ratio is exactly as it sounds, i.e. the number of times over a company can cover its interest payment. The higher the better. It’s not a pretty graph. Since 2011, companies have gone from a 17.5X ability to cover interest to near zero. Negative interest coverage ratios, seldom seen outside of deep recessions, loom on the horizon. For example on the junior mining front, **Aureus Mining** has joined the *amend*, *extend* and *pretend* list. So much so that they do not even have to pay any portion of their first interest payment. A new interest and debt payment plan will be decided upon the review of a new mine plan. Concurrently they have also hired a financial advisor to assist them with “strategic alternatives.” This is banker talk for selling all or part of their interest in the mine to free up cash. This would most likely be used to pay back creditors. Even some of the biggest names in the base metals sector cannot pull off a “head in the sand” maneuver. **Freeport McMoran** (FCX), one the world’s largest copper producers had to go to its bankers for credit assistance. Below is a snippet from the new deal. The bankers have thereby agreed to raise the covenant threshold by nearly 25% for the first part of 2016. I expect this to be extended for all of 2016 and into 2017 as base metal prices are now lower than they were in December, when this amendment was drawn up. As I write this missive, oil has broken $30 and times are unbelievably tough for the commodities sector. I fully believe that things cannot turn around until the debt unravels. Nobody wants the debt to unravel—hence all the fancy financial manoeuvrings detailed above—but it’s essential for the bottoming process. And the debt defaults will happen even after the *Amend*, *Extend* and *Pretend* phase of the markets. Because of all I have mentioned above, there are great opportunities for investments that are emerging. I intend to take full advantage of them, but one must understand the balance sheet. Fortune Favors the Bold, but Mr. Market Pays the Wise… Marin Katusa --- # This is what an Incredible Oil Well in North America Looks Like - URL: https://katusaresearch.com/this-is-what-an-incredible-oil-well-in-north-america-looks-like/ - Type: article - Published: 2016-02-01 - Updated: 2019-05-08 - Author: Marin Katusa In 2013, I was the first analyst to publish on an unknown company that had little money, an interesting land position and management team I liked. I believed in the world-class potential of its Montney acreage. My fund, myself personally and my subscribers at my old firm all bought shares in Blackbird Energy Inc. **Blackbird Energy Inc.** (BBI.TSXV) just shocked the Canadian oil patch with an incredible oil well. It is rare for a management team in the junior resource sector to actually exceed ones expectations. **Garth Braun** and his team at Blackbird Energy Inc. have done exactly that by bringing on a world class well. This is the type of well that is expected in Kuwait, not Alberta. The purpose of today’s email is to share a video interview of me and Garth Braun, the President and CEO of Blackbird Energy Inc. People are the most important aspect in a resource company, especially in a junior. This video highlights the technological advances Garth and his team have employed to deliver exceptional results. Blackbird delivered one of the best results I have ever seen in the Montney, and in the Canadian oil patch—period. This is not meant to be a promotion. I am sending this email because this is an impressive oil well that will drive a takeover. Blackbird announced a **1,768** boe/d well (36% liquids; with 94bbl/mmcf) last week, and the well results basically doubled all analyst expectations. This is what a world class well looks like in Canada. The company has no debt (rare for any Canadian oil company in today’s environment), and has built a dominant land position in the Montney with 75 net sections of land. To survive a low priced oil market, management teams will have to innovate to deliver results. Blackbird Energy Inc. has made significant advancements in validating their dominant land position by using state of the art technology. Blackbird was able to deliver world class results by executing on a 70 stage energized frac using 20,000 m3 of CO2 and water while using 2,200 tonnes of proppant. This is what a world-class frac looks like. The big boys in Texas took notice as did the oil men in Alberta. And this was a condensate rich well, a big bonus. The last middle Montney well delivered slightly above 400 boe/d results (44% liquids). This well improved those metrics by over **300%**, but the costs actually improved. That is exactly what the oil companies in both Canada and the US will have to do to survive this horrible oil market…. Bring innovation and exceed expectations. Marin Katusa --- # The Iranian Sanction Liftoff: Winners and Losers - URL: https://katusaresearch.com/the-iranian-sanction-liftoff-winners-and-losers/ - Type: article - Published: 2016-01-18 - Updated: 2019-05-08 - Author: Marin Katusa **The Iran Sanctions are a done deal. ** After the Obama administration’s breakthrough nuclear deal, Iran is preparing to re-enter the oil market with a vengeance. Ideally, it would like to see oil production cuts by OPEC, to drive up prices. But there is no way the country will sacrifice its own boost in output after being virtually shut out from growth over the past four years. With the sanctions imposed in 2011 due to its ramp up of nuclear activity, Iran was slammed to its core as a boycott of its oil exports was adopted around the world. Countries like South Africa and regions like Europe cut all imports of Iranian oil. Others such as India, South Korea, and Japan significantly reduced imports. Even in China, a prime growth market in oil, imports remained flat over the period. [![Iran Oil Exports]](https://katusaresearch.com/wp-content/uploads/2016/01/Iran-Oil-Exports.png) Asking Iran not to grow production after a four-year stall would be like shooting a laser pointer into the eye of a person who was just given the gift of sight – it’s simply not fair. As Iran brings 500,000 additional barrels per day (bbls/d) of production on line, the large markets of Europe, China, India, and Japan are likely going to get an influx of Persian oil. [![Largest Crude Consumers ex-US]](https://katusaresearch.com/wp-content/uploads/2016/01/Largest-Crude-Consumers-ex-US.png) Iran will benefit greatly from increased market share and establishing an expanded customer base in growth markets like China and India—which could see a doubling of its current imports of around 275,000 barrels per day. However, the large, highly-coveted European market stands to benefit the most from the new order. **The Losers** Iranian crude coming on line will likely hurt some of the major oil producing countries. As Iranian oil sent to China is similar in type to Saudi Arabian oil, that country will likely see its market share cut into the most. Some of Russia’s share may also be affected, but not as heavily, since Russia often sends China a much lighter sweet crude that is easy to refine. During the sanction years, Iran found ways to get oil to China with little lost market share. Now, as the country ramps up production, exports to China will quickly rise to pre-sanction levels. [![China Oil Import Market Share]](https://katusaresearch.com/wp-content/uploads/2016/01/China-Oil-Import-Market-Share.png) The biggest damage among oil-producing nations will come at the hands of the largest refining market apart from the US: Europe. Iran has greatly suffered as the EU put on sanctions. In 2011, it exported 600,000 bbls/day to Europe. For the past four years, that completely disappeared, along with all the revenues generated. [![Euro Market Share Top Producers]](https://katusaresearch.com/wp-content/uploads/2016/01/Euro-Market-Share-Top-Producers.png) Oddly, when Iran lost the European export market, the region’s largest import sources did little to increase their market share. Russia, for example, was focused on expanding in the crowded Chinese space. Causing Saudi Arabia to fight a two-pronged battle in Europe and China just to maintain its position. The sanctions left countries like Nigeria, Algeria, Angola, and Iraq to swoop in and fill most of the void. These will be among the new losers. [![Euro Oil Pre Iran Sanctions]](https://katusaresearch.com/wp-content/uploads/2016/01/Euro-Oil-Pre-Iran-Sanctions.png) [![Euro Oil Exports Iran Sanctions]](https://katusaresearch.com/wp-content/uploads/2016/01/Euro-Oil-Exports-Iran-Sanctions.png) Already reeling from low oil prices, Nigeria, Angola, and Algeria are likely to be hit hardest by Iran’s return to Europe. However, the biggest loser in the European market is probably going to be Russia. Instead of jumping on Iran’s exit as a chance to dominate the European market, Russia decided it was wiser to flaunt its power over the EU’s energy security. That forced Europe to diversify into other markets, and begin increasing imports from West Africa and Iraq. As a result, Russian imports have been reduced by over a quarter million barrels per day. And this happened at a time when European consumption of crude was growing year over year. Instead of increasing market share, Russia lost ground instead. **Iran Looking to Compete and Win** Enter Iran, which has a huge edge in terms of prices to Europe. Iranian crude trades at a $4 discount to competing Russian crude. [![Russia Oil Price Premium to Iran]](https://katusaresearch.com/wp-content/uploads/2016/01/Russia-Oil-Price-Premium-to-Iran.png) On top of that, Iran’s oil & gas industry is about to get another competitive boost. This is due to re-negotiation of its investment contracts with the big International Oil Companies (IOCs). Under what are known as *buyback contracts*, the Iranian government would grant an IOC the right to explore and develop a property for a stipulated period of 7-12 years. If the exploration was successful, the National Iranian Oil Company (NIOC) would buy back the project and take on all development and management responsibilities. The contractual investment would be paid back in full, bank charges reimbursed, and further remunerations paid to the IOC for their services. But the IOC did not own the property and had no right to future profits, nor could they book reserves as assets on their balance sheets. Instead, the IOC could only agree with the NIOC on a pre-determined internal rate of return (IRR) on the project, usually between 12% and 15%. This type of contract is very risky for an IOC… Because all costs and paybacks are pre-determined, any increase in capital costs, reduced production profile, or low price environment ($15-$20 per barrel) could result in less money being paid back, or even the postponement of payments. That will now change. Iran has some of the largest oil & gas reserves in the world and needs to develop them. But, to remain competitive the country needs the IOCs’ help. And to get it, the NIOC needs to make investments more attractive. [![Top Oil Reserves]](https://katusaresearch.com/wp-content/uploads/2016/01/Top-Oil-Reserves.png) [![Top Gas Reserves]](https://katusaresearch.com/wp-content/uploads/2016/01/Top-Gas-Reserves.png) Thus its new contract proposals for the IOCs will involve longer terms of development (20-25 years). This will provide more time for investment and profitability. The IOCs may also get an ownership stake in the projects, upwards of 20%, and be allowed the booking of reserves. Fees paid to IOCs will increase depending on the risks they assume in developing geographically isolated and challenging reservoirs. By making these changes, Iran hopes to attract **$280 billion in foreign investment** in their oil & gas sector. And they’re all but certain to get it. Representatives from **Shell** (RDS-B), **Total SA** (TOT), and **BP** (BP) have already descended on Tehran, and are speaking with Iranian energy officials as this article goes out. They booked their tickets immediately after sanctions were lifted. [![Iran Energy Map]](https://katusaresearch.com/wp-content/uploads/2016/01/Iran-Energy-Map.png) **The Winners** The big winners of Iran’s rush back into the oil market will be consumers, specifically European refiners hungry for cheap Iranian crude. Those companies who have integrated operations will benefit the most. I’m talking about those with refining capacity in Europe and exploration and development potential in Iran. These include **Eni SpA** (E), **Total SA**, **Royal Dutch Shell**, **BP**, and **Lukoil**. Additionally, this bodes well for those countries and companies looking to benefit from moving Iranian oil. Egypt, for example, is a hub for pipeline and waterborne transportation of crude oil and petroleum products. This will increase the amount of oil shipped through the country’s SUMED pipeline and Suez Canal. And it will also provide Egypt with access to oil production for its own energy requirements. [![Sumed Pipeline]](https://katusaresearch.com/wp-content/uploads/2016/01/Sumed-Pipeline.png) This is a key development, because after sanctions were imposed on Iran in 2011, Egypt saw a large decline in the amount of oil that passed through its SUMED pipeline. ![Sumed Pipeline Capacity] Once Iran puts barrels back on the international market, they will likely pass through and/or be stored in Egypt. This gives the country a much-needed boost in revenues from fees collected by the SUMED pipeline and Suez Canal. The SUMED pipeline is primarily (50%) owned by the Egyptian General Petroleum Company (EGPC) but includes minority stakes held by: - Saudi ARAMCO (15%), - Abu Dhabi IPIC (15%) - Kuwait (15%), - Qatar (5%). The $5.3 billion in revenue from Egypt’s Suez Canal has been stagnant since 2011. The lifting of Iranian sanctions could not have come at a better time given Egypt’s plan to spend $8 billion to expand the canal. This is well supported by its Arab Gulf financial partners. The plan is to create a 22-mile parallel channel that would: - Allow for two-way traffic, - Accept Very Large Crude Carriers (VLCC) and Ultra Large Crude Carriers (ULCC), - Reduce transit times from 18 to 11 hours. Additionally, those companies with large VLCC carrying capacity will benefit from the increased amounts of crude being carried by water to markets in Europe and Asia. [![Public Company VLCC Capacity]](https://katusaresearch.com/wp-content/uploads/2016/01/Public-Company-VLCC-Capacity.png) As Iran re-enters the oil market after its forced four-year hiatus, some players have to win and some have to lose. Katusa Research tries to paint a clear picture of who the biggest losers and winners will be, and show how investors can profit from this seismic shift in world energy dynamics. Time will tell if we are right. Marin Katusa **Street Report – 2016 Vancouver Resource Investment Conference (VRIC)** If you are in Vancouver during January 24-25th, I am co-hosting the 2016 VRIC with the good folks at Cambridge House. Why should you come? Well for starters, we have over 2400 pre-registered attendees—so clearly we have a good following. But more importantly, I will be asking the tough questions of our speakers everyone is thinking, but are too polite to ask. My goal is to make this the **best resource investment conference** you ever attend. Register here for free https://cambridgehouse.com/register Give me a few hours of your Sunday and I guarantee to leave you with much to think about. The agenda is world class. But more importantly, I will be grilling the speakers myself personally, and expect the unexpected. --- # 3 Key Facts the News Outlets are Missing on the Saudi Aramco IPO - URL: https://katusaresearch.com/3-keys-the-news-outlets-are-missing-on-the-saudi-aramco-ipo/ - Type: article - Published: 2016-01-15 - Updated: 2020-02-19 - Author: Marin Katusa ## **The Evolving House of Saud** Ask any random sampling of Americans what the world’s largest oil company is and the likely answer is ExxonMobil. A few might vote for Shell or possibly BP. As most of my readers will know, they’re all wrong because when most people think of oil companies they only think of the giant, publicly-owned multinationals. But in terms of raw production, the state-owned oil companies dominate, and it isn’t even close. In 2015 Saudi Arabia’s Saudi Aramco was first, pumping 11.6 million bopd. ExxonMobil was tied for fourth with Russia’s Rosneft at 4.7 million. On January 4, 2016, *The Economist* interviewed the Saudi King’s son, Deputy Crown Prince Mohammed Bin Salman al-Saud. The Deputy Crown Prince claimed that the Kingdom was months away from a Saudi Aramco IPO. Huh? Saudi Aramco was 100% nationalized in 1980 and the Saudi ruling family has maintained tight control over the company ever since. No wonder I had over a hundred emails from colleagues that day asking for my thoughts. So here they are, for all to see. For openers, a week after *The Economist* piece, the *Wall Street Journal* asked Saudi Aramco’s Chairman, Khalid al-Falih, about the potential for an IPO. The Chairman brushed off the notion, stating that the company wasn’t nearly as close as the Deputy Crown Prince had indicated. Khalid did affirm that the Kingdom had been *contemplating* a Saudi Aramco IPO on and off for many years, but by no means was there any definitive plan in place to float one. When the Chairman of Saudi Aramco and the Deputy Crown Prince give conflicting takes on a potential IPO, it’s bound to leave people confused. Do you take the word of a previous President, CEO, and now Chairman of Saudi Aramco with 35+ years of experience in the petroleum industry. Or, do you take the word of an upstart, 29-year-old son of the King? My readers know I call it the way I see it though it doesn’t mean I am always right. But, perhaps the Deputy Crown Prince’s comments referred only to the three IPOs Saudi Aramco has planned concerning the Joint Ventures with Total, Sinopec and Dow Chemical. Totally plausible, and these affect only refining, not production. So, it could have just been a case of *The Economist* misstating reality or twisting Mohammed’s words for their own reasons. And what publicity it did generate. But if we take the interview at face value, let’s dig a bit deeper (and I do want to point out, no mainstream media has reported the above JV IPO’s). ## **Saudi Politics 101:** There is a bigger issue with Saudi Arabia than the Saudi Aramco IPO. To understand the current inner strife in the Kingdom, we have to go back and analyze the history of both the country and the al-Saud family. Though human habitation of the region extends back perhaps 20,000 years, what we now think of as Saudi Arabia didn’t emerge until 1932, when it was unified by King Ibn Saud. Ibn Saud, backed by clerics of the powerful Wahhabi Islamic sect, established the Ibn-Saud as the Kingdom’s ruler and he held power until his death in 1953. He left behind 100 children, 45 of them males. So what was to be the rule of accession in a region that had formerly consisted only of scattered tribes? It was kind of fuzzy. At the founding of the Kingdom, Ibn-Saud had declared his second son as the Crown Prince and next in line to the throne. However, he decreed that from then on the new King would be the deceased monarch’s younger brother rather than one of his own sons. This all but assured that succeeding Saudi rulers would be old men. In accordance with King Ibn Saud’s wishes, his second son, Saud, was elevated from Crown Prince to the throne. King Saud – a man many history books depict as a reckless and unpopular leader. But his half-brother, Faisal bin Abdel-Aziz Al Saud, led a coup to overthrow the anointed King. Saud was deposed and Faisal assumed the throne in 1964. From then on the monarchy continued to be passed down to the youngest brothers of King Abdel-Aziz’s sons until 2015 and the ascension of King Salman bin Abdel-aziz al Saud. To give you an idea of the complexity of the vast Saud family, here’s just a small slice of it: ![Sudairis vs the Rest]Salman then proceeded to completely shake up the Kingdom. Muqrin, son of Abdel-Aziz and brother of Salman, was the rightful new Crown Prince and next in line to the throne. But Salman awarded the Crown Prince title to his own young son: the same Mohammed Bin Salman al-Saud who spoke with *The Economist*. What makes this problem of immediate concern is that the newly-minted King Salman is 80 years old and seems to have some health issues. He is rumored to have already been diagnosed with dementia. One can see how this creates an atmosphere of ongoing tension. Leaving young Crown Prince Mohammed Bin Salman as next in line and setting up the real possibility of a nasty tussle for the throne. It is difficult for us to imagine a 29 year old ruling the largest Kingdom in the Middle East, and so it could be for the people within the Kingdom. Arab culture awards respect and seeks advice from the elders and rarely the other way around. As Salman’s health deteriorates, a youth vs. age struggle could develop and a 1964-style coup could be in the air. Which has ramifications. The political fragility within the Kingdom may be a significant threat to the internal stability of Saudi Arabia, the Middle East, and the Saudis’ allies as the country enters treacherous ground going forward. I cover all of this in much greater depth in my *New York Times* Bestseller, *The Colder War. *See the chapter entitled, ‘The Shaky House of Saud’. ## **Why would an IPO be so difficult?** Saudi Aramco has the world’s largest oil reserves, 20 times those of Exxon (XOM). But how to value the company for an IPO? Some analysts have suggested that Saudi Aramco is worth $10 Trillion. This using the metric of comparing its production and reserves to ExxonMobil. But directly comparing a secretive, state run oil company like Saudi Aramco to a public company like Exxon is a bit of a stretch. Let’s look into the facts. ## **The Facts are:** Exxon produces over 60% fewer barrels of oil per day than Saudi Aramco, yet Exxon still manages to pull in $15 billion more in yearly revenue than Saudi Aramco’s $378 billion (2014 figures, including only revenue generated by operating activities). Considering that Exxon’s and Saudi Aramco’s downstream capacities are fairly similar, one can assume that Saudi Aramco is diverting payments to the Kingdom before posting its earnings. Additionally, analysts need to take into account that Saudi Aramco is less diversified. Thus, it is subject to geopolitical risks that are being played out in the Middle East as we speak. All these risks and financial burdens to Saudi Aramco’s operations warrant a discount to its valuation. Nevertheless, comparing Saudi Aramco to other partially public national oil companies (NOCs) gives the company a value as high as $2 trillion. Still a big ticket item, but you can see how tricky this process would be. **This question must be asked: **Where would they list their stock? Given the Deputy Crown Prince’s proposal to float 5% of the company in an IPO, it would be hard to imagine those shares trading on the Saudi Arabian Tadawul stock exchange. Even this small fragment of Aramco would yield a market cap equal to a quarter of the entire national exchange. Further difficulties arise over the question of transparency once Saudi Aramco became some form of public company. If its shares were listed in the US, the company would need to disclose payments made to the Kingdom through various subsidiaries, have its reserves re-assessed by an outside entity, and face shareholder dissatisfaction with the use of oil as an economic weapon at the cost of profits. ## **A Saudi Aramco IPO would likely be all about Capturing Refining Market Share** Saudi Aramco’s Chairman has said that the company could list parts of their upstream and downstream business, or a small chunk of their upstream business, or most of their downstream segment. Basically, Khalil al-Falih made the potential IPO as vague as possible. The most likely outcome of a Saudi Aramco IPO would involve a smaller segment of the company’s business that continues to remain highly profitable in today’s market: its refinery business. Saudi Arabia has the largest share of refining capacity in the Middle East & North Africa. ![Refining Capacity - ME NA] The company’s downstream business is still highly profitable as it takes on cheap regional crudes and sells petroleum products at global prices. Saudi Aramco’s refineries can make double the operating profit of US and Western European refineries. *(Note: The 3-2-1 crack spread depicted in the following chart is the operating profit per barrel generated by refining 3 barrels of oil into 2 barrels of gasoline and 1 barrel of distillates. Distillates are a category that represents jet fuels, kerosene, LPGs, diesel, and fuel oil. The 3-2-1 spread is a solid indicator of how much a refiner will make in operating profit.* *I use Kuwait and Dubai vs. Brent because they are representative of operating profits realized in the Middle East. There is no Saudi Crack Spread published, but the Kuwait and Dubai spreads give us a good idea based on their proximity to Saudi Aramco’s refineries.)* ![321 crack spread ME v West Europe] Although analysts are kept in the dark as to the exact profitability numbers, we can calculate comparable US refiners with 1.8-3 million barrels of refining capacity per day to get a range on the profitability. With those as a guide, we can estimate a $80-$100 billion value for Saudi Aramco’s downstream segment. Yet, even in just this segment, a Saudi Aramco downstream IPO would not be easy. That’s because only 1 million barrels per day of refining capacity is owned and operating by Saudi Aramco in Saudi Arabia. Most of the company’s other capacity is in joint venture with companies like Total, Exxon, Sinopec, and Dow Chemical. This throws a wrench into any immediate IPO. Simply put, Saudi Aramco will have to consult its joint venture partners as to how to structure the appropriate listing.![Saudi Aramco Refining Capacity] Additionally, as I noted earlier, Saudi Aramco already has IPO plans for three of its joint venture projects with Total, Sinopec, and Dow Chemical. That leaves roughly 2.6 million barrels per day of refining capacity available to structure a downstream IPO, which would fall in line with some of the largest refiners listed in the US. Saudi Aramco would be able to use their downstream listing as a way of consolidating refining capacity within the company. With assets in the US, Japan, China, and South Korea, look for Saudi Aramco to use its share price as an alternative source of funding to scoop up refineries in Asia. ![Saudi Aramco Refining Capacity IPO] ## **Katusa’s Take** Here are my takeaways from the IPO controversy. - First off, the Saudis are far from broke. With $640 billion in foreign reserves and untapped debt markets, they’re not even in rough shape. If they do float an IPO it is not because they need money to balance the budget. - Second, *The Economist* may have misinterpreted Deputy Crown Prince Mohammed Bin Salman al-Saud’s words. He could have been talking about the three IPO plans Saudi Aramco has in place with their Joint Ventures with Total, Sinopec and Dow Chemical. - Third, the Crown Prince might have been speaking out of turn and has since been reprimanded by his elders. I doubt it. Most likely, there is an IPO on the way. If so, I believe it’s all about refining market share. Make no mistake, Saudi Aramco is fully prepared for low oil prices for the next few years—as I’ve said for the last two years now. The Saudis are advised by smart people, and I’m willing to bet that they have recognized the possibility of increasing their revenue and political leverage by attracting large foreign funds. All this while ensuring that the foreigners stay on board with the Saudi agenda, while the Saudi’s increase refining market share. Finally, take a look again at the pie chart above. Who has the #2 refining capacity in the Middle East? Iran, the bitter Shi’ite Islamic enemy of Sunni Saudi Arabia. With the lifting of the sanctions on Iran, these two are going to be jousting even more intensely to become the dominant influence in the region far into the future. They are in a battle (perhaps to the death) for political leverage, and market share for refining and oil sales are a primary weapon. From this perspective, it’s actually quite brilliant for the Saudis to consider IPO’ing a small percentage of their downstream sector assets. All to align the biggest funds in the world with their own best interests. That would only enhance their presence on the world stage. I’ve read much about the Deputy Crown Prince Mohammed Bin Salman al-Saud being only 29 years of age and not ready for his role. But perhaps the talking heads have it totally wrong – perhaps youth will win out. Many outsiders are underestimating a powerful force for a new agenda and domestic and foreign policy out of Saudi Arabia. Personally, I think we are going to hear a lot more about and from the Deputy Crown Prince Mohammed Bin Salman al-Saud in the years to come. It’s all about market share. Marin Katusa **P.S.** **For those of you in the Vancouver, BC area on January 24th and 25th**, I will be co-producing the 2016 Vancouver Resource Investment Conference. It is the world’s largest investment conference dedicated to resources. There will be no shortage of investment thought leaders and wealth influencers to rub shoulders with and get their insights. You especially won’t want to miss me asking Frank Holmes, Doug Casey and Ron Thiessen to answer tough questions about the markets today. You can sign up for the VRIC for free at this link –[click here](https://cambridgehouse.com/register) --- # Revisiting my Open letter to David Einhorn’s Big Oil Short - URL: https://katusaresearch.com/revisiting-my-open-letter-to-david-einhorns-big-oil-short-2/ - Type: article - Published: 2015-11-19 - Updated: 2019-05-08 - Author: Marin Katusa In May 2015, David Einhorn publicly stated at the Sohn Conference that he was short the US shale sector and was particularly targeting Pioneer Natural Resources (PXD). After careful analysis of his work, I came up with my own thesis as to why [**David Einhorn was wrong to single out PXD**](https://katusaresearch.com/why-david-einhorn-is-wrong-on-the-big-oil-short/) as a short. Thus, on May 15, 2015 I wrote: ***An Open Letter to David Einhorn: Technical****** ******Reasons why you are Wrong about your “Mother Fracker” Short*** *Dear David Einhorn,* *I like you.* *I have great respect for your work, your work ethic, and your balance of career and family.* *I’ve read your book, *Fooling Some of the People All of the Time,* and enjoyed it. You may want to read mine, *The Colder War.* A *New York Times* Bestseller, it will give you a good background on the geopolitical aspects of the energy sector.* *You have made some great calls in the past. The largest short of your career, in Lehman Brothers, impressed the world. However, in my opinion your public comments and research regarding Pioneer Natural Resources, and what you call the “Mother Fracker,” is dead wrong.* Who was right? Well, not to be cocky or anything, but I was. On my own short radar were some of the most highly leveraged North American oil companies, those that couldn’t survive at or anywhere near the current oil price. If we take a look at my short list vs. Einhorn’s PXD short we can see that PXD strongly outperformed its more highly-leveraged peers. [![PXD vs.]](https://katusaresearch.com/wp-content/uploads/2015/11/PXD-vs..png) **How Did Einhorn Do?** Overall, it’s not quite clear how Einhorn did on his PXD call, but clearly it did not add significantly to his short portfolio’s gains. In Einhorn’s Q3 letter he mentions that his shorts offset the -16.9% year to date return on his fund by 7.5%. Einhorn’s short highlights were a 55% and 40% drop in the stock price of Keurig Green Mountain (GMCR) and Mallinckrodt (MNK), respectively. In passing, Einhorn mentioned that he remained disappointed at the lack of downside pressure felt by PXD in the low oil price environment. **Revisiting My Thesis** I made it very clear I had no dog in this fight, and don’t in any of the US shale players. But, I stated PXD was not the worst of them and there were easier targets to short, if you were inclined to do so. The most important argument I made to counter Einhorn’s short thesis on PXD was that he’s “using the wrong financial model: [He needs] to think of Pioneer as an asset manager, not a perpetual oil producer.” Like any asset manager, in time of hardship, PXD will: - **Rein in capital commitments ** - **Protect existing cash inflows from further price degradation ** - **Sell off non-essential items** - PXD has stated that its 2015 capital program will come in at approximately $2.2 billion. That includes $700 million of spending on storage, processing, and marketing facilities. The other $1.5 billion or so of PXD’s budget is dependent on oil prices. [![CAPEX PXD]](https://katusaresearch.com/wp-content/uploads/2015/11/CAPEX-PXD.png) Additionally, Pioneer has seen a 20%-25% decline in costs associated with drilling, completion, infrastructure, and operating in the Permian Basin & Eagle Ford. This allows PXD to cover all capital expenditures with its cash on hand and operating cash flow for 2015. - With 90% of its oil hedged at $71.24 per barrel and 85% of its gas hedged at $4.02 per mcf for 2015 the company is able to ride out low oil and gas prices in 2015 and can accurately predict future cash flows. Going into 2016 PXD is best set up, compared with other US shale players, to manage cash flows in a low oil price environment. [![PXD Hege]](https://katusaresearch.com/wp-content/uploads/2015/11/PXD-Hege.png) - Finally, as I mentioned in my previous article, “Pioneer can sell […] tangible midstream assets, which they plan on doing with EFS Midstream.” The ability for Pioneer to sell non-essential assets and rebalance their asset portfolio to sustain high margin projects is what separates PXD from other shale producers. PXD sold a 51% stake in EFS Midstream for a total consideration of $1.3 billion. [![PXD Debt]](https://katusaresearch.com/wp-content/uploads/2015/11/PXD-Debt.png) Pioneer’s rebalancing act has helped give the company ample liquidity to survive well into the next couple of years, even as the current low oil price environment endures. **David Einhorn’s Greenlight Capital Q3 Performance** For the first time since the crash of 2008, David Einhorn’s fund has returned negative value to shareholders. This is particularly unusual because the S&P 500 has been up 1.5% over the year and Greenlight Capital is down -16.9%. Einhorn’s large positions in Consol Energy and SunEdison weighed heavily on the fund’s returns. Consol Energy is focused on coal and natural gas. SunEdison is a green energy yieldco. I have spent over a decade focussed on the resource sector. I know these sectors very well. My fund is one of the top performing funds in the sector. I wrote a book that cracked the New York Times bestseller list focussed on the geopolitics of natural resources. Since late 2011, I have stated publicly, on national TV and in print, that investors and speculators should stay away from coal of any kind. I predicted that shale would hurt thermal coal, weakness in China would hurt metallurgical coal, and the environmental movement against coal would grow. All three happened. Consol Energy (CNX) is Einhorn’s 4th largest long equity position and is a natural gas and coal producer in the US Northeast with a focus on the Marcellus & Utica gas formations, along with thermal and met coal projects in Pennsylvania, Virginia, and West Virginia. Coal, of course, I’m avoiding. And as far as natural gas goes, I would much rather play the growth in the Marcellus & Utica from a pure midstream standpoint than a leveraged exploration and production company that barely breaks even at a $2.18 per mcf Henry Hub gas price (Marcellus and Utica realize 65% of Henry Hub pricing due to lack of infrastructure for bringing gas to market). Finally, SunEdison (SUNE) is Einhorn’s second largest position; the alternative energy company develops, finances, and drops down its projects to: TerraForm Power (TERP) and TerraForm Global (GLBL). TerraForm Power & Global operate the assets and pay SunEdison incentive distribution rights (IDRs) from their distributable cash flow that increases once the companies pay out the minimum allotted dividends to all its shareholders. I completely agree with Einhorn’s thesis on the green power sector, but I have stated for a year that there was a better fundamental play than SunEdison. I have **backed that belief with my own fund’s major investment in the best situated and most undervalued alternative energy company: Alterra Power Corporation (AXY.TO****)**. Einhorn is absolutely correct when he explains, “A power plant with a long-term power purchase agreement is roughly equivalent to a secured lender,” something I have explained when investing in Alterra and its perpetually stable cash flow. The only difference with Alterra and SunEdison is that Alterra operates its projects and has paid its up-front costs. However, the company is the most undervalued when compared to its US peers and it is only a matter of time until that value is unlocked. SunEdison and Consol, on the other hand, have had very tough sledding this year; SUNE dropped from over $32/share in June to just over $3 at this writing in November, while CNX fell from over $33/share in May to $8 today. Alterra, however, has been among the best performing green producers in North America and I believe the share price is going still higher in 2016. My funds and I personally own a lot of Alterra. Over the last decade I got to know the chairman very well, who happens to be the largest shareholder owning over 30% of the company. I believe in Ross and in Alterra. [![AXY comps]](https://katusaresearch.com/wp-content/uploads/2015/11/AXY-comps.png) So far my thesis has panned out better than that of Einhorn. The funds I manage hold a similar weighting of Alterra Power as Greenlight Capital’s investment in SunEdison and Consol Energy. [![AXY vs. Einhorn]](https://katusaresearch.com/wp-content/uploads/2015/11/AXY-vs.-Einhorn.png) Guys like David Einhorn will not stay down for long. He is brilliant and hardworking, and I expect 2016 will be a great year for his fund as he corrects some of his past speculations. I’m in no way taking a poke at Einhorn here; like I said, I greatly admire David. I’m just using my platform to present other perspectives and bring some attention to my very unconventional and successful analysis which has delivered some positive significant results in 2015. If readers would like to see what my funds are investing in and what I think of the markets in general, subscribe to my insights for free at [katusaresearch.com](https://katusaresearch.com/#footer-content). **Katusa’s Charts of Interest.** Here are charts you will not find anywhere else on the net all packaged nicely in one place. Enjoy them and more importantly, pay attention to them, I do. [![Crude & Calender]](https://katusaresearch.com/wp-content/uploads/2015/11/Crude-Calender1.png) [![Major Index]](https://katusaresearch.com/wp-content/uploads/2015/11/Major-Index.png) [![TSX]](https://katusaresearch.com/wp-content/uploads/2015/11/TSX.png) [![Copper]](https://katusaresearch.com/wp-content/uploads/2015/11/Copper.png) [![Refining]](https://katusaresearch.com/wp-content/uploads/2015/11/Refining.png) [![Crude]](https://katusaresearch.com/wp-content/uploads/2015/11/Crude.png) [![BHI]](https://katusaresearch.com/wp-content/uploads/2015/11/BHI.png) [![Nat Gas]](https://katusaresearch.com/wp-content/uploads/2015/11/Nat-Gas.png) [![VLCC]](https://katusaresearch.com/wp-content/uploads/2015/11/VLCC.png) --- # 2015 Silver Summit, India and the Elephant in the Room - URL: https://katusaresearch.com/2015-silver-summit-india-and-the-elephant-in-the-room/ - Type: article - Published: 2015-11-13 - Updated: 2020-02-20 - Author: Marin Katusa ![GDP Growth Rate 2015]GDP Growth Rate 2015 ![Most Confident Consumer Countries]Most Confident Consumer Countries On November 23-24 there is a conference in San Francisco that I highly recommend all serious speculators attend. Yes, it’s Thanksgiving week. Yes, the markets suck. Yes, we are entering tax loss season. But, always remember, *Fortune Favors the Bold*, but *The Wise Get Paid*. Do you know any of the following: Ross Beaty, Dave Iben, Grant Williams, Amir Adnani, Ron Thiessen, Keith Neumeyer, Randy Smallwood, Rob McEwan, Frank Holmes, Rick Rule, David Lowell, or Bob Bishop? They are all worth listening to. All experienced and successful. I make an effort to attend their talks, whenever I can, because I learn from all of them. They are making time to come to the show because they understand the benefits of being on a platform with the smartest people in the business. This conference will be packed full of actionable information. For more on the show, go to: https://goo.gl/0QwjJX **India’s Elephant in the Room** Right now, China is trying to move to a consumer-driven economy, something it is struggling to accomplish. At the same time, India is doing the same and, aided by sliding oil and other energy prices, the country is slowly seeing a positive shift in that direction. Many of India’s domestic industries are preparing for the onslaught of consumer-driven growth. Since the backbone of consumer growth is energy consumption, that is forcing India’s state owned Oil & Natural Gas Corporation (ONGC) to take steps to secure India’s energy future. From personal experience, the largest board room I have ever set foot in was ONGC’s in Delhi. In 2010, my colleague and I had a meeting with the President and Chairman of ONGC. The board room table was at least 75ft in length and behind the president and Chairman was a theatre styled seating of 5 rows, 30 seats wide, where the various department heads sat. This meeting had over 50 people from ONGC and the two of us from Canada. ONGC is about as big as it gets. **Energy for the Future** Over the last several years the ONGC has seen a fall in its own oil and gas production, from domestic and foreign sources, even as the economy grows at a record pace. ![DomVsOS] The ONGC needs to reload its energy artillery. To do that, it plans on spending $10-$12 billion on M&A over the next 3 years to double its current overseas production of 178,000 barrels per day. It has aligned with Russia, which accounts for the ONGC’s largest overseas share of oil production and reserves, through the $2.9 billion purchase of Russia’s Western Siberia assets, and the $1.35 billion investment for a 15% stake in Rosneft’s Vankor oil field. ![OSprd]![OSres] In addition to the ONGC’s overseas oil production, India mainly imports crude oil from Nigeria, Iraq, and Saudi Arabia. However, once Iranian sanctions are lifted, India will most likely replace a lot of the oil from Saudi Arabia and Iraq with Iranian oil. ![imps] **Discount Shopping & Diversification** With oil prices so low and so many companies and projects falling upon difficult times, the ONGC sees an opportunity to diversify its oil production, especially along the West Africa coast and offshore Brazil. In the near term, a probable target would be Brazil’s offshore deep water assets controlled by Petrobras. For these assets, the ONGC would continue its long partnership with Shell and newly acquired BG Group to expand its position. Shell and the ONGC are partners in the Campos Basin’s BC-10 development and it is likely the ONGC will leverage that relationship to participate in BG Group’s BM-S-11 concession and its flagship Lula Field. Currently the ownership structure is 25%-65%-10% between BG Group, Petrobras, and Petrogas Brasil. With 4 billion barrels of recoverable reserves within the BM-S-11 concession, this would add significant reserve potential for the ONGC. ![BrOps] The BM-S-11 stake will likely be sold to the ONGC out of struggling Petrobras’s share. The ONGC average transaction of $1 billion could afford the company a 12%-15% stake in the project based on historical transactions in offshore Brazil. **Coming to Africa** [![Angola]](https://katusaresearch.com/wp-content/uploads/2015/11/Angola.png)The second near term regional focus is West Africa and the coveted offshore blocks of Angola and Ghana. In 2011 the ONGC made a bid for Exxon’s (XOM) 25% stake in Block 31 offshore Angola, but that was rejected. The next target would likely be Block 15, operated by Exxon, which holds a 40% stake in the project. The other owners of the project are British Petroleum (BP), Eni SpA (E), and Statoil ASA (STO) with 26.67%, 20%, 13.33% respectively. The ONGC may have to increase its average $1 billion transaction in order to secure a share similar to that of Statoil. This would net 35,000-50,000 barrels per day of production to the ONGC at full capacity, and give the ONGC access to a potential 850 million barrels of recoverable resources. Finally, Ghana and the ONGC have a long history dating back to 2009 when India’s ONGC and China’s CNOOC were looking to purchase Kosmos Energy’s (KOS) 30% stake in the Jubilee Field. [![ghana]](https://katusaresearch.com/wp-content/uploads/2015/11/ghana.png) The operator of the Jubilee Field, Tullow Oil (TLW.L), was also targeted by the ONGC for stakes in its offshore Ghana projects. The $3-$5 billion asking price for Kosmos’ stake in the Jubilee field from 2009 may be too much for the ONGC currently; however, with Tullow getting ready to produce from the nearby TEN development, the ONGC may be prepared to make a $1-$1.5 billion bid for Kosmos’ 17% stake in TEN or a share of Tullow’s 48% operating share. This would net the ONGC 14,000 barrels per day in 2017 and give the company access to 300 million barrels of reserves. **Katusa’s Take** In today’s environment, the major national oil companies can be expected to target projects with large resource potential and substantial reserve lives, in order to maximize investment value and secure energy options long term. In my latest report, ***KR III: Alama Kubwa: The Big Score***, I highlighted this thesis, and just this week it was borne out as a major company farmed into Africa Oil’s blocks. Even in an awful oil market we have found a way to make money. Africa Oil (AOI) is sitting on top of a monster deposit with huge potential; consequently, on November 9th, 2015 it was announced that Maersk Oil, the shipping giant’s oil segment, bought a 50% interest in AOI’s 3 Kenyan blocks and 2 Ethiopia blocks for CAD $487 million. Maersk Oil will provide an additional commitment of CAD $640 million in expenditures for its working interest upon the company’s final investment decision. AOI’s stock price jumped a tidy 35% on the news. **Katusa’s Charts of Interest.** Here are charts you will not find anywhere else on the net all packaged nicely in one place. Enjoy them and more importantly, pay attention to them, I do. [![header]](https://katusaresearch.com/wp-content/uploads/2015/11/header1.png) [![majors]](https://katusaresearch.com/wp-content/uploads/2015/11/majors.png)[![sectors]](https://katusaresearch.com/wp-content/uploads/2015/11/sectors1.png) [![CuInv]](https://katusaresearch.com/wp-content/uploads/2015/11/CuInv1.png)[![ZnInv]](https://katusaresearch.com/wp-content/uploads/2015/11/ZnInv1.png)[![AlInv]](https://katusaresearch.com/wp-content/uploads/2015/11/AlInv1.png) [![RefMgn]](https://katusaresearch.com/wp-content/uploads/2015/11/RefMgn1.png) [![VLCCs]](https://katusaresearch.com/wp-content/uploads/2015/11/VLCCs.png) --- # The Future of Uranium: Three Major Takeaways from the 2015 World Nuclear Fuel Market Conference - URL: https://katusaresearch.com/future-of-uranium/ - Type: article - Published: 2015-06-26 - Updated: 2019-05-08 - Author: Marin Katusa I had the pleasure of speaking at the 2015 World Nuclear Fuel Market (WNFM) Conference in Paris, France, this month, and I returned with three important takeaways that you need to know if you are an energy investor. - The disconnect between the nuclear utilities and the realities of the uranium producers and market is at its highest point ever - Kazakhstan is the elephant in the room that nobody wanted to talk about - One company created a buzz and was the hot topic at the conference. I’ve scanned through the recent articles on *Seeking Alpha *about this company. Honestly, there’s a lot of misleading information from well-intentioned investors who are simply too far removed from this market to understand key factors. Let’s set the information straight now. Before I dig into these, a few words about the event itself. This was the 42nd annual meeting of the global organization solely focused on the nuclear fuel cycle and as such represents the key players who make up the supply and demand of this important energy commodity and related services. Nuclear fuel engineers and procurement specialists, executives of large nuclear utilities, uranium traders, government officials and uranium producers made up the attendees’ list. It was not a conference for investors. But if you want to understand the uranium sector, this is the place to do it, as it’s where the uranium spot and long-term contracts are discussed and signed. Though I was invited to speak in a key session on financial impacts on the uranium market, I was the only fund manager in attendance. I went because I wanted to get an industry insider’s perspective, and compare that with my own thoughts and ideas on the uranium sector. These are what help me form my opinions, and I like to challenge them. And who better to be challenged by than the nuclear scientists who run the industry? I was well rewarded. The insights I gained exceeded my own expectations. The first takeaway was the massive disconnect between the nuclear utilities and the realities of the uranium producers. The tension was obvious. US nuclear utilities have failed to understand the realities of the uranium sector. They are so focused on current spot prices that the majority of them are actually cannibalizing their own domestic production. Let me explain. For example, one senior executive of a large US nuclear utility stated during a keynote session that if uranium prices went up any more he would have to shut down his 8 operating nuclear reactors. He even went on to dramatize the situation, stating that what keeps him up at night is wondering what the price of uranium will be. I had many industry insiders who work at the biggest US utilities tell me that the big disconnect is because of the Utility Commission’s archaic mandates, as addressed below. The US utilities will struggle in the coming years because of this dysfunctional set up and the nexus to uranium prices was complete nonsense. Even executives within his own firm rolled their eyes and laughed off the idea—as blatantly false and very misleading. The fact is that the actual input cost of uranium makes up less than 5% of the operating cost of a nuclear reactor at US$60/lb. uranium. At current spot prices, it constitutes only about 3.5%. That particular presentation may have been off base, but it did give an important glimpse into the minds of the nuclear fuel buyers. Being a presenter, I was introduced to all of the speakers, movers and shakers within the nuclear industry, and was allowed into the private, by-invitation-only events. Over drinks, many of these scientists opened up on their subjects (with a little bit of encouragement on my part). The following chart I created illustrates a big talking point at the conference. The US utilities during 2014 purchased 94% of their uranium from foreign, non-US sources: [![Uranium purchased by U.S. nuclear reactors]](https://katusaresearch.com/wp-content/uploads/2015/06/uranium-purchased.png) Since I wasn’t talking to investors, I knew I was going to make many in the crowd feel uncomfortable. And that proved to be the case, specifically among the Americans. As I presented chart after chart, I noticed that the Russians within the nuclear industry nodded in agreement with my analysis, but the Americans acted as if I were exposing an awkward secret. Here’s a supplement to the previous chart: [![US Utility Uranium Purchases]](https://katusaresearch.com/wp-content/uploads/2015/06/utility-purchases.png) Note that the shades of red denote nations in good standing with Russia, and not so much with the US. The amount the US has become dependent on non-stable foreign sources of uranium is unprecedented, and the utilities are completely ignoring this reality. Here is an even scarier chart that really got the American attendees squirming, while putting a smile on the faces of the Russians as they nodded agreement: [![US Friendly vs. Russia Friendly Uranium Supplies]](https://katusaresearch.com/wp-content/uploads/2015/06/us-russia-uranium.png) Again, we can see that the Americans—who depend on imports for 94% of their uranium purchases, and increased imports from Kazakhstan alone by over 80% from 2013 to 2014—are losing influence in the global uranium sector. In contrast, the Russians are increasing their influence. In a private meeting, one of the key executives of a major US utility that buys a lot of uranium stated that it’s the Utility Commission that needs an overhaul—not the management of the utilities. Off the record, the reason for this large gap is that the people running the utilities have so many restrictions placed upon them. Another executive told me that federal rules prohibit the utility companies from actually participating in the development of domestic uranium assets. Even though they want to, they cannot. Hence my ongoing argument that the worst thing an American uranium company can do in the current market is to deplete its permitted resources, because a company could not replace and permit new resources at today’s uranium price. It just makes no sense to deplete resources in this market. Everyone agrees in principle, and yet the situation is only getting worse. ## Kazakhstan-The Elephant in the Room One of the reasons you read my research is to get information like this second takeaway from the Conference. It’s all about Kazakhstan, which went from virtually no uranium production 15 years ago to becoming the world’s largest producer, contributing 40% of global primary uranium production. Zero to hero in less than 20 years. Put another way, Kazakhstan is *four times more important* to the global nuclear markets than Saudi Arabia is to the global oil markets. Even worse, Kazakhstan is more important to the uranium sector than the world’s five largest oil producers (US, Russia, Saudi Arabia, China and Canada) are to the oil markets, *combined*. But what nobody is asking is this: What happens to a nation’s resource production when reinvestments into the sector—such as replacing wells and past production—never come about because the state uses the cash proceeds to fund social programs instead? Well, Mexico is a perfect case study. Pemex, the national oil company of Mexico, has one of the largest oil deposits in the world, called the Cantarell Field. At its peak, in 2003, the field was producing over 2.1 million bopd. Today, production is down over 75%, and the field is barely producing 450,000 bopd. Why? Oil proceeds make up about 1/3 of Mexico’s overall revenue, and the government siphoned that money off for other purposes, rather than supporting the industry. Thus Pemex wasn’t able to make the necessary reinvestments in its fields, and production plummeted. I’ve been writing about this phenomenon for years, and I call it the *pinch point* of national resource production. The reality is, governments are poor stewards of their natural resource sectors when they, instead of private industry, are running the show. They too often use the proceeds to fund their own political agendas, never worrying about the harsh realities that neglect of reinvestment inevitably brings. The Soviet Union is another great example of what happens to production when the state fails to continue reinvesting money into the producing assets. At its peak, the Soviet Union produced over 10 million bopd. With oil prices crashing in the 1980’s, the Soviet government had less money to fund its budget from oil revenue. Yet social programs were being continually expanded. Thus reinvestment into resources suffered. Eventually, oil field production was down by over 50%, at its low point. Once the USSR collapsed, though, reinvestment came back in. And two decades later, the Russians have been able to increase their oil production to the previous Soviet highs. The pinch point is coming to Kazakhstan, and it will happen faster than most expect. Uranium prices have been low, and the government has been using the funds from production to subsidize its political agenda. Once again, reinvestment has been sacrificed as a result. This is the elephant in the room. I had more than one industry insider at the conference come up to me and say that they completely agreed with my ideas, but they could never say anything like this publicly because it’s such a small industry. One American executive who read my book, came up to me to introduce himself and stated to me he spent years in Kazakhstan working in the uranium mines, and he couldn’t emphasize enough how bad the coming decline to their production will be. I like to remind people that it also happened in the US. In the 1960’s, the US was the world’s largest producer of uranium, and produced over 35 million pounds of uranium annually. Last year, the US produced less than 5 million pounds. That is more than an 85% decrease in production. This is a huge risk to the US. Rather than finding alternative sources of uranium to feed its 99 operating reactors (which need 50 million pounds annually), the US increased imports of Kazakh uranium by over 80% from 2013 to 2014. That’s insanity. And it’s going to be a disaster if the US utilities continue on this self-destructive course. They need to develop other sources of supply. Which brings me to my third takeaway. Truthfully, many of the talks at the Conference were incredibly dry and boring. Sorry if I’m offending any of the other speakers. But there was one speaker who stood out, and created quite a buzz with the uranium buyers. Amir Adnani. Amir is President and CEO of Uranium Energy Corp. (UEC), and he was the star of the show. Ok, my goal was for me to be the star of the show by bringing up some controversial topics. Which I did. But my stardom lasted only until Amir stepped up on stage. I’ve known Amir for a long time, and he is as smart as they come. For years I’ve been saying that Amir is the *next* Robert Friedland or Ross Beaty. Well, after watching his presentation at the WNFM, it’s evident that Amir has rightfully taken his spot at the table among the best mining executives. He gave by far the best mining presentation I have seen in years. Other attendees, not easy to impress, were awestruck actually – unexpectedly, the conference had changed. Amir laid out what his company has done and why, and what their future plans are. But it’s the contrarian approach his company has taken that really set him apart. Everyone talks about “buying low and selling high,” but how many of us have the guts to actually do it? Since Fukushima collapsed the uranium market in early 2011, UEC hasn’t missed a beat. The company has purchased six new assets; made the only new uranium discovery for large ISR project in many years; drilled more uranium holes than the rest of the US companies put together; and has been able to attract some of the world’s most successful investors, such as Hong Kong business magnate Li Ka-shing. Amir has more than doubled UEC’s uranium pounds in the ground when most companies are going bankrupt. But the biggest takeaway from his talk was his strategy moving forward, which I totally agree with. I’ve read the articles that are negative on UEC. Let me share my thoughts with you. I have been to every producing US uranium mine; I have over a decade of experience and a long successful track record in the uranium sector. There is a lot of misinformation in these articles. But the focal point for all the articles, which was true, was the low cash position of UEC. The shorts made a big deal out of this, and even claimed UEC would go bankrupt. Absolutely absurd. Something the UEC shorts are learning is that Amir is able to raise a lot of money very quickly from some very large institutions that want exposure to UEC for the years to come. UEC is not going bankrupt, nor is anywhere near such an outcome. I own a lot of UEC stock because I believe UEC is the best-positioned uranium company to maximize shareholder returns when the price of uranium moves higher. UEC just closed a $10 million financing at $2 despite the share price trading below that level. The financing was completed in just a few days, which is very rare for a resource company these days. Investors will argue, “But UEC raised money at $2, and the stock was over $2.80 just a few weeks ago”. That is true. But considering the circumstances and market volatility the company was experiencing, it makes sense to remove equity market risk and strengthen the balance sheet with only a 5% dilution effect. Also, I take a longer term perspective. The 12-month low is $1.02, and the 12-month high is $3. The 12-month VWAP (volume weight adjusted price) is $1.96. Put into perspective, although I would have liked to see UEC raise equity at a higher price, the $2 raise was done under extreme pressure from the large short position but still at no discount to market and was completed very quickly by two institutional investors. Nevertheless, let us be very clear on something. I highly doubt that the people behind the large short position expected over 17 million shares of UEC to trade on Friday, June 19, and for UEC Bulls to come out of the woodwork. I purchased shares on June 19th personally. With over $12 million in cash in the bank, UEC now has the financial flexibility to execute their business plan. Another item I would like to discuss, which the short articles focused on, is the company’s debt. Two groups, both of which are big supporters of UEC and Amir Adnani, hold the debt. How do I know? One of the principals of Sprott is Rick Rule. Rick is a partner of mine in one of my funds. Rick thinks very highly of Amir Adnani and UEC. The other holder of the debt is Li Ka-shing, who is one of Asia’s wealthiest men. Again, both groups intend on working with UEC and Amir Adnani for years to come. When you compare the amount of debt UEC has on their books vs their peer group, it’s not an issue at all. Clearly, I would prefer no debt on the books. Unfortunately, the real world of resources is a difficult place, and my money is on Amir to figure out how to navigate through this difficult market. ## Avoid Sellers Remorse It takes a minimum of 10 years to define, permit and build a uranium mine. Less than 1 in 3000 exploration targets ever becomes an economic mine. After beating the odds of 1 in 3000, Amir has decided that UEC will not deplete its resource in a low commodity price environment. I endorse this strategy 100%, as do many of the largest fund managers I know in the business. It’s absurd to deplete your resources when the commodity is at such a low price that new production cannot be brought on line. Rather than burning through its resources, UEC is continuing to permit other uranium project that can feed its Hobson processing facility, which is just 1 of 3 processing facilities in the US. UEC’s Hobson plant has the capacity to produce up to 2 million pounds of uranium annually if it were to produce at full capacity. I’ve spoken to many producers who wish they weren’t depleting their resources but they aren’t in a position to do otherwise. It may be because they signed contracts to finance their projects into production and had no alternatives, or they may have conventional mines where it’s not feasible to decrease the labor force. Each operator has its own reality. And every single one of the operators I have spoken to recognizes that the commodity price will be higher in the future. They know they are depleting their best resources in a low-price environment. They don’t like it, but can’t help it. This is what I call *seller’s remorse*. It’s no secret that I and my subscribers have been long shares of UEC for a long time, and we are sitting on big gains. I am long UEC because it has by far the best management team in the uranium sector. They are doing the right things in a bad resource market. UEC has made big acquisitions, made a major uranium discovery in the US, obtained their required permits for further production and have a fully permitted and operating uranium processing facility. Not to mention, rather than depleting its resources in a bad market, UEC has positioned itself as the only unhedged uranium producer in the world, with maximum leverage and the flexibility of ISR production to come online when the price of uranium goes higher, which it will. The US utilities will have a reality check soon enough, as Kazakh production approaches the pinch point. I’ve already positioned myself in the best uranium company, with maximum upside when the price of uranium turns. Have you? --- # Connecting the China Syndrome with Bubbles - URL: https://katusaresearch.com/connecting-china-syndrome-bubbles/ - Type: article - Published: 2015-05-21 - Updated: 2019-05-08 - Author: Marin Katusa **The Next Asian Flu Pandemic will be caused by this Bubble Popping** I regularly meet with investors in my hedge fund. It’s fun. Even though I am a very large investor in my own fund, I work for my investors. I recently met with a large investor, with whom I meet once a quarter, to talk ideas and catch up. He has made his millions in the resource sector and now resides in Beijing. Our most recent meeting was the inspiration for this research project. There is an old saying in the market that, *“A bubble is invisible when you’re in it”. *He had the bug, but not a gold bug, full on, China syndrome for the Chinese stock market. In fairness to my friend and investor, he did tell me, in fact he begged me to put some of my hedge funds cash into the Chinese markets a year ago. Unfortunately, it’s not in the mandate of my fund, and I didn’t try to push it, as I like to play in a pond I know. So, I spent my Sunday pondering if my friend and investor, whom I respect immensely, is onto a mega trend, or if he is just one of many who are suffering from the China Syndrome. **Is China in its Biggest Bubble yet?** The world’s largest fund manager, Ray Dalio, has said that the success of his $169 billion fund is partially attributable to history repeating itself and learning what went wrong. Well, there is currently a Chinese stock market boom very similar to past booms and we suggest investors take heed of Mr. Dalio’s advice. If the success of the world’s largest hedge fund rests on history, investors may want to pay close attention to our explanation of the Chinese stock rally. [![China Stock Market 1-Year Change]](https://katusaresearch.com/wp-content/uploads/2015/05/china_stock_market_one_year_change.jpg) The performance of the Chinese stock market has been superb over the past year and that must mean that the Chinese economy is doing great, right? Wrong. China’s retail and industrial sector are seeing declining growth and housing prices continue to fall; meanwhile, the stock market has more than doubled over the past year. [![China's Economy vs. China's Stock Market]](https://katusaresearch.com/wp-content/uploads/2015/05/chinas_economy_vs_chinas_stock_market.jpg) If the Chinese economy isn’t performing like its stock market, maybe outside factors are affecting its growth. Like its largest importer of goods: the US. Over the last year US stock market gains have been dwarfed by Chinese gains. ![US & China Market Performance] If the economic performance doesn’t justify the stock market rise, could we be in a bubble similar to the internet, housing, and European bond bubble? Or might it mean something worse? ### ****Two key policy changes by the Chinese government.**** - **The government enacted the Shanghai-Hong Kong Stock Connect program to integrate mainland and international investors into both markets**. Unlike Hong Kong markets, Shanghai and Shenzhen markets have limited exposure to international participation and remain mostly traded by the mainland Chinese. The program allows international involvement in the Shanghai and Shenzhen markets and mainland participation in Hong Kong markets. Since November 2014, when the program was implemented, trading volumes soared in both Shanghai and Hong Kong. [![China Trading Northbound (Mainland) vs. Southbound (Hong Kong)]](https://katusaresearch.com/wp-content/uploads/2015/05/china_trading_northbound_vs_southbound.jpg) **Connecting the Bubbles** The beginnings of the Shanghai-Hong Kong Stock connect program caused a shopping spree by mainland Chinese investors inflating the market. In one year the Shenzhen Stock Exchange A shares’ price to earnings ratio doubled to a 50 times valuation; over 2x higher than the NYSE composite index. The value between dual listed Chinese stocks on the Shanghai and Hong Kong exchanges has become distorted. This is partially attributable to more international investors in Hong Kong markets, as well as to less restrictions on balancing the market with short sellers who put downward pressure on stock prices. [![Shanghai vs. Hong Kong - Distorted Markets]](https://katusaresearch.com/wp-content/uploads/2015/05/shanghai_vs_hongkong.jpg) As of April the two distorted markets have caused more money to flow into Hong Kong markets, as mainland and international investors attempt to re-establish even pricing between dual listed companies at a record pace, filling the daily money flow quota restriction of $1.7 billion. Money from Shanghai will flow to Hong Kong, and then expect the money to go offshore. Vancouver housing prices is an example of what will happen elsewhere when wealthy Asians want to hide money outside of China. - **Chinese government relaxes trading and lending restrictions.** We all know about China’s One Child Policy. There is no such Policy when it comes to brokerage accounts in China. Mainland accounts are being opened by the millions every week, something I tweeted about a few weeks ago. More mainland Chinese are able to open several accounts each in order to maximize their involvement in the market. And, if your first child is a girl (like mine is), you get to have another child, and both will eventually be allowed many brokerage accounts. Ah, the magic of multiplicity. Additionally, the Chinese government has reduced borrowing costs. We know where this is going… Since announcing the Shanghai-Hong Kong stock connect program, the prime lending rate in China fell to 5.35% from 6% and lending to purchase stocks in China has exploded. China now uses over 3 times more leverage to borrow stocks on margin than the US. [![Margin Debt / Margin Lending / Shanghai Composite Index]](https://katusaresearch.com/wp-content/uploads/2015/05/margin_and_composite_graphs.jpg) *Source: WIND Info, Wall Street Journal* **Could there be more upside in China’s stock market?** Anything is possible. But if you’re wondering whether you should participate in the Chinese rally, I suggest you take a look at what the big investors in the US have done thus far in 2015. Since January 2015 there have been more net withdrawals from ETFs long the Chinese stock market. And there have been more net additions to ETFs that are short the market. [![US Not "Buying" into China's Bubble]](https://katusaresearch.com/wp-content/uploads/2015/05/china_bubble.jpg) So, the big funds in the US aren’t buying the Chinese Miracle. [![Street vendor selling bananas participating in the Chinese market rally]](https://katusaresearch.com/wp-content/uploads/2025/07/Placeholder.png)So, would you rather follow someone like a Ray Dalio who has decades of experience, or a Chinese retail investor who has never really participated in the stock market. Now that everyone and their mothers (and street vendors selling bananas) are participating in the Chinese market rally, US investors are wary of the sustainability of the Chinese Bull, or as the say in China, the Dragon. To put this euphoria into perspective, look at the Shenzhen IPO of Beijing Baofeng Technology Co. Limited. After listing at the equivalent of $1.65 USD per share, the company’s stock price rose by the maximum increase allowed under the Shenzhen exchange every day to reach $19.72 per share in a month. Of the 29 IPOs launched on the Shenzhen exchange last month, every company’s stock price has risen by its maximum allowed 10% per day. [![Beijing Baofeng Technology]](https://katusaresearch.com/wp-content/uploads/2015/05/beijing.jpg) *Source: Bloomberg, Financial Times* Am I being fair? I hate to be a close-minded analyst, so I decided to compare some of the equivalent peers between China and North America. I’m a numbers guy, and the numbers don’t lie (as long as the numbers are real). **A Peer Analysis: Chinese Valuations vs. North America Valuations** So after running many screens and a lot of number crunching, the conclusion is inescapable: The “irrational exuberance” of the Shanghai and Shenzhen market has led to overvaluations relative to the US exchanges. Taking all companies with a market capitalization over $12 billion USD, we see that US-listed companies are a much better investment on a relative valuation and yield comparison. Here is a chart you won’t see anywhere else. I am breaking down sector by sector the comparable valuations. [![US vs. Shanghai Stock Valuations]](https://katusaresearch.com/wp-content/uploads/2015/05/shanghaivsus.jpg) **US Market vs. Chinese Market: Who Pays a Better Yield?** This was where the alarms start sounding to tell the Chinese Speculators: BUYER BEWARE. In every single sector, the US companies pay a bigger yield than the Chinese. This is not good. [![US vs. Shanghai Stock Yield]](https://katusaresearch.com/wp-content/uploads/2015/05/stock_yield.jpg) Chinese financial and telecom companies are the only ones that trade at a discount to US equities; however this comes with higher risk in Chinese financials and higher debt burdens on Chinese telecoms. Most US companies provide a much larger dividend yield. And I trust US accounting regulations more than their Chinese equivalent. **Resource Valuations: China vs. Canada** Alright, resources is where I have spent my whole career. I was very curious to see how the Canadian peer group fared against its Chinese peers when it came to resources. **Conclusion:** Chinese resource companies trade at a significant premium to their Canadian counterparts. The same hype of Chinese equities is reflected in the resource sector when compared to Canadian companies. Looking at all companies with positive operating income, the resources sector is highly overvalued in China relative to Canadian listed equities. If I was a Chinese resource executive, I’d be on the warpath trying to buy Canadian assets with their overvalued Chinese stock paper. Hmmm….Maybe this is a new trend to come… [![Canadian vs. Shanghai Resources]](https://katusaresearch.com/wp-content/uploads/2015/05/cdn_vs_shanghai.jpg) [![Canadian vs. Shanghai Resources]](https://katusaresearch.com/wp-content/uploads/2015/05/cdn_vs_shanghai_2.jpg) The Chinese companies’ premium of 10 times EV/EBITDA over Canadian companies may not completely be justified by leverage. Although Chinese companies have less debt, Canadian companies pay out a much larger dividend. The value investor will have a tough time in the current euphoria in the Chinese stock markets. I hope my Chinese friend has taken enough money off the table that he is now playing for fun. I know I would. --- # Why David Einhorn is Wrong on the Big Oil Short - URL: https://katusaresearch.com/why-david-einhorn-is-wrong-on-the-big-oil-short/ - Type: article - Published: 2015-05-15 - Updated: 2019-05-08 - Author: Marin Katusa **An Open Letter to David Einhorn: Technical ****Reasons why you are Wrong about your “Mother Fracker” Short** Dear David Einhorn, I like you. I have great respect for your work, your work ethic, and your balance of career and family. I’ve read your book, ‘Fooling Some of the People All of the Time’, and enjoyed it. You may want to read mine, *The Colder War. *A *New York Times* Bestseller, it will give you a good background on the geopolitical aspects of the energy sector. You have made some great calls in the past. The largest short of your career, in Lehman Brothers, impressed the world. However, in my opinion your public comments and research regarding Pioneer Natural Resources, and what you call the “Mother Fracker,” is dead wrong. Like you, I have spent most of my career as a fund manager. My sole focus has been on the resource sector in North America and internationally. I was very early to the shale oil and gas sector in 2006. In 2007, for example, I was the financier and largest individual investor in Cuadrilla Resources, the most successful European unconventional energy company, with a market capitalization valuation today in the billions of British pounds. Lord Brown (former CEO of BP) is the Chairman of Cuadrilla and Riverstone is a major shareholder. David, full disclosure, I have no skin in your “Mother Fracker” fight. I am neither long nor short Pioneer. I do not own a position on either side. My purpose with this letter is to present an unbiased perspective for all the investors and speculators who are following your call on Pioneer, which I think is misguided. Challenge me if you like, but let me say where, in my opinion, you went wrong, David. - **Your depiction of Pioneer’s declining reserves over 2012 to 2014, while capital expenditures continued to climb, was biased and incorrect.** - **You (or your analysts) need to pay closer attention to price realization due to the dynamic environment within the US oil & gas landscape. Pioneer is expanding its US Gulf Coast and international exposure, something did not take into account. ** - **Using the wrong financial model: You need to think of Pioneer as an asset manager, not a perpetual oil producer. ** - **Innovation. Never underestimate innovation in the oil patch. Pioneer has a great team. They were key to unlocking the Eagle Ford, and have now moved on to unlocking the Midland Basin.** Let me explain each of these. - **Your depiction of Pioneer’s declining reserves over 2012 to 2014, while capital expenditures continued to climb, was biased and incorrect.** [![Real Numbers Behind Reserves]](https://katusaresearch.com/wp-content/uploads/2015/05/pioneer-real-numbers-behind-reserves.jpg) David, you completely ignore and fail to address the amount the asset sales contributed to the declining oil reserves. Those sales were from costly fields in the Barnett, Hugoton, and Alaska. Pioneer sold those assets in a hot oil and natural gas market and as a result was able to reduce debt. This is critical. [![Sold Noncore Assets To Reduce Debt]](https://katusaresearch.com/wp-content/uploads/2015/05/pioneer-sold-noncore-assets.jpg) Another serious omission in your reserve analysis was a failure to incorporate vertical drilling write-downs. Pioneer wrote down 500 million barrels equivalent in proven reserves due to shut-ins of 10,000 vertical wells. According to the SEC regulations, shutting in vertical wells that initially prove up barrels in the acreage, yet having no intention to bring those wells back into production, warrants a write-down of those reserves. So what does this mean? Pioneer continues to drill new horizontal wells in the same area that they shut in vertical wells, but they are unable to book any oil reserves after the area has been written down. Though the reserves are gone on paper, they still exist in the ground, because of the horizontal wells that will unlock that value. If you were to incorporate the vertical well reserve write-downs, reduction in debt due to asset sales, and increased production of over 10% over the last two years, the overall conclusion, contrary to your belief, would be net positive. - **You (or your analysts) need to pay closer attention to price realization due to the dynamic environment within the US oil & gas landscape. Pioneer is expanding its US Gulf Coast and international exposure, something that, again, was not taken into account. ** Companies don’t simply receive WTI pricing on oil and NGL-pricing on natural gas liquids. Because of the US ban on crude oil exports, different regions in the US price crude differently. Depending on availability of crude, the differences or spreads vary from $5 to $15 per barrel. Natural gas liquids (NGLs) are not one product, NGLs are made up of several liquids at varying prices. [![Natural Gas Liquids (NGLs) Table]](https://katusaresearch.com/wp-content/uploads/2015/05/natural_gas_table.jpg) Ethane is the cheapest of the bunch and Pentanes, also known as condensates, are the most expensive. Mexico and Canada import US condensates, mainly from formations such as the Eagle Ford, to blend into heavy oil for pipeline and train transport and refining. Recently a select group of US oil producers has been granted federal authority to export condensates to Asia and Europe that are refined into naphtha, diesel, and jet fuel. Approximately 40% of Pioneer’s Eagle Ford production is condensates, and it is one of few producers with the right to export. In 2015 Pioneer expects to ship 13,000 barrels per day of condensates to places where pricing **premiums** have been **as high as $10 per barrel.** This equates to transport of 50,000 barrels per day of its Permian crude oil to Gulf Coast markets instead of markets in the Midwest. It is important because Gulf Coast pricing of crude oil is much higher than prices in the Midwest. [![Gulf Coast Crude Oil Pricing]](https://katusaresearch.com/wp-content/uploads/2015/05/gulf-coast-crude-oil-pricing.png) The lack of pipeline access to the Gulf Coast forces refiners to import international crude oil to meet refining demand. This is why Gulf Coast crude, priced as Louisiana Light Sweet (LLS), trades at a premium to West Texas Intermediate (WTI). [![Crude Pipeline Capacity to Gulf Coast]](https://katusaresearch.com/wp-content/uploads/2015/05/crude-pipeline-capacity.jpg) Figure Source: PXD Q1 2015 Presentation With 65% of Pioneer’s Permian crude heading to the Gulf Coast, the company will benefit from the price differential. This is something your analysis failed to incorporate into your thesis. With higher realized pricing from Eagle Ford condensates, combined with Permian crude oil and hedges in place for 2015 and 2016, Pioneer has sheltered itself from downward pricing pressure. In fact, in 2015 Pioneer has hedged 90% of its oil & gas production. Hedging and higher price realization will result in more realistic numbers compared to your unhedged estimates. [![Projected Free Cash Flow per Barrel (2015)]](https://katusaresearch.com/wp-content/uploads/2015/05/PXD2015-FreeCashFlow1.png) This is a big gap. Failing to account for hedges and benchmarking to WTI pricing, according to your analysis, Pioneer could lose $67 million. However, adjusting for the hedges already in place, Pioneer is on track to earn $117 million in free cash flow. That leaves me stumped when you mention a $200 million cash burn in 2015. David, your analysis here is simply incorrect. ##### **“Development Costs”** That back-of-the-napkin all-in cost you calculated on a $68 WTI oil price and $4.16 Henry Hub gas has some shortfalls. For one, you simply incorporate 10 years of net capital expenditures as total development costs. That isn’t telling the whole story, and it’s the wrong way to go about analysis in the oil sector. Oil & gas companies front load their capital costs as they build midstream assets to transport, hold, and distribute their oil & gas production. Thus, you are equating costs that result in tangible assets with development costs. That is like saying that Coke incurred $5 million cost per bottle for the first 10 bottles it produced, including the cost of a $50 million factory. For Pioneer, a 60-well program in the Permian would require capital to build tank and battery facilities that would cost $7 million. According to your calculations, wells could cost up to $15.8 million per well. But those costs should be spread out over the 60-well program. That yields a figure around $9.4 million per well, not $15.8M. You’re adding 40% to what the real costs would be. You should know better. Shale oil wells must be looked at as an assembly line, and you must incorporate many wells, not just the first few wells, to get an accurate cost base. Otherwise, you’re ignoring the developmental wells in the field. [![Permian Well Costs: Up-front Capital]](https://katusaresearch.com/wp-content/uploads/2015/05/pioneer-permian-well-costs.jpg) As Pioneer increases well counts you will see the average “development costs” fall. In addition, Pioneer can sell those tangible midstream assets, which they plan on doing with EFS Midstream. With decline rates lowering production from the average Permian well, the $9.4 million cost per well will result in a positive return on capital of just under 25%. In the oil patch, that is very respectable. [![Permian Basin Well - Average Decline Rate]](https://katusaresearch.com/wp-content/uploads/2015/05/pioneer-basin-oil-well.jpg) We calculated this number by using your assumptions of $30 per barrel cash flow before capital expenditures. Thus, when you exclude costs associated with midstream assets, the economics of $68 oil and $4.16 gas are positive. - **You need to think of Pioneer as an asset manager, not a perpetual producer. ** You value Pioneer as a perpetual growth producer. That is wrong. Whether it’s EOG, Pioneer or other US E&P’s, they must adjust spending or adjust production growth during sustained lower oil prices. Think of Pioneer’s core acreage in the Eagle Ford and Midland Basin as the blue chip companies in the S&P 500 and the surrounding acreage as growth stocks in various cyclical sectors. You rely on blue chips in a market downturn, but in better times and with constant innovation, many growth stocks evolve into large and stable blue chips. Not all, but some. The innovative companies are the ones you want. ##### **David, you pulled a Homer** Thus, to draw on your Simpsons analogy, the chocolate never goes away. Companies dip into the chocolate stash when times get tough and they need to feel much better. And when hard times return? Marge has already stockpiled more chocolate ice cream from the Kwik-E-Mart. To assume perpetual production and cost growth while pricing remains static oversimplifies the cash flow from a producer like Pioneer. Analysts often project short term cash flows based off current reserves as a proxy for future cash flows with current production techniques and costs. This isn’t a bank stock and you can’t apply a similar model when analyzing the oil patch. - **David, where does Marge Simpson get all the chocolate ice cream for Homer? The answer: Innovation.** Exploitation of the Permian basin goes back a long way. A really long way, actually: oil from the Permian helped fuel the American war effort defeat the Nazis in World War II. But it was not until 2010 that the Permian Basin’s deep formations were tapped commercially. This was a result of trial and error from companies locating sweet spots in acreage and using advanced drilling & completion technology. [![Northwestern Shelf]](https://katusaresearch.com/wp-content/uploads/2025/07/Placeholder.png) Source: Wood Mackenzie [![Southern Midland Basin]](https://katusaresearch.com/wp-content/uploads/2015/05/southern_midland_basin1.jpg) Pioneer found the ultimate sweet spot in the Wolfberry trend of the Midland atop more than 2,000 ft. of pay in the Spraberry and Wolfcamp formations. Being a first mover, Pioneer has secured prime acreage right in the middle of the Wolfberry trend. In 2010, Pioneer was in the seed stage of having another elephant oil formation by the tail. Five years later, Pioneer is experimenting with innovation to lower costs and increase efficiencies (as EOG has done in other formations). [![Western Eagle Ford Current Returns Versus 2012]](https://katusaresearch.com/wp-content/uploads/2015/05/eog-resources.jpg) Source: EOG Presentation 2015 ##### **The Re-Frack Revolution** Interestingly, I had been analyzing re-fracking opportunities by Pioneer and others earlier this year, and I became aware that Pioneer is using part of this technology to fracture new Permian wells. [![Re-Fracking]](https://katusaresearch.com/wp-content/uploads/2015/05/refracking.jpg) Fracturing US shale formations requires a plug technique where a fracture stage is followed by the plugging of that stage and another fracture stage follows. Fracturing, plugging, re-entering the well, and then drilling out all the plugs is time-consuming. Pioneer moved to dissolvable plugs, which brought drilling and completion times down by 50%—to 15-16 days—in the last two years. Pioneer is also further improving wells by using the divergent chemical provided by Schlumberger (the world’s largest energy service provider) that originally plugged existing Eagle Ford wells in a re-frack. It is using this diverting agent on new wells in substitution for plugs, to keep pressure within the well. That lowers costs and increases recovery. Whether it’s innovation out of necessity, or the natural learning curve of the unconventional companies such as Pioneer, this growth curve cannot be ignored. Pioneer continues to improve, not only in production growth, but also in a better understanding of its oil resources and reserves. And that will only lead to better exploration success and lower cost development of its wells. ##### Warning: Hedge Fund Legends like David are not always Right I run a hedge fund. I have a lot of my own net worth in my hedge funds. I have done very well, but I make still make a lot of mistakes. I wish I was perfect, but I am not. The best managers in the business have exemplary track records with blemishes usually only coming when they stray too far from their comfort zone and areas of expertise. I have suffered from that myself in the past, so I endeavor to stay focused on my wheelhouse of expertise, the resource sector. It is a very complicated, very cyclical sector—a dangerous area for investors who blindly follow big-name hedge fund managers. Even the best hedge fund managers, like you David, are wrong at times. You are a media darling. You’re a favorite at the Sohn Conference, and rightly so. You have made some incredible calls in your career. But you are wrong on this one. If you wanted to short a “fracking” oil company, there are many better candidates than Pioneer. Over the last decade, I have done extensive research on the innovators in the shale sector, such as EOG and Pioneer. I am now providing my analysis for free at katusaresearch.com. Why? Because I can. I love what I do, and have fun posting and sharing my analysis. I have financially modelled short-term scenarios in which all the producers must adjust to changing oil prices. My team and I track the innovations and spending as oil prices fluctuate. I have been doing this for years. Now, what is Pioneer worth? Based on its short-term cash flows, net asset value, midstream and service assets, and peer comparisons, I believe a fair value for the Pioneer is somewhere between $128-$142 per share. Yes, I share your view that as a whole shale producers’ equity values are a bit ahead of themselves. I publicly stated in mid-2014 that the energy markets looked shaky and it was time to lock in profits and to be careful. But your analysis exaggerates the situation. If Pioneer’s share price falls to $78, as you project in your presentation, that’ll be our good fortune. I believe it will mark a great time to accumulate shares in the largest producer in the most prolific play in the Midland. I recently picked a great entry price for EOG near the bottom. I am sure it was partly luck, but it was luck supported by my best analysis. [![EOG Share Price - Our Purchase Price]](https://katusaresearch.com/wp-content/uploads/2015/05/eog-graph.jpg) Source: Yahoo EOG 2-Year Chart Both Pioneer and EOG are companies you want to own in a downturn, especially if the selloff occurs because of a short battle. Both companies are innovators with great land positions. I also believe that both will benefit from other frackers’ fiscal mismanagement. ##### **Cash is King** We are in a serious commodity deflation. As I have said many times, in such circumstances cash is king and debt is deadening. Pioneer and EOG have much cleaner balance sheets than their peers. Where others don’t, they have the ability to endure the current deflation in oil prices. This graph shows how Pioneer stacks up against some of its competitors: [![Pure US Shale Players - Pioneer Natural Resources Lowest Debt Position]](https://katusaresearch.com/wp-content/uploads/2015/05/pure-shale-players.jpg) Continental, Devon and Concho are all big oil US producers. Pioneer has much lower debt to market cap than its peer group. That is just one of many examples I can use to illustrate my argument. David, no disrespect intended. As I said earlier, no fund manager can be in business for long without making his share of mistakes. I’ve made mine, and I believe that this is one of yours. My only intent with this letter is to present the perspective of one who has immersed himself in study of the oil patch for many years. Regarding Pioneer, I just hope to give you something to think about. ##### **Help a Friend** If you have a friend or family member who plan on following David Einhorn’s lead and plan on shorting Pioneer, be a good friend and send them this article. Help your family member or friend from making a serious mistake following Einhorn and forward this technical report on the reasons why David Einhorn is wrong on his Pioneer short. --- # An Easy Arbitrage Opportunity: The Next New Gold - URL: https://katusaresearch.com/an-easy-arbitrage-opportunity-the-next-new-gold/ - Type: article - Published: 2015-05-15 - Updated: 2022-10-11 - Author: Marin Katusa **Arbitrage **[ahr-bi-trahzh]: a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time. *Note: This is the first research report published on the combined company.* **Speculative Thesis****:**** ** ** **Newmarket Gold (NGN.V) is merging with a gold producer called Crocodile Gold Corp (CRK.TO). The Arbitrage opportunity is a 15% price difference between what CRK shares trade for in the open market and the PP price of NGN. The NGN management team will be taking over the board of the new company, and in reality, this is a friendly takeover (NGN will take control, with 5 of 7 board seats). The NGN management team is investing CDN$8.5 Million (1/3 of the total CDN$25M raise) into the Private Placement (PP) of the merged company at a 15% premium to what CRK currently trades for in the open market on the Toronto Stock Exchange (CRK.TO) and the CDN$25 Million PP is fully subscribed for. The new company will be a +200,000 ounce/year gold producer. Currently the combined newco trades at a +60% discount to its peer group. New management will implement cost efficiencies and as production costs decrease, there will be a revaluation when management executes its plan and without the Aurico overhang (explained below). **Open Disclosure: **The first meeting the management team of Newmarket and Crocodile (Doug Forster and Blayne Johnson) had after the announcement of the deal, was with me (Marin Katusa) in my Vancouver office. I was travelling last week, and one of my analysts (Rob F.) was on the ball with the announcement. Rob contacted me while I was in Georgia, and we went over the deal metrics. My team did a great job of running numerous peer comparables and going through the specifics of the producing assets. We liked what we saw. I flew back into Vancouver at 2 a.m. on Friday, and I met Doug and Blayne at my office at 830am. “In the room, in the deal” is a mantra of mine, and this is an example of having an edge over the rest of the market by having access to the stories before they get mainstream institutional coverage. I have known Doug and Blayne for years, and we came very close to doing a deal together in 2008. They are smart and savvy, and do not do too many deals, so I expect both to have their focus factor on this one. During the meeting, I had a list of questions I wanted to confirm answers to, and once the two (Doug and Blayne) left my office, I went into the market and bought over 1 million shares. I bought CRK.TO shares being offered at $0.31, 0.315, 0.32, 0.325, 0.33 in the open market. The arbitrage was between a 16% and 11% discount to the financing price. I will continue to buy in the open market as the arbitrage opportunity exists and my fund is participating in the private placement. **Current Price of CRK.TO:** $0.325. Takeover Price: $0.37, Arbitrage: 14%. ## **People Behind the Deal: **Doug Forster, Blayne Johnson, Lukas Lundin, Ian Telfer, Randall Oliphant, Ray Threlkeld, Mike Vitton and Rod Lamond **Doug Forster–President/ CEO:** (Newmarket Gold) – Co-founder of Terrane Metals which was acquired by Thompson Creek for $750 million & Potash One which was acquired by K+S for $434 million. Forster has been involved in a number of large-scale Canadian mine development projects including the Mt. Milligan gold-copper mine, the Kemess South gold-copper mine, the Golden Bear gold mine and the Legacy potash project. Doug is smart, doesn’t do many deals, and the ones he does, he sticks with them until they are a success. He was known as the boy wonder early in his career, and for my money, he is about as smart as it gets in the junior resource sector, a rare thing for me to be able to say. After a decade of dealing with Doug, he hasn’t once promoted me on anything other than the facts. He is a straight up, honest man. **Rodney Lamond—COO**: (Croc Gold) – Mr. Lamond was the Group General Manager responsible for the exploration and mine development strategies for the mining division of Nyrstar NV, which included nine mine operations in six different countries in North, Central and South America. Mr. Lamond was Vice President of Operations and General Manager of Gold Hawk Resources prior to the acquisition by Nyrstar. Rod has come in and fixed up the operating kinks that Crocodile Gold (CRK) has struggled with. Furthermore, he is directly responsible for the cost saving measures that have put the CRK mines back into the black. I don’t know Rod but vetted him with people who have worked with him in the past, and he has checked out with high marks. **Blayne Johnson– Exec VP**: (Newmarket Gold) – Long-time partner of Doug Forster’s and was the Co-Founder of Terrane Metals. Blayne got into some trouble in the 1990’s during his time at First Marathon and his involvement in Cartaway Resource Corp. The key guys of First Marathon are the banking titans at Haywood Securities, and I’m only mentioning this so any skeptics out there can’t say I didn’t bring all the facts to the table. Does this prevent me from investing in this deal? Hell, no. That was in the past, he paid his dues and learned from his mistakes–enough said. I have known Blayne for 8 years, and although we could not cut the deal we worked hard on in 2008, he has always been straight up and honest with me. I always have time for Blayne. **Lukas Lundin-Director: **Lukas does not lend his name to any deal unless he believes in it. The first thought one may have is why is Lukas on the board of a non-Lundin deal? No, Lukas is not on the board to keep an eye on things for Lundin Gold, in case they want the newco for production. Lundin Gold is focussed on putting the Fruta del Norte deposit in Ecuador into production, and no other deal will happen in Lundin Gold until then. Rather, this speaks highly of the endorsement Doug Forster and Blayne have from well-known market players like Lukas. Having Lukas on the board means he is invested, but will also state his mind if he feels the company is going off track or about to make a mistake. **Randall Oliphant – Director: ** If you are trying to become the next New Gold, it makes a lot of sense to have someone like Randall on board. Randall is currently the Executive Chairman of New Gold and is Chairman of the World Gold Council. Prior to his time at NGD and the WGC, he was President and CEO of Barrick Gold Corp, the largest gold producer in the world. **Ian Telfer—Advisor: **Mr.Gold. I was actually surprised when I saw Ian’s involvement in the deal but it all makes sense now. Ian was a key person making Gold Corp. the success it is today. Ian was also involved in the early success of New Gold. I believe this company has the potential to be the next New Gold. Again, having Lukas involved is big, and having Ian also interested and engaged really separates this newco from any of its peers. Ian is an incredibly smart person, whom I hold in the highest regard. **Ray Threlkeld—Chairman: **Ray and I have an interesting past. Our paths first crossed in 2010. But, first some background on this story, as it’s a good one. In 2006, I visited Rainy River’s gold project in Ontario, Canada for the first time (I visited it again later in 2010). It was years before Ray Threlkeld was involved, and in 2006 the company was run by Nelson Baker. As I was driving with the president of Rainy River on that cold miserable October Sunday morning, I noticed that the gold property was essentially a giant bog. After driving around the property, I came across an 80+ acre parcel that looked like it wasn’t part of the bog. Rainy River didn’t own the project yet, as it was owned by some locals at the time. For whatever reason, that block of land stuck out in my memory because of a road that cut the properties. A few years later, I ran into a few geologists I know, and they asked me if I could raise them some money. I’m always open to a new idea, and this rather unknown group showed me what their plan was. It was a small parcel of land that is adjacent to the Rainy River block. I knew the ground well as I had driven through that specific block of land and had seen it firsthand myself 3 years earlier, as I remembered that road from the map. I quickly left that meeting and went to the Rainy River website. This is where I got lucky. I pulled up, what at that time was the most recent Rainy River PowerPoint presentation, and noticed that the pit design by Rainy River in the presentation actually included what became known as the Burns Block. I only noticed this because of a specific road that I drove on getting to the project years earlier. I locked in the private placement and became a major shareholder of Bayfield Ventures (BYV.VN), along with my high net worth friends and subscribers. By the time I completed the private placement, Nelson Baker had moved on from Rainy River and Ray Threlkeld became the man in charge at Rainy River. So, I politely approached Ray with a proposal. I pointed out to him and his team that their pit design included land that Rainy River didn’t own. But, I happened to be one of the major shareholders and my group of investors would be more than happy to do a deal, at the right price of course. Ray wasn’t too impressed, and called the ground “deader than a door knob”. Literally, a week later, the press release for Bayfield announced very high gold drilling results. The ground was not “deader than a door knob”. I contacted Ray again. Always a professional, Ray told me why Rainy River didn’t need and wouldn’t buy the land. During this time, Bayfield stock was on fire and everyone in the financing was sitting on +500% gains. Eventually, Rainy River was bought out by New Gold (Ray was involved with both companies), and then New Gold bought out Bayfield. Although there were some intense discussions between Ray and me, he was always a professional, and I liked his style—I’m not sure he would say the same about me at the time. As it turned out, we were both right. Rainy River never did buy out Bayfield, it was New Gold. I was right on my thesis, and my investors and I made a bundle on the speculation. **Mike Vitton—Advisor: **Before Mike left BMO banking, he was the #1 investment banker in the resource sector. One of Mike’s mentors at BMO, Carl Rezoni—who started up the BMO resource investment banking arm—speaks very highly of Mike. I have known Carl since 2009, when he joined the Copper Mountain board, and Carl is very smart and experienced. I have dealt with Mike Vitton only once, in the early days of Copper Mountain and he is someone who is clearly smart and knows the resource sector. If Mike’s name is on a deal, you want to pay attention. Mike left BMO to work on a few large private deals and became the go-to banker for Eike Batista, who at the time was the most successful and famous mining icon in the world. ## **Deal Terms:** Under the terms of the arrangement agreement, each Newmarket shareholder will receive one NewCo common share for each Newmarket common share held. **Each Crocodile Gold shareholder will have the option to elect to receive consideration per Crocodile Gold common share of (i) 1.228 NewCo shares, (ii) 37 Canadian cents in cash, or (iii) a combination thereof subject to a maximum aggregate cash consideration of $20-million (Canadian).** Assuming full proration, shareholders of Crocodile Gold will receive 1.088 NewCo shares and 4.2 Canadian cents in cash for each Crocodile Gold share held. All NewCo shares will be issued in the transaction on a notional 1:5 consolidated basis. The cash component of the Crocodile Gold consideration will be financed from the proceeds of the private placement (as defined below). Assuming full proration, on completion of the transaction and private placement financing, it is anticipated that NewCo will have approximately 134 million NewCo shares issued and outstanding and approximately $40-million (Canadian) in cash on hand. We have spoken to a few a shareholders of CRK, and all have indicated they will be taking shares, not the cash. Luxor Capital Group, the largest shareholder of CRK, is also taking shares in the newco. **The transaction is expected to close in the third quarter of 2015.** We believe the best way for speculators to participate is to actually buy CRK shares, as they are trading at a 15% discount (as of Tuesday May 19th–the time of publication) to the financing price of the newco. That is how I took my initial position in the company. In connection with the proposed transaction, Newmarket has entered into an agreement with GMP Securities LP on behalf of a syndicate of underwriters including BMO Capital Markets as co-lead underwriter, to complete a private placement of subscription receipts for total gross proceeds of $25-million (Canadian) at a price per subscription receipt to be determined in the context of the market. One third of the financing is being taken down by management and insiders for a total investment of CDN$8.5 Million. Each subscription receipt will entitle the holder thereof to receive one NewCo share in connection with the completion of the transaction. Up to $20-million (Canadian) of the proceeds of the private placement will be used to finance the Crocodile Gold consideration payable to Crocodile shareholders who elect to receive cash in connection with the transaction. **Largest Stakeholder has already agreed to 12 month lockup** Luxor Capital Group LP, which together with its affiliates control approximately 56 per cent of the Crocodile shares, has entered into a lock-up and voting support agreement with Newmarket pursuant to which it will vote in favour of the transaction. Furthermore, Luxor has agreed not to dispose of more than 20 per cent of the securities of NewCo it will own for a period of 12 months following the effective date of the transaction. Assuming full proration, on completion of the transaction and private placement financing Luxor will own approximately 43 per cent of the issued and outstanding shares of NewCo on an issued and outstanding basis. In addition to Luxor, each of the officers and directors of Newmarket and Crocodile Gold have entered into a voting support agreement for the transaction, pursuant to which they will vote any securities of the companies, as applicable, that are held by them in favour of the approval of the transaction. **Simply put, what is the opportunity? Crocodile Gold was a poorly run gold company, hence the discount it trades at to its peers. I am speculating this will change and a revaluation will occur, not to mention that I am paying 15% less than the insiders are paying for the PP.** ![Crocodile Gold Market Cap] **All companies in peer-group are Canada/US/Mexico, which avoids jurisdictional risk discounts.** ![Gold Reserves and Resources] Currently Crocodile has 3 producing mines. The workhorse of the group is the Fosterville mine, which has been in production since 2006. Australia has a bit of a different style than we do when it comes to proving up ounces. Somewhat typical of the Aussie mentality, they use a “just in time method”, which means they do not move ounces from “measured and indicated” into the “proved and probable” category until they have to. Due to this, the 5-year plan that comes as part of the annual guidance always underestimates production in the later years. Doug and Blayne did an excellent job of explaining the deposit and how they go about proving up additional ounces. The Cosmo Gold Mine is the main upcoming priority for Newmarket Gold. Commerical production was initiated in 2013 and has ramped up quickly. There are numerous additional targets that are available to pursue. The deposit is open along strike with high grades being intercepted on plunging shoots. The corridor containing the known deposits at Cosmo and Howley extends approximately five kilometers along strike. At Howley, drilling to date has only extended to approximately 100 metres depth, so there is significant potential at depth and along strike while remaining an open pit operation.![Cosmo Gold Deposit]From the discussions with Doug and Blayne, 240,000 ounces per year of production is by no means a stretch and looking at Q1 2015 numbers, likely a reality given they produced nearly 60,000 ounces in the first quarter. Furthermore, the replenishment cost is only $80/ounce, which yields free cash flow down to $1050 gold.** ![Cosmo Geology]![Gold Production]**The CRK team under Rod has done a fantastic job cutting costs and renegotiating with the labour unions. Most notably was renegotiating their southern power agreement down to 4.5 cents per kilowatt hour. Why is this important? Because power in the northern territory currently sells for 24-25 cents and with their power agreement coming up to renegotiation time soon, being able to drop these costs down would generate significant additional savings to overall production costs.![Gold Production Cash Flow Model]**Currency Gift Horse:![Net Present Value]** The Aussie dollar is a bit of a wild card. Given how bullish I am on the USD based on the global currency deflationary environment, pressure on the USD/AUD is very important. Think of it like this, gold is valued in USD and as such revenue is earned in USD, but the labour and operational costs at the mine are priced in Aussie dollars. Given low Aussie interest rates and the Reserve Bank of Australia’s appetite for cutting rates, this weakens the AUD against other currencies such as the USD. This currency differential opens up the door for improved margins. ![Currency Exchange on Cash Flow] **Crocodile – Aurico Free Cash Flow Sharing Agreement bought out. Fantastic for CRK ** **Initial terms:** Free cash flow sharing arrangement, which was established when Crocodile Gold acquired the Fosterville and Stawell Gold Mines from AuRico in 2012. Crocodile Gold was entitled to cumulative net free cash flow from those mines of up to C$60 million. AuRico would then be entitled to 100% of the next C$30 million in net free cash flow, after which Crocodile Gold and AuRico would share the next C$30 million of net free cash flow on a 50/50 basis until C$120 million of cumulative net free cash flow was achieved, following which AuRico would then be entitled to 20% on an ongoing basis. **Under the revised agreement,** which will be effective upon final approval, Crocodile Gold will pay AuRico C$20 million in cash on the effective date and will grant AuRico a net smelter return royalty of 2% from the Fosterville Gold Mine, also commencing the effective date, and a 1% royalty from the Stawell Gold Mine commencing January 1, 2016. **Conclusion:** Buying CRK.TO in the open market at current prices (CDN$0.32/share) is a 15% discount to the private placement, which has no warrants and a 4-month hold period. The risk is the deal falls apart, but I believe that risk is quite low. Doug, Blayne and other insiders have committed to investing CDN$8.5 million into the private placement. This is what the newco will look like post consolidation and after a rollback:![Newmarket Gold post Consolidation] The arbitrage opportunity will slowly go away as management completes the transaction. I also believe that Rod and his team will prove to the market that they will reduce costs and improve production. That will result in a reweighting without the Aurico overhang, and on P/CFO, P/E, Mktcap/P+P, Mkt etc. metrics Management currently has sustainable +200K oz/year of gold production for years to come, and I believe management will find more assets like the ones from CRK to acquire. I am long CRK at an average entry price of CDN$0.32. --- # The Clintons, the New York Times, Uranium and the Truth - URL: https://katusaresearch.com/the-clintons-the-new-york-times-uranium-and-the-truth/ - Type: article - Published: 2015-05-15 - Updated: 2019-05-08 - Author: Marin Katusa What the *New York Times* didn’t tell you, and the Real Threat to US Energy Security In a recent front-page article in the *New York* *Times* by Jo Becker and Mike McIntire, Russia’s dominance of the world energy landscape was brought to America’s attention. In the article, the writers described the importance of Russia’s national nuclear company, Rosatom, and its acquisition of Uranium One which has uranium producing assets in the US. The article summed up quite well how Russia has re-established its energy influence around the world, and the US has become incredibly vulnerable. In the article, Jo Becker mentions my book, *The Colder War* and quotes me. She contacted me a few weeks before this article went live, and had many good questions. I gave her the facts about the current state of the global uranium sector. She got my contact details from the WNFM (World Nuclear Fuel Market) where I am giving a keynote talk at their 42nd Annual meeting this June 7-9th, 2015 in Paris, France. A terrific writer, Jo Becker has put together a very interesting article, which was the most-read piece in the *NY *Times **that day. One can easily see why she has won a Pulitzer Prize. However, before I get into the very important data on the state of the uranium sector, I would like to clarify a few things that were unfairly portrayed in the article. The Christianson Ranch property the *NYT* article referred to is dormant and not producing, another clarification I wanted to make in the article. I have received hundreds of emails and phone calls because of this article, asking about Ian Telfer’s and Frank Giustra’s involvement with President Clinton, as mentioned in the *Times* article. My first personal interaction with Ian personally was in early 2012. He was on the board of Renaissance Oil Corp (ROE.VN) a junior oil company that I saw great potential in. Through a mutual industry contact, Mr. Telfer and I were introduced to one another. After months of negotiations regarding a private placement opportunity in this oil company, Mr. Telfer and I agreed on the terms of the investment. Ian and I were on opposite sides of the table here, as he was the company leader and I was the financier trying to get the best possible terms on the private placement. I was impressed with Ian Telfer’s integrity in every aspect of the process. Everything he said he would do, he did. A couple of years later, in early 2014, another round of financing was required for Renaissance Oil Corp (ROE.V). As expected, Ian not only did everything he said he would, he went out of his way to help me, with no benefit to him. Through our many discussions about the financing for Renaissance Oil Corp (ROE.V) and the oil company going public, I shared with Ian that my first book was about to be published that fall. In *The Colder War*, I have a chapter on uranium, and how Russia has quietly consolidated its lead position in the global uranium sector and, as a result, the United States is now in a situation where there is a serious domestic threat regarding the American base load power generation. In the US, nuclear power provides 20% of its total base load electricity. And over the past 20 years, half of that has been generated by uranium that the Russians have supplied to the US utilities. Ian Telfer not only read every page of my manuscript, he gave me unique insights that helped me improve my book. Mr. Telfer has vision, and the ability to take that vision and bring it to life. What the *New York *Times** article did not mention were the many net benefits that Ian Telfer and Frank Giustra brought to Kazakhstan’s uranium production profile and to the people of Kazakhstan. In the last decade, Kazakh uranium production has increased by over 300%, and the country has become the largest uranium producer in the world. That production increase was not because of the Russians. The incredible increase by the Kazakhs in uranium production over the last decade was because of the North American innovation, technology and financing brought to Kazakhstan by the North American team. Another important aspect that was not mentioned in the article, that I felt was important, was the fact that the environmental and safety standards of the uranium industry in Kazakhstan had increased substantially because of the North American standards of Uranium One that were brought to Kazakhstan. The safety and working conditions of the average Kazakh uranium miner were also considerably improved by Uranium One’s involvement over the last decade in Kazakhstan. Ian donated $3 million to Clinton’s charity. Ian did so, like any charity donor, because he believed in the cause. Another well-known resource financier mentioned in Jo Becker’s *New York* *Times* article was Frank Giustra, and his role in the uranium transaction. I have known Mr. Giustra on a professional and personal basis since 2007. I like Frank a lot. We have not always agreed on business items, but I have a great deal of respect for his business acumen, his vision, intelligence, and integrity. Based on my business and personal interactions with Mr. Giustra, he is a man of his word. Frank Giustra put out a statement on April 23, a day after the *New York* *Times *article. I believe Frank is an honest man. The one line from his statement that most resonated for me was, “***This is not about me, but rather an attempt to tear down Secretary Clinton and her presidential campaign.” *****That sums up my feelings about the article.** The goal of my rant up to this point is to clarify where I thought the *NY* *Times *article was off with respect to Ian and Frank. I have nothing to personally gain from this. I just wanted to share my views about two individuals whom I have done business with. The *Times* unfairly portrayed them in a light that is not reflective of their true characters. I wanted to point out all the good things both men have done not only with their charity efforts, but in improving the working conditions and environmental standards of the Kazakh mining industry. None of this was mentioned in the article. Nevertheless, the *Times* article did get many facts right regarding the looming uranium crisis the US is facing. The Russians have attempted to consolidate the uranium industry globally. The United States is now incredibly vulnerable as a result. The article correctly points out America’s current energy security Achilles’ heel. This is such an important topic that it should become a topic in this presidential election. Russia has taken physical and political steps to further secure its grasp on the planetary nuclear energy market. Russia has significant influence over uranium reserves and production and its weapon of choice has been its influence over energy rich countries like Kazakhstan. About a quarter of the population in Kazakhstan is Russian. In addition, most of the government agencies and almost all businesses use Russian as the official language. Kazakhstan is the world’s largest producer of uranium and has the second largest recoverable reserves of the mineral. Vladimir Putin’s relationship with the Russian-backed Kazakh President, Nursultan Nazarbayev, has established Russia as the uranium market mover. If you haven’t read my book, which will help you understand what’s going on in this important sector, here is a link to my chapter on uranium for free: [click here to read the chapter on uranium](https://www.scribd.com/fullscreen/241831262?access_key=key-saWCIEQ1fxooqioei4x7&allow_share=true&escape=false&show_recommendations=false&view_mode=scroll). In addition to its large reserves and production, Russia has a stockpile of highly enriched weapons-grade uranium and plutonium—enough that the country is estimated to hold over 5 times the world’s annual uranium production of just under 134 million pounds. **The misunderstood Fact of Underfeeding** The linchpin of Russia’s nuclear energy dominance lies in its enrichment capacity. Russian enrichment facilities can take low grade uranium tails with grades between 0.2% and 0.3% and turn them into the 3%-5% grade uranium required for fission in nuclear reactors for energy. By 2016 Russia will be capable of producing over 15 million pounds of uranium per year, or 40% of the US’s uranium demand. Fukushima resulted in a fire sale of uranium into the spot market. Because of the rapid shutdown of the Japanese nuclear reactors, separative work units (SWUs) have traded at historic low prices, and have caused what is called an Underfeeding market. SWUs measure the amount of separation work necessary to enrich uranium. Most reactors require ~3-5% U-235 in uranium’s enriched form, from a natural concentration of about 0.7%. After enrichment from ~0.7% U-235 to ~3-5%, the material left behind is what the industry calls tails. Tails still contain up to 0.3% U-235. This is where the price is important of SWUs, and why the Russians are benefiting from underfeeding while the US uranium companies are suffering. The price of SWUs are much lower now than before Fukushima. Therefore the Russians can process tails with lower concentrations of U-235. In fact, the Russians have been able to produce 500% more uranium from tails *post-Fukushima* then just a year before the disaster at the same world uranium spot price. This is called an underfeeding market. We are currently in an underfeeding market. Overfeeding would be the opposite situation; such that SWU’s are expensive and much less uranium would be produced from the tails because the grade of the tails would have to be much higher to be economic. Let us make something very clear: the Russians are the ones benefiting from an underfeeding market; the US is at a disadvantage and domestic US production is suffering. The reason is that the US DOEs not have the infrastructure in place that the Russians have, for the necessary enrichment that can take advantage of the underfeeding market we’re in. Underfeeding has contributed to the low price of Uranium, and that has created significant problems for US domestic production, which depends on mining rather than reprocessing tails. Moreover, the Russians benefit in yet another way. Because they can reprocess more tails, the Russians have less radioactive material to dispose of. **President Obama’s Unintended Consequences** Ironically, President Obama has done more to help the Russians to execute their global nuclear agenda than anyone else in the world. This was something completely neglected in the *New York* *Times* article. Pre-2013, the US Department of Energy (DOE) had a cap on its uranium sales. Historically, the DOE followed the following two guidelines: - DOE sales would not exceed 10% of the total annual uranium fuel requirements of all US nuclear plants. - The DOE sales of uranium to the nuclear utilities would not occur at a price below that of a domestic uranium producer’s cost of production. President Obama changed those two guidelines in 2013, and he could not have chosen a worse time to do so. President Obama’s plan was well-intended but his advisors were short sighted. The president intended on using the DOE sales of uranium to generate $250 million annually for past clean ups on historic sites with environmental issues. The unintended consequence of his actions is that President Obama has cannibalized the domestic US uranium production industry by selling strategic reserves into the open market, which in turn, has flooded the market. The uranium industry is a much smaller industry than oil, natural gas and coal. Thus, the uranium lobbyists do not have as much influence as the other sectors in Washington. For example, the four states involved in uranium production—Texas, Nebraska, Wyoming, and Utah—are all Republican states, hence you can see why Obama cares little what they have to say. Therefore, Obama threw out both of the DOE’s historic guidelines listed above, and today we have a situation where the US has helped create the environment for the Russians to execute their global agenda on uranium. Way to go, Obama! **A Different type of Nuclear War** Most of the US headlines in the energy sector are about shale oil and gas, and there is some mention of coal. Uranium rarely, if ever, gets any coverage. However, it should, and it *will*, get a lot more coverage very soon. The US is about to be hit with a shortage of a key strategic resource in its energy landscape. The US is the largest consumer of uranium in the world. As noted earlier, 20% of its energy needs are satisfied by nuclear energy. The US consumes over 40 million pounds of uranium annually for its own domestic energy needs, and it produces around 10% of what it consumes domestically. Some of the rest comes from DOE sales or is imported from friendly neighbors in Canada and Australia. However, the largest imports come from weapons-grade downblending from Russia. Downblending allows Russia to turn its nuclear warheads with uranium grades over 20% to the 3%-5% uranium required by nuclear utilities. As mentioned earlier, for the last 20 years, the Russians supplied the US with uranium to power 10% of its total domestic energy needs. The Obama government depleted 30% of the DOE’s 160 million pounds of uranium from 2008 to 2013. Based on 2015 uranium requirements, this means the DOE’s reserve life for US demand is anywhere between 3-5 years. It took over 50 years to build up that stockpile. This is not what you call national energy security. Japan plans to restart 4 of its 54 nuclear reactors this year. The Japanese government has also stated that it plans to get 2/3 of its nuclear reactors online in the next 4 years. That means that in the next 4 years approximately 14 million pounds of uranium per year will be needed to meet the Japanese nuclear demands; almost matching the demand expected to come from China in 2015. **From Underfeeding to Overfeeding** When the nuclear restarts in Japan happen, the uranium sector will go from underfeeding to overfeeding, which means higher cost to process tails and the price of uranium will rise with it. In addition, there will be growing demand from China and India. Both will be bringing online significant nuclear capacity over the next four years. China’s uranium demand alone will increase by over four million pounds next year. India has recently signed a long-term supply deal with Canada to help meet its demand moving forward. On April 15, 2015 Cameco Corp. (CCJ) signed a 5 year deal that would provide India with 7.1 million pounds of uranium annually until 2020. India will be doubling its current demand for uranium to 3.6 million pounds per year by 2017. **The US Dilemma** [![US Uranium Shortfall]](https://katusaresearch.com/wp-content/uploads/2015/05/us-dilemma.jpg) The US is losing the race to secure global sources of uranium supplies. With the media and most analysts focused on how the shale sector will survive the new reality in oil, there is a global colder war developing in the nuclear sector. It’s one that the US is losing. Uranium is very different from oil or natural gas. Significant production of uranium occurs only in a few countries. This is a high-risk proposition for those who depend on imports of uranium. From the data below, you will quickly reach the same conclusion I have; the US will need to jump-start their own uranium production and fast. The red bars in this graph highlight countries producing uranium that would have their interests aligned elsewhere than with Washington. [![National Uranium Production]](https://katusaresearch.com/wp-content/uploads/2015/05/uranium-production.jpg) Kazakhstan is highly tied to Russia. One can guarantee that Putin will make sure that the Americans won’t get their hands on any Russian or Kazakh yellowcake without his blessing or on his terms. The US could rely on Canada and Australia for imports of their uranium; however, neither country can supply enough to fulfil the American demand. More importantly, both Canada and Australia have signed long-term off agreements with India and China. This means there is even less uranium available for US imports. [![Top 5 and Bottom 5 Uranium National Trade Imbalances]](https://katusaresearch.com/wp-content/uploads/2015/05/image0111.png) The USA and France are far and away the two largest consumers of Uranium in the world; however, China is catching up fast. Currently for the major consumers of uranium, with the exception of France, uranium makes up well under 25% of the nation’s total generating capacity. The energy content of uranium is approximately 3 million times greater than that of fossil fuel. To put it in perspective; a tenth of an ounce of uranium contains the equivalent energy of 6,613,868 pounds of coal. Furthermore, we know that nuclear is a significantly cleaner option for countries such as China or India who are suffering from their own versions of the Airpocalypse. [![National Estimated Demand and Nuclear Generation]](https://katusaresearch.com/wp-content/uploads/2015/05/image013.png) There are 64 new nuclear reactors that could be online as soon as 2024. While this a significant number, a more useful approach is to look at the number of reactors currently under construction. Regardless of which numbers you use, demand is set to increase dramatically. Below are all the nuclear reactors that are currently under construction. Now include 2/3 of Japan’s 54 reactors, and you get the picture for what the demand for uranium will be in the near future. Putting this all together into a single macro chart from the World Nuclear Association, one can quickly see that there is a serious need for new uranium production to meet demand. ![World Demand and Supply] **US Domestic Production** The nuclear sector is a cyclical industry. However, the quantity of exploration work always trails the price of uranium. 1 in 3000 exploration targets ever becomes an economic mine. The odds of finding an economic geologic anomaly are very low. Not to mention, obtaining the financing required to build the mine will always be a challenge. Permitting is also a nightmare in North America, so bringing new mines online is no easy task. Currently only a small handful of companies have commercial production around the world. Below are the net produced uranium pounds for each company. Kazakhstan is producing almost 60 Million pounds of uranium. KazAtom is the state owned uranium producer, and the Russians have very close ties with KazAtom. With President Obama’s sanctions against the Russians over the past year, look for Putin to seek revenge in an unassuming way, and KazAtom is just the platform. Also under the influence of Russia is Navoi, the Uzbekistan national uranium producer. Both countries were part of the Soviet Union. We can see that, as with national production, the US DOEs not have too many friends in the corporate world. Red bars highlight companies whose interests lie outside the United States. [![Corporate Uranium Production]](https://katusaresearch.com/wp-content/uploads/2015/05/image019.png) On the small cap side, there are 4 producers that have operations under way. Energy Fuels is the largest of the producers but while they produce more, the production comes with a higher opex and conventional mines are harder to quickly ramp production than “in situ recovery” (ISR) mines. Through my research and management of my hedge funds I have been fortunate to have had the opportunity to see all of the US uranium mines that are currently in operation. **Depleting US Reserves** Before I move on, let me explain the difference between reserves and resources. Resources are how much uranium or “ore” is in the ground. Reserves are classified as the amount of economic uranium in the project at a specific price. Reserves are much more critical to a project then resources. Calculating the Reserve Life Index (RLI) of each company provides a quality measurement of the life span of a company’s assets (Reserves / Annual Production). Another way to approach the RLI calculation is to look at total reserves divided by nameplate capacity. Nameplate capacity refers to the maximum quantity a company is legally permitted to mine on an annual basis. We can take this a step further, however, and talk about something that no one else in the world is talking about. The ISR decline curve. Just like a shale well in the Bakken, in which up to 70% of the well’s oil is recovered in the first year, one can apply similar math to uranium ISR production. The groundwater fluid from the injection wells is pulled underground to the extraction wells and is pumped to the surface plant where the uranium will be extracted. The cycle is repeated, and the groundwater is recirculated, over and over. Each time the process is repeated there is less uranium in the ore body; as a result, less uranium is extracted above ground. This leads to a decline curve just like oil. The average decline in an ISR well field is a conservative 25-40% annually. Using a very basic example, if the initial ISR well production is 100 lbs of uranium, at the end of year 1, production will be closer to 60-75 pounds of uranium. So just like in oil or natural gas production where companies are forced to repeatedly drill new wells to hold production constant, the same can be said for uranium production. At high uranium prices this is not a hindrance, because a company should be trying to maximize production anyways. However, in a low price environment where they are forced to drill new production and injector wells, just to keep output stable and meet their offtake agreements, they are losing money on every pound of yellowcake they produce. Now allow for permitting and financing delays, and you can see how valuable current permitted reserves are. **US Permitting Headwinds** The growth of ISR in the US has been significantly slowed by regulatory issues. Unsurprisingly in the US, the regulatory agencies were unprepared for the ISR ‘boom’ triggered by all-time high uranium prices — these approached US$138/lb in June 2007 (up from US$70/lb six months earlier). This was the catalyst that led to regulators receiving seven ISR permit applications (or Letters of Intent, LOIs). The majority of these were between May and June 2007, although January 2010 also saw a high level of activity. Wyoming pioneered ISR mining in the 1960s, and by 2008 only three companies had ISR mines in operation, and these had been permitted in 1987 & 1992, 2002 and 2006. Furthermore, the mine permitted in 2006 was of a pre-existing mine that had closed down in 1999. So really, the US regulators had only permitted one new ISR project over this time frame. This means that US regulators have only permitted a few ISR projects in the last 19 years, averaging a 6 year life span for attaining permits. Barriers to entry create a solid investment thesis for all current uranium producers. It is near impossible for a company to capitalize on a short term bump in uranium prices with having to wait multiple years just to get a permit. When properties get overvalued and prices drop, they become uneconomic and lose money. This causes producers to shut down their operations or worse yet be stuck—as most of the producers are—in long-term production contracts that force the company to deplete its reserves while realizing a significantly lower price than what the mine was designed for. Having the ability to slow down production and not deplete reserves while lowering both revenue and costs is a distinct advantage for uranium producers during a tough market. More exciting, however, is the valuable leverage they attain by being unhedged and not pinned to long-term contracts. The current spot price is $35.25, and as prices move back to the $50-$60 level and higher, a company that is unhedged and not tied to contracts becomes significantly more leveraged to the upside. Ur-Energy and Uranerz are both prime examples of companies tied to the price and production requirements of a long-term contract. In their recent MD&A they state all their contracts are protected via price floors and ceilings. While this stabilizes cash flow, the main concern is the depletion of critical reserves in a depressed market environment, and that leaves the shareholders little upside on a longer-term sustained basis. Uranium Energy Corp, on the other hand, is the only unhedged uranium producer in the world. It has the capacity to produce up to 2 million pounds from the Hobson plant, and when uranium prices do correct, UEC shareholders will benefit from the maximum leverage to the uranium price appreciation. Let’s extrapolate this idea of staying unhedged over a number of years. It becomes a significant drag on cash flow if you hedge when the price of uranium increases. This leverage and upside potential for UEC is best exemplified through the cash flow per share chart below. While none of the companies currently produce 2 million pounds per year, we have adjusted to each company’s nameplate production capacity using current costs. By modeling the cash flow at $50, $55 and $60 we can see the per share growth across the board with the best cash flow per share in the comp group coming from UEC. **Who will the Big Funds Buy?** Liquidity is extremely important in the junior resource sector. There’s nothing harder or more frustrating than not being able to enter or, more importantly, exit a position. The 3 month volume average for the junior uranium producers is a no contest, with UEC’s volume coming in at 3 times higher than the nearest junior. In fact, something major funds such as Blackrock (who is a large shareholder of UEC) have recognized, UEC is more liquid than their peer group combined by over 200%! **Moving Forward** The best RLI both on a current production and nameplate capacity basis provides long-term growth potential for UEC shareholders. By not being hedged to either spot or the long-term price in the current depressed market, UEC enjoys the distinct advantage of maximum leverage as the only unhedged uranium producer in the world. I have been to the site of every US publicly listed uranium producer, and have seen firsthand the difficulty of putting a mine into production. Every single producer I mentioned above should be lauded for achieving producer status. Mining is a tough business, and I believe all of the companies mentioned above will do well. The time period between the exploration of the deposit to the actual production of yellowcake takes roughly 10 years for most uranium mines in the US. After going through such a difficult process, and beating the 1 in 3000 odds, why deplete your reserves in a down market? I am long UEC. --- # Slow Down the Trains & Speed Up Those Profits - URL: https://katusaresearch.com/slow-down-the-trains-speed-up-those-profits/ - Type: article - Published: 2015-05-12 - Updated: 2022-10-18 - Author: Marin Katusa For those of you who did not get a chance to read the 395-page US Department of Transportation (DOT) ruling over the past weekend like I did, then this is a must read. No, not because yet another BNSF (yes, the BNSF owned by Warren Buffett’s BH) train derailed last week. But because there are serious changes coming. Changes the astute railroad investor should be paying attention too. The DOT legislation mandates several new crucial safety standards and operational controls that need to be implemented for all tankers carrying crude oil and ethanol. This directly impacts every single company that manufactures or builds parts for tanker cars, along with all 250,000 cars used in rail transportation of crude oil and other highly flammable liquids. Over 68% of the flammable liquids carried everyday by trains across the US stems from crude oil or ethanol production, normally carried in what’s known as a HHFT (High-Hazard Flammable Train). [![Intra-US Crude Oil Movements]](https://katusaresearch.com/wp-content/uploads/2015/05/rail-pipe.png)Intra-US Crude Oil Movements Over the past 5 years the US has seen its shale oil and gas production grow exponentially. Getting it out of the ground is only one half of the equation, though. The 2nd half needs to solve the question “ok now it’s out of the ground, how do I get it from A to B”. For decades crude has been moved along pipelines that crisscross thousands of miles across the United States. As shale oil production increased, pipelines couldn’t be added fast enough and rail began to gain a foothold in the transportation market for oil. Unfortunately the growth in transportation of crude by rail has come at price. From 2006 to April 2014, there were 16 high-profile accidents involving “high-hazard” trains carrying crude or ethanol, according to the US National Transportation Safety Board. In all, 281 tank cars have derailed, spilling nearly 5 million gallons of crude or ethanol. We are not talking a bonfire with marshmallows here, we are talking full on blazes that have the ability to easily burn down a town or development area. The image above is a shot of the train derailment that killed 47 people two years ago in Quebec. There are two important standouts in the DOT ruling. [![Annual In-Transit Rail Incident Costs]](https://katusaresearch.com/wp-content/uploads/2015/05/incidents.png)Annual In-Transit Rail Incident Costs First, the adoption of thicker walls on the tankers. Thicker walls on the crude tankers are harder to puncture and thus should decrease the likelihood of a spill if a train derails. The second takes the form of enhanced braking requirements, which means trains must travel slower through urban areas (30mph-40mph depending on train length and car type) and at a maximum speed of 50-mph outside of urban areas. Overhauling the system is not an overnight procedure, as much as everyone involved would like it to be. The capacity simply isn’t there to handle it. As you will see below, this will be a long, time-consuming process. The DOT-111 car can be considered the industry standard, with the bulk of the cars being built under old compliance rules. [![Estimated North American Tank Car Fleet]](https://katusaresearch.com/wp-content/uploads/2015/05/tank-car-fleet1.jpg)Estimated North American Tank Car Fleet Tackling the first issue of shell thickness requires that manufacturers either retrofit or build new cars that conform to the new standards. The shell must be 9 ¼ inches thick. The retrofit option is estimated to cost between $25,000 and $40,000 per tanker car, while adapting new standards will increase the price of a new build by $5,000 (while new build cars are built on an undisclosed contract price, the average selling price for Greenbrier new builds was approximately $100,000 in Q1 2015). So retrofitting is still a significantly cheaper option. [![DOT 117 Specification Car]](https://katusaresearch.com/wp-content/uploads/2025/07/Placeholder.png)DOT 117 Specification Car The bulk of the retrofitting needs to be done by March 2018, which sounds like a lot of time but it’s not. Rail manufacturers already have a significant multi-year backlog of train cars to build, let alone deal with potentially several hundred thousand retrofits. The VP of the American Fuel and Petrochemical Manufactures stated that “this aggressive retrofit schedule is unrealistic and may be disruptive to transporting crude oil to markets across the country”. Interpreting the statement as an investor and hedge fund manager, “disrupting the transportation of crude” to me means that there will be less tanker cars available for transporting crude, which will cause areas that do not have takeaway capacity by pipeline to accept a lower realized price for crude. The losers being the E&Ps, with the main benefactor being the refiners as they will get cheaper crude. Naturally the rail manufacturers also benefit, as they are literally being handed revenue by this new legislation. The second major takeaway from the new legislation is on train speed and enhanced braking. Any HHFT loaded with 70 or more cars travelling at 30+mph is required to have a new brake system called ECP, which is an electronically controlled braking system. This limiting of the speed of trains within urban areas, added to elimination of trains that do not have all cars up to the new standard, is going to impact the movement of crude significantly. The industry standard DOT-111 rail car can carry between 475-715 barrels (20,000 and 30,000 gallons). Consider a hypothetical example where a HHFT has a contract to transport crude oil from the Bakken down to Cushing. Assuming nothing else changes except for speed, the train will arrive a few hours or maybe at worst a day later when speed is reduced. However as you reduce speed, this means that less oil is getting to the refinery on a per day basis. Since refineries require continuous inputs of crude, delays are not an option. The only option to keep the same level of inputs per day is to increase the number of cars per train to make up for the lag in arrival time. More trains on the rails at a time will add further to congestion. Government policy always provides interesting wrinkles. In a case like this, where companies are forced to abide by the new policy, it creates distinct winners and losers as a side effect. [![FY 2014 Rail Car Manufacturing Comps]](https://katusaresearch.com/wp-content/uploads/2015/05/railcomps.png)FY 2014 Rail Car Manufacturing Comps [![Rail Manufacturing ROE / ROIC]](https://katusaresearch.com/wp-content/uploads/2015/05/ROICROE.png)Rail Manufacturing ROE / ROIC Trinity Industries looks cheap from a cash flow and earnings perspective but they are amidst some serious legal battles with the government over guardrail testing. Management believed they had passed all the required testing however the government thinks otherwise. Until this is cleared up and the class action suits are dropped, best to steer clear. Greenbrier (GBX) trades at slightly more expensive metrics than the peer group but has better ROE and ROICs than its competitors. What is particularly odd—and no one seems to be talking about it—is the enormous short float in GBX. The current short float is above 30%, which would be extremely high in any industry, let alone one that is considered relatively stable like rail. Greenbrier’s new crude carrying tanker complies with all new DOT regulations, which would be the only real cause for such a high short float percentage. Barring a complete meltdown in the crude markets, or GBX losing their entire revenue backlog over the next year the shorters in GBX have significant potential to be rolled up. The change for the rail sector is not going to have an immediate overnight impact on the cash flows of both winners and losers. Companies have several years to comply fully with the regulations. The majority of the retrofitting needs to be done by Q1 2018, while braking compliance will take up to 2021. The multi-day fire caused by the CSX derailment earlier this year, demonstrates that even with new thicker shelled cars we are not out of the woods. Not only were the cars that derailed and exploded made with the new 9¼ inch shell, but they were also only going 33-mph, which is slower than the new mandate. Clearly the changes aren’t enough. The oil by rail risk is nothing new for me. For years, I’ve been talking about the risks, and was even asked to debate the cofounder of Greenpeace, in a debate called ‘Debate: Greenpeace vs. Marin Katusa on Northern Gateway Pipeline’ [Watch Video](https://youtu.be/OZJeW14fzZY) In the debate, I brought up the risks of shipping oil via rail, 6 months before the horrific disaster in Quebec in the summer of 2013 that I pictured above that took 47 innocent lives. I like and respect Rex Weyler one of the cofounders of Greenpeace. We had a good time together after the debate, and it’s fair to say he liked my straight up, old school style of no nonsense and no bullshit. I showed up to the debate with facts and industry experience. Watch the debate, and sadly, it has played out as I stated. Hopefully the politicians will figure this out before more deaths occur from shipping oil via rail. --- # K1.15 Magna Carta, Tuum Est, and the first edition of The Katusa Report - URL: https://katusaresearch.com/k1-15-magna-carta-tuum-est-and-the-first-edition-of-the-katusa-report/ - Type: article - Published: 2015-05-06 - Updated: 2022-10-11 - Author: Marin Katusa 800 years ago in mid-June, a document called the Magna Carta changed the world forever. In English, the translation is ‘Great Charter’, and essentially the document gave basic human rights to the common folk, formalizing rules that even the king must follow. Of course, I don’t in any way compare myself to the authors of that revolutionary document, but in a way, this introductory newsletter is kind of my *Katusa Magna Carta*. My statement of purpose, as well as the Katusa Reports first in-depth analytics. Most of you reading my newsletters will not invest in what I discuss here and in those to come. That is fine. But even if you don’t, what you will get is a useful stream of original ideas, access to some of the best research on Street, and analyses that are free of bias. For those of you who are resource speculators, I hope that my letter will become a monthly event you look forward to and by which you will prosper. My rules—or, shall I say, my Carta (or Karta for all my Balkan readers!)—for this newsletter is simple: I will provide all of my best original research ideas in the resource sector. I will let you know exactly what I am doing with my money and my funds. If there is a company or person I follow that I believe is worth following, I will tell you. I will always disclose my cost base. I will always discuss my plan. Will I make mistakes and be wrong? Definitely. Will I have some big scores? I believe so, but time will be the judge of that. The only guarantees I make are that you will receive my best work and ideas, and my own personal money will be at stake in every company I write about. What this will not be is an investment advisory service, because what you choose to do with the information is *tuum est*, which is Latin for “it’s up to you.” Do what you like with these write-ups. Invest along with me or just enjoy the content, as you wish. *Tuum est*… Change is Good This past Monday, my alma mater—the University of British Columbia (UBC)—celebrated its 100th anniversary. In conjunction, I was asked to be part of the 2015 Science Graduation Ceremony as a distinguished alumnus. Of course I accepted. Being on stage, beside the dean, shaking hands with all the students who had just earned their PhD’s, M.Sc., and B.Sc. degrees, I couldn’t help but think back to the time, 15 years ago, when my name was announced and I walked across the stage to get my first degree, a Bachelor in Science. Then, after this year’s ceremony, I walked around the campus with my wife and child. I was in awe of how so much has changed, and for the better, on campus. I believe change is good. But not just for its own sake. It’s important that one also evolves with the times and comes out better. As many of you know, I have recently made some major changes in my own life. And I couldn’t be happier. It was time. Those changes led, in part, to the creation of *The Katusa Report*. In these pages, I will do my best to make sure my material is better than ever and, going forward, to provide you with the best ideas and in-depth research on the resource sector that is available anywhere. And to kick things off in a big way, here is this month’s lead feature. You’re going to like it. Truth is, I have a tiger by the tail. It wasn’t easy, as it took me seven long years. But I did it. And I will tell you why it will be a big success. Do your portfolio a favor and make sure you take 20 minutes to read this report. I believe it will be well worth your time. Blast from the Past For starters, let me take you back to 2008. That was when I first visited one of the projects of this company. Now, I knew very little about the “green energy” sector at the time. But then, looking back, neither did the self-proclaimed experts, since the sector as a whole lost fortunes from 2008-2014. The peak of the geothermal and green energy revolution was the fall of 2009. Obama was still in the first year of his presidency, and the Green Dream was alive and well, and full of hope. I was the moderator of a green energy panel at an investment conference in the fall of 2009. On the panel were some of the legends of this business: Ross Beaty, Rick Rule, Lukas Lundin, Bob Bishop and my old buddy Doug Casey (and yes, even though I left Casey Research, Doug, his wife Ancha and I remain very close as friends, business partners in the funds and I still manage their money). The market was red hot, with geothermal companies at record valuations. Ram Power was over CDN$4 per share. Magma Energy was over CDN$2 per share. There was a buzz in the crowd about the potential of both companies. You could feel it in the air. That was when someone in the audience asked me what my thoughts were on the investment potential of the companies being discussed. My answer: *“The net worth of each of the men on this panel have zero or two more than my own. But I believe that over the next 6, 12 or 18 months, or longer, investors, if patient, will have a chance to buy these stocks 50% or lower than they are today”* 12 months later, I was right. And so, I started to buy. But I still ended up losing a lot of money by 2012. I invested in only one green energy producer at the time, through a private placement in a producing geothermal company called Nevada Geothermal. The company did not deliver what it promised, and I lost a lot of money. I wasn’t alone. Others fared even worse. Ram Power went from CDN$4 per share to CDN$0.01. Magma, which was over CDN$2 per share, merged with Plutonic Power Corp.—now called Alterra Power Corp.—and it went to a low of CDN$0.30. Those who know it the best, in this case, definitely love it the least, and for good reason; it’s been an awful place for an investor. Yet, seven years after my first site visit to one of its projects, I have become a major shareholder in Alterra Power Corp. (AXY.TO)! This investment journey is definitely worth sharing for all the lessons learned. I have invested over three times more money into Alterra Power than I had in Nevada Geothermal in 2010, and I think I am going to do quite well with this investment. I first wrote up and recommended the company at CDN$0.30 in October of 2014. I have bought millions of shares. My average share price is CDN$0.33. I am not alone. The largest shareholder, Ross Beaty, who is also the Chairman of the company, has been buying millions of shares in the open market also, as have his close friends. Fortune favors the bold. But the markets pay the wise. I believe that by 2017, this share price will be trading at more than a 100% premium to my first recommendation on the company, meaning it will be over CDN$0.60. I believe the company will trade at a price of at least CDN$0.75 per share by January 1, 2018. Let me explain why. Ross Beatty is currently the largest shareholder of Alterra Power and is the Executive Chairman. Alterra Power (AXY) is engaged in the operation, development, and acquisition of renewable power plants across the globe. It operates six power plants totaling 568 MW of capacity, with operations in Canada, Iceland, and the United States, and exploration projects in the US, Chile, Peru, Argentina, and Italy. I have gone on record numerous times, explaining how and why we are in a resource deflation. Countries are racing each other to devalue their currencies, while commodities are getting cheaper. Both are serious indications that we are in a deflation. However, even in a deflationary market there is always a way to make money. Alterra has fixed-rate contracts that protect it from deflation. At the same time there are also inflation buffer rates associated to the long life power rates. So, it’s one of the few resource producers that is both deflation- and inflation-protected. But there is much more to this speculation than that. The sum of the parts is worth much more than the market is currently valuing the company. Not to mention, these are the closest type of assets to what I call “infinite royalties.” What do I mean by that? For one thing, mining, oil, and gas royalty companies all have a finite lifespan based on their reserve life index (Total Reserves/Annual Production). Alterra’s renewable energy sources—such as their geothermal projects, wind farms and run of river assets—will never run out. Furthermore, on a financial level, each of these producing renewable assets is backed by long-term contracts known as Power Purchase Agreements (PPAs), with lengths averaging nearly 20 years, and in some cases extending over 35 years. When the contracts approach maturity, they are renegotiated and the cash flows continue. This means perpetual stable cash flows. Hence the term *infinite royalty*. And here’s another one: YieldCo. A YieldCo is a company, such as TerraForm Power or Brookfield Renewable Energy, that pays a yield and has producing green energy projects. The appetite for YieldCos has grown exponentially in the last several years in the US. Goldman Sachs, Citi and even Berkshire Hathaway are all involved (yes, even Warren Buffett has figured out how to get in on YieldCo plays—through the tax equity plays). Consequently, the green energy YieldCos have quietly been one of the best performing sectors in the US this year. For example, the world’s largest solar panel producer, First Solar, has combined forces with SunPower to spin off their renewable power generation assets into a YieldCo backed by Goldman Sachs. The financing was oversold, and a big win for all early investors. And there will be further consolidation in the YieldCo space. Today, savvy fund managers not only demand yield, they also want growth. These YieldCos provide a fixed dividend, and are red hot. Yet the mainstream crowd is still in the dark about this all-but-invisible bull market. I have studied and analyzed the space. Alterra is by far the cheapest of its peer group and, more importantly, has assets that will trade at a premium to those of the other YieldCos. **What is Alterra Worth?** Before I jump into the many different valuation metrics on AXY, let’s see how the company has performed vs. its publicly-listed Canadian and US peers. It’s been a dog. That is just the three-year chart. The five-year chart looks even worse. But again, I couldn’t care less what happened in the past, because I have recently made my bets. What you and I should be looking at is what is going to happen next, and why I think you should consider the company for your own portfolio. How to make money off the Bull Market in the Yieldco’s: I mentioned earlier that the US YieldCo’s are red hot right now. I have shared my thoughts with both Ross Beaty, and the president of AXY, John Carson. I’d like the company to take one of the following approaches: 1. Sell North American producing assets to a US YieldCo 2. Roll back the stock 10:1, announce a dividend and list on a US stock exchange Personally, I’d prefer option 1. Why? Because, it will be a quicker return and win for shareholders. After going through all of the peer group, costs to build projects and the various cash flow models, I have come up with a valuation for the North American assets. But, the better valuation will come when Jimmie Creek and Shannon Windfarms are financed and completed. Unlocking Hidden Value in Alterra Alterra is what I like to call the “invisible YieldCo”. Why? Because its true value remains unlocked, which is especially evident if you compare its stock performance against its YieldCo and renewable power generation peers. As discussed above, Alterra has assets across the globe that generate positive, stable cash flow and under the correct circumstances could pay a dividend. But what if there was something better, something even more hidden? A possible best case scenario for Alterra is actually to sell itself in pieces, into three parts: 1. Sell off all producing North American assets to a US listed YieldCo 2. Sell off Iceland’s producing assets 3. Sell off all the exploration and advanced-stage projects In a world where companies build SpinCos on a regular basis to unlock additional value, selling the company acts in the same manner but with better upside in the short term. Let’s start by valuing just the producing assets. The Icelandic assets are easily worth over US$75million, and that is with the current PPA’s (Power Purchasing Agreements) in place. And I expect that to change after the arbitration next year, meaning the Icelandic assets will be worth more in one year then they are today. So the range of the value with cash for AXY, using options 1 and 2, I believe will be CDN$0.75-0.85 per share within 12-16 months. But I stated CDN$0.60 per share earlier. Confused? I like to be conservative, and never use full NAV for my target. I factored in a big discount because of potential risks, volatility, etc. Hence CDN$0.60 per share 12 month target—but I believe the final return to shareholders will be over CDN$1 when it’s all said and done. How did I come up with those numbers? Developed and producing long life renewable assets offer transaction values over and above the standard M&A 5x-10x EBITDA multiple. The reason for this is their ability to generate perpetual stable cash flow. In North America, hydro power assets are commonly sold for approximately 10x-15x annual EBITDA. Solar, wind, and geothermal assets sell for anywhere between 10x-13x their yearly EBITDA. Prime examples of such transaction values include SunEdison’s wind power acquisition for $625 million that yielded a multiple of 11.2x EBITDA, Brookfield Energy Partners hydro acquisition for $613 million that yielded a multiple of 11x EBITDA, and Innergex’s hydro acquisition for $113 million, which was equivalent to a 12.5x EBITDA multiple. To some, EBITDA stands for Exit Before It Tumbles Down Again. To me it stands for Earnings Before Interest Taxes Depreciation and Amortization. Think of wind farms and geothermal as silver mines in the green energy sector. Those projects are getting anywhere between 11-13 X EBITDA valuation when financed or sold. But think of the hydro projects as gold mines. Because they are valued more by the YieldCo’s, they get 13-15X EBITDA valuation. The reason hydro projects get the golden valuation is because there are so few, quality, long-life hydro projects like the ones AXY owns and operates in North America. From these recent transactions, along with discounting Jimmie Creek and Shannon Wind Farm by 20%, there is significant upside potential in unlocking shareholder value via asset sales. The base case scenario involves the sale of the main producing assets at current EBITDA multiples, discounting the development stage projects by 20% and giving $0 value to the exploration stage projects. The valuation range is anywhere between USD$0.65-$1.08. This is just one metric, but a realistic one for share valuation. I’ll get into other metrics later. Now, we buy the shares in Canadian dollars, and the exchange rate today is 1.25 CDN to US. Thus, in Canadian dollars, the valuation target is anywhere between CDN$0.79-$1.35. This is what every analyst in Canada is missing. AXY will not be sold to a CDN producer, but rather a US YieldCo. I have given ZERO value to all their exploration projects, which is über conservative. As the demand for perpetual stable cash flows continues to increase, this demand will drive the demand for assets like AXY’s. This upside case is a strong possibility. The beauty of a company like Alterra is that since the cash flows are backed by long-term commitments we can derive a comprehensive NAV for the company. The NAV model also confirms that the current price of AXY shares is undervalued. This is another metric valuation used. Catalysts for Alterra Alterra is clearly being undervalued by the market, but what are the catalysts for getting the share price in line with the comp group? Alterra is being undervalued because they do not pay a dividend currently, but I expect that this is very likely to change. **Catalyst #1:** Refinance the HS Orka loan. Refinancing the Orka loan opens the door to become free cash flow positive. Getting the interest payment down to 6.5% increases cash flow this year alone by $12 million. This might sound like a chore but in fact it should “in theory” be very easy for AXY management. The appetite for green energy debt is enormous. Most recently, Innergex just took on nearly $200 million in debt at an interest rate below 4.75%. Why? For the same reason I love the company: pension and private equity funds love the perpetual cash flow, plus the debt can be asset-backed for further security. **Catalyst #2: **Issue a sustainable dividend. The cash flow model for AXY suggests that a quarterly dividend is a very realistic possibility once the Orka loan is refinanced to 6.5%. The dividend yield could easily be 5%, which would place Alterra in the upper tier of dividend-paying companies in the YieldCo and Renewable Power sectors. Peer Group Comparable As noted earlier, there are many metrics. Another one I like to use is the peer comparable. By building a set of comparable companies in the YieldCo and Renewable Power sectors one can quickly see that AXY is in a class of its own, yet trades at a significant discount to the peer averages. When looking at the peer group of IPPs (independent Power producers—think of them as a mini-utility) and YieldCos it is crucial to use the EV metric, as debt has an impact on every company, including Alterra. One can use the EV/Net Generation metric just as it is applied to the oil and gas sector via EV/BOEPD, or the mining sector via EV/Annual Production. Based on EV/Capacity, EV/Net Generation and EV/EBITDA, Alterra trades a significant discount to its peer group. The mainstream crowd mistakenly compares Alterra to the likes of oil and gas royalty companies such as Freehold, Panhandle and Prairesky. The reason why this is a particularly misguided comp group is that Alterra’s assets are infinite, whereas an oil and gas royalty company’s assets are finite. Unless the water stops running or the wind dies, Alterra will have producing assets. In comparison, an oil and gas royalty company has a life span based on its acreage and the number of wells that can be drilled on the property. Furthermore, oil and gas assets are far more variable in terms of cash flow generation, since they are exposed to changes in commodity prices. Freehold Royalties, for example, had to cut their dividend this past year due to low oil prices. Alterra on the other hand is not exposed to commodity price risk. Despite this major differentiating factor, Alterra still trades at a discount on an EV/EBTIDA basis. The model below provides an in-depth analysis of the current and potential cash flow for Alterra. HS Orka provides the lion’s share of the cash flow generation but it comes with a hefty premium as its interest payments are significant. As I said earlier, I believe Alterra will be successful in renegotiating the terms of the HS Orka loan down to 6.5%, thus becoming able to begin paying a dividend. The cash flow model below demonstrates the robustness of Alterra’s cash flow when the interest payment is reduced to a more reasonable 6.5%. We can see a 5% yield is easily sustainable at these levels, and that would give the company one of the highest yields among its YieldCo peers. It would certainly drive an upwards revaluation of AXY stock. [**Boralax Price and Volume History**](https://katusaresearch.com/wp-content/uploads/2015/07/boralax-price.png) You can see the impact a dividend had in the case of Boralex. This share price graph demonstrates what kind of value can be unlocked in a very short period of time when a dividend is initiated, because the initiation forces a revaluation against the peer group. This is very important for Alterra, because it trades at such a discount to the peer group that a revaluation would send the share price up significantly. A 5% yield would be at the upper end of yields in the comp group and would likely force a revaluation that would cause AXY to switch from trading at a discount to trading at a premium, relative to its competitors. One can make this reweighting conclusion by looking at Brookfield and Innergex. These two companies pay the two highest yields in the group, and both enjoy premium multiples to the comp averages. Alterra would put itself into this category by paying out 65% of its cash flow in the form a dividend. As you can see from the Boralex example, its EV/EBITDA increased from 12x to 19x upon the dividend initiation, share volume tripled and the share price increased 24%. Furthermore, we can see that the free cash flow growth profile for Alterra, as compared to Boralex, is far superior. **Catalyst #3:** Listing on a US exchange will bring significant attention and more volume to the stock. The US listing serves multiple purposes. First off, real assets that produce healthy cash flows are highly sought after in the US because of their low volatility and inflation hedges. Brookfield Renewable is an example of a Canadian company that crossed the border and obtained a US listing. They enjoyed a forced revaluation, and increase in liquidity. Additionally, by obtaining a US listing, down the road Alterra can transform into an MLP that “drops down” assets into a designated YieldCo. Terraform Power is a prime example of this methodology. SunEdison is the General Partner and drops down renewable assets into their YieldCo Terraform Power. Illustrating the appetite for demand, SunEdison and Terraform are taking this one step further by creating a second YieldCo solely focused on emerging market power generation. And finally, with Alterra’s recently completed $110 million loan facility with AMP Capital, its development projects are fully funded and the loan facility is available in three tranches. § Tranche A—$67.3 million on or before August 15, 2014; § Tranche B—$21.5 million at or after the closing of construction financing for the 62 MW Jimmie Creek hydro project, subject to certain agreed conditions precedent; and § Tranche C—$21.2 million at or after the closing of construction financing for the 204 MW Shannon wind project. People behind the Company Ross Beaty is a serially successful legend in the resource and speculation business. He is the founder of Pan American Silver Corp, one of the largest silver producers in the world, with a market cap of $1.8 billion. In further testaments to his talents, Ross was the 2nd largest shareholder of Augusta Resources, which was acquired for $555 million, and the largest shareholder of Lumina Copper when it was acquired by First Quantum for $470 million. Ross has been involved with Alterra Power since it was Magma Energy, where it was one of the first IPOs after the financial crisis. Ross currently owns over 33% of the outstanding shares. This is the first time in a decade that I have had the opportunity to buy shares at the same price as Ross—and I seized the opportunity. Assets If you go through the financials of Alterra, you quickly find that they are confusing, complicated and difficult to understand. With operating, developing and exploration assets around the world, you can easily get lost in the material. Don’t worry, you are not alone. Many analysts have openly admitted to me they were overwhelmed by the reporting style. That works to my advantage, because it makes Alterra one of the most misunderstood stories on the TSX. Yes, it’s not on the TSX-V, it’s on the big board, TSX. The company has cash flow, operating assets, and debt—and the best growth potential of any of its peers. This is a real business, with many moving parts. Soon enough, the market will figure out what I am sharing with you, and the value will be unlocked. Let me explain, in simple language, where the value is. [**Alterra Power Asset Map**](https://katusaresearch.com/wp-content/uploads/2015/07/alterra-power-asset-map.png) The company currently has 5 producing projects and in the next 12 months will have another 2 producing projects. Iceland: Geothermal assets (AXY 67% ownership) The Icelandic assets Reykjanes and Svartsengi are among the best geothermal projects in the world. They are held in a company called HS Orka, of which AXY owns 67%. The remaining net interest is held by the Icelandic government. Geothermal power is measured in megawatts and, as a general rule of thumb, 1MW can power 1000 houses. This may help you visualize what a MW is. I’ve found that people can visualize a barrel of oil, an ounce of gold or a pound of copper, but many have an issue with MW megawatts. The Reykjanes facility has a capacity of 100 MW and generates an average of 830,000 MWh per year. The Svartsengi plant has a capacity of 72 MW and generates an average of 530,000 MWh per year, but also produces 150 MW of hot water for heating. Power is sold to commercial and retail customers, including power sold under two long-term PPAs with Landsvirkjun, an energy company owned by the Icelandic state until 2019, and one with Norðurál, an aluminum smelter operator until June 2026. British Columbia, Canada assets: Toba Montrose hydroelectric facility (AXY 40% ownership) Alterra holds a 40% interest in Toba Montrose, which has been operational since May 2010. The remaining 60% interest is held by Fiera Axium, a private equity firm. Alterra sells all of its electricity to BC Hydro under a 35-year PPA that expires in May 2045, and the facility is expected to generate an average of 727,000 MWh per year. Toba Montrose is EcoLogo certified and gets funding—from the Canadian government’s ecoEnergy for Renewable Power program—of up to C$72.7 million during its first 10 years of operations, at a rate of C$10 per MWh. Dokie 1 Wind Farm (AXY 25.5% ownership) Alterra sold half its interest in the Dokie 1 Wind Farm, netting $28.62 million while retaining a 25.5% interest. The Dokie 1 Wind Farm has a 144 MW capacity and is located in northeast British Columbia. It commenced commercial operation on February 16, 2011 and operates under an EPA with 100% of the electricity purchased by BC Hydro, an arrangement that expires in February 2036. Like Toba Montrose, the Dokie 1 Wind Farm qualifies for the ecoEnergy Program and will receive $10 per MWh for 10 years. Dokie 2 Wind Expansion Alterra holds a 51% interest in the expansion project which has a projected capacity of 156 MW. The company continues to collect and evaluate wind resource data; this is expected to continue for the rest of 2015. The project currently holds a BC Provincial Environmental Assessment Certificate, but will probably be subject to revisions once further development occurs. Development Assets: Shannon Wind Development (I expect AXY to maintain 50% ownership) Alterra completed its 100% acquisition of the 204 MW Shannon wind project in February 2014. Located in Clay County, Texas, this is a late-stage development project. In December 2013, Alterra completed construction activities to qualify for the US production tax credit. The company is expects Shannon to be in full production by Q1 2016. I held off sending this newsletter out (it was ready to go out last month) until AXY announced how they would finance the project completion. Alterra has now fully financed the project—and it includes Warren Buffett’s Bershire Hathaway and Starwood’s Energy division for 50% of the project. Starwood Energy Group Global LLC have completed a $287-million construction loan facility (all amounts are in U.S. dollars) for the 204-megawatt Shannon wind project. The facility was supplied by affiliates of Citi, Santander Bank, N.A. and the Royal Bank of Canada, and consists of a $212 million loan plus $75 million in various letters of credit. The loan is supported by a $219 million tax equity investment commitment (subject to typical conditions precedent) supplied by subsidiaries of Citi and Berkshire Hathaway Energy. While the asset is still under construction there are completion risks, but the value of the project is significant, and I believe the AXY team will deliver on time and on budget (even with the flooding issues in Texas this past summer). Jimmie Creek Project (AXY 51% ownership) The Jimmie Creek project is a 62 MW run-of-river facility in the Jimmie Creek drainage basin, located about 30 km northeast of Toba Inlet. Alterra recently entered into an agreement with Fiera Axium Infrastructure and will own 51% of the project, with Fiera owning 49%. Jimmie Creek is estimated to have a capacity of 62 MW and will sell all of its electricity to BC Hydro for 40 years starting in August 2016. Alterra has already executed on all major contracts, and construction is currently underway, with 100 workers onsite. The growth potential from Dokie 2, Shannon Wind, and Jimmie Creek will add considerably to the cash flow generating prowess of Alterra. Conclusion: There are three potential outcomes I see. 1. I am wrong, and AXY shares drift down back to the low CDN$0.30. I am very confident that I am right, but a major market contraction could cause such a selloff. If that happened, I would add more to my already very large position. 2. AXY rolls back the stock 10:1. Then announces a dividend. Then lists on a US exchange. If this happens, in 12 months the stock is a double. 3. AXY sells all operating North American assets next year when Jimmie Creek and Shannon Wind Farm are in production. Spins out the cash as a onetime distribution. Then after the arbitration on the geothermal assets in Iceland in 2016, AXY refinances the debt, and then sells off the geothermal assets in Iceland. Another one-time distribution. Then the company with the remaining assets goes private (which I think it should be at that point) and the existing shareholders get a buyout. Personally, I would like to see #3 happen. Originally, I was focussed on #2. My funds and I have purchased a very large position in AXY in the open market. If #2 happens, it will happen within the next 12 months. If the company goes option #3, it will happen within 24-30 months. I have made my bets; time will tell if I am right. Open Disclosure I have been following the Alterra Power story for over 7 years, and began to build a significant position in the company over the past eight months. My fund’s cost base is about CDN$0.33. My personal cost base (in my trust) is about CDN$0.35—as my funds always get first fill. I eat my own cooking, and walk the talk such that I have put the maximum I am allowed from the mandates of my funds into AXY. Not to mention, it’s personally my third largest position. Also, I am an active shareholder not a paid touter—and I am not receiving any compensation whatsoever from AXY or Ross Beaty in any way. I am doing this because I believe the equity value of AXY is significantly undervalued, and I will make a nice score on this stock. Updates I have been posting my thoughts and research on my website, but I’ve had hundreds of requests to send out a weekly recap of my weekly thoughts—so that will start in July. Once a month you will get my thorough investment research newsletter to your inbox. Crocodile Gold (CRK.TO) In May I wrote about the arbitrage opportunity in Crocodile Gold (CRK.TO). I ended up buying many millions of shares in my fund at an average price of CDN$0.32. I speak to Doug Forester (President) regularly, and anyone who bought the shares would have received the proxy to either take cash for a +15% arbitrage, or shares. For the shares I bought before June 1, I am taking the 15% gain, and for the shares I bought after June 1, I am taking shares. Roughly a 50-50 split. I couldn’t resist locking the 15% arb on half my position. Uranium Energy Corp (UEC): On May 8, 2015, UEC was the first company I discussed on my website, but I have been following the company for years. The company became a short target by some funds in the US, and on Friday June 19, 2015 the company traded over 17 Million shares. I thought the shorts underestimated Amir Adnani and his team at UEC. But, at the same time, any large position like UEC would result in the share price being under attack. Amir put up a big fight, and on Tuesday June 23rd, UEC announced a $10 million placement by two funds who believe in the company. Amir did not do a banker-led road show to generate potential orders. He did an overnight deal with funds he knew wanted to take a big position in the company. Personally, I believe this caught the shorts by surprise because so few companies have the financial flexibility and ability to do such a quick raise in these awful resource markets. The shorts are covering, and I think this whole short fiasco will be over shortly. How this is even legal blows my mind, but it is, so it’s reality for any company listed on the US exchanges. This is another example why I am so bullish on UEC, and especially the management team led by Amir Adnani. I own a very large position in UEC. I will publish my research report on the next generation of Franchise Resource Entrepreneurs people should be following, and within this report, people will get a better understanding why I have put so much money and effort behind Amir Adnani, because he will deliver. I will be adding to my position on UEC on any market weakness. Until next month, Marin Katusa. --- # Lukas Lundin Raw: An Insiders Take - URL: https://katusaresearch.com/lukas-lundin-raw-an-insiders-take/ - Type: article - Published: 2015-05-06 - Updated: 2019-07-31 - Author: Marin Katusa ## **Lukas Lundin Raw: Part 1-Oil** If you’ve invested in mining, you’ve most likely heard of the Lundin family. If not, you need to. This piece will give you my take on the serially successful Lundin Empire. The patriarch of the Lundin resource empire is Lukas Lundin. If anyone lives his life by the mantra, “Fortune Favors the Bold”, it’s Lukas. He’s worth listening to. What follows is an inside view on what Lukas Lundin is thinking and doing now to position his resource empire to benefit from the current down markets. You will want to pay attention, as the knowledge Lukas shares in this exclusive interview will have considerable implications for your own portfolio over the next few years. I’ve known Lukas since 2006. My first direct business dealing with him was on the opposite side of the negotiating table in late 2008. Over the last decade, I have negotiated with the best and brightest in the resource sector, and not one of them had a quicker mind than Lukas. Lukas is in a class of his own. These three qualities really differentiate him from his peers: his ability to absorb information, to recognize value, and to walk away from a deal if the terms aren’t favorable to the Lundin shareholders. Some background on my first direct dealing with Lukas. In 2007, I was heavily invested in a private company called Turkana Energy. I was involved in the initial first two rounds of capital-raising required for the acquisition and preliminary exploration on a 10BB oil block in Kenya. By the fall of 2008, the company needed to raise another $10 million. I, along with a few other key large shareholders, took the initiative to take the company public. Unfortunately, oil was below $40/bbl at the time, and the market appetite was essentially zero for any early stage international exploration companies. That’s when I came up with the plan to pitch Lukas. But first, I knew I had to sell Keith Hill, one of Lukas’s key oil executives. Keith is smart and very trustworthy, and I called him up and explained my plan to him. Now, it’s no secret that Keith Hill is a close friend and mentor of mine (except at the poker table, where I mentor him). So Keith, being the good friend he is, made time to hear my pitch and concept. I put together a whole report to walk Keith through the value of the 10BB block. Keith, also being the shrewd oil man he is, played it down to me. But I don’t take *no* for an answer lightly, so I kept pestering Keith, and that’s when he said, “Let’s talk to Lukas”. The resource markets were in an awful state in late 2008, even worse than the current down market. Lukas listened to my pitch, had a whole list of questions, and after hearing my price, said “No”. My heart sank. I took it personally; not only did I have a lot of my own money in the deal, I had my fund, my friends, family and loyal subscribers in there with me at the same price. I had to make this work. [![mkdcll]](https://katusaresearch.com/wp-content/uploads/2015/05/mkdcll.png) After picking the pieces of my ego off the floor, I tweaked my proposal, and met with Keith and Lukas again. Again, we went through the metrics, the geology, the potential, and after going through my whole deck, Lukas, again, said *no*. I left with my tail between my legs. I was frustrated and pissed off. During the walk back to my office on that miserable rainy Friday afternoon, I knew I had to redo my pitch deck and give it one more shot. Perhaps it was my naïveté, or my lack of experience at the time, or my sure belief in the project, but I didn’t give up. A month later, we did a third meeting, and we finally agreed on terms, after a much heated verbal debate. ## **The Benefit of Time** After we agreed on a deal, Lukas and Keith worked out a plan on the structure and capital that would be required to give the 10BB block—and the whole concept of the East African Rift that would eventually became Africa Oil—a real shot at success. Boy, were they ever spot on. Within a few years of that initial private placement in early 2009, Africa Oil made the world’s largest onshore oil discovery in a decade. The Lundins were able to attract a deep pocket oil company to farm into the project, which reduced the risk and cost for Africa Oil shareholders. Naturally, my recent interview with Lukas started with oil, and his thoughts on the North American, European and international oil markets. The following is a summary of that interview. ## **US Shale Oil** Lukas hasn’t participated in the US shale sector. Why?[![Quote]](https://katusaresearch.com/wp-content/uploads/2015/05/Quote.png) His team did not have a technical advantage over the peer group exploring the shale formations in the US and Canada, thus he stayed away. Rightly so. He does believe that the incredible success of the unconventional oil production will continue to slow down. In the past, the shale oil producers were rewarded on production, not on delivering profits for their shareholders. The Lundin family is always one of, if not *the* largest group of shareholders in their own deals, thus the decisions his companies make are always in the best interest of the shareholders. Reality has now set in for the US shale oil sector. Flash oil is where the bulk of shale oil wells’ production happens in the first year, and then production declines significantly. As a result, there will be a slowdown in the US shale sector. The decline of oil production from current levels will be in the range of 200-500,000 bopd within the next 12 months. Lukas believes that the price of oil will eventually find a range between $70-80 per barrel within the next 18 months. But even with oil in the $70-80 range, the early stage US shale companies will have a difficult time attracting capital. Why? Because the shale oil producers failed so miserably to return profits to shareholders in the first shale run with oil above $90/bbl, and because the days of QE benefits flowing into the oil patch are behind us. I agree 100% with Lukas. He is spot on. There is currently a frack log build up, which means there are the thousands of wells that have been drilled and are waiting to be tied into production. But they won’t be coming online until oil is in the $70 range. Until then, bringing the frack backlog online is uneconomic. ## **Canadian Oil** My own view of the Canadian tar sand oil is the same as Lukas’s. The Canadian oil sands projects will continue to produce oil, and over the next decade will actually increase production. The Canadian oil sands projects, known globally as the tar sands, are large capex projects that are planned years in advance, and cost in the tens of billions. Once committed, the projects will come online. By 2020, I expect that the Canadian oil sands will produce in the neighborhood of 3 million barrels of oil a day. It’s important for investors to differentiate between the oil sands and heavy oil. Back in 2007, I visited Onion Lake with Lukas, whose assets are in Blackpearl Resources (PXX.TO), which is an example of heavy oil production. Heavy oil is much different than both shale oil and tar sand oil, but shares a common price point as shale oil. Heavy oil in Canada is price dependent, and the differentials to the US pricing do matter. At $75 oil, a SAGD (steam assisted gravity drainage) project like Blackrod, which has over 180 million boe in reserves will become a project of interest to a large mid-tier producer looking to replace its reserves. ## **Off Shore Oil** Like the oil sands, offshore oil deposits are big capex projects costing billions to develop. Hunting for elephants is a big company game, pursued mainly by the majors. Over the last decade, the Lundin Petroleum hasn’t just found an elephant, they have found a whole herd of offshore elephant deposits. Leveraging this success and knowledge, Lundin Petroleum has secured the rights to explore the Barents Sea, which looks to be one of the most promising offshore regions in the world. Haven’t heard of the oil potential of the Barents Sea? You will soon. The timing couldn’t be better for Lundin Petroleum. With decreasing economic viability of the UK North Sea oil production, the North Sea oil production has seen significant decline over the last decade. In my book, *The Colder War, *I cover the coming crisis of Western Europe depending on Russian sources of oil and natural gas. Western Europe needs to explore and develop their own oil and natural gas deposits. However, exploring and developing any offshore oil assets takes years. The oil potential of Barents Sea will prove to be the next North Sea of Europe, and Lundin Petroleum has positioned itself ahead of the pack. The large European Oil companies such as BP and Royal Dutch Shell are well aware of what the Lundins have in the Barents Sea. These are world class oil deposits in a politically stable and economically viable jurisdiction. ## **Africa** The East African rift play is attracting the attention of the largest National Oil Companies (NOCs) and funds in the world. As it should, because the East African Tertiary Rift trend has the potential to hold over a billion barrels of oil. The rift is an extension of the Lake Albert basin of Uganda, where over a billion barrels have been discovered to date. Lukas believes that the oil the company has already found makes the project viable and warrants development. So the risk isn’t whether there is oil. It’s a timing risk now. Nobody knows when the project’s infrastructure will get the go ahead to be built to unlock the value in the ground. It could be in a few months or a few years. And as always, timing is an issue of politics. The logical and economic oil pipeline route would be to the south to Mombasa. However, politics has its own logic. There could be a political movement wanting the pipeline to build to the north, as the north lacks much of the infrastructure of the south. This could be an approach the government uses to develop the infrastructure of the north. Either way, though, the oil will be produced. The majors know the oil is there in the East Africa Rift. Other than the infrastructure uncertainty, which will get solved, the remaining question that needs to be answered from a major’s perspective is the reservoir certainty. In the current oil market environment, no major will put their necks out. The majors will want the basin as de-risked as possible, which means answering the question about the basin’s reservoir production capacity. The majors will want to see longer term tests on the production characteristics of the wells, and over the next 12 months, these questions will be answered. I will be publishing a full research report on Africa Oil when I take a position in the stock. I made a lot of money on my first take at Africa Oil, and I believe I will do so again. Click the icon to direct you to the companies mentioned in this piece. [![image008]](http://www.africaoilcorp.com) | [![image010]](http://www.blackpearlresources.ca/) | [![image011]](https://www.lundin-petroleum.com/) | Regards, Marin Katusa --- # Pushing Out the Risk Curve - URL: https://katusaresearch.com/pushing-out-the-risk-curve/ - Type: article - Published: 2015-05-06 - Updated: 2022-10-11 - Author: Marin Katusa Past, Present and Future of the Federal Reserve and the Bubble End Game The US Federal Reserve as we know it today was created in 1913. Most people do not know that the current Fed is actually the third rendition of the ‘central bank’ of the US. The first two had 20 year mandates, and were legislated such that 20% of the bank was owned by the US federal government and the remaining 80% was owned by wealthy shareholders. President Jackson (7th President of the US from 1829-1837) should get much credit to ending that history of the “rich” controlling the Fed when he used this as a key issue in his campaign for his second term as president. The system was terminated in 1836. President Jackson’s second term ended in 1837, and he succeeded in preventing the Second Bank of the United States getting an extension to its mandate, a victory for Jackson. Little changed over the next 24 years. Then the US Civil War changed everything. To finance the Civil War, a system of national banks was created via the National Currency Act, which evolved into the National Banking Act a year later in 1864. A major problem at that time with the National bank currency was the fact that the value of the currency was based on US Treasury bonds. That meant, that if the bond price declined, the national bank had to reduce the currency it had in circulation which had significant impacts to the economy. Not only did that mean it couldn’t make new loans, but it also meant that the bank would have to call in loans it already had out. This was a serious liquidity issue for the national currency. But the problems would only compound for the bank when this occurred, because when word got out that the bank was in a liquidity crunch and calling in the loans, people who had deposits in that bank would rush out and withdraw their deposits, only causing more issues. All this led to more financial panics. The worst of these panics up to the time was the October 1907 financial panic. Most people know that, as legend goes, JP Morgan saved the day by having all the key bankers come to his home after the panic had shut down Wall Street. What many people don’t know is that one of the major catalysts that led to the October panic actually started in February 1907, because of the world’s largest oil company at the time, Rockefeller’s Standard Oil Company. Standard Oil had a severe financial problem it did not anticipate. What caused its crisis? A good guess would be that the price of oil dropped significantly. But that wasn’t the reason. The oil price was quite stable during those years. It was because of a decision by President Roosevelt in 1906. Roosevelt had decided to push through Congress the Hepburn Bill, which would deliver two serious blows to Rockefeller and Standard Oil. But what President Roosevelt didn’t consider were the unintended consequences that would happen to the other 43 trusts he would break up. The main premise of the Hepburn Bill was to reform rate evaluation, ban excessive rebates designed to thwart competitors and bring in federal government supervision of all interstate commerce. The cash crunch hit Standard Oil very hard, and their crisis in February 1907 had a significantly negative effect on the stock market during that time. The stock market sold off. Then as more companies experienced the struggles which Standard Oil barely survived, but didn’t have the wherewithal of Standard Oil, more companies started to collapse. *From left to right: J.P. Morgan, George Wharton Pepper, Teddy Roosevelt, and Flavel Sweeten Luther in 1918 with Trinity College president, Luther (Record photo morgue) * The tipping point came in October, when the US economy (and the global economy as a whole) was slowing. Then two major corporations failed: Westinghouse Electric Company and Knickerbocker Trust. And when news got out that the president of Knickerbocker Trust committed suicide the siren announcing the 1907 Panic went off. Massive bank runs, on a scale never seen before, occurred all across America at the same time. Stock market prices plummeted, deposits were being pulled as fast as the tellers could process them, and the US Treasury had no choice but to pump millions of dollars into undercapitalized small banks across the US hoping to save them. The domino effect was in full motion. **JP Morgan to the rescue**. The leading financial experts and bankers all get together at JP Morgan’s house where he was able to convince the strong institutions to bail out the weak ones. At the same time, another major crisis erupted when the very large brokerage firm called Moore and Schley nearly collapsed, and would have if it wasn’t able to get access to $5 million in stock in the Tennessee Coal and Iron Company it held to pay back its investors. President Roosevelt again looked to JP Morgan for help. Morgan orchestrated a brilliant takeover of Tennessee Coal and Iron, such that his US Steel would buy the company. However, in return, Roosevelt blessed the deal by granting JP Morgan an exemption from the Hepburn Bill and the Sherman Anti-Trust Act, moves which would eventually make Morgan the most powerful man in America. The emergency measures worked for the time being, but both the Democrats and Republicans believed significant reforms to the American banking system were required to prevent another major panic such as the one experienced in the Panic of 1907. What is the most dramatic item that was to be changed? I see the key issue at the time to be the inelasticity of the currency. A custodian of the currency that was responsive to the needs of the economy, and independent of party politics, was desired by both political parties. With significant input from the bankers from J.P Morgan, First National Bank, National City Bank of New York and Kuhn, Loeb &Co, the Owen-Glass Federal Reserve Act was passed, and what we know today as the Federal Reserve was created. ![image005] So, how has the Fed done? Depends who you ask. For example, look at the USD vs the British Pound. From the Brits’ perspective, the Fed has done a much better than job then their own Bank of England has done on the British pound. ![image007] Let’s now look at The USD thru the oil lens. Well, that was easy. One can see that it was much better to own a tangible item like oil rather than the USD the last 100 years. **The Present Central Bank Dilemma** We are in uncharted territory. This is the first time in the history of the Federal Reserve that the Central Bank is buying bonds and that we have had essentially zero interest rates for six years. The Fed is doing everything in its power to fight deflation, which is the greatest enemy of a central banker. **Why is Deflation worse than Inflation for a Central banker?** This answer is actually quite simple. With inflation, the banker can inflate his debt away. However, with deflation, that debt becomes even more cumbersome, and harder to pay. Thus, interest rates held at near zero for so long. Considering that the drastic measures taken currently by the central bankers are greater than at any time in the past, one must ask why? Are the current economic conditions present in the US the worst the US has experienced over the last 100 years? Or do the central bankers know something we don’t? **The U.S. Federal Reserve Perspective** In late 2014, I spoke at a conference also attended by Alan Greenspan. In the speakers lounge room, we exchange pleasantries, and he is quite the witty old man. I reminded Alan of our first encounter in 2007 when we had lunch and of our conversation at that time, which was about gold. ![image009]The picture to the left is of me with Alan Greenspan, taken in 2007. Back then, I asked Mr. Greenspan what he believed was the appropriate asset allocation between USD and gold, and his answer was, “That is a difficult question”. Fast-forward 7 years, and now Mr. Greenspan believes gold is going a lot higher. That is an interesting answer for the former Federal Reserve Chairman. Greenspan, Ben Bernanke and now Janet Yellen have done whatever they can to stimulate the economy. One can argue that if the Fed didn’t have near zero interest rates and didn’t buy the bonds (which has never been done before in the history of the Central Bank) to increase the risks on the Federal Reserve balance sheets, the US economy would have struggled much more the past few years than it has already. This is probably true. **Pushing out the Risk Curve** Eventually a bubble caused by the low rates and unintended consequence of pushing out the risk curve will pop. A bubble popping is clearly, at least in my mind, a deflationary event. But, it’s common sense that with interest rates so low for so long, the marginal benefits one gets greatly diminishes. For example, consider what’s happened since the end of World War II, as shown in this chart. ![image011]With zero interest rates, investors of all types have been forced to chase yield. One only needs to look at the current state of the debt load in the US oil shale sector to see the risks investors have taken onto their balance sheets. But it’s not just in the oil sector. This is true for the tech, bio-tech and other sectors that make up the US market. For example, today 80% of US IPO’s are unprofitable when they list and go public. Last time this was the case: 1999. We know how that party ended. In fact, this has only happened twice in the last 100 years. **Poker with the Federal Reserve** I’ve played poker with professionals, guys who think they’re professional, and very smart, very good players who play just for fun. I have a pretty solid track record playing poker, and my old friend Doug Casey has been trying for years to get me to come to Vegas for the World Series of Poker tournament. Personally, I don’t find it fun playing poker with strangers. I’m what you call a social poker player. I love playing with people I know, such as Doug and other industry professionals in the resource sector, because we have more than just our passion for poker in common. In fact, one of my favorite poker tournaments of all time was a pretty large tournament that Doug Casey and I played in, held by Stansberry & Associates. Porter, who is the charismatic front man of S&A, really made it clear that his goal was to beat me. In fact, he wanted it so bad, that in a multi-table tournament, with an open bar all night, Porter choose to sit beside me as he wanted to knock me out of the tournament. Well, on one of the first hands of the tournament, Porter and I were betting big. Knowing Porter is smart, I knew he wasn’t bluffing. But I looked at what cards were on the table, and looked at the outs, meaning how many combinations I could have to make the best possible hand on the table. I determined that there was one better hand than mine possible, and waiting for the river, I had multiple outs so I went for it. Porter and I were all in. I won the hand, and Porter was the first knocked out of the tournament. After about 4 hours, and multiple drinks, Frank Curzio and Jeff Clark both showed strong, but it was Doug Casey and I who were the final two at the table. There was a few thousand dollars on the table, and it being now past 2 a.m., and me travelling from Europe the day earlier, I had been up for over 24 hours and made Doug Casey a proposal I thought was very fair. “Doug, I have twice as many chips as you. It’s late and we are both tired. Let’s make a deal and call it a night. We will split the pot 50-50.” To my dismay, Doug said “no.” I was shocked. I thought perhaps the old man had lost his marbles and was out of touch with reality. No? Next hand, Doug caught me, and now the chips were about equal. I lost focus, my bad. Anyways, I got my focus back quickly, and within a couple of hands, I took the pot. I placed first, Doug doubled his money, placing second. But not once did either of us bluff. When the stakes are high, it’s a fool’s game to bluff. Which leads me to ask: **Is the Federal Reserve Bluffing?** It sure seems like the attitude at the Fed right now can be described by the line, ***“The situation is critical, but it’s not serious”***. Will Janet Yellen do nothing and leave rates as they are? Will she raise them, so she has some gunpowder to fight deflation down the road by cutting rates? Can she even raise the rates? What outs does Janet Yellen actually have? The US Federal Reserve has 4 outs right now: - Interest rates go lower - Interest rates stay the same - US actually follows the fate of Germany and the interest rate goes negative - Interest rates rise Either way you look at the cards Janet Yellen is playing with, her hand is weak. The first two outs would show that the economy is slowing and eventually the pushing of the risk curve will implode somewhere and a bubble will pop…deflationary event. QE4 sound familiar? Long term, this is very bad for US pensions as there are millions who would be in big trouble. Why? With such low interest rates, how would the pension funds be able to earn enough money to meet the payments for all the retirees depending on the system? I don’t see US rates going negative in the near term. But I have learned long ago to never say never. If the rates went negative in the US, expect the bubble of all bubble in equities and real-estate in the US markets, as the investor will have no place to store his cash safely. If Janet Yellen were to raise interest rates, the US bubble would pop much quicker than most expect, and major deflation would bring the US economy much hardship. Even with its negatives, the most likely outcome is Janet Yellen does nothing, and leaves rates as they are. Why? **Run USD Run** Even though the USD has increased in value relative to other currencies, another way of looking at this situation is that the USD has been revaluing itself, while all the other currencies are staying within relative range of one another. So, if the USD revalues and strengthens in the near term relative to its peer group, the Yuan will have to eventually unpeg itself from the USD, as China is currently pricing itself out of the global trade. Eventually this will lead to further revaluation for the USD—unless of course, the emerging markets get the stimulus they need in the near term from either the new BRICs bank, US QE4, China’s own QE policy or any combination of the above to attract the capital to keep their economies going. **Mirage in the Markets** In the last two years, US corporations issued over 50% more debt than in 2006 and 2007. Remember, in a deflation, debt is bad. But, it’s the quality of that debt that is really alarming. In 2006 and 2007, only 28% of the $700 Billion in US corporate debt was B-rated or lower. In 2013 and 2014, 71% of the $1.1 Trillion in US corporate debt is B-rated or lower. If this isn’t a wakeup call, I don’t know what is. **US Corporate Balance Sheet** Another alarm should be sounded by the US corporate balance sheet as a whole. If we were to put all the US public corporations into a holdco.—let’s call it USA Inc. for simplicity—in 2014, USA Inc. would have earnings of $1.1 Trillion. Cash flow would be about $2.5 Trillion. $1.7 Trillion would be spent on business and equipment and $700 Billion paid out in dividends, for a total of $2.4 Trillion in costs. Yet USA Inc. debt increased by $600 Billion last year. Almost all of the $2.5 Trillion in operating cash flow was spent on dividends, business and equipment, and USA Inc. debt increased by $600 Billion last year (let’s not forget about $1.4 Trillion in depreciation). So, the $560 Billion USA Inc. spent in share buybacks, was mostly financed by debt. This is ugly. Even though the debt increased significantly on the books and the book value of USA Inc. had no growth, everyone was happy, because the share price of USA Inc. kept rising. But of course, we know that the fundamentals will eventually matter, and the smart money is starting to take their chips and go home. When the music stops, there will be some tragic losses in this one. **The Federal Reserve and the Oil Patch** If the Fed doesn’t raise interest rates, which I expect it won’t, oil production will continue in the US oil patch and the debt will implode many of the leveraged high cost producers in the next 24 months. It may take a lot longer than we all want or expect it to, because of the low interest rate in the current market. But in the end mathematics doesn’t lie. Because of the Federal Reserve’s loose standards the US oil patch has been lent money from investors chasing yield. It’s going to be horrible for many of those oil investors. Corporate America has benefited from the loose money also, and I don’t think its fate will be any different. Eventually one of the bubbles will pop, which will have a ripple effect and lead to unintended consequences. Remember, a bubble popping is a deflationary event. **How to Protect Yourself** Stick to sound, long term, proven investing techniques. Stay unleveraged and avoid debt. Debt is a killer in a deflation. Debt is ok during inflation, but awful during deflation. The Fed is doing everything it can to fight deflation. Because other countries are devaluing their currencies, the most likely outcome, or the most probable hand Janet Yellen will play, will be doing nothing. Right now, the Fed doesn’t have to pony up an ante. Frankly, it’s the best hand the Federal Reserve has to play. Zero interest rates cannot last forever, so be sound. Because of the lack of discipline, pushing out the risk curve will cause some companies, even in the zero interest rate environment, to default and implode. There will be more than one. It could be a foreign bank that defaults or a major oil company that sets off the domino impact of implosion like in 1907. A key item to watch out for is the yield curve, because if it goes negative, and/or oil drops below USD$40/bbl for more than a quarter, watch out below. This will confirm the advent of a deflation that could rival the Great Depression. Deflations historically have not been solved solely by inflation. It’s a misconception that the cure to the virus called deflation is a dose of medicinal inflation. Not true. Historically (and ominously), a major war has been mixed with inflation in the vaccine to counter deflation. --- # Why Hitler Loves the Euro - URL: https://katusaresearch.com/why-hitler-loves-the-euro/ - Type: article - Published: 2015-05-06 - Updated: 2022-10-18 - Author: Marin Katusa This might be the most controversial piece I ever write, and rightly so. In the last decade, the German government, without firing a bullet or mobilizing a tank, has completely dominated European politics and has passively solidified its old intentions of regional supremacy. Hitler could only have fantasized such an outcome for the German Reich. Hitler is one of humankind’s greatest monsters. Yet he had a very shrewd and successful foreign policy up to the outbreak of WW2 in 1939. Before he plunged the nations of the world into the greatest war on earth, Hitler convinced the West that one of his main goals was peace with equality. I know it sounds absurd today, but that was the situation prior to 1938. To understand Hitler’s rise, one must understand what he represented to most Germans at the time. Hitler came to power in Germany under his mandate of restoring the country to its past glory and undoing the much-hated Treaty of Versailles. That peace settlement crippled Germany’s economic ability to recover from its WW1 reparations. It also prevented Germany from restoring its military to a global level of prominence. Hitler’s propaganda struck a chord with the masses in Germany. Part of the reason for his rise was that the people wanted their nation to take its place among the global superpowers. Hitler was seen as the man who would get them there. ## **A Nazi Chorus with a Twist** During Hitler’s ascendency, there was a famous Nazi song called **Es zittern die morschen Knochen **which in English means: “The rotten bones are trembling.” It was sung by millions.** **A line from the chorus had a special twisted meaning to the Nazis, as you can see below: [![eng-ger1]](https://katusaresearch.com/wp-content/uploads/2015/05/eng-ger1.png)A twist to the one lyric by the Nazis at the time was adding ‘ge’ to ‘hört’, and the whole meaning of the song changed with great pleasure to Hitler. This new version became a common chant by the Nazis in the 1936 Olympic Games.[![eng-ger2]](https://katusaresearch.com/wp-content/uploads/2015/05/eng-ger2.png)And for those listening carefully, the true Nazi agenda was being sung publicly years before the onset of WW2. Unfortunately, most of the world wasn’t listening. ## **Hitler’s Foreign Policy Coup d’état** ![image006] Between 1933 and 1938, Hitler would execute a series of impressive foreign policy victories, which nobody in Europe at the time expected. The image Hitler portrayed to the German people initially, and on the European stage at the time, was very different then the Hitler we know today: the one with a boundless evil desire for world domination and an intent on expanding at all costs. At the time, he created an image of peacefully restoring Germany to its past place of glory. But that quickly changed, for the worse. Eventually Hitler’s propaganda machine turned its sights to the east, the direction in which Germans historically looked to expand. The objective was to take land from the Slavs. Hitler spoke much of creating an autocratic, economically independent third Reich. In order to achieve that, Hitler believed Germany not only had to escape the Treaty of Versailles, it needed more land. The only solution was to expand and colonize. Hitler often referred to the ill effects of the sanctions laid against Germany by England in WW1, which resulted in the starvation of millions of Germans. Seizure of territory to the east would help affirm the country’s independence. But in so doing, Hitler was well aware early on that the great end game was going to be a showdown with the Soviet Union. ## **Hitler’s version of the Fantastic 4** Hitler believed that his country’s rightful place was to be one of the four superpowers of the world: Germany (controlling continental Europe), Japan (the superpower of Asia, or as he referred to them the Asian Aryans), Great Britain (and its global collection of colonies) and the United States (superpower of the western hemisphere). Hitler also stated publicly that he didn’t believe the United States would last50 more years, its demise brought about by its diverse racial mixture. ## **Rally against Treaty of Versailles** Hitler knew that for Germany to build up its military, the Treaty of Versailles would require more than a revision. It had to be completely destroyed. Hitler railed at the West, insisting that the treaty denied equality for Germans and prevented a decent standard of living and economic prosperity. Hitler also chafed that the pseudo-states created post WW1—such as Yugoslavia and Czechoslovakia—were allowed to have a military while the Germans were not. He saw all this as a comprehensive threat to the safety of the German people. ## **The World changed in 1933** Hitler decided to pull the greatest bluff in foreign policy history, at the League of Nations disarmament conference in 1933. He realized that France and Great Britain would refuse any revisions to the Treaty of Versailles, so Hitler decided to make a dramatic proposal. He promised that Germany would completely disarm if France, Great Britain, USSR, US and Japan disarmed as well. At the time, Hitler, against the rules created a very small military of 100,000 troops. Compared to France, the German military was insignificant. Of course the French refused, and it was clear they were never going to accept Hitler’s terms. Hitler now had all the propaganda material he needed via this bluff. He immediately withdrew all German representation from the conference and the League of the Nations. He then used this event as the catalyst to declare that the rest of the world obviously had no interest in his “Peace and Equality” offer, since they refused to disarm. Clearly, he said, France and the West didn’t want peace; they only wanted continued suppression of Germany and the German people. Hitler claimed that violated the right of national determination of peoples. ## **France Makes a Tactical Error:** On March 7th 1936, against the advice of **all** **his military generals**, Hitler moved German troops into the Rhineland near Cologne. The Germans still had very little military at this time. They were incredibly vulnerable, and if France had only sent a small battalion of troops to meet the Germans, the latter would have been routed quite easily and embarrassed globally. And Hitler’s whole plan would have been a huge failure. Hitler rolled the dice, and won. The French hesitated. The French then protested. France looked to its allies for support, but Great Britain didn’t even blink. Why? The English had made a deal whereby the Germans were allowed to build up their naval fleet, as long as it never got bigger than 1/3 of the size of the British fleet. The French felt sold out—that they couldn’t trust the British any further. The English were supposed to defend the Treaty of Versailles, but behind France’s back they cut their own deal with Hitler. Neither the French nor the Brits could trust the Americans, who were focused on isolationism (in the depths of depression, the last thing the US wanted was another war). The West was forced to accept that the end was near for the Treaty of Versailles. ## **Origins of the Great War** In 1928, Harvard Professor Sidney B. Fay wrote a two-volume book claiming that Germany was not solely responsible for World War1. In fact, Fay argued that Germany was not even *mostly* responsible. That was a rogue thought, the first time a western scholar had published such a treatise. But he was joined by John Maynard Keynes, who agreed that the economic reparations against Germany were too harsh. This was the beginning of the movement against the Treaty of Versailles. ## **Germany Hosts the World in 1936** In 1936, the summer Olympics were in Germany. There is a misconception, because of the success of Jesse Owens, that the US won the 1936 Olympic Games. That is flat wrong. The Germans overwhelmingly won those Olympics. That marked a huge success for Hitler’s public relations and his foreign policy. [![image008]](https://katusaresearch.com/wp-content/uploads/2015/05/image008.png)Another success for Hitler in 1936 on the global stage was the support he lent for Francisco Franco’s coup in Spain. The Nazis sent troops, equipment and money to Franco. This actually resulted in Mussolini and Hitler working closer together, and driving a wedge between Italy and France. It is hard to believe today, but Mussolini was held in high regard in France and particularly in England at the time. **Back to the Future?** Fast forward to 2015. Without Germany backstopping the euro, the EU28 will cease to exist. But it is precisely because of the euro that Germany is easily the dominant power in continental Europe. Hitler would be amazed at the power Germany holds over Greece and the other EU28 members today, and all of this being accomplished without a single bullet, rocket, missile or tank. In a zero interest rate environment, the power of debt is astonishing. Imagine what will happen when interest rates eventually rise, which they will. The quote below—attributed to Norm Franz, author of *Money & Wealth in the New Millennium: A Prophetic Guide to the New World Economic Order*—sums up the future of those whose currency of choice is debt. [![gsbd]](https://katusaresearch.com/wp-content/uploads/2015/05/gsbd.png) There isn’t anything any one of us can do for the EU28 and the coming mess they will have to sort out regarding their own debt situation. But, there is something you can do for yourself and your own family: Don’t get caught up in debt, and you won’t be a slave. Marin Katusa